As filed with the United States Securities and Exchange Commission on June 29, 2021
Registration No: 333-255936
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
Amendment No. 2 to
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________________
FUSION ACQUISITION CORP.
(Exact name of registrant as specified in its charter)
____________________________________
Delaware |
6770 |
85-0849243 |
||
(State or other jurisdiction of |
(Primary Standard Industrial |
(I.R.S. Employer |
667 Madison Avenue, 5th Floor
New York, New York 10065
Tel: (212) 763-0169
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
____________________________________
John James
667 Madison Avenue, 5th Floor
New York, New York 10065
Tel: (212) 763-0169
(Name, address, including zip code, and telephone number, including area code, of agent for service)
____________________________________
Copies to:
Joel L. Rubinstein |
Byron B. Rooney |
____________________________________
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the transactions contemplated by the Merger Agreement described in the included proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 |
☐ |
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Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
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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 7(a)(2)(B) of the Securities Act. ☐
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) |
☐ |
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) |
☐ |
CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered |
Amount |
Proposed |
Proposed |
Amount of |
|||||||||
Class A common stock, par value $0.0001 per share |
237,500,000(1) |
$ |
9.90 |
$ |
2,351,250,000.00 |
(2) |
$ |
256,521.38 |
(3) |
||||
Total |
|
$ |
2,351,250,000.00 |
|
$ |
256,521.38 |
(4) |
____________
(1) Based on the maximum number of shares of Class A common stock, par value $0.0001 per share (“Fusion Class A common stock”), of the registrant (“Fusion”) estimated to be issued in connection with the business combination described herein (the “Business Combination”). Such maximum number of shares of Fusion Class A common stock is based on the sum of: (a) 220,000,000 shares of Fusion Class A common stock to be issued to the holders of shares of common stock, par value $0.0001 per share (“MoneyLion common stock”), of MoneyLion (including the shares MoneyLion common stock issuable immediately prior to the effective time of the Business Combination from the conversion of the shares of preferred stock of MoneyLion, the exercise of all of the MoneyLion warrants and options pursuant to their terms and the MoneyLion convertible notes); and (b) 17,500,000 shares of Fusion Class A common stock that may be issued pursuant to the earn out provisions of the Merger Agreement described herein.
(2) Pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is calculated as the product of (i) 237,500,000 shares of Fusion Class A common stock and (ii) $9.90, the average of the high and low trading prices of Fusion Class A common stock on May 5, 2021 (such date being within five business days prior to the date that this Registration Statement was first filed with the SEC).
(3) Calculated pursuant to Rule 457 under the Securities Act by multiplying the proposed maximum aggregate offering price of securities to be registered by 0.0001091.
(4) Previously paid.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the SEC, acting pursuant to said Section 8(a), may determine.
The information in this proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commissions is effective. This proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
PRELIMINARY — SUBJECT TO COMPLETION DATED June 29, 2021
PROXY STATEMENT OF FUSION ACQUISITION CORP.
PROSPECTUS FOR
237,500,000 SHARES OF CLASS A COMMON STOCK
On February 11, 2021, the board of directors of Fusion Acquisition Corp., a Delaware corporation (“Fusion,” “we,” “us” or “our”), unanimously approved an agreement and plan of merger, dated February 11, 2021, by and among Fusion, ML Merger Sub Inc., a wholly owned subsidiary of Fusion (“Merger Sub”), and MoneyLion Inc. (“MoneyLion”) (as amended on June 28, 2021 and as it may be further amended and/or restated from time to time, the “Merger Agreement”). Copies of the Merger Agreement and Amendment No. 1 to the Merger Agreement, are attached to this proxy statement/prospectus as Annex A and Annex G, respectively. If the Merger Agreement is adopted by Fusion’s stockholders and the transactions under the Merger Agreement are consummated, Merger Sub will merge with and into MoneyLion with MoneyLion surviving the merger as a wholly owned subsidiary of Fusion (the “Business Combination”). In addition, in connection with the consummation of the Business Combination, Fusion will be renamed “MoneyLion Inc.” and is referred to herein as “New MoneyLion” as of the time following such change of name.
Under the Merger Agreement, Fusion has agreed to acquire all of the outstanding equity interests of MoneyLion for $2,200,000,000.00 in aggregate consideration. The aggregate consideration to be paid to MoneyLion stockholders shall be (i) shares of Class A common stock of New MoneyLion (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the Merger Agreement) exceeds $260,000,000 and (B) $100,000,000, and (ii) the contingent right to receive a pro rata portion of up to 17,500,000 shares of Class A common stock of New MoneyLion (the “Earn Out Shares”). See the “Sources and Uses of Funds for the Business Combination” section for more information. Pursuant to the Merger Agreement, the election to receive cash will be made after the special meeting of Fusion stockholders (the “Special Meeting”) and prior to the Closing. Consequently, at the time of the Special Meeting, Fusion’s stockholders will not know or be able to determine the amount of cash consideration the MoneyLion stockholders will receive at Closing (if any). See “Risk Factors — Risks Related to Fusion and the Business Combination — Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting.” for more information.
Pursuant to the Merger Agreement, at the effective time of the Business Combination (the “Effective Time”), the stock consideration to be issued to the then current holders of stock in MoneyLion will be in the form of Class A common stock of New MoneyLion. Assuming none of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the transaction elect to exercise their options or warrants prior to the closing of the Business Combination and MoneyLion does not elect to receive cash consideration, at the Effective Time, MoneyLion equity holders holding such options or warrants, as applicable, are expected to receive, in the aggregate, options to purchase approximately 38,985,776 shares of New MoneyLion Class A common stock and warrants to purchase approximately 9,148,897 shares of New MoneyLion Class A common stock pursuant to the Merger Agreement.
Concurrently with the execution of the Merger Agreement, Fusion entered into certain subscription agreements (the “PIPE Subscription Agreements”) with certain institutional and accredited investors (the “PIPE Investors”), pursuant to which the PIPE Investors have agreed to purchase, immediately prior to the consummation of the Business Combination (the “Closing”), an aggregate of 25,000,000 shares of Fusion Class A common stock at a purchase price of $10.00 per share (the “PIPE Financing”), for aggregate proceeds of $250,000,000.
Pursuant to the Merger Agreement, at the Effective Time, each warrant to purchase shares of MoneyLion capital stock that is issued and outstanding prior to the Effective Time and has not been exercised or terminated pursuant to its terms will be assumed and converted into a warrant exercisable for shares of Class A common stock of New MoneyLion.
In addition, the Merger Agreement contemplates that holders of MoneyLion common stock and certain participating option holders and warrant holders (each, an “Earn Out Participant”, as defined in the Merger Agreement), following the closing of the Business Combination and for a period of five years thereafter, will be eligible to receive the Earn Out Shares, subject to certain price milestones that are more fully set out in the Merger Agreement (each, a “Triggering Event”). Upon the occurrence of a Triggering Event, New MoneyLion will release such Earn Out Shares to the holders of MoneyLion’s common stock, and participating option holders and warrant holders of MoneyLion as of the Closing.
In connection with the execution of the Merger Agreement, Fusion Sponsor LLC, a Delaware limited liability company (the “Sponsor”) entered into a support agreement (the “Sponsor Support Agreement”) with Fusion, MoneyLion and Fusion’s directors and officers (the “Insiders”), pursuant to which the Sponsor agreed, among other things, to vote all
shares of Subject Securities (as defined in the Sponsor Support Agreement), in favor of the Business Combination, against a business combination not relating to the Business Combination, against any change in the business, management and Fusion board of directors, other than in connection with the Business Combination and against any adjournment proposal, except as permitted pursuant to the Sponsor Support Agreement. In addition, Fusion, the Sponsor and the Insiders agreed to amend that certain letter agreement, dated as of June 25, 2020, so that the Lock-Up Period (as defined in the Sponsor Support Agreement) applicable to the Subject Securities (other than any Private Placement Warrants (as defined in the Merger Agreement)) held by the Sponsor will end on the earlier of (a) 180 days after the closing date of the Business Combination (the “Closing Date”) and (b) the date on which the closing price of the shares of Class A common stock of New MoneyLion is equal to or greater than $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period; provided that, for purposes of this clause (b), the measurement period for determining the closing price of the share of Class A common stock of New MoneyLion shall commence no earlier than 60 days following the Closing Date. The percentage of outstanding shares subject to the Sponsor Support Agreement is approximately 20% of the voting power of Fusion.
Immediately prior to the Effective Time, each of the currently issued and outstanding shares of Fusion Class B common stock will automatically convert, on a one-for-one basis, into shares of Fusion Class A common stock in accordance with the terms of the Current Charter. Thereafter, in connection with the Closing, each of the then issued and outstanding shares of Fusion Class A common stock will become shares of New MoneyLion Class A common stock.
Assuming there are no redemptions of our Class A common stock, the total maximum number of shares of New MoneyLion common stock expected to be issued at the Closing is (i) approximately 220,000,000 shares, assuming MoneyLion does not elect to take any cash as part of the merger consideration at Closing and all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination, and (ii) approximately 210,000,000 shares, assuming MoneyLion elects to take the maximum amount of cash as part of the merger consideration at Closing and all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination.
Assuming there are no redemptions of our Class A common stock, MoneyLion does not elect to take any cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and all of the Earn Out Shares have been released to the Earn Out Participants, following the Closing: (i) holders of shares of MoneyLion capital stock (the “MoneyLion equityholders”) are expected to hold, in the aggregate, 237,500,000 shares of New MoneyLion Class A common stock, or 77.55% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 11.43% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 2.86% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.16% of the issued and outstanding shares of New MoneyLion common stock.
Assuming there are no redemptions of our Class A common stock, MoneyLion does not elect to take any cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and none of the Earn Out Shares are released to the Earn Out Participants, following the Closing: (i) MoneyLion equityholders are expected to hold, in the aggregate, 220,000,000 shares of New MoneyLion Class A common stock, or 76.19% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 12.12% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 3.03% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.66% of the issued and outstanding shares of New MoneyLion common stock.
Assuming there are no redemptions of our Class A common stock, MoneyLion does elect to take the maximum amount of cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and all of the Earn Out Shares have been released to the Earn Out Participants, following the Closing: (i) MoneyLion equityholders are expected to hold, in the aggregate,
227,500,000 shares of New MoneyLion Class A common stock, or 76.79% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 11.81% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 2.95% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.44% of the issued and outstanding shares of New MoneyLion common stock.
Assuming there are no redemptions of our Class A common stock, MoneyLion does elect to take the maximum amount of cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and none of the Earn Out Shares are been released to the Earn Out Participants, following the Closing: (i) MoneyLion equityholders are expected to hold, in the aggregate, 210,000,000 shares of New MoneyLion Class A common stock, or 75.34% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 12.56% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 3.14% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.97% of the issued and outstanding shares of New MoneyLion common stock.
Fusion’s units, Class A common stock and public warrants are publicly traded on the New York Stock Exchange (the “NYSE”) under the symbols “FUSE.U,” “FUSE” and “FUSE WS”, respectively. Fusion intends to apply to list the New MoneyLion Class A common stock and public warrants on the NYSE under the symbols “ML” and “ML WS”, respectively, upon the Closing of the Business Combination. New MoneyLion will not have units traded following Closing.
Fusion will hold a Special Meeting of its stockholders to consider matters relating to the Business Combination. Fusion cannot complete the Business Combination unless Fusion’s stockholders consent to the approval of the Merger Agreement and the transactions contemplated thereby. Fusion is sending you this proxy statement/prospectus to ask you to vote in favor of these and the other matters described in this proxy statement/prospectus.
Unless adjourned, the Special Meeting of the stockholders of Fusion will be held at [•], New York City time, on [•], 2021 at [•]. In light of ongoing developments related to the novel coronavirus (COVID-19), after careful consideration, Fusion has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend the virtual Special Meeting online, vote, view the list of stockholders entitled to vote at the Special Meeting and submit questions during the Special Meeting by visiting [•] and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in this proxy statement/prospectus.
This proxy statement/prospectus provides you with detailed information about the Business Combination. It also contains or references information about Fusion and New MoneyLion and certain related matters. You are encouraged to read this proxy statement/prospectus carefully. In particular, you should read the section titled “Risk Factors” on page 42 of this proxy statement/prospectus for a discussion of the risks you should consider in evaluating the Business Combination and how it will affect you.
If you have any questions or need assistance voting your common stock, please contact Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200, or banks and brokers can call collect at (203) 658-9400, or by emailing FUSE.info@investor.morrowsodali.com. This notice of Special Meeting is and the proxy statement/prospectus relating to the Business Combination will be available at [•].
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of the Business Combination or the other transactions contemplated thereby, as described in this proxy statement/prospectus, or passed upon the adequacy or accuracy of the disclosure in this proxy statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated, [•], 2021, and is first being mailed to stockholders of Fusion on or about, [•], 2021.
FUSION ACQUISITION CORP.
667 Madison Avenue, 5th Floor
New York, New York 10065
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [•], 2021
TO THE STOCKHOLDERS OF FUSION ACQUISITION CORP.:
NOTICE IS HEREBY GIVEN that a special meeting (the “Special Meeting”) of the stockholders of Fusion Acquisition Corp., a Delaware corporation (“Fusion,” “we,” “us” or “our”), will be held at [•], New York City time, on [•], 2021 at [•]. You are cordially invited to attend the Special Meeting, which will be held for the following purposes:
(a) Proposal No. 1 — The Business Combination Proposal — to consider and vote upon a proposal to approve the agreement and plan of merger, dated as of February 11, 2021 (as amended on June 28, 2021 and as it may be further amended and/or restated from time to time, the “Merger Agreement”), by and among Fusion Acquisition Corp. (“Fusion”), ML Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Fusion (“Merger Sub”), and MoneyLion Inc., a Delaware corporation (“MoneyLion”); and the transactions contemplated thereby, pursuant to which Merger Sub will merge with and into MoneyLion with MoneyLion surviving the merger as a wholly owned subsidiary of Fusion (the transactions contemplated by the Merger Agreement, the “Business Combination” and such proposal, the “Business Combination Proposal”);
(b) Proposal No. 2 — The Charter Proposal — to consider and vote upon a proposal to approve, assuming the Business Combination Proposal is approved and adopted, the proposed fourth amended and restated certificate of incorporation of Fusion (the “Proposed Charter”), which will replace Fusion’s third amended and restated certificate of incorporation, dated June 25, 2020 (the “Current Charter”), and will be in effect upon the consummation of the Business Combination (we refer to such proposal as the “Charter Proposal”);
(c) Proposal No. 3 — The Advisory Charter Proposals — to consider and vote upon separate proposals to approve, on a non-binding advisory basis, the following material differences between the Proposed Charter and the Current Charter, which are being presented in accordance with the requirements of the SEC as six separate sub-proposals (we refer to such proposals as the “Advisory Charter Proposals”);
(i) to provide that New MoneyLion will have authorized capital stock of 2,200,000,000 shares, consisting of 2,000,000,000 shares of Class A common stock, par value $0.0001 per share (the “New MoneyLion Class A common stock”) and 200,000,000 shares of preferred stock, par value $0.0001 per share, as opposed to Fusion having authorized capital stock of 401,000,000 shares, consisting of 380,000,000 shares of Fusion Class A common stock, 20,000,000 shares of Fusion Class B common stock and 1,000,000 shares of preferred stock (we refer to such proposal as “Advisory Charter Proposal A”);
(ii) to provide that directors of New MoneyLion may be removed from office only for cause and only with the affirmative vote of the holders of at least 66 2/3% of the voting power of the outstanding shares of stock of New MoneyLion (we refer to such proposal as “Advisory Charter Proposal B”);
(iii) to change the stockholder vote required to amend certain provisions of the Proposed Charter (we refer to such proposal as “Advisory Charter Proposal C”);
(iv) to change the stockholder vote required to amend the amended and restated bylaws of New MoneyLion (the “Proposed Bylaws”) (we refer to such proposal as “Advisory Charter Proposal D”);
(v) to prohibit stockholders from acting by written consent by specifying that any action required or permitted to be taken by stockholders must be effected by a duly called annual or special meeting and may not be effected by written consent (we refer to such proposal as “Advisory Charter proposal E”);
(vi) to provide for certain additional changes, including, among other things, (i) changing the post-business combination company’s corporate name from “Fusion Acquisition Corp.” to “MoneyLion Inc.” and making the company’s corporate existence perpetual and (ii) removing certain provisions related to our status as a blank check company that will no longer apply upon consummation of the Business Combination, all of which our board of directors believes are necessary to adequately address the needs of the post-business combination company (we refer to such proposal as “Advisory Charter proposal F”).
(d) Proposal No. 4 — The Stock Issuance Proposal — to consider and vote upon a proposal to approve, assuming the Business Combination Proposal and the Charter Proposal are approved and adopted, for the purposes of complying with the applicable listing rules of the NYSE, the issuance of (x) shares of Fusion Class A common stock pursuant to the terms of the Merger Agreement and (y) shares of Fusion Class A common stock to certain institutional investors (the “PIPE Investors”) in connection with the Private Placement (as defined below) (we refer to such proposal as the “Stock Issuance Proposal”);
(e) Proposal No. 5 — The Incentive Plan Proposal — to consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Charter Proposal and the Stock Issuance Proposal are approved and adopted, the MoneyLion Inc. Omnibus Incentive Plan (the “Incentive Plan”), a copy of which is attached to this proxy statement/prospectus as Annex E, including the authorization of the initial share reserve under the Incentive Plan (we refer to such proposal as the “Incentive Plan Proposal”);
(f) Proposal No. 6 — The ESPP Proposal — to consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Charter Proposal, the Stock Issuance Proposal and the Incentive Plan Proposal are approved and adopted, the MoneyLion Inc. Employee Stock Purchase Plan (the “ESPP”), a copy of which is attached to this proxy statement/prospectus as Annex F, including the authorization of the initial share reserve under the ESPP (we refer to such proposal as the “ESPP Proposal”);
(g) Proposal No. 7 — The Adjournment Proposal — to consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, any of the Business Combination Proposal, the Charter Proposal, the Stock Issuance Proposal, the Incentive Plan Proposal and the ESPP Proposal (together the “condition precedent proposals”) would not be duly approved and adopted by our stockholders or we determine that one or more of the closing conditions under the Merger Agreement is not satisfied or waived (we refer to such proposal as the “Adjournment Proposal”).
Only holders of record of shares of Fusion’s Class A common stock and Class B common stock (collectively, “Fusion Shares”) at the close of business on [•], 2021 are entitled to notice of and to vote and have their votes counted at the Special Meeting and any further adjournments or postponements of the Special Meeting.
We will provide you with the proxy statement/prospectus and a proxy card in connection with the solicitation of proxies to be voted at the Special Meeting and at any adjournment of the Special Meeting. Whether or not you plan to attend the Special Meeting, we urge you to read, when available, the proxy statement/prospectus (and any documents incorporated into the proxy statement/prospectus by reference) carefully. Please pay particular attention to the section entitled “Risk Factors.”
After careful consideration, Fusion’s board of directors has determined that each of the Business Combination Proposal, the Charter Proposal, the Advisory Charter Proposals, the Stock Issuance Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Adjournment Proposal are in the best interests of Fusion and its stockholders and unanimously recommends that you vote or give instruction to vote “FOR” each of those proposals.
The existence of financial and personal interests of Fusion’s directors and officers may result in a conflict of interest on the part of one or more of the directors between what they may believe is in the best interests of Fusion and its stockholders and what they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section entitled “The Business Combination Proposal — Interests of Fusion’s Directors and Officers in the Business Combination” in the proxy statement/prospectus for a further discussion.
Under the Merger Agreement, the approval of the condition precedent proposals presented at the Special Meeting is a condition to the consummation of the Business Combination. The adoption of each condition precedent proposal is conditioned on the approval of all of the condition precedent proposals. If our stockholders do not approve each of the condition precedent proposals, the Business Combination may not be consummated. The Adjournment Proposal and the Advisory Charter Proposals are not conditioned on the approval of any other proposal.
In connection with the execution of the Merger Agreement, Fusion, Fusion Sponsor LLC, a Delaware limited liability company (our “Sponsor”) and Fusion’s directors and executive officers entered into a sponsor support agreement (the “Sponsor Support Agreement”) with MoneyLion, pursuant to which, among other things, the Sponsor agreed to vote its shares of Fusion Class B common stock purchased prior to our initial public offering (the “founder shares”), as well as any shares of Fusion Class A common stock sold as part of the units by us in our initial public offering (the “public shares”) purchased by it during or after our initial public offering, in favor of the Business Combination Proposal and all of the other proposals being presented at the Special Meeting. As of the date hereof, our Sponsor owns approximately 20% of our total outstanding common stock.
Pursuant to the Current Charter, a holder of public shares (a “public stockholder”) may request that Fusion redeem all or a portion of its public shares for cash if the Business Combination is consummated. As a public stockholder, and assuming the Business Combination is consummated, you will be entitled to receive cash for any public shares to be redeemed only if you:
(i) (a) hold public shares or (b) hold public shares through units and you elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares; and
(ii) prior to [•], New York City time, on [•], 2021, (a) submit a written request to Continental Stock Transfer & Trust Company, Fusion’s transfer agent (the “transfer agent”), that Fusion redeem your public shares for cash and (b) deliver your public shares to the transfer agent, physically or electronically through Depository Trust Company (“DTC”).
Holders of units must elect to separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact the transfer agent, directly and instruct it to do so. Public stockholders may elect to redeem all or a portion of their public shares even if they vote for the Business Combination Proposal. If the Business Combination is not consummated, the public shares will not be redeemed for cash. If the Business Combination is consummated and a public stockholder properly exercises its right to redeem its public shares and timely delivers its shares to the transfer agent, we will redeem each public share for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account established in connection with our initial public offering (the “Trust Account”), calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares. For illustrative purposes, as of March 31, 2021, this would have amounted to approximately $10.00 per public share. If a public stockholder exercises its redemption rights, then it will be exchanging its redeemed public shares for cash and will no longer own such shares. Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for submitting redemption requests and thereafter, with our consent, until the consummation of the Business Combination. If a holder of a public share delivers its shares in connection with an election to redeem and subsequently decides prior to the deadline for submitting redemption requests not to elect to exercise such rights, it may simply request that Fusion instruct the transfer agent to return the shares (physically or electronically). The holder can make such request by contacting the transfer agent, at the address or email address listed in this proxy statement/prospectus. See “The Special Meeting — Redemption Rights” in the proxy statement/prospectus for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.
Notwithstanding the foregoing, a holder of public shares, together with any affiliate of such public stockholder or any other person with whom such public stockholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public stockholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
Furthermore, Fusion entered into subscription agreements with the PIPE Investors, pursuant to which the PIPE Investors have agreed to purchase immediately prior to the consummation of the Business Combination an aggregate of 25,000,000 shares of Fusion Class A common stock at a purchase price of $10.00 per share (the “Private Placement”). In connection with the consummation of the Business Combination, all of the issued and outstanding shares of Fusion Class A common stock, including the shares of Fusion Class A common stock issued to the PIPE Investors, will become shares of New MoneyLion Class A common stock.
All Fusion stockholders are cordially invited to attend the Special Meeting which will be held in virtual format. You will not be able to physically attend the Special Meeting. To ensure your representation at the Special Meeting, however, you are urged to complete, sign, date and return the proxy card accompanying the proxy statement/prospectus as soon as possible. If you are a stockholder of record holding shares of Fusion Shares, you may also cast your vote at the Special Meeting electronically by visiting [•]. If your shares are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares or, if you wish to attend the Special Meeting and vote electronically, obtain a proxy from your broker or bank. The Charter Proposal requires the affirmative vote of the holders of at least a majority of the outstanding shares of Fusion Shares, voting as a single class. Accordingly, if you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as a vote “AGAINST” the Charter Proposal. Because approval of the other proposals only require a majority of the votes cast, assuming a quorum is established at the Special Meeting, if you do not vote or do not instruct your broker or bank how to vote, it will have no effect on these other proposals because such action would not count as a vote cast at the Special Meeting.
Your vote is important regardless of the number of shares you own. Whether you plan to attend the Special Meeting or not, please sign, date and return the proxy card accompanying the proxy statement/prospectus as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted.
If you have any questions or need assistance voting your common stock, please contact Morrow Sodali LLC, our proxy solicitor, by calling (800) 662-5200, or banks and brokers can call collect at (203) 658-9400, or by emailing FUSE.info@investor.morrowsodali.com. This notice of Special Meeting is and the proxy statement/prospectus relating to the Business Combination will be available at [•].
Thank you for your participation. We look forward to your continued support.
[•], 2021
By Order of the Board of Directors, |
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Jim Ross |
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IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS. TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST (I) IF YOU HOLD SHARES OF FUSION CLASS A COMMON STOCK THROUGH UNITS, ELECT TO SEPARATE YOUR UNITS INTO THE UNDERLYING SHARES OF FUSION CLASS A COMMON STOCK AND PUBLIC WARRANTS PRIOR TO EXERCISING YOUR REDEMPTION RIGHTS WITH RESPECT TO THE PUBLIC SHARES, (II) SUBMIT A WRITTEN REQUEST TO THE TRANSFER AGENT THAT YOUR PUBLIC SHARES BE REDEEMED FOR CASH AND (III) DELIVER YOUR SHARES OF FUSION CLASS A COMMON STOCK TO THE TRANSFER AGENT, PHYSICALLY OR ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM, IN EACH CASE, IN ACCORDANCE WITH THE PROCEDURES AND DEADLINES DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS. IF THE BUSINESS COMBINATION IS NOT CONSUMMATED, THEN THE PUBLIC SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “THE SPECIAL MEETING — REDEMPTION RIGHTS” IN THIS PROXY STATEMENT/PROSPECTUS FOR MORE SPECIFIC INSTRUCTIONS.
ABOUT THIS DOCUMENT
This document, which forms part of a registration statement on Form S-4 filed with the SEC by Fusion, constitutes a prospectus of Fusion under Section 5 of the Securities Act of 1933, as amended, with respect to the shares of Class A common stock of Fusion to be issued to MoneyLion’s stockholders under the Merger Agreement. This document also constitutes a proxy statement of Fusion under Section 14(a) of the Securities Exchange Act of 1934, as amended.
You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such incorporated document. Neither the mailing of this proxy statement/prospectus to Fusion stockholders nor the issuance by Fusion of its Class A common stock in connection with the Business Combination will create any implication to the contrary.
Information contained in this proxy statement/prospectus regarding Fusion has been provided by Fusion and information contained in this proxy statement/prospectus regarding MoneyLion has been provided by MoneyLion.
This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.
MARKET AND INDUSTRY DATA
This proxy statement/prospectus contains information concerning the market and industry in which MoneyLion conducts its business. This proxy statement/prospectus includes market and industry data and forecasts that MoneyLion has derived from publicly available information, various industry publications, other published industry sources and internal data and estimates. Industry publications and other published industry sources generally indicate that the information contained therein was obtained from sources believed to be reliable. Internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which MoneyLion operates and MoneyLion’s and our management’s understanding of industry conditions. Although we believe that such information is reliable, we have not had this information verified by any independent sources. Any estimates underlying such market-derived information and other factors could cause actual results to differ materially from those expressed in the independent parties’ estimates and in our estimates.
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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND THE SPECIAL MEETING |
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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA COMBINED PER SHARE FINANCIAL INFORMATION |
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF FUSION |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF MONEYLION |
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ANNEX C — FORM OF AMENDED AND RESTATED BYLAWS OF MONEYLION INC. |
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ANNEX F — FORM OF MoneyLion Inc. EMPLOYEE STOCK PURCHASE PLAN |
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This proxy statement/prospectus incorporates important business and financial information about Fusion from other documents that are not included in or delivered with this proxy statement/prospectus. This information is available for you to review at the public reference room of the U.S. Securities and Exchange Commission, or SEC, located at 100 F Street, N.E., Washington, D.C. 20549, and through the SEC’s website at www.sec.gov. You can also obtain the documents incorporated by reference into this proxy statement/prospectus free of charge by requesting them in writing or by telephone from the appropriate company at the following address and telephone number:
Fusion Acquisition Corp.
667 Madison Avenue, 5th Floor
New York, New York 10065
Tel: (212) 763-0169
Attention: Chief Executive Officer
or
Morrow Sodali LLC
470 West Avenue
Stamford, CT 06902
Telephone: (800) 662-5200
(banks and brokers can call collect at (203) 658-9400)
Email: FUSE.info@investor.morrowsodali.com
To obtain timely delivery, Fusion stockholders must request the materials no later than five business days prior to the Special Meeting.
You also may obtain additional proxy cards and other information related to the proxy solicitation by contacting the appropriate contact listed above. You will not be charged for any of these documents that you request.
For a more detailed description of the information incorporated by reference in this proxy statement/prospectus and how you may obtain it, see the section entitled “Where You Can Find More Information.”
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Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our” and “Fusion” refer to Fusion Acquisition Corp., and the terms “New MoneyLion,” “combined company” and “post-combination company” refer to MoneyLion Inc. (f/k/a Fusion Acquisition Corp. as of immediately following the consummation of the Business Combination) and its subsidiaries following the consummation of the Business Combination.
In this document:
“Amendment No. 1” means that certain Amendment No. 1 to the Merger Agreement, dated June 28, 2021 by and among Fusion, MoneyLion and Merger Sub.
“Business Combination” means the transactions contemplated by the Merger Agreement, including the merger of Merger Sub with and into MoneyLion, pursuant to which (i) MoneyLion survives the merger as a wholly owned subsidiary of Fusion and (ii) the MoneyLion stockholders and holders of MoneyLion options and warrants exchange their MoneyLion capital stock and MoneyLion options and warrants for equity interests in Fusion, as further described herein.
“Closing” means the closing of the Business Combination.
“Closing Date” means the closing date of the Business Combination.
“Code” means the Internal Revenue Code of 1986, as amended.
“Current Charter” means Fusion’s third amended and restated certificate of incorporation.
“DGCL” means the General Corporation Law of the State of Delaware.
“DTC” means The Depository Trust Company.
“Effective Time” means the time at which the Business Combination becomes effective.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Founder Shares” means the aggregate of 8,750,000 shares of Fusion Class B common stock held by the Sponsor.
“Fusion” means Fusion Acquisition Corp., a Delaware corporation (which, after the Closing will be known as MoneyLion Inc.).
“Fusion Board” means the board of directors of Fusion.
“Fusion Class A common stock” means the shares of Class A common stock, par value $0.0001 per share, of Fusion.
“Fusion Class B common stock” means the shares of Class B common stock, par value $0.0001 per share, of Fusion.
“Fusion Shares” means, collectively, the Fusion Class A common stock and Fusion Class B common stock.
“Fusion Stockholders” means, the holder of Fusion Shares issued in the IPO.
“GAAP” means United States generally accepted accounting principles.
“Group Companies” means MoneyLion and all of its direct and indirect Subsidiaries.
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
“Investment Company Act” means the Investment Company Act of 1940, as amended.
“IPO” means Fusion’s initial public offering, consummated on June 30, 2020, through the sale of 35,000,000 units at $10.00 per unit.
“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.
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“Merger Agreement” means that Agreement and Plan of Merger, dated as of February 11, 2021 (as amended on June 28, 2021 and as it may be further amended or otherwise modified from time to time), by and among Fusion, Merger Sub and MoneyLion.
“Merger Sub” means ML Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Fusion.
“Minimum Proceeds Condition” means the minimum aggregate cash amount that Fusion must have available at Closing from the Trust Account.
“MoneyLion” means MoneyLion Inc., a Delaware corporation.
“MoneyLion stockholder” means each holder of MoneyLion capital stock.
“Morrow” means Morrow Sodali, proxy solicitor to Fusion.
“New MoneyLion” means the Delaware corporation which, prior to consummation of the Business Combination, was known as Fusion Acquisition Corp. (“Fusion” herein), and renamed as determined by MoneyLion.
“New MoneyLion Board” means the board of directors of New MoneyLion.
“New MoneyLion Class A common stock” means the shares of common stock, par value $0.0001 per share, of New MoneyLion.
“New MoneyLion Management” means the management of New MoneyLion following the consummation of the Business Combination.
“Net Promoter Score,” or “NPS,” refers to MoneyLion’s net promoter score, which is a percentage, expressed as a numerical value up to a maximum value of 100, that MoneyLion uses to gauge customer satisfaction. Net Promoter Score reflects responses to the following question on a scale of zero to ten: “How likely are you to recommend MoneyLion to a friend or colleague?” Responses of 9 or 10 are considered “promoters,” responses of 7 or 8 are considered neutral or “passives,” and responses of 6 or less are considered “detractors.” MoneyLion then subtracts the number of respondents who are detractors from the number of respondents who are promoters and divide that number by the total number of respondents. This methodology of calculating Net Promoter Score reflects responses from customers who purchase products from MoneyLion and choose to respond to the survey question. Net Promotor Score gives no weight to customers who decline to answer the survey question.
“NYSE” means The New York Stock Exchange.
“Parent Closing Cash” shall mean (i) the amount of cash in the Trust Account plus (ii) the proceeds actually received by Parent upon consummation of the PIPE Investment, in each case after giving effect to all payments to be made by Parent in connection with the Parent Stockholder Redemption and the payment by Parent of all Fusion Transaction Costs and MoneyLion Transaction Costs.
“PIPE Investors” means certain institutional investors who are party to the Subscription Agreements.
“Private Placement” means the issuance of an aggregate of 25,000,000 shares of Fusion Class A common stock pursuant to the Subscription Agreements to the PIPE Investors immediately before the Closing, at a purchase price of $10.00 per share.
“private placement warrants” means the 8,100,000 warrants issued to our Sponsor concurrently with our IPO, each of which is exercisable for one share of Fusion Class A common stock.
“Proposed Bylaws” means the proposed amended and restated bylaws to be adopted by Fusion immediately prior to the Closing, a copy of which is attached as Annex C to this proxy statement/prospectus.
“Proposed Charter” means the proposed fourth amended and restated certificate of incorporation to be adopted by Fusion pursuant to the Charter Proposal immediately prior to the Closing (and which at and after the Closing will operate as the fourth amended and restated certificate of incorporation of New MoneyLion), a copy of which is attached as Annex B to this proxy statement/prospectus.
“Public shares” means shares of Fusion Class A common stock included in the units issued in the IPO.
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“Public stockholders” means holders of public shares.
“Public warrants” means the warrants included in the units issued in the IPO, each of which is exercisable for one share of Fusion Class A common stock, in accordance with its terms.
“Sponsor” means Fusion Sponsor LLC, a Delaware limited liability company.
“Subscription Agreements” means the subscription agreements, each dated as of February 11, 2021, between Fusion and the PIPE Investors, pursuant to which Fusion has agreed to issue an aggregate of 25,000,000 shares of Fusion Class A common stock to the PIPE Investors immediately before the Closing at a purchase price of $10.00 per share, the form of which is attached to this proxy statement/prospectus as Annex D.
“Surviving Company” means the surviving corporation resulting from the merger of the Merger Sub with and into MoneyLion.
“Termination Date” means November 11, 2021.
“Transfer Agent” means Continental Stock Transfer & Trust Company.
“Trust Account” means the Trust Account of Fusion that holds the proceeds from Fusion’s IPO and the private placement of the private placement warrants.
“Trust Agreement” mean that certain Investment Management Trust Agreement, dated as of June 25, 2020, between Fusion and the Trustee.
“Trustee” means Continental Stock Transfer & Trust Company.
“Units” means the units of Fusion, each consisting of one share of Fusion Class A common stock and one-half (½) of one public warrant of Fusion.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus includes forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of Fusion and MoneyLion. These statements are based on the beliefs and assumptions of the management of Fusion and MoneyLion. Although Fusion and MoneyLion believe that their respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither Fusion nor MoneyLion can assure you that either will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. 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. RSM US LLP (“RSM”), MoneyLion’s independent auditor, has not examined, compiled or otherwise applied procedures with respect to the accompanying forward-looking financial information presented herein and, accordingly, expresses no opinion or any other form of assurance on it. The RSM report included in this proxy statement/prospectus relates to historical financial information of MoneyLion. It does not extend to the forward-looking information and should not be read as if it does. Forward-looking statements contained in this proxy statement/prospectus include, but are not limited to, statements about the ability of Fusion and MoneyLion prior to the Business Combination, and New MoneyLion following the Business Combination, to:
• meet the Closing conditions to the Business Combination, including approval by stockholders of Fusion and the availability of at least $260,000,000 of cash at the Closing, consisting of cash held in the Trust Account after taking into account the exercise by the holders of shares of Fusion Class A common stock issued in Fusion’s initial public offering of securities of their right to redeem such shares of Fusion Class A common stock in accordance with Fusion’s governing documents, if any, and cash received from PIPE Investors, net of transaction expenses of Fusion and MoneyLion;
• realize the benefits expected from the Business Combination;
• the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;
• the ability to obtain and/or maintain the listing of New MoneyLion’s Class A common stock on NYSE following the Business Combination;
• New MoneyLion’s ability to raise financing in the future and to comply with restrictive covenants related to long-term indebtedness;
• New MoneyLion’s success in retaining or recruiting, or changes required in, its officers, key employees or directors following the Business Combination;
• factors relating to the business, operations and financial performance of MoneyLion, including:
• New MoneyLion’s ability to comply with laws and regulations applicable to its business; and
• market conditions and global and economic factors beyond New MoneyLion’s control;
• intense competition and competitive pressures from other companies worldwide in the industries in which the combined company will operate;
• litigation and the ability to adequately protect New MoneyLion’s intellectual property rights; and
• other factors detailed under the section entitled “Risk Factors.”
These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this proxy statement/prospectus are more fully described under the heading “Risk Factors” and elsewhere in this proxy statement/prospectus. The risks described under the heading “Risk Factors” are not exhaustive. Other sections of this proxy statement/prospectus describe additional factors that could adversely affect the business, financial condition or results of operations of Fusion and MoneyLion prior to the Business
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Combination, and New MoneyLion following the Business Combination. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can Fusion or MoneyLion assess the impact of all such risk factors on the business of Fusion and MoneyLion prior to the Business Combination, and New MoneyLion following the Business Combination, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements, which speak only as of the date hereof. All forward-looking statements attributable to Fusion or MoneyLion or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements. Fusion and MoneyLion prior to the Business Combination, and New MoneyLion following the Business Combination, undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND THE SPECIAL MEETING
The following are answers to certain questions that you may have regarding the Business Combination and the Special Meeting. Fusion urges you to read carefully the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this proxy statement/prospectus.
Q: Why am I receiving this proxy statement/prospectus?
A: Fusion is proposing to consummate the Business Combination with MoneyLion. Fusion, Merger Sub and MoneyLion, have entered into the Merger Agreement, the terms of which are described in this proxy statement/ prospectus. A copy of the Merger Agreement is attached hereto as Annex A. Fusion urges its stockholders to read the Merger Agreement in its entirety.
The Merger Agreement must be adopted by the Fusion Stockholders in accordance with the DGCL and the Current Charter. Fusion is holding a Special Meeting to obtain that approval. Fusion Stockholders will also be asked to vote on certain other matters described in this proxy statement/prospectus at the Special Meeting and to approve the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies in the event there are not sufficient votes at the time of the Special Meeting to adopt the Merger Agreement and thereby approve the Business Combination.
THE VOTE OF FUSION STOCKHOLDERS IS IMPORTANT. FUSION STOCKHOLDERS ARE URGED TO SUBMIT THEIR PROXIES AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS AND CAREFULLY CONSIDERING EACH OF THE PROPOSALS BEING PRESENTED AT THE MEETING.
Q: Why is Fusion proposing the Business Combination?
A: Fusion was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more operating businesses.
Based on its due diligence investigations of MoneyLion and the industries in which it operates, including the financial and other information provided by MoneyLion in the course of Fusion’s due diligence investigations, the Fusion Board believes that the Business Combination with MoneyLion is in the best interests of Fusion and its stockholders and presents an opportunity to increase stockholder value. However, there can be no assurances of this.
Although the Fusion Board believes that the Business Combination with MoneyLion presents a unique business combination opportunity and is in the best interests of Fusion and its stockholders, the board of directors did consider certain potentially material negative factors in arriving at that conclusion. See “The Business Combination Proposal — The Fusion Board’s Reasons for Approval of the Business Combination” for a discussion of the factors considered by the Fusion Board in making its decision.
Q: What is MoneyLion?
A: MoneyLion Inc. is an all-in-one, digital financial platform that provides convenient, low-cost access to banking, borrowing and investing solutions tailored for its customers, rooted in data, and delivered through its proprietary technology platform. MoneyLion addresses its customers from a data-driven perspective of the individual and their specific circumstances. When customers enjoy periods of financial excess, MoneyLion provides tools for them to easily manage their spending and saving goals through its digital banking and automated investing solutions. When customers experience moments of financial need, MoneyLion provides them immediate access to innovative lending or advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health.
Q: What are the conditions to completion of the Business Combination?
A: The Closing is subject to certain conditions, including, among other things, (i) approval by Fusion’s stockholders and MoneyLion’s stockholders of the Merger Agreement, the Business Combination and certain other actions related thereto, (ii) the expiration or termination of the waiting period (or any extension thereof)
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applicable under the HSR Act, (iii) the absence of a material adverse effect with respect to MoneyLion, (iv) Fusion having at least $260,000,000 of cash at the Closing, consisting of cash held in the Trust Account after taking into account the exercise by the holders of shares of Fusion Class A common stock issued in Fusion’s initial public offering of securities of their right to redeem such shares of Fusion Class A common stock in accordance with Fusion’s governing documents, if any, and cash received from PIPE Investors, net of transaction expenses of Fusion and MoneyLion and (v) the continued listing of the shares of New MoneyLion common stock on the NYSE. Unless waived, if any of these conditions are not satisfied, the Business Combination may not be consummated. Furthermore, in no event will we redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001. See the section entitled “The Business Combination Proposal.”
Q: When and where will the Special Meeting take place?
A: The Special Meeting of Fusion Stockholders will be held on [•], 2021, at [•] New York City time, at [•].
In light of ongoing developments related to COVID-19, and the related protocols that governments have implemented, the Fusion Board determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast. The Fusion Board believes that this is the right choice for Fusion and its stockholders at this time, as it permits stockholders to attend and participate in the Special Meeting while safeguarding the health and safety of Fusion’s stockholders, directors and management team. You will be able to attend the Special Meeting online, vote, view the list of stockholders entitled to vote at the Special Meeting and submit your questions during the Special Meeting by visiting [•]. To participate in the virtual meeting, you will need a 12-digit control number assigned by Continental Stock Transfer & Trust Company. The meeting webcast will begin promptly at [•], New York City time. We encourage you to access the meeting prior to the start time and you should allow ample time for the check-in procedures. Because the Special Meeting will be a completely virtual meeting, there will be no physical location for stockholders to attend.
Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the Special Meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five business days prior to the meeting date in order to ensure access.
Q: What matters will be considered at the Special Meeting?
A: The Fusion Stockholders will be asked to consider and vote on the following proposals:
• a proposal to adopt the Merger Agreement and approve the Business Combination (the “Business Combination Proposal”);
• a proposal to approve, assuming the Business Combination Proposal is approved and adopted, the Proposed Charter (the “Charter Proposal”);
• a proposal to approve, on a non-binding advisory basis and as required by applicable SEC guidance, certain material differences between the Current Charter and the Proposed Charter (the “Advisory Charter Proposals”);
• to consider and vote upon a proposal to approve, assuming the Business Combination Proposal and the Charter Proposal are approved and adopted, for the purposes of complying with the applicable listing rules of the NYSE, the issuance of shares of New MoneyLion Class A common stock pursuant to the terms of the Merger Agreement (the “Stock Issuance Proposal”);
• to consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Charter Proposal and the Stock Issuance Proposal are approved and adopted, the MoneyLion Inc. Omnibus Incentive Plan (the “Incentive Plan Proposal”);
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• to consider and vote upon a proposal to approve, assuming the Business Combination Proposal, the Charter Proposal, the Stock Issuance Proposal and the Incentive Plan Proposal are approved and adopted, the MoneyLion Inc. Employee Stock Purchase Plan (the “ESPP Proposal”); and
• to consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, any of the condition precedent proposals would not be duly approved and adopted by our stockholders or we determine that one or more of the closing conditions under the Merger Agreement is not satisfied or waived (the “Adjournment Proposal”).
Q: Is my vote important?
A: Yes. The Business Combination cannot be completed unless the Merger Agreement is adopted by the Fusion Stockholders holding a majority of the votes cast on such proposal and the other condition precedent proposals achieve the necessary vote outlined below. Only Fusion Stockholders as of the close of business on [•], 2021, the record date for the Special Meeting, are entitled to vote at the Special Meeting. The Fusion Board unanimously recommends that such Fusion Stockholders vote “FOR” the approval of the Business Combination Proposal, “FOR” the approval of the Charter Proposal, “FOR” the approval, on an advisory basis, of the Advisory Charter Proposals, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the ESPP Proposal and “FOR” the approval of the Adjournment Proposal.
Q: If my shares are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically vote those shares for me?
A: No. A “broker non-vote” occurs when a broker submits a proxy that states that the broker does not vote for some or all of the proposals because the broker has not received instructions from the beneficial owners on how to vote on the proposals and does not have discretionary authority to vote in the absence of instructions. Under the relevant rules, brokers are not permitted to vote on any of the matters to be considered at the Special Meeting. As a result, your public shares will not be voted on any matter unless you affirmatively instruct your broker, bank or nominee how to vote your shares in one of the ways indicated by your broker, bank or other nominee. You should instruct your broker to vote your shares in accordance with directions you provide.
Q: What Fusion Stockholder vote is required for the approval of each proposal brought before the Special Meeting? What will happen if I fail to vote or abstain from voting on each proposal?
A: The Business Combination Proposal. Approval of the Business Combination Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. The failure to vote, abstentions and broker non-votes will have no effect on the outcome of the proposal. Our Sponsor, directors and executive officers have agreed to vote their shares in favor of the Business Combination Proposal. Our Sponsor currently owns approximately 20% of our outstanding common stock. Accordingly, if all of our outstanding shares were to be voted, we would only need the additional affirmative vote of shares representing approximately 37.5% of the outstanding shares in order to approve the Business Combination Proposal. Because the Business Combination Proposal only requires a majority of the votes cast at the Special Meeting in order to be approved and because a quorum will exist at the Special Meeting if a majority of the outstanding Fusion Shares as of the record date are present, the Business Combination Proposal could be approved by the additional affirmative vote of shares representing as little as 6.3% of the outstanding shares.
The Charter Proposal. Approval of the Charter Proposal requires the affirmative vote of the holders of at least a majority of the outstanding Fusion Shares entitled to vote thereon, voting as a single class. The failure to vote, abstentions and broker non-votes have the same effect as a vote “AGAINST” the proposal.
The Advisory Charter Proposals. Approval of each of the Advisory Charter Proposals, each of which is a non-binding vote, requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. The failure to vote, abstentions and broker non-votes have no effect on the outcome of the proposal.
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The Stock Issuance Proposal. Approval of the Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. The failure to vote and broker non-votes have no effect on the outcome of the proposal. However, the NYSE considers abstentions as “votes cast” and, therefore, abstentions will have the same effect as votes “AGAINST” this proposal.
The Incentive Plan Proposal. Approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. The failure to vote and broker non-votes have no effect on the outcome of the proposal. However, the NYSE considers abstentions as “votes cast” and, therefore, abstentions will have the same effect as votes “AGAINST” this proposal.
The ESPP Proposal. Approval of the ESPP Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by a proxy at the Special Meeting and entitled to vote thereon. The failure to vote and broker non-votes have no effect on the outcome of the proposal. However, the NYSE considers abstentions as “votes cast” and, therefore, abstentions will have the same effect as votes “AGAINST” this proposal.
The Adjournment Proposal. Approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. The failure to vote, abstentions and broker non-votes have no effect on the outcome of the proposal.
Q: What will MoneyLion’s equity holders receive in connection with the Business Combination?
A: The aggregate value of the consideration paid in respect of MoneyLion is $2,200,000,000.00. The aggregate consideration to be paid to MoneyLion stockholders shall be (i) shares of New MoneyLion Class A common stock (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash exceeds $260,000,000 and (B) $100,000,000, and (ii) the contingent right to receive a pro rata portion of up to 17,500,000 shares of New MoneyLion Class A common stock (the “Earn Out Shares”). See the “Sources and Uses of Funds for the Business Combination” section for more information. Pursuant to the Merger Agreement, the election to receive cash will be made after the Special Meeting of Fusion Stockholders and prior to the Closing. Consequently, at the time of the special meeting, you will not know or be able to determine the amount of cash consideration the MoneyLion stockholders will receive at Closing (if any). See “Risk Factors — Risks Related to Fusion and the Business Combination — Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting.” for more information.
Pursuant to the Merger Agreement, at the Effective Time, the stock consideration to be issued to the then current holders of stock in MoneyLion will be in the form of New MoneyLion Class A common stock.
Additionally, each outstanding option to purchase shares of MoneyLion common stock (a “MoneyLion option”) that is outstanding and unexercised, whether or not then vested or exercisable, will be assumed by New MoneyLion and will be converted into an option to acquire New MoneyLion Class A common stock with the same terms and conditions as applied to the MoneyLion option immediately prior to the Effective Time; provided that the number of shares underlying such New MoneyLion option will be determined by multiplying the number of shares of MoneyLion common stock subject to such option immediately prior to the Effective Time, by the ratio determined by dividing the per share merger consideration value by $10.00 (the quotient being the “option exchange ratio”), which product shall be rounded down to the nearest whole number of shares, and the per share exercise price of such New MoneyLion option will be determined by dividing the per share exercise price immediately prior to the Effective Time by the option exchange ratio, which quotient shall be rounded up to the nearest whole cent.
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Pursuant to the Merger Agreement, at the Effective Time, each warrant to purchase shares of MoneyLion capital stock that is issued and outstanding prior to the Effective Time and has not been exercised or terminated pursuant to its terms will be assumed and converted into a warrant exercisable for shares of Class A common stock of New MoneyLion.
In addition, the Merger Agreement contemplates that the Earn Out Participants (as defined in the Merger Agreement), following the closing of the Business Combination and for a period of five years thereafter (the “Earn Out Period”), will be eligible to receive the Earn Out Shares contingent on the occurrence of certain triggering events (each a “Triggering Event”) as follows:
• a one-time issuance of 7,500,000 Earn Out Shares, if after the Closing Date (but during the Earn Out Period), the closing price of the shares of New MoneyLion Class A common stock is equal to or greater than $12.50 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, which will be paid within five business days of such Triggering Event;
• a one-time issuance of 10,000,000 Earn Out Shares, if after the Closing Date (but during the Earn Out Period), the closing price of the shares of New MoneyLion Class A common stock is equal to or greater than $16.50 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, which will be paid within five business days of such Triggering Event; and
Each Triggering Event may only occur once, if at all, and in no event will the amount of Earn Out Shares distributed in connection with the Triggering Events exceed 17,500,000 aggregate shares. Any Earn Out Shares to be released and distributed shall be released and distributed as shares of New MoneyLion common stock.
Q: What equity stake will current Fusion Stockholders and MoneyLion stockholders hold in New MoneyLion immediately after the consummation of the Business Combination?
A: It is anticipated that, upon completion of the Business Combination, the ownership interests in New MoneyLion will be as set forth in the tables below:
(Assuming No Release of Earn Out Shares) |
Assuming No Redemptions of Public Shares |
Percentage |
Assuming Maximum Redemptions of Public Shares(1) |
Percentage |
|||||||||
MoneyLion stockholders(2) |
210,000,000 |
(2) |
75.3 |
% |
220,000,000 |
83.9 |
% |
||||||
Fusion public stockholders |
35,000,000 |
|
12.6 |
% |
8,324,377 |
3.8 |
% |
||||||
PIPE Investors |
25,000,000 |
|
9.0 |
% |
25,000,000 |
9.5 |
% |
||||||
Sponsor |
8,750,000 |
|
3.1 |
% |
8,750,000 |
3.3 |
% |
||||||
278,750,000 |
|
|
|
262,074,377 |
|
|
___________ |
||||
(1) |
Assumes that holders of 26,675,623 public shares exercise their redemption rights in connection with the Business Combination (maximum redemption scenario based on approximately $350 million held in trust as of March 31, 2021 and a redemption price of $10.00 per share). The maximum redemptions figures shown in this proxy statement/prospectus are based on the closing conditions in the Merger Agreement, which may be waived by MoneyLion and Fusion under certain circumstances. Accordingly, actual redemptions may exceed the maximum redemption figures shown in this proxy statement/prospectus. |
|||
(2) |
Assumes that the aggregate cash consideration elected by MoneyLion is $100 million in the no redemption scenario and $0 in the maximum redemption scenario and all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination (and do not automatically terminate) elect to exercise their options or warrants prior to the closing of the Business Combination. If MoneyLion elects not to receive any cash consideration at the Closing, in the no redemption scenario, the amount would be 220,000,000 shares. If MoneyLion elects to receive the maximum amount of cash consideration at the Closing, in the maximum redemption scenario, the amount would be 217,160,623 shares. |
|||
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The MoneyLion warrants currently outstanding represent 902,917 shares of MoneyLion common stock on an as-converted basis. Of those outstanding warrants, (i) MoneyLion warrants representing 12,792 shares of MoneyLion common stock on an as-converted basis will automatically excercise and convert into MoneyLion common stock immediately prior to Closing, and the holders of such shares of MoneyLion common stock will participate in the merger consideration on the same basis as all other holders of MoneyLion common stock, (ii) MoneyLion warrants representing 331,891 shares of MoneyLion common stock on an as-converted basis will terminate at Closing in accordance with their respective terms without converting into shares of MoneyLion common stock and (iii) the remaining outstanding MoneyLion warrants (which represent 558,234 shares of MoneyLion common stock on an as-converted basis) are exercisable at the discretion of their respective holders either before or after the consummation of the merger. If any holder of such excercisable MoneyLion warrants elects to exercise its MoneyLion warrants before Closing, such holder will receive MoneyLion common stock or MoneyLion preferred stock (as applicable), which will convert into shares of New MoneyLion Class A common stock at Closing on the same basis as other MoneyLion stockholders. If such holder does not elect to exercise its MoneyLion warrants before Closing, immediately after Closing each such warrant will automatically convert into a warrant to acquire a number of New MoneyLion Class A common stock that the holder of such warrant would have received as a result of the merger had such warrant been exercised before Closing. The MoneyLion options currently outstanding represent 2,378,777 shares of MoneyLion common stock on an as-converted basis. MoneyLion options representing 1,025,056 shares of MoneyLion common stock on an as-converted basis are excercisable at the discretion of their respective holders either before or after the consummation of the merger. If any holder of such excercisable MoneyLion options elects to exercise its MoneyLion options before Closing, such holder will receive MoneyLion common stock, which will convert into shares of New MoneyLion Class A common stock at Closing on the same basis as other MoneyLion stockholders. If such holder does not elect to exercise its MoneyLion options before Closing, immediately after Closing each such option will automatically convert into an option to acquire a number of New MoneyLion Class A common stock that the holder of such option would have received as a result of the merger had such option been exercised before Closing. |
For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”
(Assuming Full Release of Earn Out Shares) |
Assuming No Redemptions of Public Shares |
Percentage |
Assuming Maximum Redemptions of Public Shares(1) |
Percentage |
|||||||||
MoneyLion stockholders(2) |
227,500,000 |
(2) |
76.8 |
% |
237,500,000 |
85.0 |
% |
||||||
Fusion public stockholders |
35,000,000 |
|
11.8 |
% |
8,324,377 |
2.8 |
% |
||||||
PIPE Investors |
25,000,000 |
|
8.4 |
% |
25,000,000 |
8.9 |
% |
||||||
Sponsor |
8,750,000 |
|
3.0 |
% |
8,750,000 |
3.1 |
% |
||||||
296,250,000 |
|
|
279,574,377 |
|
___________ |
||||
(1) |
Assumes that holders of 26,675,623 public shares exercise their redemption rights in connection with the Business Combination (maximum redemption scenario based on approximately $350 million held in trust as of March 31, 2021 and a redemption price of $10.00 per share). The maximum redemptions figures shown in this proxy statement/prospectus are based on the closing conditions in the Merger Agreement, which may be waived by MoneyLion and Fusion under certain circumstances. Accordingly, actual redemptions may exceed the maximum redemption figures shown in this proxy statement/prospectus. |
|||
(2) |
Assumes that the aggregate cash consideration elected by MoneyLion is $100 million in the no redemption scenario and $0 in the maximum redemption scenario and all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination (and do not automatically terminate) elect to exercise their options or warrants prior to the closing of the Business Combination. If MoneyLion elects not to receive any cash consideration at the Closing, in the no redemption scenario, the amount would be 237,500,000 shares. If MoneyLion elects to receive the maximum amount of cash consideration at the Closing, in the maximum redemption scenario, the amount would be 234,660,623 shares. |
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The MoneyLion warrants currently outstanding represent 902,917 shares of MoneyLion common stock on an as-converted basis. Of those outstanding warrants, (i) MoneyLion warrants representing 12,792 shares of MoneyLion common stock on an as-converted basis will automatically excercise and convert into MoneyLion common stock immediately prior to Closing, and the holders of such shares of MoneyLion common stock will participate in the merger consideration on the same basis as all other holders of MoneyLion common stock, (ii) MoneyLion warrants representing 331,891 shares of MoneyLion common stock on an as-converted basis will terminate at Closing in accordance with their respective terms without converting into shares of MoneyLion common stock and (iii) the remaining outstanding MoneyLion warrants (which represent 558,234 shares of MoneyLion common stock on an as-converted basis) are exercisable at the discretion of their respective holders either before or after the consummation of the merger. If any holder of such excercisable MoneyLion warrants elects to exercise its MoneyLion warrants before Closing, such holder will receive MoneyLion common stock or MoneyLion preferred stock (as applicable), which will convert into shares of New MoneyLion Class A common stock at Closing on the same basis as other MoneyLion stockholders. If such holder does not elect to exercise its MoneyLion warrants before Closing, immediately after Closing each such warrant will automatically convert into a warrant to acquire a number of New MoneyLion Class A common stock that the holder of such warrant would have received as a result of the merger had such warrant been exercised before Closing. The MoneyLion options currently outstanding represent 2,378,777 shares of MoneyLion common stock on an as-converted basis. MoneyLion options representing 1,025,056 shares of MoneyLion common stock on an as-converted basis are excercisable at the discretion of their respective holders either before or after the consummation of the merger. If any holder of such excercisable MoneyLion options elects to exercise its MoneyLion options before Closing, such holder will receive MoneyLion common stock, which will convert into shares of New MoneyLion Class A common stock at Closing on the same basis as other MoneyLion stockholders. If such holder does not elect to exercise its MoneyLion options before Closing, immediately after Closing each such option will automatically convert into an option to acquire a number of New MoneyLion Class A common stock that the holder of such option would have received as a result of the merger had such option been exercised before Closing. |
||||
For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” |
As of the date of this proxy statement/prospectus, there are warrants to acquire a number of shares of MoneyLion preferred stock or MoneyLion common stock equal to 558,234 shares of MoneyLion common stock following the conversion of all MoneyLion preferred stock into MoneyLion common stock in accordance with MoneyLion’s organizational documents that are exercisable at the option of the warrant holder prior to or in connection with the Closing, but are not automatically exercised in connection with the Business Combination. If unexercised at the Closing, each such warrant shall be converted into a warrant to acquire a number of shares of New MoneyLion Class A common stock the holder of such warrant would have received had such warrant been exercised prior to the Closing and shall be exercisable at the option of the warrant holder. There are also currently 2,378,777 outstanding options to acquire shares of MoneyLion common stock, of which 1,025,056 are exercisable at the option of the optionholder prior to or in connection with the Closing, but are not automatically exercised in connection with the Business Combination. If unexercised at the Closing, each such option (whether vested or unvested) shall be converted into an option to acquire a number of shares of New MoneyLion Class A common stock the holder of such option would have received had such option been exercised prior to the Closing and shall be exercisable at the option of the optionholder.
In addition, there are currently outstanding an aggregate of 25,600,000 warrants to acquire shares of Fusion Class A common stock, which comprise 8,100,000 private placement warrants held by our initial stockholders and 17,500,000 public warrants. Each of our outstanding whole warrants is exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020, for one share of Fusion Class A common stock and, following the Closing, will entitle the holder thereof to purchase one share of New MoneyLion Class A common stock in accordance with its terms. Therefore,
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as of the date of this proxy statement/prospectus, if we assume that each outstanding whole warrant is exercised and one share of New MoneyLion Class A common stock is issued as a result of such exercise, with payment to New MoneyLion of the exercise price of $11.50 per warrant for one whole share, our fully diluted share capital would increase by a total of 25,600,000 shares, with approximately $294,400,000 paid to exercise the warrants.
Q: How will I be notified of the outcome of MoneyLion’s stockholder vote to approve the Business Combination and whether MoneyLion has decided to receive cash consideration at Closing?
A: Pursuant to the terms of the Merger Agreement, MoneyLion will not make its election to receive cash consideration until after the Special Meeting. As such, Fusion’s stockholders will not know what portion of the merger consideration will be paid in cash (if any) prior to casting their vote at the Special Meeting. Fusion plans to disclose whether MoneyLion has elected to receive cash consideration at Closing in its “Super 8-K”, which will be filed within four business days of the Closing. For more information on the consideration to be paid by Fusion in connection with the Business Combination, please see the question entitled “— What will MoneyLion’s equity holders receive in connection with the Business Combination?” above, “Risk Factors — Risks Related to Fusion and the Business Combination — Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting” and the section entitled “The Business Combination Proposal — Consideration to MoneyLion Stockholders and Fusion Stockholders.” For more information on the expected ownership of New MoneyLion after the Closing, please see the question entitled “— What equity stake will current Fusion Stockholders and MoneyLion stockholders hold in New MoneyLion immediately after the consummation of the Business Combination?” above.
Q: Do MoneyLion’s stockholders need to approve the Business Combination?
A: Yes. In connection with and following the execution of the Merger Agreement, Fusion entered into support agreements with certain MoneyLion stockholders (the “MoneyLion Support Agreements”), pursuant to which such MoneyLion stockholders agreed, among other things, to vote (whether pursuant to a duly convened meeting of MoneyLion’s stockholders or pursuant to an action by written consent) in favor of the adoption and approval of the Business Combination and any of the documents and transactions contemplated by the Merger Agreement thereto following the time at which the registration statement to which this proxy statement/prospectus forms a part shall have been declared effective under the Securities Act and delivered or otherwise made available to the MoneyLion stockholders. The shares of MoneyLion common stock and MoneyLion preferred stock held by the MoneyLion stockholders that entered into the MoneyLion Support Agreements represent (i) a majority of the outstanding voting power of the MoneyLion preferred stock, voting as a separate class, and (ii) a majority of the outstanding voting power of MoneyLion common stock and MoneyLion preferred stock (on an as converted basis), voting together as a single class. The shares of MoneyLion common stock and MoneyLion preferred stock subject to the MoneyLion Support Agreements represent the requisite majority to approve the Business Combination and any of the documents and transactions contemplated by the Merger Agreement thereto.
Q: What happens to the funds deposited in the Trust Account after consummation of the Business Combination?
A: A total of $350 million, including approximately $13,150,000 of underwriters’ deferred discount and approximately $8,100,000 of the proceeds of the sale of the private placement warrants, was placed in a Trust Account maintained by Continental, acting as trustee. As of March 31, 2021, there were investments and cash held in the Trust Account of $350,279,969. These funds will not be released until the earlier of Closing or the redemption of our public shares if we are unable to complete an initial Business Combination by December 31, 2021, although we may withdraw the interest earned on the funds held in the Trust Account to pay taxes.
Q: What happens if a substantial number of the public stockholders vote in favor of the Business Combination Proposal and exercise their redemption right?
A: Fusion Stockholders who vote in favor of the Business Combination may also nevertheless exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of public stockholders are reduced as a result of redemptions by public stockholders. Nonetheless, the consummation of the Business Combination is conditioned upon,
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among other things, Fusion having an aggregate cash amount of at least $260,000,000 of cash at the Closing, consisting of cash held in the Trust Account after taking into account the exercise by the holders of shares of Fusion Class A common stock issued in Fusion’s initial public offering of securities of their right to redeem such shares of Fusion Class A common stock in accordance with Fusion’s governing documents, if any, and cash received from PIPE Investors, net of transaction expenses of Fusion and MoneyLion (the “Minimum Proceeds Condition”) (though this condition may be waived by MoneyLion). Fusion intends to notify Fusion Stockholders by press release promptly after it becomes aware that MoneyLion has waived this condition. In addition, with fewer public shares and public stockholders, the trading market for New MoneyLion Class A common stock may be less liquid than the market for Fusion Class A common stock was prior to consummation of the Business Combination and New MoneyLion may not be able to meet the listing standards for the NYSE or another national securities exchange. In addition, with less funds available from the Trust Account, the working capital infusion from the Trust Account into New MoneyLion’s business will be reduced. As a result, the proceeds will be greater in the event that no public stockholders exercise redemption rights with respect to their public shares for a pro rata portion of the Trust Account as opposed to the scenario in which Fusion’s public stockholders exercise the maximum allowed redemption rights.
Furthermore, our Current Charter provides that we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Merger Agreement. Other than this limitation, our Current Charter does not provide a specified maximum redemption threshold.
Q: What amendments will be made to the Current Charter?
A: We are asking Fusion Stockholders to approve the Proposed Charter that will be effective upon the consummation of the Business Combination. The Proposed Charter provides for various changes that the Fusion Board believes are necessary to address the needs of the post-Business Combination company, including, among other things: (i) changing the post-combination company’s name to MoneyLion Inc., (ii) removing the blank check company provisions, (iii) changing the stock classes and the total number of authorized shares of common stock to 2,200,000,000 shares, (iv) changing the stockholder vote required to 662/3% in voting power of then outstanding shares of New MoneyLion Class A common stock to (A) alter, amend or repeal the bylaws, (B) remove a director and (C) amend, alter or repeal certain provisions of the Proposed Charter and (v) providing that stockholders may not take action by written consent.
Pursuant to the DGCL and the Current Charter, Fusion is required to submit the Charter Proposal to the Fusion Stockholders for approval. For additional information, see the section entitled “The Charter Proposal.”
Q: What material negative factors did the Fusion Board consider in connection with the Business Combination?
A: Although the Fusion Board believes that the acquisition of MoneyLion will provide the Fusion Stockholders with an opportunity to participate in a combined company with significant growth potential, market share and a well-known brand, the Fusion Board did consider certain potentially material negative factors in arriving at that conclusion, such as the risk that Fusion Stockholders would not approve the Business Combination and the risk that significant numbers of Fusion Stockholders would exercise their redemption rights. In addition, during the course of Fusion management’s evaluation of MoneyLion’s operating business and its public company potential, management conducted detailed due diligence on certain potential challenges. Some factors that both Fusion management and the Fusion Board considered were (i) the ability to unlock and enhance shareholder value, (ii) the ability of the business to innovate through new operation techniques, (iii) the business’s ability to demonstrate advantages when compared to their competitors, (iv) the creation of a growing environment toward digital banking and (v) the financial profile of the business and its prospects for continued growth. These factors are discussed in greater detail in the section entitled “The Business Combination Proposal — Fusion’s Board of Directors ‘Reasons for Approval of the Business Combination” as well as in the section entitled “Risk Factors — Risk Factors Relating to the Business Combination and Integration of MoneyLion’s Business.”
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Q: Do I have redemption rights?
A: If you are a public stockholder, you have the right to request that Fusion redeem all or a portion of your public shares for cash, provided that you follow the procedures and deadlines described elsewhere in this proxy statement/prospectus under the heading “The Special Meeting — Redemption Rights” Public stockholders may elect to redeem all or a portion of their public shares even if they vote for the Business Combination Proposal. We sometimes refer to these rights to elect to redeem all or a portion of the public shares into a pro rata portion of the cash held in the Trust Account as “redemption rights.”
If you wish to exercise your redemption rights, please see the answer to the next question: “How do I exercise my redemption rights?”
Notwithstanding the foregoing, a public stockholder, together with any affiliate of such public stockholder or any other person with whom such public stockholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public stockholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
Our Sponsor, directors and executive officers entered into the insider letter agreement, pursuant to which they agreed to waive their redemption rights with respect to their shares in connection with the completion of a business combination.
Q: How do I exercise my redemption rights?
A: If you are a public stockholder and wish to exercise your right to redeem your public shares, you must:
(i) (a) hold public shares or (b) hold public shares through units and elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares; and
(ii) prior to , New York City time, on , 2021, (a) submit a written request to Continental that Fusion redeem your public shares for cash and (b) deliver your public shares to Continental, physically or electronically through the DTC.
The address of Continental is listed under the question “Whom do I call if I have questions about the Special Meeting or the Business Combination?” below.
Holders of units must elect to separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact Continental directly and instruct them to do so.
Any public stockholder will be entitled to request that their public shares be redeemed for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares. For illustrative purposes, as of March 31, 2021, this would have amounted to approximately $10.00 per public share. However, the proceeds deposited in the Trust Account could become subject to the claims of our creditors, if any, which could have priority over the claims of our public stockholders, regardless of whether such public stockholders vote for or against the Business Combination Proposal. Therefore, the per-share distribution from the Trust Account in such a situation may be less than originally anticipated due to such claims. Your vote on any proposal other than the Business Combination Proposal will have no impact on the amount you will receive upon exercise of your redemption rights. It is anticipated that the funds to be distributed to public stockholders electing to redeem their public shares will be distributed promptly after the consummation of the Business Combination.
If you are a holder of public shares, you may exercise your redemption rights by submitting your request in writing to Continental at the address listed under the question “ Whom do I call if I have questions about the Special Meeting or the Business Combination?” below.
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Any request for redemption, once made by a holder of public shares, may be withdrawn at any time up to the deadline for submitting redemption requests, which is [•], 2021 (two business days prior to the date of the Special Meeting), and thereafter, with our consent, until the Closing. If you deliver your shares for redemption to Continental and later decide prior to the deadline for submitting redemption requests not to elect redemption, you may request that Fusion instruct Continental to return the shares to you (physically or electronically). You may make such request by contacting Continental at the phone number or address listed at the end of this section.
Any corrected or changed written exercise of redemption rights must be received by Fusion’s secretary prior to the deadline for submitting redemption requests. No request for redemption will be honored unless the holder’s stock has been delivered (either physically or electronically) to Continental prior to [•], New York City time, on [•], 2021.
If you are a holder of public shares and you exercise your redemption rights, it will not result in the loss of any Fusion warrants that you may hold.
Q: If I am a holder of units, can I exercise redemption rights with respect to my units?
A: No. Holders of outstanding units must elect to separate the units into the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If you hold your units in an account at a brokerage firm or bank, you must notify your broker or bank that you elect to separate the units into the underlying public shares and public warrants, or if you hold units registered in your own name, you must contact Continental, Fusion’s transfer agent, directly and instruct them to do so. If you fail to cause your units to be separated and delivered to Continental, Fusion’s transfer agent, prior to [•], New York City time, on [•], 2021, you will not be able to exercise your redemption rights with respect to your public shares.
Q: What are the U.S. federal income tax consequences of exercising my redemption rights?
A: The U.S. federal income tax consequences of exercising your redemption rights depend on your particular facts and circumstances. It is possible that you may be treated as selling your public shares for cash and, as a result, recognize capital gain or capital loss. It is also possible that the redemption may be treated as a distribution for U.S. federal income tax purposes depending on the number of public shares that you own or are deemed to own (including through the ownership of New MoneyLion warrants). Any portion of such a distribution to you if you are a Non-U.S. holder (as defined below) that constitutes a dividend for U.S. federal income tax purposes will generally be subject to withholding tax at a rate of 30% of the gross amount of the dividend (unless you establish that you are eligible for a reduced rate of withholding tax under an applicable income tax treaty or certain other exceptions apply). Because the determination as to whether a redemption is treated as a sale or a distribution is dependent on matters of fact, withholding agents may presume, for withholding purposes, that all amounts paid to Non-U.S. holders in connection with a redemption are treated as distributions in respect of such Non-U.S. holder’s public shares. Accordingly, if you are a Non-U.S. holder, you should expect that a withholding agent will likely withhold U.S. federal income tax on the gross proceeds payable to you pursuant to a redemption at a rate of 30% unless you are eligible for a reduced rate of withholding tax under an applicable income tax treaty and provide proper certification of your eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E, or other applicable IRS Form W-8). For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “Material U.S. Federal Income Tax Considerations.”
TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF EXERCISING YOUR REDEMPTION RIGHTS WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE EXERCISE OF REDEMPTION RIGHTS TO YOU IN YOUR PARTICULAR CIRCUMSTANCES.
Q: How does the Fusion Board recommend that I vote?
A: The Fusion Board recommends that the Fusion Stockholders vote “FOR” the approval of the Business Combination Proposal, “FOR” the approval of the Charter Proposal, “FOR” the approval, on an advisory basis, of the Advisory Charter Proposals, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the ESPP Proposal and “FOR” the approval of
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the Adjournment Proposal. For more information regarding how the board of directors of Fusion recommends that Fusion Stockholders vote, see the section entitled “The Business Combination Proposal — The Fusion Board’s Reasons for Approval of the Business Combination.”
Q: How does our Sponsor intend to vote its shares?
A: In connection with the execution of the Merger Agreement, our Sponsor entered into the Sponsor Support Agreement, pursuant to which, among other things, it agreed to vote its shares in favor of the Business Combination Proposal and all other proposals being presented at the Special Meeting. Our Sponsor currently owns approximately 20% of our outstanding common stock. Accordingly, if all of our outstanding shares were to be voted, we would need the affirmative vote of approximately 37.5% of the remaining shares to approve the Business Combination.
Q: May the Sponsor purchase public shares or warrants prior to the Special Meeting?
A: At any time prior to the Special Meeting, during a period when they are not then aware of any material nonpublic information regarding Fusion or its securities, the Sponsor, MoneyLion and/or its affiliates may purchase shares and/or warrants from investors, or they may enter into transactions with such investors and others to provide them with incentives to acquire public shares or vote their public shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood that (i) the proposals presented for approval at the Special Meeting are approved and/or (ii) Fusion satisfies the Minimum Proceeds Condition. Any such stock purchases and other transactions may thereby increase the likelihood of obtaining stockholder approval of the Business Combination Proposal. This may result in the completion of our Business Combination in a way that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares or rights owned by the Sponsor for nominal value.
Entering into any such arrangements may have a depressive effect on public shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares it owns, either prior to or immediately after the Special Meeting.
If such transactions are effected, the consequence could be to cause the Business Combination Proposal to be approved in circumstances where such approval could not otherwise be obtained. Purchases of public shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the Special Meeting and would likely increase the chances that such proposals would be approved. As of the date of this proxy statement/prospectus, there have been no such discussions and no agreements to such effect have been entered into with any such investor or holder.
Q: What interests do the Sponsor and Fusion’s current officers and directors have in the Business Combination?
A: The Sponsor and Fusion’s directors and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination. These interests include the following:
• Our Sponsor will lose its entire investment in us if we do not complete a business combination by December 31, 2021. If we are unable to complete our initial business combination by December 31, 2021, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
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• There will be no liquidating distributions from the Trust Account with respect to the founder shares if we fail to complete a business combination within the required period. Our Sponsor purchased the founder shares prior to our initial public offering for an aggregate purchase price of $25,000. Upon the Closing, such founder shares will convert into 8,750,000 shares of New MoneyLion Class A common stock (assuming no founder shares are forfeited by the Sponsor at Closing), and such shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would have an aggregate market value of approximately $87.1 million based upon the closing price of $9.95 per public share on the NYSE on June 7, 2021, but, given the restrictions on such shares, we believe such shares have less value.
• Simultaneously with the closing of its initial public offering, Fusion consummated the sale of 8,100,000 private placement warrants at a price of $1.00 per warrant in a private placement to our Sponsor. The warrants are each exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020, for one share of Class A common stock at $11.50 per share. If we do not consummate a business combination transaction by December 31, 2021, then the proceeds from the sale of the private placement warrants will be part of the liquidating distribution to the public stockholders and the warrants held by our Sponsor will be worthless. The warrants held by our Sponsor had an aggregate market value of approximately $10.1 million based upon the closing price of $1.25 per warrant on the NYSE on June 7, 2021.
• Jeff Gary is expected to continue to serve as a director of New MoneyLion after the Closing. As such, in the future he may receive any cash fees, stock options or stock awards that the New MoneyLion Board determines to pay to its directors.
• Our Sponsor, directors and executive officers have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if Fusion fails to complete a business combination by December 31, 2021.
• In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have entered into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under our indemnity of the underwriters of the offering against certain liabilities, including liabilities under the Securities Act.
• Following the Closing, our Sponsor would be entitled to the repayment of any working capital loan and advances that have been made to Fusion and remain outstanding. As of the date of this proxy statement/prospectus, our Sponsor has not made any advances to us for working capital expenses. If we do not complete an initial business combination within the required period, we may use a portion of our working capital held outside the Trust Account to repay the working capital loans, but no proceeds held in the Trust Account would be used to repay the working capital loans.
• Following the consummation of the Business Combination, we will continue to indemnify our existing directors and officers and will maintain a directors’ and officers’ liability insurance policy.
• Upon the Closing, subject to the terms and conditions of the Merger Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Fusion from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination.
These interests may influence Fusion’s directors in making their recommendation that you vote in favor of the approval of the Business Combination.
Q: Will the management of New MoneyLion change in connection with the Closing?
A: We anticipate that all of the executive officers of MoneyLion will continue to serve in such capacities for New MoneyLion after the Closing. In addition, we expect that each of the current Fusion directors, other than Jeff Gary, will resign upon the Closing and each of John Chrystal, Diwakar (Dee) Choubey, Gregory DePetris,
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Chris Sugden, Lisa Gersh, Matt Derella, Michael Paull, Annette Nazareth and Ambassador (Ret) Dwight L. Bush will be appointed to serve as directors of the post-combination company upon the Closing. For additional information, please see the section entitled “New MoneyLion Management After the Business Combination.”
Q: Who is entitled to vote at the Special Meeting?
A: The Fusion Board has fixed [•], 2021 as the record date for the Special Meeting. All holders of record of Fusion Shares as of the close of business on the record date are entitled to receive notice of, and to vote at, the Special Meeting, provided that those shares remain outstanding on the date of the Special Meeting. Physical attendance at the Special Meeting is not required to vote. See the section entitled “Questions and Answers About the Business Combination and the Special Meeting — How can I vote my shares without attending the Special Meeting?” for instructions on how to vote your Fusion Shares without attending the Special Meeting.
Q: How many votes do I have?
A: Each Fusion Stockholder of record is entitled to one vote for each Fusion Share held by such holder as of the close of business on the record date. As of the close of business on the record date, there were [•] outstanding Fusion Shares.
Q: What constitutes a quorum for the Special Meeting?
A: A quorum is the minimum number of stockholders necessary to hold a valid meeting.
A quorum will exist at the Special Meeting with respect to each matter to be considered at the Special Meeting if the holders of a majority of the outstanding Fusion Shares as of the record date present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting. All shares represented by proxy are counted as present for purposes of establishing a quorum.
Q: What will happen to my Fusion Shares as a result of the Business Combination?
A: If the Business Combination is completed, each share of Fusion Class B common stock will be converted into one share of Fusion Class A common stock in accordance with the terms of the Current Charter and each then outstanding share of Fusion Class A common stock will automatically become a share of MoneyLion Class A common stock. See the section entitled “The Business Combination Proposal — Consideration to MoneyLion Stockholders and Fusion Stockholders” for more information.
Q: Where will the New MoneyLion Class A common stock that Fusion Stockholders receive in the Business Combination be publicly traded?
A: Assuming the Business Combination is completed, the shares of New MoneyLion Class A common stock (including the New MoneyLion Class A common stock issued in connection with the Business Combination) will be listed and traded on the NYSE under the ticker symbol “ML” and the public warrants will be listed and traded on the NYSE under the ticker symbol “ML WS.”
Q: What happens if the Business Combination is not completed?
A: If the Closing has not occurred by the date that is nine months following the date of the Merger Agreement, then we will seek to consummate an alternative initial business combination prior to December 31, 2021. If we do not consummate an initial business combination by December 31, 2021, we will cease all operations except for the purpose of winding up and redeem our public shares and liquidate the Trust Account, in which case our public stockholders may only receive approximately $10.00 per share and our warrants will expire worthless.
Q: How can I attend and vote my shares at the Special Meeting?
A: If you were the record holder of shares of our common stock as of the record date, you may submit your proxy to vote such shares by mail or at the Special Meeting.
Voting by Mail
• To submit your proxy by mail, simply mark your proxy card, date and sign it and return it in the postage-paid envelope. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.
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• If you vote by mail, your proxy card must be received no later than the close of business, Eastern time, on [•], 2021.
Please carefully consider the information contained in this proxy statement and, whether or not you plan to attend the Special Meeting, please vote by mail so that your shares will be voted in accordance with your wishes even if you later decide not to attend the Special Meeting.
Voting at the Special Meeting
• We encourage you to vote by mail. If you attend the Special Meeting, you may also submit your vote at the Special Meeting via the Special Meeting website at [•], in which case any votes that you previously submitted by mail will be superseded by the vote that you cast at the Special Meeting. If your proxy is properly completed and submitted, and if you do not revoke it prior to or at the Special Meeting, your shares will be voted at the Special Meeting in the manner set forth in proxy statement or as otherwise specified by you. Again, your paper proxy card must be received by mail no later than the close of business, Eastern time, on [•], 2021.
Voting of Shares Held in Street Name
• If your shares are held in an account at a broker, bank, or nominee (i.e., in “street name”), you must provide the record holder of your shares with instructions on how to vote the shares. Please follow the voting instructions provided by the broker, bank, or nominee. See the section entitled “The Special Meeting of Stockholders — Voting Your Shares — Beneficial Owners” for more information.
Q: How can I vote my shares without attending the Special Meeting?
A: If you are a stockholder of record of Fusion Shares as of the close of business on [•], 2021, the record date, you can vote by mail by following the instructions provided in the enclosed proxy card. Please note that if you hold your shares in “street name,” which means your shares are held of record by a broker, bank or nominee, you should contact your broker to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the broker, bank or nominee with instructions on how to vote your shares, or otherwise follow the instructions provided by your bank, brokerage firm or other nominee.
Q: What is a proxy?
A: A proxy is a legal designation of another person to vote the stock you own. If you are a stockholder of record of Fusion Shares as of the close of business on the record date, and you vote by phone, by Internet or by signing, dating and returning your proxy card in the enclosed postage-paid envelope, you designate two of Fusion’s officers as your proxies at the Special Meeting, each with full power to act without the other and with full power of substitution. These two officers are John James and Jeff Gary.
Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?
A: If your Fusion Shares are registered directly in your name with Continental you are considered the stockholder of record with respect to those shares, and access to proxy materials is being provided directly to you. If your shares are held in a stock brokerage account or by a bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in street name. Access to proxy materials is being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.
Direct holders (stockholders of record). For Fusion Shares held directly by you, please complete, sign, date and return each proxy card (or cast your vote by telephone or Internet as provided on each proxy card) or otherwise follow the voting instructions provided in this proxy statement/prospectus in order to ensure that all of your Fusion Shares are voted.
Shares in “street name.” For Fusion Shares held in “street name” through a bank, brokerage firm or other nominee, you should follow the procedures provided by your bank, brokerage firm or other nominee to vote your shares.
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Q: If a Fusion Stockholder gives a proxy, how will the Fusion Shares covered by the proxy be voted?
A: If you provide a proxy by returning the applicable enclosed proxy card, the individuals named on the enclosed proxy card will vote your Fusion Shares in the way that you indicate when providing your proxy in respect of the Fusion Shares you hold. When completing the proxy card, you may specify whether your Fusion Shares should be voted FOR or AGAINST, or should be abstained from voting on, all, some or none of the specific items of business to come before the Special Meeting.
Q: How will my Fusion Shares be voted if I return a blank proxy?
A: If you sign, date and return your proxy and do not indicate how you want your Fusion Shares to be voted, then your Fusion Shares will be voted “FOR” the approval of the Business Combination Proposal, “FOR” the approval of the Charter Proposal, “FOR” the approval, on an advisory basis, of the Advisory Charter Proposals, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the ESPP Proposal and “FOR” the approval of the Adjournment Proposal.
Q: Can I change my vote after I have submitted my proxy?
A: Yes. If you are a stockholder of record of Fusion Shares as of the close of business on the record date, you can change or revoke your proxy before it is voted at the meeting in one of the following ways:
• submit a new proxy card bearing a later date;
• give written notice of your revocation to Fusion’s Corporate Secretary, which notice must be received by Fusion’s Corporate Secretary prior to the vote at the Special Meeting; or
• attend and vote electronically at the Special Meeting by visiting [•] and entering the control number found on your proxy card, voting instruction form or notice you previously received. Please note that your attendance at the Special Meeting will not alone serve to revoke your proxy.
If your shares are held in “street name” by your broker, bank or another nominee as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.
Q: Where can I find the voting results of the Special Meeting?
A: The preliminary voting results are expected to be announced at the Special Meeting. In addition, within four business days following certification of the final voting results, Fusion will file the final voting results of its Special Meeting with the SEC in a Current Report on Form 8-K.
Q: Are Fusion Stockholders able to exercise dissenters’ rights or appraisal rights with respect to the matters being voted upon at the Special Meeting?
A: No. Fusion Stockholders are not entitled to exercise dissenters’ rights or appraisal rights under Delaware law in connection with the Business Combination. Dissenters’ rights or appraisal rights are unavailable under the DGCL in connection with the Business Combination to holders of Fusion Class A Common Stock because it is currently listed on a national securities exchange and such holders are not required to receive any consideration (other than continuing to hold their shares of Fusion Class A common stock, which will become an equal number of shares of New MoneyLion Class A common stock after giving effect to the Business Combination). Holders of Fusion Class A common stock may vote against the Business Combination Proposal or redeem their Fusion Shares if they are not in favor of the adoption of the Merger Agreement or the Business Combination. Dissenters’ rights or appraisal rights are unavailable under the DGCL in connection with the Business Combination to holders of Fusion Class B Common Stock because they have agreed to vote in favor of the Business Combination.
Q: Are there any risks that I should consider as a Fusion Stockholder in deciding how to vote or whether to exercise my redemption rights?
A: Yes. You should read and carefully consider the risk factors set forth in the section entitled “Risk Factors.” You also should read and carefully consider the risk factors of Fusion and MoneyLion contained in the documents that are incorporated by reference herein.
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Q: What happens if I sell my Fusion Shares before the Special Meeting?
A: The record date for Fusion Stockholders entitled to vote at the Special Meeting is earlier than the date of the Special Meeting. If you transfer your Fusion Shares before the record date, you will not be entitled to vote at the Special Meeting. If you transfer your Fusion Shares after the record date but before the Special Meeting, you will, unless special arrangements are made, retain your right to vote at the Special Meeting but will transfer the right to hold New MoneyLion shares to the person to whom you transfer your shares.
Q: What are the material U.S. federal income tax consequences of the Business Combination to me?
A: Certain material U.S. federal income tax considerations that may be relevant to you in respect of the Business Combination are discussed in more detail in the section entitled “Material U.S. Federal Income Tax Considerations.” The discussion of the U.S. federal income tax consequences contained in this proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all of the U.S. federal income tax considerations that are applicable to you in respect of the Business Combination, nor does it address any tax considerations arising under U.S. state or local or non-U.S. tax laws.
TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF THE BUSINESS COMBINATION WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE BUSINESS COMBINATION TO YOU IN YOUR PARTICULAR CIRCUMSTANCES.
Q: When is the Business Combination expected to be completed?
A: Subject to the satisfaction or waiver of the Closing conditions described in the section entitled “The Merger Agreement — Conditions to Closing”, including the adoption of the Merger Agreement by the Fusion Stockholders at the Special Meeting, the Business Combination is expected to close in the second quarter of 2021. However, it is possible that factors outside the control of both Fusion and MoneyLion could result in the Business Combination being completed at a later time, or not being completed at all.
Q: Who will solicit and pay the cost of soliciting proxies?
A: Fusion has engaged a professional proxy solicitation firm, Morrow, to assist in soliciting proxies for the Special Meeting. Fusion has agreed to pay Morrow a fee of $35,000, plus disbursements. Fusion will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Fusion will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of our common stock for their expenses in forwarding soliciting materials to beneficial owners of our common stock and in obtaining voting instructions from those owners. Fusion’s management team may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Q: What should I do now?
A: You should read this proxy statement/prospectus carefully in its entirety, including the annexes, and return your completed, signed and dated proxy card(s) by mail in the enclosed postage-paid envelope or submit your voting instructions by telephone or via the Internet as soon as possible so that your Fusion Shares will be voted in accordance with your instructions.
Q: What should I do if I receive more than one set of voting materials?
A: Stockholders may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your Fusion Shares.
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Q: Whom do I call if I have questions about the Special Meeting or the Business Combination?
A: If you have questions about the Special Meeting or the Business Combination, or desire additional copies of this proxy statement/prospectus or additional proxies, you may contact:
Morrow Sodali LLC
470 West Avenue, Suite 3000
Stamford, CT 06902
Tel: (800) 662-5200
Banks and brokers call collect: (203) 658-9400
E-mail: FUSE.info@investor.morrowsodali.com
You also may obtain additional information about Fusion from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.” If you are a holder of public shares and you intend to seek redemption of your shares, you will need to deliver your public shares (either physically or electronically) to Continental Stock Transfer & Trust Company, Fusion’s transfer agent, at the address below prior to [•], New York City time, on [•], 2021. If you have questions regarding the certification of your position or delivery of your stock, please contact:
Mark Zimkind
Continental Stock Transfer & Trust Company
One State Street Plaza, 30th Floor
New York, New York 10004
E-mail: mzimkind@continentalstock.com
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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This summary highlights selected information included in this proxy statement/prospectus and does not contain all of the information that may be important to you. You should read this entire document and the annexes and the other documents to which we refer before you decide how to vote with respect to the proposals to be considered and voted on at the Special Meeting.
Information About the Parties to the Business Combination
Fusion Acquisition Corp.
667 Madison Avenue, 5th Floor
New York, New York 10065
Tel: (212) 763-0169
Fusion Acquisition Corp. is a blank check company whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.
MoneyLion Inc.
30 West 21st Street, 9th Floor
New York, New York 10010
Tel: (212) 380-1735
MoneyLion Inc. is an all-in-one, digital financial platform that provides convenient, low-cost access to banking, borrowing and investing solutions tailored for its customers, rooted in data, and delivered through its proprietary technology platform. MoneyLion addresses its customers from a data-driven perspective of the individual and their specific circumstances. When customers enjoy periods of financial excess, MoneyLion provides tools for them to easily manage their spending and saving goals through its digital banking and automated investing solutions. When customers experience moments of financial need, MoneyLion provides them immediate access to innovative lending or advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health.
The Business Combination and the Merger Agreement
The terms and conditions of the Business Combination are contained in the Merger Agreement, as amended by Amendment No. 1, which are attached as Annex A and Annex G to this proxy statement/prospectus, respectively. We encourage you to read the Merger Agreement carefully and in its entirety, as it is the legal document that governs the Business Combination.
If the Merger Agreement is approved and adopted and the Business Combination is consummated, Merger Sub will merge with and into MoneyLion with MoneyLion surviving the merger as a wholly-owned subsidiary of Fusion.
Structure of the Business Combination
Pursuant to the Merger Agreement, Merger Sub will merge with and into MoneyLion, with MoneyLion surviving the Business Combination. Upon consummation of the foregoing transactions, MoneyLion will be a wholly-owned subsidiary of Fusion, which will then be renamed as determined by MoneyLion.
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The following diagrams illustrate in simplified terms the current structure of Fusion and MoneyLion and the expected structure of New MoneyLion (formerly Fusion) upon the Closing.
Simplified Pre-Combination Structure
Simplified Post-Combination Structure
Merger Consideration
The aggregate value of the consideration paid in respect of MoneyLion is $2,200,000,000.00. The aggregate consideration to be paid to MoneyLion stockholders shall be (i) shares of New MoneyLion Class A common stock (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash exceeds $260,000,000 and (B) $100,000,000, and (ii) the contingent right to receive a pro rata portion of the Earn Out Shares. Pursuant to the Merger Agreement, the election to receive cash will be made after the Special Meeting of Fusion Stockholders and prior to the Closing. Consequently, at the time of the Special Meeting, Fusion’s stockholders will not know or be able to determine the amount of cash consideration the MoneyLion stockholders will receive at Closing (if any). See “Risk Factors — Risks Related to Fusion and the Business Combination — Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting.” for more information.
Pursuant to the Merger Agreement, at the Effective Time, the stock consideration to be issued to the then current holders of stock in MoneyLion will be in the form of New MoneyLion Class A common stock.
Additionally, each MoneyLion option that is outstanding and unexercised, whether or not then vested or exercisable, will be assumed by New MoneyLion and will be converted into an option to acquire New MoneyLion Class A common stock with the same terms and conditions as applied to the MoneyLion option immediately prior to the Effective Time; provided that the number of shares underlying such New MoneyLion option will be determined by multiplying the number of shares of MoneyLion common stock subject to such option immediately prior to the Effective Time, by the option exchange ratio, which product shall be rounded down to the nearest whole number of
26
shares, and the per share exercise price of such New MoneyLion option will be determined by dividing the per share exercise price immediately prior to the Effective Time by the option exchange ratio, which quotient shall be rounded up to the nearest whole cent.
Pursuant to the Merger Agreement, at the Effective Time, each warrant to purchase shares of MoneyLion capital stock that is issued and outstanding prior to the Effective Time and has not been exercised or terminated pursuant to its terms will be assumed and converted into a warrant exercisable for shares of New MoneyLion Class A common stock.
Earn Out Consideration
In addition, the Merger Agreement contemplates that the Earn Out Participants, following the closing of the Business Combination and for a period of five years thereafter, will be eligible to receive the Earn Out Shares, subject to a Triggering Event. Upon the occurrence of a Triggering Event, New MoneyLion will release such Earn Out Shares to the Earn Out Participants.
The Private Placement
Fusion entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, Fusion agreed to issue and sell in private placements an aggregate of 25,000,000 shares of Fusion Class A common stock to the PIPE Investors for $10.00 per share, generating total gross proceeds of $250,000,000 (the “PIPE Investment Amount”). The PIPE Investment amount is expected to be used by the Company to (a) pay any cash amounts required to be paid by the Company in connection with the closing of the Business Combination and (b) pay any fees and expenses of the Company, with any remaining amounts to remain on the Company’s balance sheet as working capital.
The Private Placement is expected to close immediately prior to the Closing. In connection with the Closing, all of the issued and outstanding shares of Fusion Class A common stock, including the shares of Fusion Class A common stock issued to the PIPE Investors, will become shares of New MoneyLion Class A common stock.
Special Meeting of Fusion Stockholders and the Proposals
The Special Meeting will convene on [•], 2021 at [•], New York City time, in virtual format. Stockholders may attend, vote and examine the list of Fusion Stockholders entitled to vote at the Special Meeting by visiting [•] and entering the control number found on their proxy card, voting instruction form or notice they previously received. The purpose of the Special Meeting is to consider and vote on the Business Combination Proposal, the Charter Proposal, the Advisory Charter Proposals, the Stock Issuance Proposal, the Incentive Plan Proposal, the ESPP Proposal and the Adjournment Proposal.
Approval of the condition precedent proposals is a condition to the obligation of Fusion to complete the Business Combination.
Only holders of record of issued and outstanding Fusion Shares as of the close of business on [•], 2021, the record date for the Special Meeting, are entitled to notice of, and to vote at, the Special Meeting or any adjournment or postponement of the Special Meeting. You may cast one vote for each share of Fusion Shares that you owned as of the close of business on that record date.
A quorum of stockholders is necessary to hold a valid meeting. A quorum will exist at the Special Meeting with respect to each matter to be considered at the Special Meeting if the holders of a majority of the outstanding Fusion Shares as of the record date present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting. All shares represented by proxy are counted as present for purposes of establishing a quorum.
Approval of the Business Combination Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
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Approval of the Charter Proposal requires the affirmative vote of a majority of the outstanding Fusion Shares, voting together as a single class. Abstentions and broker non-votes have the same effect as a vote “AGAINST” the proposal.
Approval of each of the Advisory Charter Proposals, each of which is a non-binding vote, requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
Approval of the Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Broker non-votes have no effect on the outcome of the proposal but, for purposes of NYSE rules, abstentions will have the same effect as votes “AGAINST” this proposal.
Approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Broker non-votes have no effect on the outcome of the proposal but, for purposes of NYSE rules, abstentions will have the same effect as votes “AGAINST” this proposal.
Approval of the ESPP Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Broker non-votes have no effect on the outcome of the proposal but, for purposes of NYSE rules, abstentions will have the same effect as votes “AGAINST” this proposal.
Approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
Recommendation of Fusion Board
The Fusion Board has unanimously determined that the Business Combination is in the best interests of, and advisable to, the Fusion Stockholders and recommends that the Fusion Stockholders adopt the Merger Agreement and approve the Business Combination. The Fusion Board made its determination after consultation with its legal and financial advisors and consideration of a number of factors.
The Fusion Board recommends that you vote “FOR” the approval of the Business Combination Proposal, “FOR” the approval of the Charter Proposal, “FOR” the approval, on an advisory basis, of each of the Advisory Charter Proposals, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the ESPP Proposal and “FOR” the approval of the Adjournment Proposal.
For more information about the Fusion Board’s recommendation and the proposals, see the sections entitled “The Special Meeting — Vote Required and Fusion Board Recommendation” and “The Business Combination Proposal — The Fusion Board’s Reasons for Approval of the Business Combination.”
The Fusion Board’s Reasons for Approval of the Business Combination
We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We sought to do this by utilizing the networks and industry experience of our management team and our sponsors to identify, acquire and operate one or more businesses in the gaming industry. Our Board considered and evaluated several factors in evaluating and negotiating the transaction and the transaction agreements. For additional information relating to the Fusion Board’s evaluation of the transaction and the factors it considered in connection therewith, please see the section entitled “The Business Combination Proposal — The Fusion Board’s Reasons for Approval of the Business Combination.”
Regulatory Approvals
The Business Combination is subject to the expiration or termination of the waiting period (or any extension thereof) applicable under the HSR Act. The waiting period expired on March 29, 2021.
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Conditions to the Completion of the Business Combination
The Business Combination is subject to customary Closing conditions, including (i) approval by Fusion’s stockholders and MoneyLion’s stockholders of the Merger Agreement, the Business Combination and certain other actions related thereto, (ii) the expiration or termination of the waiting period (or any extension thereof) applicable under the HSR Act, (iii) the absence of a material adverse effect with respect to MoneyLion, (iv) Fusion having at least $260,000,000 of cash at the Closing, consisting of cash held in the Trust Account after taking into account the exercise by the holders of shares of Fusion Class A common stock issued in Fusion’s initial public offering of securities of their right to redeem such shares of Fusion Class A common stock in accordance with Fusion’s governing documents, if any, and cash received from PIPE Investors, net of transaction expenses of Fusion and MoneyLion and (v) the continued listing of the shares of New MoneyLion Class A common stock on the NYSE. The obligations of MoneyLion to complete the Business Combination are further conditioned on, in addition to customary Closing conditions, the current certificate of incorporation of Fusion shall have been amended and restated in the form contemplated by the Charter Proposal. Unless waived, if any of these conditions are not satisfied, the Business Combination may not be consummated.
Termination
Mutual Termination Rights
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
• by mutual written agreement of Fusion and MoneyLion at any time;
• by either MoneyLion or Fusion if the Closing shall not have occurred by the date that is nine months following the date of the Merger Agreement; provided, however, a party may not terminate the Merger Agreement pursuant to this provision if such party’s action or failure to act has been a principal cause of or resulted in the failure of the Closing to occur on or before the Termination Date and such action or failure to act constitutes a breach of the Merger Agreement;
• by either MoneyLion or Fusion if a governmental entity issues an order or takes any other action, which would permanently restrain, enjoin or prohibit the consummation of the Business Combination, if such action is final and nonappealable; or
• by either MoneyLion or Fusion, if, at the Special Meeting of Fusion’s stockholders, the stockholder matters, other than the Adjournment Proposal, are not duly adopted by Fusion’s stockholders by the requisite vote under the DGCL and Fusion’s organizational documents.
Termination Rights of Fusion
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
• prior to the Closing, by written notice to MoneyLion from Fusion if (i) there is any breach of any representation, warranty, covenant or agreement on the part of MoneyLion or if any representation or warranty of MoneyLion shall have become untrue, in either case such that the conditions set forth in Section 8.03(a) or Section 8.03(b) of the Merger Agreement would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that if such breach or untrue statement is curable by MoneyLion prior to the Closing, then Fusion must first provide written notice of such breach or misstatement and may not terminate the Merger Agreement until the earlier of (i) 30 days after deliver of written notice of the breach; and (ii) the Termination Date; provided, further that MoneyLion continues to exercise commercially reasonable efforts to cure such breach (it being understood that Fusion may not terminate the Merger Agreement pursuant to this provision if: (A) it has materially breached the Merger Agreement and such breach has not been cured or (B) if such breach by MoneyLion is cured during such 30-day period); or
• by Fusion if the approval of MoneyLion’s stockholders is not obtained within 48 hours following the effectiveness of this registration statement;
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Termination Rights of MoneyLion
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
• prior to the Closing, by written notice to Fusion from MoneyLion if (i) there is any breach of any representation, warranty, covenant or agreement on the part of Fusion or Merger Sub or if any representation or warranty of Fusion or Merger Sub shall have become untrue, in either case such that the conditions set forth in Section 8.02(a) or Section 8.02(b) of the Merger Agreement would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that if such breach or untrue statement is curable by Fusion or Merger Sub prior to the Closing, then MoneyLion must first provide written notice of such breach or misstatement and may not terminate the Merger Agreement until the earlier of (i) 30 days after deliver of written notice of the breach; and (ii) the Termination Date; provided, further that Fusion and Merger Sub continues to exercise commercially reasonable efforts to cure such breach (it being understood that MoneyLion may not terminate the Merger Agreement pursuant to this provision if: (A) it has materially breached the Merger Agreement and such breach has not been cured or (B) if such breach by MoneyLion is cured during such 30-day period).
Redemption Rights
Pursuant to the Current Charter, a public stockholder may request that Fusion redeem all or a portion of their public shares for cash if the Business Combination is consummated. You will be entitled to receive cash for any public shares to be redeemed only if you:
• (a) hold public shares or (b) hold public shares through units and you elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares; and
• prior to [•], New York City time, on [•], 2021, (a) submit a written request to the transfer agent that Fusion redeem your public shares for cash and (b) deliver your public shares to the transfer agent, physically or electronically through DTC.
As noted above, holders of units must elect to separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. Holders may instruct their broker to do so, or if a holder holds units registered in its own name, the holder must contact the transfer agent directly and instruct them to do so. Public stockholders may elect to redeem all or a portion of their public shares even if they vote for the Business Combination Proposal. If the Business Combination is not consummated, the public shares will not be redeemed for cash. If a public stockholder properly exercises its right to redeem its public shares and timely delivers its public shares to Continental Stock Transfer & Trust Company, Fusion’s transfer agent, Fusion will redeem such public shares upon the Closing for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares. If a public stockholder exercises its redemption rights, then it will be exchanging its redeemed public shares for cash and will no longer own such shares. See the section entitled “The Special Meeting — Redemption Rights” for a detailed description of the procedures to be followed if you wish to redeem your public shares for cash.
Notwithstanding the foregoing, a holder of public shares, together with any affiliate of such public shareholder or any other person with whom such public shareholder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming its public shares with respect to more than an aggregate of 15% of the public shares. Accordingly, if a public shareholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
Holders of our warrants will not have redemption rights with respect to the warrants.
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No Delaware Appraisal Rights
Appraisal rights are statutory rights under the DGCL that enable stockholders who object to certain extraordinary transactions to demand that the corporation pay such stockholders the fair value of their shares instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. However, appraisal rights are not available in all circumstances. Appraisal rights are not available to Fusion Stockholders or warrant holders in connection with the Business Combination.
Proxy Solicitation
Proxies may be solicited by mail, telephone or in person. Fusion has engaged Morrow to assist in the solicitation of proxies. If a stockholder grants a proxy, it may still vote its shares at the Special Meeting if it revokes its proxy before the Special Meeting. A stockholder also may change its vote by submitting a later- dated proxy as described in the section entitled “The Special Meeting — Revoking Your Proxy”
Interests of Fusion’s Directors and Officers in the Business Combination
When you consider the recommendation of the Fusion Board in favor of approval of the Business Combination Proposal, you should keep in mind that the Sponsor, its directors and executive officers, have interests in such proposal that are different from, or in addition to those of Fusion Stockholders and warrant holders generally. These interests include, among other things, the interests listed below:
• Our Sponsor, officers and directors will lose their entire investment in us if we do not complete a business combination by December 31, 2021. If we are unable to complete our initial Business Combination by December 31, 2021, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, liquidate and dissolve, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial Business Combination by December 31, 2021.
• Our Sponsor purchased the founder shares prior to our initial public offering for an aggregate purchase price of $25,000. Upon the Closing, such founder shares will be converted into 8,750,000 shares of New MoneyLion Class A common stock (assuming no founder shares are forfeited by the Sponsor at Closing), and such shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would have an aggregate market value of approximately $87.1 million based upon the closing price of $9.95 per public share on the NYSE on June 7, 2021, but, given the restrictions on such shares, we believe such shares have less value.
• Simultaneously with the Closing of our initial public offering, we consummated the sale of 8,100,000 private placement warrants at a price of $1.00 per warrant in a private placement to our Sponsor. The warrants are each exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020, for one share of Fusion Class A common stock at $11.50 per share. If we do not consummate a Business Combination transaction by December 31, 2021, then the proceeds from the sale of the private placement warrants will be part of the liquidating distribution to the public stockholders and the warrants held by our Sponsor will be worthless. The warrants held by our Sponsor had an aggregate market value of approximately $10.1 million based upon the closing price of $1.25 per warrant on the NYSE on June 7, 2021.
• Jeff Gary is expected to continue to serve as a director of New MoneyLion after the Closing. As such, in the future he may receive any cash fees, stock options or stock awards that the New MoneyLion Board determines to pay to its directors.
• Our Sponsor and our officers and directors have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if Fusion fails to complete a business combination by December 31, 2021.
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• In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have entered into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.
• Following the Closing, our Sponsor would be entitled to the repayment of any working capital loan and advances that have been made to Fusion and remain outstanding. As of the date of this proxy statement/prospectus, our Sponsor has not made any advances to us for working capital expenses. If we do not complete an initial Business Combination within the required period, we may use a portion of our working capital held outside the Trust Account to repay the working capital loans, but no proceeds held in the Trust Account would be used to repay the working capital loans.
• Following the consummation of the Business Combination, we will continue to indemnify our existing directors and officers and will maintain a directors’ and officers’ liability insurance policy.
• Upon the Closing, subject to the terms and conditions of the Merger Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial Business Combination, and repayment of any other loans, if any, and on such terms as to be determined by Fusion from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial Business Combination.
At any time prior to the Special Meeting, during a period when they are not then aware of any material nonpublic information regarding Fusion or its securities, the Sponsor, MoneyLion and/or its affiliates may purchase shares and/or warrants from investors, or they may enter into transactions with such investors and others to provide them with incentives to acquire Fusion Shares or vote their Fusion Shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood that (i) the proposals presented for approval at the Special Meeting are approved and/or (ii) Fusion satisfies the Minimum Proceeds Condition. Any such purchases of public shares and other transactions may thereby increase the likelihood of obtaining stockholder approval of the Business Combination. This may result in the completion of our Business Combination that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares or rights owned by the Sponsor for nominal value.
Entering into any such arrangements may have a depressive effect on Fusion Shares. For example, as a result of these arrangements, an investor or holder may have the ability to effectively purchase shares at a price lower than market and may therefore be more likely to sell the shares it owns, either prior to or immediately after the Special Meeting.
If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the proposals to be presented at the Special Meeting and would likely increase the chances that such proposals would be approved. As of the date of this proxy statement/prospectus, there have been no such discussions and no agreements to such effect have been entered into with any such investor or holder.
The existence of financial and personal interests of the Fusion directors and officers may result in a conflict of interest on the part of one or more of them between what he may believe is best for Fusion and what he may believe is best for him in determining whether or not to grant a waiver in a specific situation. See the sections entitled “Risk Factors” and “The Business Combination Proposal — Interests of Fusion’s Directors and Officers in the Business Combination” for a further discussion of this and other risks.
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Stock Exchange Listing
Fusion’s units, Class A common stock and public warrants are publicly traded on the NYSE under the symbols “FUSE.U”, “FUSE” and “FUSE WS”, respectively. Fusion intends to apply to list the New MoneyLion Class A common stock and public warrants on the NYSE under the symbols “ML” and “ML WS”, respectively, upon the Closing. New MoneyLion will not have units traded following the Closing.
Sources and Uses of Funds for the Business Combination
The following table summarizes the sources and uses for funding the transactions contemplated by the Merger Agreement. Where actual amounts are not known or knowable, the figures below represent MoneyLion’s good faith estimate of such amounts assuming a Closing as of June 8, 2021.
(in millions) |
Assuming No Redemption |
Assuming Maximum Redemption |
||||
Sources |
|
|
||||
Proceeds from Trust Account |
$ |
350 |
$ |
350 |
||
Private Placement |
|
250 |
|
250 |
||
Sellers’ Equity |
|
2,100 |
|
2,200 |
||
Fusion Upfront Founder Equity |
|
88 |
|
88 |
||
Total Sources |
$ |
2,788 |
$ |
2,888 |
||
Uses |
|
|
||||
Cash on Balance Sheet(1) |
$ |
450 |
$ |
283 |
||
Cash Proceeds to Selling Shareholders |
|
100 |
|
— |
||
Redemptions to Public Investors |
|
— |
|
267 |
||
Sellers’ Equity |
|
2,100 |
|
2,200 |
||
Paydown of MoneyLion Debt |
|
5 |
|
5 |
||
Fusion Upfront Founder Equity |
|
88 |
|
88 |
||
Transaction costs |
|
45 |
|
45 |
||
Total Uses |
$ |
2,788 |
$ |
2,888 |
____________
(1) Assumes MoneyLion elects to receive the maximum amount of cash consideration at the Closing in the no redemption scenario and no cash consideration in the maximum redemption scenario. If MoneyLion elects not to receive any cash consideration at the Closing in the no redemption scenario, then New MoneyLion will have an additional $100 million of Cash on its Balance Sheet and the Sellers’ Equity will increase by an additional $100 million and if MoneyLion elects to receive the maximum amount of cash consideration at the Closing in the maximum redemption scenario, then the amount of Cash on the Balance Sheet of New MoneyLion will decrease by $28,393,770 and the Seller’s Equity will decrease by $28,393,770.
Accounting Treatment
The Business Combination will be accounted for as a reverse recapitalization, in accordance with U.S. GAAP. Under this method of accounting, although Fusion will issue shares for outstanding equity interests of MoneyLion in the Business Combination, Fusion will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of MoneyLion issuing stock for the net assets of Fusion, accompanied by a recapitalization. The net assets of Fusion will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of MoneyLion.
Comparison of Stockholders’ Rights
Following the consummation of the Business Combination, the rights of Fusion Stockholders who become New MoneyLion stockholders in the Business Combination will no longer be governed by the Current Charter and Fusion’s bylaws and instead will be governed by the Proposed Charter and the Proposed Bylaws. See the section entitled “Comparison of Stockholders’ Rights” for further information.
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Summary of Risk Factors
In evaluating the proposals to be presented at the Special Meeting, a Fusion Stockholder should carefully read this proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors.”
Emerging Growth Company
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of New MoneyLion’s financial statements with those of another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the Closing of Fusion’s initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
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SUMMARY HISTORICAL FINANCIAL INFORMATION OF FUSION
Fusion is providing the following summary historical financial data to assist you in your analysis of the financial aspects of the Business Combination.
Fusion’s statement of operations data for the three months ended March 31, 2021 and balance sheet data as of March 31, 2021, is derived from Fusion’s unaudited condensed financial statements included elsewhere in this proxy statement/prospectus. Fusion’s statement of operations data for the period from March 6, 2020 (date of inception) to December 31, 2020 (As Restated), and balance sheet data as of December 31, 2020 (As Restated), is derived from Fusion’s audited condensed financial statements included elsewhere in this proxy statement/prospectus.
This information is only a summary and should be read in conjunction with Fusion’s financial statements and related notes and “Fusion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations (As Restated)” contained elsewhere in this proxy statement/prospectus. The historical results included below and elsewhere in this proxy statement/prospectus are not indicative of the future performance of Fusion.
Statement of Operations Data |
Three Months |
For the Period from |
||||||
Formation, operating costs and general and administrative expenses |
$ |
446,461 |
|
$ |
1,167,417 |
|
||
Loss from operations |
|
(446,461 |
) |
|
(1,167,417 |
) |
||
|
|
|
|
|||||
Other income (expense): |
|
|
|
|
||||
Change in fair value of public warrant liability |
|
24,500,000 |
|
|
(25,725,000 |
) |
||
Change in fair value of private placement warrant liability |
|
11,737,872 |
|
|
(12,584,590 |
) |
||
Change in fair value of derivative warrant liabilities |
|
36,237,872 |
|
|
(38,309,590 |
) |
||
Interest income on investments held in Trust Account |
|
60,633 |
|
|
219,337 |
|
||
Income (loss) before provision for income taxes |
|
35,852,044 |
|
|
(39,257,670 |
) |
||
Provision for income taxes |
|
(2,233 |
) |
|
(11,509 |
) |
||
Net income (loss) |
$ |
35,849,811 |
|
$ |
(39,269,179 |
) |
||
Weighted average shares outstanding of Class A common stock, basic and diluted |
|
35,000,000 |
|
|
35,000,000 |
|
||
Basic and diluted net income per common share, Class A |
$ |
0.00 |
|
$ |
0.00 |
|
||
Weighted average shares outstanding of Class B common stock, basic and diluted |
|
8,750,000 |
|
|
8,750,000 |
|
||
Basic and diluted net income (loss) per common share, Class B |
$ |
4.10 |
|
$ |
(4.49 |
) |
Balance Sheet Data |
March 31, |
December 31, |
||||
Total assets |
$ |
350,993,683 |
$ |
351,283,764 |
||
Total liabilities |
|
43,387,638 |
|
79,527,530 |
||
Total stockholders’ equity |
|
5,000,005 |
|
5,000,004 |
35
SUMMARY HISTORICAL FINANCIAL INFORMATION OF MONEYLION
MoneyLion is providing the following summary historical financial data to assist you in your analysis of the financial aspects of the Business Combination.
MoneyLion’s statement of operations data for the years ended December 31, 2020 and 2019 and balance sheet data as of December 31, 2020 and 2019 is derived from MoneyLion’s audited consolidated financial statements included elsewhere in this proxy statement/prospectus.
This information is only a summary and should be read in conjunction with MoneyLion’s consolidated financial statements and related notes and “MoneyLion’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this proxy statement/prospectus. The historical results included below and elsewhere in this proxy statement/prospectus are not indicative of the future performance of Fusion.
Year Ended |
Year Ended |
|||||||
(in thousands) |
(in thousands) |
|||||||
Statement of Operations Data: |
|
|
|
|
||||
Revenue |
|
|
|
|
||||
Net interest income on finance receivables |
$ |
4,347 |
|
$ |
11,056 |
|
||
Membership subscription revenue |
|
25,994 |
|
|
33,627 |
|
||
Affiliates income |
|
2,234 |
|
|
2,994 |
|
||
Fee income |
|
46,639 |
|
|
11,711 |
|
||
Other income |
|
197 |
|
|
996 |
|
||
Total Revenues, net |
|
79,411 |
|
|
60,384 |
|
||
Operating expenses |
|
|
|
|
||||
Marketing |
|
11,060 |
|
|
34,114 |
|
||
Provision for loss on receivables |
|
21,294 |
|
|
29,143 |
|
||
Other direct costs |
|
4,336 |
|
|
3,593 |
|
||
Interest expense (including $91 and $239 accretion of debt issuance costs) |
|
2,950 |
|
|
3,308 |
|
||
Personnel expenses |
|
24,200 |
|
|
25,646 |
|
||
Underwriting expenses |
|
6,242 |
|
|
14,130 |
|
||
Information technology expenses |
|
7,041 |
|
|
8,064 |
|
||
Bank and payment processor fees |
|
13,737 |
|
|
7,098 |
|
||
Change in fair value of warrant liability |
|
14,419 |
|
|
4,260 |
|
||
Change in fair value of subordinated convertible notes |
|
4,000 |
|
|
— |
|
||
Professional fees |
|
8,396 |
|
|
5,298 |
|
||
Depreciation expense |
|
1,108 |
|
|
898 |
|
||
Occupancy expense |
|
1,233 |
|
|
1,360 |
|
||
Gain on foreign currency translation |
|
(179 |
) |
|
(116 |
) |
||
Other operating expenses |
|
1,155 |
|
|
2,733 |
|
||
Total operating expenses |
|
120,992 |
|
|
139,529 |
|
||
Net loss before income taxes |
|
(41,581 |
) |
|
(79,145 |
) |
||
Income tax benefit |
|
6 |
|
|
(8 |
) |
||
Net loss |
$ |
(41,587 |
) |
$ |
(79,137 |
) |
36
As of |
As of |
|||||||
(in thousands) |
(in thousands) |
|||||||
Balance Sheet Data: |
|
|
|
|
||||
Cash and restricted cash |
$ |
20,927 |
|
$ |
45,813 |
|
||
Total current assets |
|
92,296 |
|
|
92,847 |
|
||
Total current liabilities |
|
19,468 |
|
|
14,472 |
|
||
Total assets |
|
123,643 |
|
|
97,403 |
|
||
Total liabilities |
|
90,737 |
|
|
53,958 |
|
||
Total stockholders’ deficit |
|
(255,277 |
) |
|
(187,575 |
) |
Year Ended |
Year Ended |
|||||||
(in thousands) |
(in thousands) |
|||||||
Statement of Cash Flows Data: |
|
|
|
|
||||
Net cash provided by (used in) operating activities |
$ |
3,028 |
|
$ |
(46,429 |
) |
||
Net cash used in investing activities |
|
(42,747 |
) |
|
(35,971 |
) |
||
Net cash provided by financing activities |
|
14,833 |
|
|
58,210 |
|
37
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following summary unaudited pro forma condensed combined financial data is derived from the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statement of operations included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements are based on Fusion’s historical financial statements and MoneyLion’s historical consolidated financial statements as adjusted to give effect to the merger and the PIPE Investment. The unaudited pro forma condensed combined balance sheet gives pro forma effect to the merger, treated as a reverse recapitalization for accounting purposes and the PIPE Investment as if they had been consummated on December 31, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 give effect to the merger and the PIPE Investment as if they had occurred on January 1, 2020.
The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Fusion has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the merger and the PIPE Investment.
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. Fusion and MoneyLion have not had any historical relationship prior to the merger. Accordingly, no pro forma Transaction Accounting Adjustments were required to eliminate activities between the companies.
This information should be read together with Fusion’s and MoneyLion’s historical financial statements and related notes, “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fusion,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion,” and other financial information relating to Fusion and MoneyLion included elsewhere in this proxy statement/prospectus.
Pro Forma |
||||||||
Year Ended December 31, 2020 |
||||||||
Scenario 1 Assuming |
Scenario 2 Assuming Maximum Redemptions |
|||||||
(in thousands) |
||||||||
Combined Statement of Operations data: |
|
|
|
|
||||
Net revenue |
$ |
79,411 |
|
$ |
79,411 |
|
||
Loss from operations |
|
(42,748 |
) |
|
(42,748 |
) |
||
Net loss |
|
(81,075 |
) |
|
(81,075 |
) |
||
Net loss attributable to common stockholders |
|
(106,693 |
) |
|
(106,693 |
) |
38
Pro Forma |
||||||
As of December 31, 2020 |
||||||
Scenario 1 Assuming No Redemptions |
Scenario 2 Assuming Maximum Redemptions |
|||||
(in thousands) |
||||||
Combined Balance Sheet data: |
|
|
||||
Total assets |
$ |
611,278 |
$ |
416,609 |
||
Total debt |
|
44,103 |
|
44,103 |
||
Total liabilities |
|
138,116 |
|
138,116 |
||
Total stockholders’ equity |
|
473,162 |
|
278,493 |
39
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA
COMBINED PER SHARE FINANCIAL INFORMATION
The following table sets forth selected historical comparative share information for Fusion and MoneyLion and unaudited pro forma condensed combined per share information of New MoneyLion after giving effect to the merger, assuming two redemption scenarios as follows:
• Assuming no redemptions:
• Assuming maximum redemptions:
The unaudited pro forma condensed combined balance sheet as of December 31, 2020 was derived from the audited historical balance sheet of Fusion as of December 31, 2020 and the audited historical consolidated balance sheet of MoneyLion as of December 31, 2020 and gives effect to the merger and the PIPE Investment as if they occurred on December 31, 2020. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 give effect to the merger and the PIPE Investment as if they occurred on January 1, 2020.
This information is only a summary and should be read together with the summary historical financial information included elsewhere in this proxy statement/prospectus, and the historical financial statements of Fusion and MoneyLion and related notes that are included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined per share information of Fusion and MoneyLion is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information and related notes included elsewhere in this proxy statement/prospectus.
The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Fusion and MoneyLion would have been had the companies been combined during the periods presented.
(in thousands, except share and per share amounts) |
Historical |
Pro Forma |
||||||||||||||
For the year ended December 31, 2020 |
Fusion |
MoneyLion |
Scenario 1 Assuming No Redemptions |
Scenario 2 Assuming Maximum Redemptions |
||||||||||||
Net loss |
$ |
(39,269 |
) |
$ |
(41,587 |
) |
$ |
(81,075 |
) |
$ |
(81,075 |
) |
||||
Net loss attributable to Class B non-redeemable common stockholders |
$ |
(39,477 |
) |
$ |
(67,205 |
) |
$ |
(106,693 |
) |
$ |
(106,693 |
) |
||||
Weighted average common Class B |
|
8,750,000 |
|
|
2,753,400 |
|
|
241,137,636 |
|
|
221,670,703 |
|
||||
Net loss per share attributable to common |
$ |
(4.49 |
) |
$ |
(24.41 |
) |
$ |
(0.44 |
) |
$ |
(0.48 |
) |
40
MARKET PRICE, TICKER SYMBOL AND DIVIDEND INFORMATION
Fusion
Market Price and Ticker Symbol
Fusion’s units, Class A common stock and public warrants are currently listed on the NYSE under the symbols “FUSE.U,” “FUSE,” and “FUSE WS,” respectively.
The closing price of Fusion’s units, Class A common stock and public warrants on February 11, 2021, the last trading day before announcement of the execution of the Merger Agreement, was $13.60, $12.20 and $2.85, respectively. As of [•], 2021, the record date for the Special Meeting, the closing price for each unit, share of Class A common stock and public warrant was $[•], $[•] and $[•], respectively.
Holders
As of [•], 2021, there was [•] holder[s] of record of our units, [•] holder[s] of record of Fusion Class A common stock, [•] holder[s] of record of Fusion Class B common stock and [•] holder[s] of record of our public warrants. The number of holders of record does not include a substantially greater number of “street name” holders or beneficial holders whose units, Fusion Class A common stock and warrants are held of record by banks, brokers and other financial institutions.
Dividend Policy
Fusion has not paid any cash dividends on Fusion common stock to date and does not intend to pay any cash dividends prior to the completion of the Business Combination. The payment of cash dividends in the future will be dependent upon New MoneyLion’s revenue and earnings, if any, capital requirements and general financial condition subsequent to completion of the Business Combination. The payment of any cash dividends subsequent to the Business Combination will be within the discretion of the New MoneyLion Board at such time.
MoneyLion
There is no public market for shares of MoneyLion’s common stock.
41
We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition, results of operations or reputation. The risks described below are not the only risks we face. Additional risks not presently known to us or that we currently believe are not material may also significantly affect our business, financial condition, results of operations or reputation. Our business could be harmed by any of these risks. In assessing these risks, you should also refer to the other information contained in this proxy statement prospectus, including our consolidated financial statements and related notes.
Unless the context otherwise requires, references in this subsection “— Risks Related to MoneyLion’s Business and Industry” to “we”, “us”, “our”, and “the Company” generally refer to MoneyLion in the present tense or New MoneyLion from and after the Business Combination.
SUMMARY RISK FACTORS
The following is a summary of select risks and uncertainties that could materially adversely affect the Business Combination, MoneyLion and its business, financial condition and results of operations. You should read this summary together with the full and complete discussion of risk factors contained below.
Risks Related to MoneyLion’s Business and Industry
• MoneyLion’s results of operations and future prospects depend on its ability to retain existing, and attract new, customers. MoneyLion faces intense and increasing competition and, if it does not compete effectively, its competitive positioning and operating results will be harmed.
• Because MoneyLion relies on third parties to provide services, MoneyLion could be adversely impacted if they fail to fulfill their obligations or if MoneyLion’s arrangements with them are terminated and suitable replacements cannot be found on commercially reasonable terms or at all.
• If MoneyLion fails to comply with the applicable requirements of our third-party partners, they could seek to suspend or terminate MoneyLion’s accounts, which could adversely affect MoneyLion’s business.
• If the information provided to MoneyLion by customers is incorrect or fraudulent, MoneyLion may misjudge a customer’s qualifications to receive its products and services and its results of operations may be harmed and could subject MoneyLion to regulatory scrutiny or penalties.
• MoneyLion services all of the loans it originates. A failure by MoneyLion to service loans properly could result in lost revenue and negatively impact its business and operations or subject MoneyLion to regulatory scrutiny or penalties.
• Systems defects, failures or disruptions, including events beyond MoneyLion’s control, and resulting interruptions in the availability of MoneyLion’s websites, applications, products, or services could harm MoneyLion’s business, harm its reputation, result in significant costs to MoneyLion, decrease MoneyLion’s potential profitability and expose it to substantial liability.
• The legal and regulatory regimes governing certain of MoneyLion’s products and services are uncertain and evolving. Changing laws, regulations, interpretations or regulatory enforcement priorities may negatively impact the management of its business, results of operations, ability to offer certain products or the terms and conditions upon which they are offered, and ability to compete.
• While MoneyLion takes precautions to prevent consumer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of MoneyLion’s products and services or subject MoneyLion to scrutiny or penalties.
• MoneyLion’s business and platform depend in part on intellectual property and proprietary rights and technology licensed from or otherwise made available to MoneyLion by third parties. If MoneyLion fails to comply with its obligations under license or technology agreements with third parties, MoneyLion may be required to pay damages and MoneyLion could lose license rights that are critical to our business.
42
• MoneyLion has in the past, and continues to be, subject to inquiries, subpoenas, exams, pending investigations, and enforcement matters by state and federal regulators, the outcome of which is uncertain and could cause reputational and financial harm to MoneyLion’s business and results of operations.
• MoneyLion’s projections are subject to significant risks, assumptions, estimates and uncertainties. As a result, MoneyLion’s projected revenues, market share, expenses and profitability may differ materially from its expectations.
• MoneyLion has a history of losses and may not achieve profitability in the future.
Risks Related to Fusion and the Business Combination
• Directors and officers of Fusion have potential conflicts of interest in recommending that stockholders vote in favor of approval of the Business Combination and approval of the other proposals described in this proxy statement/prospectus.
• Fusion’s Sponsor, directors and executive officers have agreed to vote in favor of the Business Combination, regardless of how our public stockholders vote.
• Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting.
• We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
• Even if we consummate the Business Combination, there can be no assurance that the warrants will be in the money at the time they become exercisable, and they may expire worthless.
• If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of our securities may decline.
• Our actual financial position and results of operations may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.
• Financial projections with respect to New MoneyLion may not prove to be reflective of actual future results.
• The Business Combination is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all.
• We will incur significant costs and obligations as a result of being a public company.
Risks Related to MoneyLion’s Business and Industry
Our financial condition and results of operations may be adversely impacted by the COVID-19 pandemic.
Occurrences of epidemics or pandemics, depending on their scale, may cause different degrees of disruption to the regional, state, and local economies in which we offer our products and services. The current COVID-19 pandemic could have a material adverse effect on the value, operating results and financial condition of our business.
The COVID-19 pandemic has caused substantial changes in consumer behavior, restrictions on business and individual activities, and high unemployment rates, which have led to reduced economic activity. Extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, suspension of interest accrual, and similar mandates for many individuals and businesses to substantially restrict daily activities have led to a decrease in consumer activity generally. Additionally, the COVID-19 pandemic has had a negative impact on consumer finances and on employment levels, which could lead to lower demand for loans, higher loan delinquencies, less likelihood of signing up for our membership programs, less likelihood of making investments through our platform and less spending on the MoneyLion platform, all of which would have a negative impact on our financial condition, results of operations and cash flows.
43
While the extent and duration of the economic slowdown and high unemployment rates attributable to the COVID-19 pandemic remain uncertain at this time, a continued significant economic slowdown could have a substantial adverse effect on our financial condition, liquidity and results of operations. As of the date of this proxy statement/prospectus, COVID-19 could have the following adverse effects on our business and results of operations, among others:
• reduced borrower approval rates, including as a result of credit eligibility and other adjustments;
• lower average balances of our loans as a result of changes in consumer demand and adjustments to our credit decisioning process and credit criteria;
• reduced pool of customers eligible for our loan or advance products;
• impeded liquidity and negative fair value adjustments with respect to our loans or advance products; and
• reduced funds available for our investment products.
See “MoneyLion’s Management’s Discussion and Analysis of our Financial Condition and Results of Operations — Key Performance Metrics” and “— Results of Operations for the Year Ended December 31, 2020 and 2019” for further discussion of the impact of the COVID-19 pandemic in recent periods on our business and operating results. The COVID-19 pandemic, and its impact, may also have the effect of heightening many of the other risks described herein.
Our business may be adversely affected by economic conditions and other factors that we cannot control.
Uncertainty and negative trends in general economic conditions, including significant tightening of credit markets, historically have created a difficult operating environment for our industry. Many factors, including factors that are beyond our control, may impact our results of operations or financial condition and our overall success by affecting a customer’s willingness and capacity to use our products and services, including a customer’s willingness to incur loan obligations or willingness or capacity to make payments on their loans or other services we offer. These factors include interest rates, unemployment levels, conditions in the housing market, immigration policies, gas prices, energy costs, government shutdowns, trade wars and delays in tax refunds, as well as events such as natural disasters, acts of war, terrorism, catastrophes and pandemics.
Many new customers on our platform have limited or no credit history and limited financial resources. Accordingly, such customers have historically been, and may in the future become, disproportionately affected by adverse macroeconomic conditions, such as the disruption and uncertainty caused by the COVID-19 pandemic. In addition, major medical expenses, divorce, death or other issues that affect customers could affect a customer’s willingness or ability to make payments on their loans or advances or engage in investing activities. If borrowers default on loans facilitated on our platform, the cost to service these loans may also increase without a corresponding increase in revenue earned from lending operations, and the value of the loans could decline. Higher default rates by these borrowers may lead to lower demand by our funding sources and institutional investors to fund loans and other receivables facilitated by our platform, which would adversely affect our business, financial condition and results of operations.
During periods of economic slowdown or recession, our current and potential investors in our special purpose financing structure may reduce the number of loans or other receivables they are willing to finance or demand terms that are less favorable to us, to compensate for any increased risks. A reduction in the volume of the loans and other receivables we are able to finance through this structure would negatively impact our ability to maintain or increase the level of our lending and provision of other services to customers. Any sustained decline in demand for loans or other services we offer, or any increase in delinquencies or defaults that result from economic downturns, may harm our ability to maintain robust volumes for our lending operations and other services, which would adversely affect our business, financial condition and results of operations. For the year ended December 31, 2020, for loans provided through our Credit Builder Plus product, the average 30+ day delinquency rate was 4.2% and the average monthly default rate was 1.4%. For the year ended December 31, 2020, the non-repayment rate for advances provided through our Instacash product was 4.8%. See “Business of New MoneyLion — Our Product Platform.”
For example, the COVID-19 pandemic and other related adverse economic events led to a significant increase in unemployment, comparable, and at times surpassing, the unemployment rates during the peak of the financial crisis in 2008. There can be no assurance that levels of unemployment or underemployment will improve in the
44
near term. The increase in the unemployment rate could increase the non-repayment rate on our loans and advance products, increase the rate of customers declaring bankruptcy or decrease our customers’ use of our investment and other products and services, any of which could adversely affect the attractiveness of our loans and other receivables to our financing sources. If we are unable to adjust our platform to account for events like the COVID-19 pandemic and the resulting rise in unemployment, or if our platform is unable to more successfully predict the creditworthiness of potential borrowers compared to other lenders, then our business, financial condition and results of operations could be adversely affected.
Furthermore, the COVID-19 pandemic has caused some borrowers on our platform to request a temporary extension or modification of the payment schedules of their loans under our temporary relief or loan modification programs, or hardship programs. If a large number of borrowers seek to participate in such hardship programs, the investment returns of our financing sources could decline. Further, if the rate of borrowers that participate in such hardship programs is greater than those experienced by our competitors, then our financing sources may become less interested providing financing for our loans and other consumer receivables, which could negatively impact our funding strategy or significantly increase the cost of obtaining funding. Any of the foregoing could adversely affect our business, financial condition and results of operations.
If there is an economic downturn that affects our current and prospective customers or our financing sources, or if we are unable to address and mitigate the risks associated with any of the foregoing, our business, financial condition and results of operations could be adversely affected.
We operate in a cyclical industry. In an economic downturn, we may not be able to grow our business or maintain expected levels of liquidity or revenue growth.
The timing, severity, and duration of an economic downturn can have a significant negative impact on our ability to generate adequate revenue and to absorb expected and unexpected losses. For example, in making a decision whether to extend credit to a new or existing customer or determine appropriate pricing for a loan or whether to provide a customer an advance, our decision strategies rely on robust data collection, including from third-party sources, proprietary scoring models, and market expertise. An economic downturn could place financial stress on our customers, potentially impacting our ability to make accurate assessments or decisions about our customers’ ability to pay for loans and other services we provide, as well as our customers’ willingness to use our products and services. Our ability to adapt in a manner that balances future revenue production and loss management will be tested in a downturn. The longevity and severity of a downturn will also place pressure on our funding sources. There can be no assurance that our financing arrangements will remain available to us through any particular business cycle or be renewed on the same terms. The timing and extent of a downturn may also require us to change, postpone or cancel our strategic initiatives or growth plans to pursue shorter-term sustainability. The longer and more severe an economic downturn, the greater the potential adverse impact on us, which could be material.
We are a rapidly growing company with a relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties, and makes it difficult to evaluate our future prospects.
We were founded in 2013 and have experienced rapid growth in recent years. Our limited operating history may make it difficult to make accurate predictions about our future performance. Assessing our business and future prospects may also be difficult because of the risks and difficulties we face. These risks and difficulties include our ability to:
• improve the effectiveness and predictiveness of our data-driven platform;
• maintain and increase the volume of loans, advances and other financial products we provide through our platform;
• enter into new and maintain existing relationships with third-party partners and service providers;
• successfully maintain cost-effective sources of financing for our operations;
• maintain competitive interest rates offered to borrowers on our platform, while enabling our funding sources to achieve an adequate return over their cost of funds;
45
• successfully build our brand and protect our reputation from negative publicity;
• increase the effectiveness of our marketing strategies, including our direct consumer marketing initiatives;
• continue to expand the number of our potential customers;
• successfully adjust our proprietary models, products and services in a timely manner in response to changing macroeconomic conditions and fluctuations in the credit market;
• comply with and successfully adapt to complex and evolving regulatory environments;
• protect against increasingly sophisticated fraudulent uses of financial products and online theft;
• successfully compete with companies that are currently in, or may in the future enter, the business of providing consumer financial services;
• enter into new markets and introduce new products and services;
• sufficiently obtain, maintain, protect, or enforce our intellectual property and other proprietary rights;
• effectively secure and maintain the confidentiality of the information received, accessed, stored, provided and used across our systems;
• successfully obtain and maintain funding and liquidity to support continued growth and general corporate purposes;
• attract, integrate and retain qualified employees; and
• effectively manage and expand the capabilities of our operations teams, outsourcing relationships and other business operations.
If we are not able to timely and effectively address these risks and difficulties as well as those described elsewhere in this “Risk Factors” section, our business and results of operations may be harmed.
Our results of operations and future prospects depend on our ability to retain existing, and attract new, customers. We face intense and increasing competition and, if we do not compete effectively, our competitive positioning and our operating results will be harmed.
We operate in a rapidly changing and highly competitive industry, and our results of operations and future prospects depend on, among others:
• the continued growth of our customer base;
• our ability to monetize our customer base, including through additional products by our existing customers;
• our ability to acquire customers at a lower cost; and
• our ability to increase the overall value to us of each of our customers while they remain on our platform.
We expect our competition to continue to increase, as there are generally no substantial barriers to entry to the markets we serve. In addition to established enterprises, we may also face competition from early-stage companies attempting to capitalize on the same, or similar, opportunities as we are. Some of our current and potential competitors have longer operating histories, particularly with respect to financial services products similar to ours, significantly greater financial, technical, marketing and other resources and a larger customer base than we do. This allows them, among other things, to potentially offer more competitive pricing or other terms or features, a broader range of financial products, or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging technologies and changes in customer preferences. Our existing or future competitors may develop products or services that are similar to our products and services or that achieve greater market acceptance than our products and services. This could attract customers away from our services and reduce
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our market share in the future. Additionally, when new competitors seek to enter our markets, or when existing market participants seek to increase their market share, these competitors sometimes undercut, or otherwise exert pressure on, the pricing terms prevalent in that market, which could adversely affect our market share and/or ability to capitalize on new market opportunities.
We currently compete at multiple levels with a variety of competitors, including:
• traditional banks and credit unions;
• new entrants obtaining banking licenses;
• other non-bank digital providers that white label regulated products, offering banking-related services;
• specialty finance and other non-bank providers, offering consumer lending-related products or advances; and
• online wealth management platforms, such as robo-advisors, offering consumer investment services.
We compete with traditional banks for many of the services we offer. Because we do not currently control a bank or a bank holding company, we are subject to regulation by a variety of state and federal regulators across our products and services and we rely on MetaBank®, N.A. (“MetaBank”) to provide banking accounts and debit cards to our customers. This regulation by federal, state and local authorities increases our compliance costs, particularly for our lending business, as we navigate multiple regimes with different examination schedules and processes, varying disclosure requirements, and at times conflicting consumer protection laws. In addition, our ability to compete may be hampered in certain states where the amount of interest we are permitted to charge customers is capped and we are consequently unable to make loans to all the customers that we believe may be qualified but to whom we cannot offer the appropriate risk-adjusted margin.
We believe that our ability to compete depends upon many factors both within and beyond our control, including, among others, the following:
• the size, diversity and activity levels of our customer base;
• the timing and market acceptance of products and services, including developments and enhancements to those products and services, offered by us and our competitors;
• customer service and support efforts;
• selling and marketing efforts;
• the ease of use, performance, price and reliability of solutions developed either by us or our competitors;
• changes in economic conditions, regulatory and policy developments;
• general credit markets conditions and their impact on our liquidity and ability to access funding;
• the ongoing impact of the COVID-19 pandemic on the lending and financial services markets we serve;
• our brand strength relative to our competitors; and
• competition over highly skilled personnel in the technology industry.
Our current and future business prospects demand that we act to meet these competitive challenges but, in doing so, our net revenue and results of operations could be adversely affected if we, for example, increase marketing expenditures or make other expenditures. Competitive pressures could also result in us reducing the amounts we charge for our various products and services, such as reducing the annual percentage rate on the loans we originate, incurring higher customer acquisition costs and could make it more difficult for us to grow our financial services product offerings in both number and volume for new as well as existing customers. All of the foregoing factors and events could adversely affect our business, financial condition, results of operations, cash flows and future prospects.
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Because we rely on third parties to provide services, we could be adversely impacted if they fail to fulfill their obligations or if our arrangements with them are terminated and suitable replacements cannot be found on commercially reasonable terms or at all.
We depend on certain key third-party partners, service providers and vendors for certain products and services. The success of our business depends in part on our ability to work with a bank partner, currently MetaBank, to provide our customers with deposit accounts and debit cards facilitated through our platform. We are also dependent on our relationship with DriveWealth LLC (“DriveWealth”), a third-party broker-dealer partner, which provides brokerage and related services for the investment accounts facilitated through our platform. Any changes in these relationships or loss of these partners could degrade the functionality of our products and services, impose additional costs or requirements, or give preferential treatment to competitors’ services, including their own services, and materially and adversely affect usage of our products and services. In the event our agreements with these third parties are terminated, or if upon their expiration we are unable to renew the contracts on terms favorable to us, or at all, it may be difficult for us to replace these services, which may adversely affect our operations and profitability. Some of these organizations and third-party service providers provide similar services and technology to our competitors, and we do not have long-term or exclusive contracts with them.
Our systems and operations or those of our third-party service providers could be exposed to damage or interruption from, among other things, financial insolvency, bankruptcy, contractual default, or adverse regulatory changes. In addition, we may be unable to renew our existing contracts with our most significant third-party relationships, MetaBank and DriveWealth, or they may stop providing or otherwise supporting the products and services we obtain from them, and we may not be able to obtain these or similar products or services on the same or similar terms as our existing arrangements, if at all. The failure of these third-party providers to perform their obligations and provide the products and services we obtain from them in a timely manner for any reason could adversely affect our operations and profitability.
If we fail to comply with the applicable requirements of our third-party partners, they could seek to suspend or terminate our accounts, which could adversely affect our business.
We rely on agreements with MetaBank, DriveWealth and other third-party providers to provide deposit accounts, debit card services and investment advisory services. These agreements and corresponding regulations governing banks and financial institutions may give them substantial discretion in approving certain aspects of our business practices, including our application and qualification procedures for customers and require us to comply with certain legal requirements. Our financial institution partners’ discretionary actions under these agreements could impose material limitations to, or have a material adverse effect on, our business, financial condition and results of operations. Without these relationships, we would not be able to service our deposit accounts, debit cards and investment accounts, which would have a material adverse effect on our business, financial condition and results of operations. Furthermore, our financial results could be adversely affected if our costs associated with such relationships materially change or if any penalty or claim for damages is imposed as a result of our breach of the agreement with them or their other requirements.
We rely on third-party service providers for payment processing and other functions that are important to our operations. The loss of those service providers could materially and adversely affect our business, results of operations and financial condition. Additionally, if a third-party service provider fails to comply with legal or regulatory requirements or otherwise to perform these functions properly, our business may be adversely affected.
We rely on third-party service providers to perform various functions relating to our business, including underwriting, fraud detection, marketing, operational functions, cloud infrastructure services, information technology, and telecommunications, and, because we are not a bank and cannot belong to or directly access the ACH payment network, ACH processing, and debit card payment processing. While we oversee these service providers to ensure they provide services in accordance with our agreements and regulatory requirements, we do not have control over the operations of any of the third-party service providers that we utilize. In the event that a third-party service provider for any reason fails to perform such functions, including through negligence, willful misconduct or fraud, our ability to process payments and perform other operational functions for which we currently rely on such third-party service providers will suffer and our business, cash flows and future prospects may be negatively impacted.
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Additionally, if one or more key third-party service providers were to cease to exist, to become a debtor in a bankruptcy or an insolvency proceeding or to seek relief under any debtor relief laws or to terminate its relationship with us, there could be delays in our ability to process payments and perform other operational functions for which we are currently relying on such third-party service provider, and we may not be able to promptly replace such third-party service provider with a different third-party service provider that has the ability to promptly provide the same services in the same manner and on the same economic terms. As a result of any such delay or inability to replace such key third-party service provider, our ability to process payments and perform other business functions could suffer and our business, cash flows and future prospects may be negatively impacted.
A significant change in consumer confidence in our products and services could negatively impact our business.
We have developed a strong and trusted brand that has contributed significantly to the success of our business. We believe that maintaining and promoting our brand is critical to achieving widespread acceptance of our products and services and expanding our base of customers.
Maintaining and promoting our brand will depend largely on our ability to continue to provide useful, reliable, secure, and innovative products and services, as well as our ability to maintain trust and remain a leading financial services platform. We may introduce, or make changes to, features, products, services, privacy practices, or terms of service that customers do not like, which may materially and adversely affect our brand. Our brand promotion activities may not generate customer awareness or increase revenue, and even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand or if we incur excessive expenses in this effort, our business could be materially and adversely affected.
We rely on relationships with third-party partners to obtain and maintain customers. Our ability to acquire new customers could be materially harmed if we are unable to enter into or maintain these relationships on terms that are commercially reasonable to us, or at all.
Harm to our brand can arise from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality, inadequate protection or misuse of personally identifiable information (“PII”), compliance failures and claims, litigation and other claims, and misconduct by our partners or other counterparties. We have been, from time to time and, may in the future be, the target of incomplete, inaccurate, and misleading or false statements about our company and our business that could damage our brand and deter customers from adopting our services. Any negative publicity about our industry or our company, the quality and reliability of our products and services, our compliance and risk management processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy, data protection, and information security practices, litigation, regulatory licensing and infrastructure, and the experience of our customers with our products or services could adversely affect our reputation and the confidence in and use of our products and services. If we do not successfully maintain a strong and trusted brand, our business could be materially and adversely affected.
If the information provided to us by customers 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.
Our decisions to provide many of our products and services to our customers are based partly on information customers provide to us or authorize us to receive. To the extent that these customers provide information to us in a manner that we are unable to verify, our decisioning process may not accurately reflect the associated risk. In addition, data provided by third-party sources, including consumer reporting agencies, is a component of our credit decisions and this data may contain inaccuracies. Inaccurate analysis of credit data that could result from false loan application information could harm our reputation, business and results of operations.
In addition, we use identity and fraud prevention tools to analyze data provided by external databases to authenticate each applicant’s identity. From time to time, these checks have failed and there is a risk that these checks could fail in the future, and fraud, which may be significant, may occur. We may not be able to recoup funds underlying loans or associated with our other services made in connection with inaccurate statements, omissions of fact or fraud, in which case our revenue, results of operations and profitability will be harmed. Fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, which could negatively impact our results of operations, brand and reputation, and require us to take steps to reduce fraud risk, which could increase our costs.
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Many of our investment advisory customers are first-time investors and our revenues could be reduced if these customers stop investing altogether or stop using our platform for their investing activities.
Our business model focuses on making the financial markets accessible to a broad demographic of retail investors. In each of the years ended December 31, 2020, 2019 and 2018, over half of our customers for the applicable period were first-time investors. In addition, in the first half of 2020, we saw a significant increase in the number of new accounts opened by first-time investors, largely as a result of economic and social conditions driven by the COVID-19 pandemic. Our success, and our ability to increase revenues and operate profitably, depends in part on such customers continuing to utilize our platform, even as global social and economic conditions shift. However, our customers do not have long-term contractual arrangements with us and can utilize our platform on a transaction-by-transaction basis and may also cease to use our platform at any time or use a competitor’s platform. We may face particular challenges in retaining these investors as customers, for example as a result of a return to pre-COVID-19 behaviors, increased volatility in the financial markets or increasing availability of competing products that seek to target the same demographic. In particular, a broad decline in the equity or other financial markets could result in some of these investors exiting the markets and leaving our platform. Any significant loss of these customers or a significant reduction in their use of our platform could have a material impact on our investment volumes and revenues, and materially adversely affect our business, financial condition and results of operations.
If loans and other receivables originated through our platform do not perform, or significantly underperform, we may incur financial losses on the receivables we originate or lose the confidence of our financing sources.
Any significant underperformance of the loans and other receivables facilitated through our platform, especially if they underperform compared to those generated by our competitors, may adversely impact our relationship with our funding sources and result in their loss of confidence in us, which could lead to the termination of our existing funding arrangements. We do not provide a guarantee for the performance of loans and other receivables that we facilitate, and also sell these loans and other receivables at a discount of approximately 10% to our special purpose vehicle financing structure. Any requirement that we increase the amount of receivables we hold on our balance sheet due to a decrease or termination by our funding sources in their investments in our credit products and other consumer receivables would have a material adverse effect on our business, results of operations, financial condition, and future prospects.
Borrowers may prepay a loan at any time without penalty, which could reduce our revenue and limit our ability to obtain financing for our lending operations.
A borrower may decide to prepay all or a portion of the remaining principal amount on a loan at any time without penalty. If the entire or a significant portion of the remaining unpaid principal amount of a loan is prepaid, we would receive significantly lower interest associated with such prepaid loan. Prepayments may occur for a variety of reasons, including if interest rates decrease after a loan is made. If a significant volume of prepayments occurs, the amount of our servicing fees would decline, which could harm our business and results of operations. Our data-driven models are designed to predict prepayment rates. However, if a significant volume of prepayments occur that our models do not accurately predict, returns targeted by our financing sources in our loan funding programs would be adversely affected and our ability to attract new investors would be negatively affected.
We service all of the loans we originate. A failure by us to service loans properly could result in lost revenue and negatively impact our business and operations or subject us to regulatory scrutiny or penalties.
We service all of the loans we originate. Any failure on our part to perform functions related to our servicing activities to properly service our loans could result in a significant decrease in the amount of loans we service and therefore adversely impact the amount of revenue generated from interest income.
We rely on investment through our subsidiary Special Purpose Vehicle financing structure to finance loans and advances, and any inability to meet investors expected returns or our obligations concerning that financing could result in significant losses in and harm to our business.
Our credit and advance products are currently financed through Invest in America Credit Fund 1 LLC (“IIA”) and associated special purpose vehicles. IIA was formed in 2016 and is an indirect wholly owned subsidiary of MoneyLion Inc. If we fail to meet our contractual obligations under the arrangement with our funding sources, including ensuring that our credit and advance products are run and managed appropriately, or if we fail to meet the
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investment expectations or returns of our funding sources, our funding sources could terminate their arrangements with us or we may not be able to refinance such funding sources on favorable terms or at all, which could significantly impair our ability to finance future credit and advance receivables beyond the contractual obligations of the funding sources. Loss of one or more of the financing sources we have for our credit products and other receivables could have an adverse impact on our performance, and it could be costly and time consuming to obtain a new financing, if at all. Additionally, any failure involving our servicing processes and any related technical or other errors could create material obligations between MoneyLion and IIA, which could negatively impact our results of operations.
We depend on our key personnel and other highly skilled personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results of operations could be adversely affected.
Our success significantly depends on the continued service of our senior management team, including Diwakar (Dee) Choubey, our Co-Founder and Chief Executive Officer, and Rick Correia, our Chief Financial Officer, and other highly skilled personnel. Our success also depends on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization.
Competition for highly skilled personnel, including engineering and data analytics personnel, is extremely intense, particularly in New York where our headquarters is located. We have experienced, and expect to continue to face, difficulty identifying and hiring qualified personnel in many areas, especially as we pursue our growth strategy. Further, as a result of the COVID-19 pandemic, a large and increasing number of companies have adopted permanent work-from-home policies, which further increases the challenges associated with hiring and retaining qualified personnel. We may not be able to hire or retain such personnel at compensation or flexibility levels consistent with our existing compensation and salary structure and policies. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In particular, candidates making employment decisions, specifically in high-technology industries, often consider the value of any equity they may receive in connection with their employment. Any significant volatility in the price of our stock after this Business Combination may adversely affect our ability to attract or retain highly skilled technical, financial and marketing personnel.
In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements. While we are in the process of training their replacements, the quality of our services and our ability to serve our customers could decline, resulting in an adverse effect on our business.
If we fail to promote, protect, and maintain our brand in a cost-effective manner, we may lose market share and our revenue may decrease.
We believe that developing, protecting, and maintaining awareness of our brand in a cost-effective manner is critical to attracting new and retaining existing customers to our platform. Successful promotion of our brand will depend largely on the effectiveness of our marketing efforts and the experience of existing customers. Our efforts to build our brand have involved significant expense, and we expect to increase our marketing spend in the near term. These brand promotion activities may not result in increased revenue and, even if they do, any increases may not offset the expenses incurred. Additionally, the successful protection and maintenance of our brand will depend on our ability to obtain, maintain, protect, and enforce trademark and other intellectual property protection for our brand. If we fail to successfully promote, protect, and maintain our brand or if we incur substantial expenses in an unsuccessful attempt to promote, protect, and maintain our brand, we may lose our existing merchants and customers to our competitors or be unable to attract new merchants and customers. Any such loss of existing merchants or customers, or inability to attract new merchants or customers, would have an adverse effect on our business and results of operations.
Our engineering and technical development teams are based primarily in Malaysia, which could be adversely affected by changes in political or economic stability or by government policies.
Our engineering and technical development teams operate a foreign office in Malaysia, which is subject to relatively higher degrees of political and social instability than the United States and may lack the infrastructure to withstand political unrest or natural disasters. The political or regulatory climate in the United States, or elsewhere, also could change so that it would not be lawful or practical for us to use international operations in the manner in which we currently use them. If we had to curtail or cease operations in Malaysia and transfer some or all of these
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operations to another geographic area, we would incur significant transition costs as well as higher future overhead costs that could materially and adversely affect our results of operations. In many foreign countries, particularly in those with developing economies, it may be common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act of 1977, as amended (“FCPA”). Any violations of the FCPA or local anti-corruption laws by us, our subsidiaries or our local agents could have an adverse effect on our business and reputation and result in substantial financial penalties or other sanctions.
Our ability to collect payments on our financial products and services and maintain accurate accounts may be adversely affected by computer malware, social engineering, phishing, physical or electronic break-ins, undetected technical errors, bugs and similar disruptions.
The automated nature of our platform may make it an attractive target for hacking and potentially vulnerable to computer viruses, physical or electronic break-ins and similar disruptions. It is possible that we may not be able to anticipate or to implement effective preventive measures against all security breaches of these types, in which case there would be an increased risk of fraud or identity theft, and we may experience losses on, or delays in the collection of amounts owed on, a fraudulently induced loan or payments relating to our other products and services. Security breaches could occur from outside our company, and also from the actions of persons inside our company who may have authorized or unauthorized access to our technology systems. In addition, the software that we have developed to use in our daily operations is highly complex and may contain undetected technical errors that could cause our computer systems to fail. Because many of the products and services we provide involve, in part, our proprietary automated decisioning processes, any failure of our computer systems involving our automated processes and any technical or other errors contained in the software pertaining to our automated processes could compromise our ability to accurately evaluate potential customers, which would negatively impact our results of operations. Furthermore, any failure of our computer systems could cause an interruption in operations and result in disruptions in, or reductions in the amount of, collections on fees and other amounts from our customers.
Additionally, if hackers were able to access our secure files, they might be able to gain access to the personal information of our customers. If we are unable to prevent such activity, we may be subject to significant liability, negative publicity and a material loss of customers, all of which may negatively affect our business.
Our platform and internal systems, and those of third parties upon whom we rely, rely on software that is highly technical, and if it contains undetected technical errors, our business could be adversely affected.
Our platform and internal systems rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software to store, retrieve, process and manage high volumes of data. The software upon which we rely may from time to time contain undetected technical errors or bugs. Some technical errors or bugs may only be discovered after the code has been released for external or internal use. Technical errors or other design defects within the software upon which we rely may result in failure to accurately predict a loan applicant’s creditworthiness or the suitability of other applicants for our other products and services, failure to comply with applicable laws and regulations, approval of sub-optimally priced loans, incorrectly displayed interest rates or other fees to borrowers and other customers, or incorrectly charged interest or fees to borrowers and other customers or to third-party partners or institutional investors, failure to detect fraudulent activity on our platform, our inability to accurately evaluate potential customers, a negative experience for customers or third-party partners, delayed introductions of new features or enhancements or failure to protect customer data or our intellectual property or other sensitive data or proprietary information. Any technical errors, bugs or defects discovered in the software upon which we rely could result in harm to our reputation, loss of customers or bank partners, increased regulatory scrutiny, fines or penalties, loss of revenue or liability for damages, any of which could adversely affect our business, financial condition and results of operations.
Some aspects of our business processes include open source software, which poses risks that could have a material and adverse effect on our business, financial condition and results of operations. In addition, any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.
We incorporate open source software into processes supporting our business and anticipate using open source software in the future. Such open source software may include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open source licenses to which we are subject have not
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been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our systems, limits our use of the software, inhibits certain aspects of our systems and negatively affects our business operations.
Some open source licenses contain requirements that we make source code publicly available or make available on unfavorable terms or at no cost, modifications or derivative works we create based upon the type of open source software we use.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source license, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. We may face claims from third parties claiming ownership of, or demanding the release or license of, modifications or derivative works that we have developed using such open source software (which could include our proprietary source code or artificial intelligence (“AI”) models), or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and if portions of our proprietary AI models or software are determined to be subject to an open source license, or if the license terms for the open source software that we incorporate change, we could be required to publicly release all or affected portions of our source code, purchase a costly license, cease offering the implicated products or services unless and until we can re-engineer such source code in a manner that avoids infringement, discontinue or delay the provision of our offerings if re-engineering could not be accomplished on a timely basis or change our business activities, any of which could negatively affect our business operations and potentially our intellectual property rights. In addition, the re-engineering process could require us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process successfully. If we were required to publicly disclose any portion of our proprietary models, it is possible we could lose the benefit of trade secret protection for our models.
In addition to risks related to license requirements, the use of certain open source software can lead to greater risks than the use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification, controls or other contractual protections regarding infringement claims or the quality of the origin of the software. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. Use of open source software may also present additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open source software. Any of these risks associated with the use of open source software could be difficult to eliminate or manage, and if not addressed, could materially and adversely affect our business, financial condition and results of operations.
Systems defects, failures or disruptions, including events beyond our control, and resulting interruptions in the availability of our websites, applications, products, or services could harm our business, harm our reputation, result in significant costs to us, decrease our potential profitability and expose us to substantial liability.
We use vendors, such as our cloud computing web services provider, account transaction and card processing companies, and third-party software providers, in the operation of our platform. The satisfactory performance, reliability, and availability of our technology and our underlying network and infrastructure are critical to our operations and reputation and the ability of our platform to attract new and retain existing customers. We rely on these vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications failures, air quality issues, environmental conditions, computer viruses or attempts to harm these systems, criminal acts, unauthorized access, sabotage, acts of vandalism, military actions, negligence, human errors, fraud, spikes in platform use and denial of service issues, hardware failures, improper operation, cyberattacks, data loss, wars and similar events. If our arrangement with a vendor is terminated or if there is a lapse of service or damage to its systems or facilities, we could experience interruptions in our ability to operate our platform. We also may experience increased costs and difficulties in replacing that vendor and replacement services may not be available on commercially reasonable terms, on a timely basis, or at all. In addition, our platform is accessed by many customers, often at the same time. As we continue to expand the number of our customers, and products and services available through our platform, we may not be able to scale our technology to accommodate the increased capacity requirements. The failure of data centers, internet service providers or other third-party service providers to meet our capacity requirements could result in interruptions or delays in access to our platform or impede our ability to grow our business and scale our operations. Any interruptions or delays in our platform availability, whether as
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a result of a failure to perform on the part of a vendor, any damage to one of our vendor’s systems or facilities, the termination of any of our third-party vendor agreements, software failures, our or our vendor’s error, natural disasters, terrorism, other man-made problems, security breaches, whether accidental or willful, or other factors, could harm our relationships with our customers, prevent our customers from accessing their accounts, damage our reputation with current and potential customers, expose us to liability, cause us to lose customers, cause the loss of critical data, prevent us from supporting our platform, products or services or cause us to incur additional expense in arranging for new facilities and support or otherwise harm our business and also harm our reputation.
In addition, we source certain information from third parties. For example, our risk-scoring model is based on algorithms that evaluate a number of factors and currently depend on sourcing certain information from third parties, including consumer reporting agencies. In the event that any third party from which we source information experiences a service disruption, whether as a result of maintenance, natural disasters, terrorism, or security breaches, whether accidental or willful, or other factors, the ability to score and decision loan applications and applications for our other products and services through our platform may be adversely impacted. Additionally, there may be errors contained in the information provided by third parties. This may result in the inability to approve otherwise qualified applicants through our platform, which may adversely impact our business by negatively impacting our reputation and reducing our transaction volume.
To the extent we use or are dependent on any particular third-party data, technology, or software, we may also be harmed if such data, technology, or software becomes non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement, misappropriation, or other violation, or malfunctions or functions in a way we did not anticipate. Any loss of the right to use any of this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software, which could result in the loss or limiting of our products, services, or features available in our products or services.
In addition, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. Furthermore, prolonged interruption in the availability, or reduction in the speed or other functionality, of our platform, products or services could materially harm our reputation and business. Any of the foregoing could prevent us from processing transactions or posting payments on our platform, damage our brand and reputation, divert the attention of our employees, reduce our revenue, subject us to liability, and cause customers to abandon our platform, any of which could have a material and adverse effect on our business, results of operations, financial condition, and future prospects.
Demand for our products may decline if we do not continue to innovate or respond to evolving technological or other changes.
We operate in a dynamic industry characterized by rapidly evolving technology, frequent product introductions, and competition based on pricing and other differentiators. We rely on our proprietary technology to make the MoneyLion platform available to customers, to service customers and to introduce new products. In addition, we may increasingly rely on technological innovation as we introduce new types of products, expand our current products into new markets, and continue to streamline the MoneyLion platform. The process of developing new technologies and products is complex, and if we are unable to successfully innovate and continue to deliver a superior customer experience, customers’ demand for our products may decrease and our growth and operations may be harmed. Participants in our industry also compete on price, and our ability to meet the demand of our customers in this respect could affect our ability to maintain demand for our products and services.
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.
We are subject to extensive regulation, supervision and examination under United States federal and state laws and regulations. Regulators have broad discretion with respect to the interpretation, implementation, and enforcement of these laws and regulations, including through enforcement actions that could subject us to civil money penalties, customer remediations, increased compliance costs, and limits or prohibitions on our ability to offer certain products or services or to engage in certain activities. Any failure or perceived failure to comply
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with any of these laws or regulations could subject us to lawsuits or governmental actions and/or damage our reputation, which could materially and adversely affect our business. In addition, to the extent that we undertake actions requiring regulatory approval or non-objection, regulators may make their approval or non-objection subject to conditions or restrictions that could have a material adverse effect on our business. Moreover, any competitors subject to different, or in some cases less restrictive, legislative or regulatory regimes may have or obtain a competitive advantage over us.
We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (“CFPB”), which oversees compliance with federal consumer financial protection laws. In addition, if the CFPB were to expand its supervisory authority by promulgating new regulations, it is possible that the CFPB could be permitted to conduct periodic examination of our business, which may increase our risk of regulatory or enforcement actions. Further, we are regulated by many state regulatory agencies through licensing and other supervisory or enforcement authority, which includes regular examination by state governmental authorities.
In addition, our wholly-owned subsidiary, ML Wealth LLC (“ML Wealth”), is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and is subject to regulation by the SEC. The Advisers Act, together with related regulations and interpretations of the SEC, impose numerous obligations and restrictions on investment advisers, including requirements relating to the safekeeping of client funds and securities, limitations on advertising, disclosure and reporting obligations, prohibitions on fraudulent activities, restrictions on agency cross and principal transactions between an adviser and its advisory clients, and other detailed operating requirements, as well as general fiduciary obligations.
We are also subject to potential enforcement and other actions that may be brought by state attorneys general or other state enforcement authorities and other governmental agencies. Any such actions could subject us to civil money penalties and fines, customer remediations, and increased compliance costs, damage our reputation and brand and limit or prohibit our ability to offer certain products and services or engage in certain business practices. Further, in some cases, regardless of fault, it may be less time-consuming or costly to settle these matters, which may require us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to a given party or regulatory body.
The legal and regulatory regimes governing certain of our products and services are uncertain and evolving. Changing laws, regulations, interpretations or regulatory enforcement priorities may negatively impact the management of our business, results of operations, ability to offer certain products or the terms and conditions upon which they are offered, and ability to compete.
We are required to comply with constantly changing federal, state, and local laws and regulations that regulate, among other things, the terms of the loans and other consumer receivables that we originate and the associated fees that may be charged. Federal and state regulators of consumer financial products and services are also enforcing existing laws, regulations, and rules more aggressively and enhancing their supervisory expectations regarding the management of legal and regulatory compliance risks. Changes in the laws, regulations and enforcement priorities applicable to our business could have a material impact on our business model, operations and financial position.
Such laws and regulations are complex and require us to incur significant expenses and devote significant management attention to ensure compliance. In addition, our failure to comply (or to ensure that our agents and third-party service providers comply) with these laws or regulations may result in litigation or enforcement actions, the penalties for which could include: revocation of licenses and registrations; fines and other monetary penalties; civil and criminal liability; substantially reduced payments by our customers; modification of the original terms of loans and other products, permanent forgiveness of debt, or inability to, directly or indirectly, collect all or a part of the principal of or interest on loans or other amounts owed by our customers; and indemnification claims. Such consequences could, among other things, require changes to our business practices and scope of operations or harm our reputation, which in turn, could have a material adverse effect on our results of operations, financial condition or business.
In addition, the transition to a new Presidential Administration occurring in 2021 is expected to bring an increased focus on enforcement of federal consumer protection laws and appointment of consumer-oriented regulators at federal agencies such as the CFPB, the SEC, the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”). It is possible that changes made by regulators in the Biden Administration could result in new requirements or restrictions that apply to us (or our third-party partners), impacting our business, operations, and profitability.
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State attorneys general have indicated that they will take a more active role in enforcing consumer protection laws, including through use of Dodd-Frank Act provisions that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and obtain civil money penalties and other relief available to the CFPB.
Further, we may not be able to respond quickly or effectively to regulatory, legislative, and other developments, and these changes may in turn impair our ability to offer our existing or planned features, products, and services and/or increase our cost of doing business. In addition, if our practices are not consistent or viewed as not consistent with legal and regulatory requirements, we may become subject to audits, inquiries, whistleblower complaints, adverse media coverage, investigations, or criminal or civil sanctions, all of which may have an adverse effect on our reputation, business, results of operations, and financial condition.
These regulatory changes and uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact the results of our operations. New laws or regulations also require us to incur significant expenses to ensure compliance. As compared to our competitors, we could be subject to more stringent state or local regulations or could incur marginally greater compliance costs as a result of regulatory changes.
Proposals to change the statutes affecting financial services companies are frequently introduced in Congress and state legislatures that, if enacted, may affect our operating environment in substantial and unpredictable ways. In addition, numerous federal and state regulators have the authority to promulgate or change regulations that could have a similar effect on our operating environment. We cannot determine with any degree of certainty whether any such legislative or regulatory proposals will be enacted and, if enacted, the ultimate impact that any such potential legislation or implementing regulations, or any such potential regulatory actions by federal or state regulators, would have upon our business.
In addition, we expect to continue to launch new products and services in the coming years, which may subject us to additional legal and regulatory requirements under federal, state and local laws and regulations, but which we expect to be similar to the legal and regulatory regimes to which we are already subject. We are currently evaluating the business and regulatory implications of offering a Buy Now Pay Later (“BNPL”) product to our customers directly through MoneyLion-controlled lending subsidiaries or offering it through a partnership with an originating bank. Depending on the model we choose, we may be subject to additional or different state lending licensing requirements or contractual requirements under arrangements with a bank partner. We also anticipate launching a credit card product in the future, which would also be provided in partnership with a credit card issuing bank. Depending on the terms of the credit card product, we may need to comply with additional legal, regulatory and contractual obligations, including card association rules. In 2021, we also anticipate making certain cryptocurrency-related products or services available to our customers through one or more regulated partners. On March 26, 2021, we signed a licensing and cooperation agreement with Zero Hash LLC and Zero Hash Liquidity Services LLC (collectively, “Zero Hash”), both of which are registered as money services businesses and have the necessary state-level licenses for engaging in digital assets activities where the Zero Hash services are offered. Under the terms of the agreement, we will not be directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency at or through Zero Hash, and therefore, we do not currently expect to be subject to money services business, money transmitter licensing, or other licensing or regulatory requirements specific to transactions relating to virtual currencies. Zero Hash will remain primarily liable for its digital assets activities, and the agreement specifically requires Zero Hash to indemnify us for, among other things, Zero Hash’s failure to perform or comply with the provisions of the agreement, any claims or disputes concerning Zero Hash’s provision of cryptocurrency services, and any failure by Zero Hash to comply with applicable laws and regulations. To the extent claims are made against us and/or we incur liabilities as a result of any such failures, claims or disputes by Zero Hash and Zero Hash is not able to indemnify us for such claims or liabilities, we may suffer losses. With respect to each of our new product offerings, to the extent the application of federal, state, and local laws or regulations to these products is unclear or evolving, including changing interpretations and the implementation of new or varying regulatory requirements by federal or state governments and regulators, this may significantly affect or change our proposed business model, increase our operating expenses and hinder or delay our anticipated launch timelines for new products and services.
New laws, regulations, policy or changes in enforcement of existing laws or regulations applicable to our business, or reexamination of current practices, could adversely impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our business practices or alter its
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relationships with customers, affect retention of key personnel, or expose us to additional costs (including increased compliance costs and/or customer remediation). These changes also may require us to invest significant resources, and devote significant management attention, to make any necessary changes and could adversely affect our business.
If loans made by us under our state lending licenses are found to violate applicable state interest rate limits or other provisions of applicable state lending and other laws, it could adversely affect our business, results of operations, financial condition, and future prospects.
The loans we originate pursuant to our state licenses are subject to state licensing and interest rate restrictions, as well as numerous state requirements regarding consumer protection, interest rate, disclosure, prohibitions on certain activities, and loan term lengths. If the loans we originate pursuant to our state licenses were deemed subject to and in violation of certain state consumer finance or other laws, we could be subject to fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), and other penalties or consequences, and the loans could be rendered void or unenforceable in whole or in part, any of which could have an adverse effect on our business, results of operations, financial condition, and future prospects.
If we operate without having obtained necessary state or local licenses, it could adversely affect our business, results of operations, financial condition, and future prospects.
Certain states have adopted laws regulating and requiring licensing, registration, notice filing, or other approval by parties that engage in certain activity regarding consumer finance transactions, including facilitating and assisting such transactions in certain circumstances. Furthermore, certain states and localities have also adopted laws requiring licensing, registration, notice filing, or other approval for consumer debt collection or servicing, and/or purchasing or selling consumer loans. We have also received inquiries from state regulatory agencies regarding requirements to obtain licenses from or register with those states, including in states where we have determined that we are not required to obtain such a license or be registered with the state, and we expect to continue to receive such inquiries. The application of some consumer financial licensing laws to our platform and the related activities it performs is unclear. In addition, state licensing requirements may evolve over time, including, in particular, recent trends toward increased licensing requirements and regulation of parties engaged in loan solicitation activities. If we were found to be in violation of applicable state licensing requirements by a court or a state, federal, or local enforcement agency, or agree to resolve such concerns by voluntary agreement, we could be subject to or agree to pay fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), criminal penalties, and other penalties or consequences, and the loans facilitated through our platform could be rendered void or unenforceable in whole or in part, any of which could have an adverse effect on the enforceability or collectability of the loans facilitated through our platform.
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, results of operations, financial condition, and future prospects.
Our third-party partners are subject to federal and state supervision and regulation. Federal regulation of the banking and investment industries, along with tax and accounting laws, regulations, rules, and standards, may limit their operations significantly and control the methods by which they conduct business. In addition, compliance with laws and regulations can be difficult and costly, and changes to laws and regulations can impose additional compliance requirements. Regulatory requirements affect our third-party partners’ banking and investment practices, among other aspects of their business, and restrict transactions between us and our third-party partners. These requirements may constrain the operations of our third-party partners, and the adoption of new laws and changes to, or repeal of, existing laws may have a further impact on our business.
In choosing whether and how to conduct business with us, current and prospective third-party partners can be expected to take into account the legal, regulatory, and supervisory regime that applies to them, including potential changes in the application or interpretation of regulatory standards, licensing requirements, or supervisory expectations. Regulators may elect to alter standards or the interpretation of the standards used to measure regulatory compliance or to determine the adequacy of liquidity, certain risk management, or other operational practices for financial services companies in a manner that impacts our current and prospective third-party partners.
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Furthermore, the regulatory agencies have extremely broad discretion in their interpretation of the regulations and laws and their interpretation of the quality of our third-party partners’ assets. If any regulatory agency’s assessment of the quality of our third-party partners’ assets, operations, lending practices, investment practices, or other aspects of their business changes, it may reduce our third-party partners’ earnings, capital ratios, and share price in such a way that affects our business.
Bank holding companies and financial institutions are extensively regulated and currently face an uncertain regulatory environment. Applicable state and federal laws, regulations, and interpretations, including enforcement policies and accounting principles have been subject to significant changes in recent years, and may be subject to significant future changes. We cannot predict with any degree of certainty the substance or effect of pending or future legislation or regulation or the application of laws and regulations to our current and prospective third-party partners. Future changes may have an adverse effect on our current and prospective third-party partners and, therefore, on us.
The collection, processing, use, storage, sharing and transmission of PII and other sensitive data are subject to stringent and changing state, federal and international laws, regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.
In the course of our operations and the processing of transactions, we collect, process, store, disclose, use, share and/or transmit a large volume of PII and other sensitive data from current, past and prospective customers as well as our employees in and across multiple jurisdictions. The regulatory framework for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. There are federal, state, and foreign laws and regulations regarding privacy, data security and the collection, processing, use, storage, protection, sharing and/or transmission of PII and sensitive data. For example, the Gramm-Leach-Bliley Act (“GLBA”) (along with its implementing regulations) restricts certain collection, processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information. Additionally, many states continue to enact legislation on matters of privacy, information security, cybersecurity, data breach and data breach notification requirements. For example, as of January 1, 2020, the California Consumer Privacy Act (“CCPA”) grants additional consumer rights with respect to data privacy in California. The CCPA, among other things, entitles California residents to know how their PII is being collected and shared, to access or request the deletion of their PII and to opt out of certain sharing of their PII. The CCPA is subject to further amendments pending certain proposed regulations that are being reviewed and revised by the California Attorney General. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of PII. This private right of action may increase the likelihood of, and risks associated with, data breach litigation. We cannot predict the impact of the CCPA on our business, operations or financial condition, but it could require us to modify certain processes or procedures, which could result in additional costs and liability.
Additionally, a new California ballot initiative, the California Privacy Rights Act (“CPRA”) was passed in November 2020. Effective starting on January 1, 2023, the CPRA imposes additional obligations on companies covered by the legislation and will significantly modify the CCPA, including by expanding customers’ rights with respect to certain sensitive PII. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.
We expect more states to enact legislation similar to the CCPA and the CPRA, which provide customers with new privacy rights and increase the privacy and security obligations of entities handling certain PII of such customers. The CCPA has prompted a number of proposals for new federal and state-level privacy legislation, such as in Nevada, New Hampshire, Illinois and Nebraska, as well as in Virginia, which recently signed such legislation, the Virginia Consumer Data Protection Act (“VCDPA”), into law on March 2, 2021 with an effective date of January 1, 2023. The VCDPA and such other proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies.
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Additionally, our investment adviser, ML Wealth, and broker-dealer, MoneyLion Securities LLC, are subject to SEC Regulation S-P, which requires that businesses maintain policies and procedures addressing the protection of customer information and records. This includes protecting against any anticipated threats or hazards to the security or integrity of customer records and information and against unauthorized access to or use of customer records or information. Regulation S-P also requires businesses to provide initial and annual privacy notices to customers describing information sharing policies and informing customers of their rights.
Because the interpretation and application of many privacy and data protection laws are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the features of our services and platform capabilities. If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities and practices or modify our platform, which could have an adverse effect on our business. Any violations or perceived violations of these laws, rules and regulations by us, or any third parties with which we do business, may require us to change our business practices or operational structure, including limiting our activities in certain states and/or jurisdictions, addressing legal claims by governmental entities or private actors, sustaining monetary penalties, sustaining reputational damage, expending substantial costs, time and other resources and/or sustaining other harms to our business. Furthermore, our online, external-facing privacy policy and website make certain statements regarding our privacy, information security, and data security practices with regard to information collected from our customers or visitors to our website. Failure or perceived failure to adhere to such practices may result in regulatory scrutiny and investigation, complaints by affected customers or visitors to our website, reputational damage and/or other harm to our business. If either we, or the third-party service providers with which we share customer data, are unable to address privacy concerns, even if unfounded, or to comply with applicable privacy or data protection laws, regulations and policies, it could result in additional costs and liability to us, damage our reputation, inhibit sales and harm our business, financial condition and results of operations.
Cyberattacks and other security breaches or disruptions suffered by us or third parties upon which we rely could have a materially adverse effect on our business, harm our reputation and expose us to public scrutiny or liability.
In the normal course of business, we collect, process, use and retain sensitive and confidential information regarding our customers and prospective customers, including data provided by and related to customers and their transactions, as well as other data of the counterparties to their payments. We also have arrangements in place with certain third-party service providers that require us to share consumer information. Although we devote resources and management focus to ensuring the integrity of our systems through information security and business continuity programs, our facilities and systems, and those of third-party service providers, are vulnerable to actual or threatened external or internal security breaches, acts of vandalism, theft, or fraud or misconduct on the part of employees, other internal sources or third parties, computer viruses, phishing attacks, internet interruptions, disruptions or losses, misplaced or lost data, ransomware, unauthorized encryption, denial-of-service attacks, social engineering, unauthorized access, spam or other attacks, natural disasters, fires, terrorism, war, telecommunications or electrical interruptions or failures, programming or human errors or malfeasance, and other similar malicious or inadvertent disruptions or events. We and our third-party service providers may from time to time experience such instances. We also face security threats from malicious third parties that could obtain unauthorized access to our systems and networks, which threats we anticipate will continue to grow in scope and complexity over time. These events could interrupt our business or operations, result in legal claims or proceedings, result in significant legal and financial exposure, supervisory liability under U.S. federal or state, or non-U.S. laws regarding the privacy and protection of information, including PII, damage to our reputation and a loss of confidence in the security of our systems, products and services. Although the impact to date from these events has not had a material adverse effect on us, no assurance is given that this will be the case in the future.
Information security risks in the financial services industry have increased recently, in part because of new technologies, the use of the Internet and telecommunications technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities of organized criminals, perpetrators of fraud, hackers, terrorists and other malicious third parties. In addition to cyberattacks and other security breaches involving the theft of sensitive and confidential information, hackers, terrorists, sophisticated nation-state and nation-state supported actors and other malicious third parties recently have engaged in attacks that are designed to disrupt key business services, such as consumer-facing websites. We and our third-party service providers may not be able to anticipate or implement effective preventive measures against all security breaches of these types, especially because the techniques used to sabotage or to obtain unauthorized access to our or our third-party service providers’ technology, systems, networks and/or physical facilities in which data is stored or through which data is transmitted
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change frequently and because attacks can originate from a wide variety of sources. We employ detection and response mechanisms designed to contain and mitigate security incidents. Nonetheless, early detection efforts may be thwarted by sophisticated attacks and malware designed to avoid detection. We also may fail to detect the existence of a security breach related to the information of our customers and to prevent or detect service interruption, system failure or data loss. Further, as the current COVID-19 pandemic continues to result in a significant number of people working from home, these cybersecurity risks may be heightened by an increased attack surface across our business and those of our customers and third-party service providers. We cannot guarantee that our efforts, or the efforts of those upon whom we rely and partner with, will be successful in preventing any such information security incidents.
The access by unauthorized persons to, or the improper disclosure by us of, confidential information regarding our customers or our proprietary information, software, methodologies and business secrets could interrupt our business or operations, result in significant legal and financial exposure, supervisory liability, damage to our reputation or a loss of confidence in the security of our systems, products and services, all of which could have a material adverse impact on our business. In addition, there recently have been a number of well-publicized attacks or breaches affecting companies in the financial services industry that have heightened concern by customers, which could also intensify regulatory focus, cause customers to lose trust in the security of the industry in general and result in reduced use of our services and increased costs, all of which could also have a material adverse effect on our business.
Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data. In addition, our agreements with certain partners and service providers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach. A security breach of any of our vendors that processes PII of our customers may pose similar risks.
A security breach may also cause us to breach customer contracts. Our agreements with certain partners and service providers may require us to use industry-standard or reasonable measures to safeguard PII. We also may be subject to laws that require us to use industry-standard or reasonable security measures to safeguard PII. A security breach could lead to claims by our customers or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages, and in some cases our customer agreements may not limit our remediation costs or liability with respect to data breaches.
Litigation resulting from security breaches may adversely affect our business. Unauthorized access to our technology, systems, networks, or physical facilities, or those of our third-party service providers, could result in litigation with our customers or other relevant stakeholders. These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our products and/or technology capabilities in response to such litigation, which could have an adverse effect on our business. If a security breach were to occur, and the confidentiality, integrity or availability of PII was disrupted, we could incur significant liability, or our technology, systems or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
We may not have adequate insurance coverage. The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.
While we take precautions to prevent consumer identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of our products and services or subject us to scrutiny or penalties.
There is risk of fraudulent activity associated with our platform, customers, service providers and third parties handling consumer information. Our resources, technologies, and fraud prevention tools may be insufficient to accurately detect and prevent fraud. The level of fraud-related charge-offs on the loans and other products and
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services facilitated through our platform could be adversely affected if fraudulent activity were to significantly increase. Significant amounts of fraudulent cancellations or chargebacks could adversely affect our business or financial condition. High profile fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negative publicity, and the erosion of trust from our customers, and could materially and adversely affect our business, results of operations, financial condition, future prospects, and cash flows.
We may be unable to sufficiently obtain, maintain, protect, or enforce our intellectual property and other proprietary rights, which could reduce the value of our platform, products, services and brand, impair our competitive position and cause reputational harm.
Intellectual property and other proprietary rights are important to the success of our business. Our ability to compete effectively is dependent in part upon our ability to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights, including with respect to our proprietary technology, and to obtain licenses to use the intellectual property and proprietary rights of others. We rely on a combination of trademarks, service marks, copyrights, trade secrets, domain names and contractual rights to protect our intellectual property and other proprietary rights. We own the domain name rights for moneylion.com, and, as of March 31, 2021, we owned 22 registered trademarks and four trademark applications in the United States. Nonetheless, the steps we take to obtain, maintain, protect, and enforce our intellectual property and other proprietary rights may be inadequate and, despite our efforts to protect these rights, unauthorized third parties, including our competitors, may duplicate, mimic, reverse engineer, access, obtain, or use the proprietary aspects of our technology, processes, products, or services without our permission, thereby impeding our ability to promote our platform and possibly leading to customer confusion. Our competitors and other third parties may also design around or independently develop similar technology or otherwise duplicate or mimic our services or products such that we would not be able to successfully assert our intellectual property or other proprietary rights against them. We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property. We cannot assure that any future patent, trademark, or service mark registrations will be issued for our pending or future applications or that any of our current or future patents, copyrights, trademarks, or service marks (whether registered or unregistered) will be valid, enforceable, sufficiently broad in scope, provide adequate protection of our intellectual property or other proprietary rights, or provide us with any competitive advantage.
Our trademarks, trade names, and service marks have significant value, and our brand is an important factor in the marketing of our services. We rely on, and intend to rely on, both registrations and common law protections for our trademarks. However, we may be unable to prevent competitors or other third parties from acquiring or using trademarks, service marks, or other intellectual property or other proprietary rights that are similar to, infringe upon, misappropriate, dilute, or otherwise violate or diminish the value of our trademarks and service marks and our other intellectual property and proprietary rights. The value of our intellectual property and other proprietary rights could diminish if others assert rights in or ownership of our intellectual property or other proprietary rights, or in trademarks or service marks that are similar to our trademarks or service marks. Additionally, if third parties succeed in registering or developing common law rights in such trademarks or similar trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks to develop brand recognition of our platform, products or services. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could adversely impact our business, financial condition and results of operations.
In addition to registered intellectual property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets, confidential information, know-how and technical information. In order to protect our proprietary information and technology, we rely in part on confidentiality and intellectual property assignment agreements with our employees and contractors involved in the development of material intellectual property for us, which require such individuals to assign such intellectual property to us and place restrictions on the employees’ and contractors’ use and disclosure of our confidential information. However, these agreements may not be self-executing, and we cannot guarantee that we have entered into such agreements containing obligations of confidentiality with each party that has or may have had access to proprietary information, know-how, or trade secrets owned or held by us. Individuals that were involved in the development of intellectual property for us or who had access to our intellectual property may make adverse ownership claims to our current and future intellectual property. Likewise, to the extent that our employees, independent contractors or other third parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting works of authorship, know-how and inventions. Moreover, our contractual
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arrangements may be insufficient or breached or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or provide an adequate remedy in the event of an unauthorized disclosure, which could cause us to lose any competitive advantage resulting from this intellectual property. The measures we have put in place may not prevent misappropriation, infringement, or other violation of our intellectual property or other proprietary rights or information and any resulting loss of competitive advantage, and we may be required to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement, or other violation by others, which is time-consuming and expensive, could cause a diversion of resources, and may not be successful, even when our rights have been infringed, misappropriated, or otherwise violated. Our efforts to enforce our intellectual property and other proprietary rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property and other proprietary rights, and if such defenses, counterclaims, or countersuits are successful, it could diminish or we could otherwise lose valuable intellectual property and other proprietary rights. Furthermore, changes to U.S. or foreign intellectual property laws and regulations may jeopardize the enforceability and validity of our intellectual property portfolio and harm our ability to obtain patent protection, including for some of our unique business methods. Additionally, the laws of some foreign countries may not be as protective of intellectual property and other proprietary rights as those in the United States, and the mechanisms for enforcement of intellectual property and other proprietary rights may be inadequate.
Furthermore, third parties may challenge, invalidate, or circumvent our intellectual property and proprietary rights, including through administrative processes or litigation. The legal standards relating to the validity, enforceability, and scope of protection of intellectual property and other proprietary rights are uncertain and still evolving. Our intellectual property and other proprietary rights may not be sufficient to provide us with a competitive advantage and the value of our intellectual property and other proprietary rights could also diminish if others assert rights therein or ownership thereof, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction.
We may be sued by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights which may be costly and may subject us to significant liability and increased costs of doing business.
Our success depends, in part, on our ability to develop and commercialize our products and services without infringing, misappropriating, or otherwise violating the intellectual property or other proprietary rights of third parties.
We may become involved in disputes from time to time concerning intellectual property or other proprietary rights of third parties, which may relate to our own proprietary technology, or to technology that we acquire or license from third parties, and we may not prevail in these disputes. Relatedly, competitors or other third parties may raise claims alleging that we, service providers or other third parties retained or indemnified by us, infringe on, misappropriate, or otherwise violate such competitors’ or other third parties’ intellectual property or other proprietary rights. These claims of infringement, misappropriation, or other violation may be extremely broad, and it may not be possible for us to conduct our operations in such a way as to avoid all such alleged violations of such intellectual property or other proprietary rights. We also may be unaware of third-party intellectual property or other proprietary rights that cover or otherwise relate to some or all of our products and services. For example, there may be issued patents of which we are not aware, held by third parties that, if found to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There also may be pending patent applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our current or future technologies or products. Because patent applications can take years to issue and are often afforded confidentiality for some period of time there may currently be pending applications, unknown to us, that later result in issued patents that could cover our current or future technologies or products.
Given the complex, rapidly changing, and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual property-related litigation, a claim of infringement, misappropriation, or other violation against us may require us to spend significant amounts of time and other resources to defend against the claim (even if we ultimately prevail), pay significant money damages, make significant payments for legal fees, settlement payments or other costs, lose significant revenues, be prohibited from using the relevant systems, processes, technologies, or other intellectual property (temporarily or permanently),
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cease offering certain products or services, obtain a license, which may not be available on commercially reasonable terms or at all, to sell or use the relevant technology or redesign our allegedly infringing products or services or functionality therein to avoid infringement, misappropriation or other violations, which could be costly, time-consuming, or impossible, rebrand our products and services and/or be prevented from selling some of our products or services if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or otherwise violate their trademarks or other intellectual property rights, and/or limit the manner in which we use our brands. In addition, if a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop alternative technology for any infringing aspect of our business, we may be forced to limit or stop sales of our relevant products and technology capabilities or cease business activities related to such intellectual property. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition or results of operations.
Some of the aforementioned risks of infringement, misappropriation or other violation, in particular with respect to patents, are potentially increased due to the nature of our business, industry, and intellectual property portfolio. For instance, it has become common in recent years for certain third parties to purchase patents or other intellectual property assets for the sole purpose of making claims of infringement, misappropriation, or other violation in an attempt to extract settlements from companies such as ours. In addition, many companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them than we can. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid, or both. The strength of our defenses may depend on the patents asserted, the interpretation of these patents, or our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. We do not currently have a patent portfolio, which could prevent us from deterring patent infringement claims from competitors or other third parties and our competitors and others may now and in the future have significantly larger and more mature patent portfolios than we may have. Any litigation may also involve patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, any future patents we may have may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
In addition to the previously mentioned impacts of intellectual property-related litigation, while in some cases a third party may have agreed to indemnify us for costs associated with intellectual property-related litigation, such indemnifying third party may refuse or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to pay monetary damages, which may be significant.
Even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating results. Moreover, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. The occurrence of infringement and misappropriation claims may grow as the market for our platform and products grows. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Any of the foregoing could adversely impact our business, financial condition and results of operations.
Our business and platform depend in part on intellectual property and proprietary rights and technology licensed from or otherwise made available to us by third parties. If we fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we could lose license rights that are critical to our business.
Our business and our platform rely on technologies developed or licensed by third parties. These third-party software components may become obsolete, defective or incompatible with future versions of our services, relationships with the third-party licensors or technology providers may deteriorate, or our agreements with the third-party licensors or technology providers may expire or be terminated. Additionally, some of these licenses or other grants of rights may not be available to us in the future on terms that are acceptable, or at all, or that allow
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our platform, products and services to remain competitive. Our inability to obtain licenses or rights on favorable terms could have a material and adverse effect on our business and results of operations. Furthermore, incorporating intellectual property or proprietary rights licensed from or otherwise made available to us by third parties on a non-exclusive basis in our products or services could limit our ability to protect the intellectual property and proprietary rights in our services and our ability to restrict third parties from developing, selling or otherwise providing similar or competitive technology using the same third-party intellectual property or proprietary rights.
We believe we have all the necessary licenses and other grants of rights from third parties to use technology and software that we do not own. A third party could, however, allege that we are infringing its rights, which may deter our ability to obtain licenses or other grants of rights on commercially reasonable terms from the third party, if at all, or cause the third party to commence litigation against us. Our failure to obtain necessary licenses or other rights, or litigation or claims arising out of intellectual property matters, may harm or restrict our business. In addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Any such litigation or the failure to obtain any necessary licenses or other rights could adversely impact our business, financial position and results of operations.
Failure to comply with anti-money laundering, economic and trade sanctions regulations, and similar laws could subject us to penalties and other adverse consequences.
We maintain an enterprise-wide program designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including the Bank Secrecy Act and the Patriot Act. This program includes policies, procedures, processes, and other internal controls designed to identify, monitor, manage, and mitigate the risk of money laundering and terrorist financing. These controls include procedures and processes to detect and report potentially suspicious transactions, perform consumer due diligence, respond to requests from law enforcement, and meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. We are required to maintain this program under our agreements with our third-party partners, and certain state regulatory agencies have intimated they expect the program to be in place and followed. We cannot provide any assurance that our programs and controls will be effective to ensure compliance with all applicable anti-money laundering and anti-terrorism financing laws and regulations we are required to comply with, and our failure to comply with these laws and regulations could result in a breach and termination of our agreements with our third-party partners or criticism by state governmental agencies, which would have a material adverse effect on our business, results of operations, financial condition, and future prospects.
We have in the past, and continue to be, subject to inquiries, subpoenas, exams, pending investigations, and enforcement matters by state and federal regulators, the outcome of which is uncertain and could cause reputational and financial harm to our business and results of operations.
The financial services industry is subject to extensive regulation under federal, state, and applicable international laws. From time to time, we have been, and continue to be, subject to inquiries, subpoenas, pending investigations, and enforcement matters by state and federal regulators and have been threatened with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities, consumer financial services and other matters. We are also subject to periodic regulatory examinations and inspections. Compliance and trading problems that are reported to regulators, such as the SEC, Financial Industry Regulatory Authority, Inc. (“FINRA”), the CFPB, or state regulators, by dissatisfied customers or others are investigated by such regulators, and may, if pursued, result in formal claims being filed against us by customers or disciplinary action being taken against us or our employees by regulators or enforcement agencies. To resolve issues raised in examinations or other governmental actions, we may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to us. We expect to continue to incur costs to comply with governmental regulations. Any such claims or disciplinary actions that are decided against us could have a material impact on our financial results. For a discussion of specific legal and regulatory proceedings, inquiries and investigations, to which we are currently subject, please refer to “Business of New MoneyLion–Legal and Regulatory Proceedings.”
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Unfavorable outcomes in legal proceedings may harm our business and results of operations.
We are, and may in the future become, subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings, whether civil or criminal, or lawsuits by governmental agencies or private parties, which may affect our results of operations. These claims, lawsuits, and proceedings could involve labor and employment, discrimination and harassment, commercial disputes, intellectual property rights (including patent, trademark, copyright, trade secret, and other proprietary rights), class actions, general contract, tort, defamation, data privacy rights, antitrust, common law fraud, government regulation, or compliance, alleged federal and state securities and “blue sky” law violations or other investor claims, and other matters. Due to the consumer-oriented nature of our business and the application of certain laws and regulations, participants in our industry are regularly named as defendants in litigation alleging violations of federal and state laws and regulations and consumer law torts, including fraud. Many of these legal proceedings involve alleged violations of consumer protection laws. In addition, we have in the past and may in the future be subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings related to our loan products and other financial services we provide. For instance, our membership model and some of the products and services we offer are relatively novel and have been subject to limited regulatory scrutiny, but there has been, and may continue to be, increasing regulatory interest in and/or litigation challenging our membership model, our products or services.
Any unfavorable results of pending or future legal proceedings may result in contractual damages, usury related claims, fines, penalties, injunctions, the unenforceability, rescission or other impairment of loans originated on our platform or other censure that could have an adverse effect on our business, results of operations and financial condition. Even if we adequately address the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues, which could harm our business, financial condition and results of operations.
Changes in tax law and differences in interpretation of tax laws and regulations may adversely impact our financial statements.
We operate in multiple jurisdictions and are subject to tax laws and regulations of the U.S. federal, state and local and non-U.S. governments. U.S. federal, state and local and non-U.S. tax laws and regulations are complex and subject to varying interpretations. U.S. federal, state and local and non-U.S. tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions that we have taken. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have an adverse effect on our financial condition and results of operations. Further, future changes to U.S. federal, state and local and non-U.S. tax laws and regulations could increase our tax obligations in jurisdictions where we do business or require us to change the manner in which we conduct some aspects of our business.
As the regulatory framework for artificial intelligence and machine learning technology evolves, our business, financial condition and results of operations may be adversely affected.
The regulatory framework for artificial intelligence and machine learning technology is evolving and remains uncertain. It is possible that new laws and regulations will be adopted in the United States, or existing laws and regulations may be interpreted in new ways, that would affect the operation of our platform and the way in which we use artificial intelligence and machine learning technology, including with respect to fair lending laws. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
We may be unsuccessful in managing the effects of changes in the cost of capital on our business.
We may need to raise funds in the future, for example, to develop new technologies, expand our business, respond to competitive pressures and make acquisitions. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements.
Our ability to obtain debt or equity funding will depend on a number of factors, including market conditions, interest rates, our operating performance, our credit rating and investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate funds are not available, we may be required to reduce expenditures, including curtailing our growth strategies, foregoing acquisitions or reducing our business development efforts. If we succeed in raising additional funds through the issuance of equity or equity-linked
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securities, then existing stockholders could experience substantial dilution. If we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior to those of the holders of our common stock. In addition, any such issuance could subject us to restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. Further, to the extent we incur additional indebtedness or such other obligations, the risks associated with our existing debt, including our possible inability to service our existing debt, would increase.
Our projections are subject to significant risks, assumptions, estimates and uncertainties. As a result, our projected revenues, market share, expenses and profitability may differ materially from our expectations.
We operate in a rapidly changing and competitive industry and our projections will be subject to the risks and assumptions made by management with respect to our industry. Operating results are difficult to forecast because they generally depend on a number of factors, including the competition we face, and our ability to attract and retain customers and enterprise partnerships, while generating sustained revenues. Additionally, our business may be affected by reductions in consumer borrowing, spending and investing from time to time as a result of a number of factors which may be difficult to predict. This may result in decreased revenue levels, and we may be unable to adopt measures in a timely manner to compensate for any unexpected shortfall in income. This inability could cause our operating results in a given quarter to be higher or lower than expected. These factors make creating accurate forecasts and budgets challenging and, as a result, we may fall materially short of our forecasts and expectations, which could cause our stock price to decline and investors to lose confidence in us.
Real or perceived inaccuracies in our key operating metrics may harm our reputation and negatively affect our business.
We track certain key operating metrics such as total payment volume, total originations and total customers with internal systems and tools that are not independently verified by any third party. While the metrics presented in this prospectus are based on what we believe to be reasonable assumptions and estimates, our internal systems and tools have a number of limitations, and our methodologies for tracking these metrics may change over time. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If the internal systems and tools we use to track these metrics understate or overstate performance or contain algorithmic or other technical errors, the key operating metrics we report may not be accurate. If investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies with respect to these figures, our reputation may be significantly harmed, and our results of operations and financial condition could be adversely affected.
If we fail to 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.
As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards of the NYSE. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs, and significant management oversight. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
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The nature of our business is such that our financial statements involve a number of complex accounting policies, many of which involve significant elements of judgment, including determinations regarding the consolidation of variable interest entities, determinations regarding the fair value of financial assets and liabilities (including loans and other consumer receivables, notes receivable and notes payable) and the appropriate classification of various items within our financial statements. The inherent complexity of these accounting matters and the nature and variety of transactions in which we are involved require that we have sufficient qualified accounting personnel with an appropriate level of experience and controls in our financial reporting process commensurate with the complexity of our business. While we believe we have sufficient internal accounting personnel and external resources and appropriate controls to address the demands of our business, we expect that the growth and development of our business will place significant additional demands on our accounting resources. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting. There can be no assurance that we will maintain internal control over financial reporting sufficient to enable us to identify or avoid material weaknesses in the future.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed, or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could materially and adversely affect our business, results of operations, and financial condition and could cause a decline in the trading price of our common stock.
MoneyLion has identified a material weakness in its internal control over financial reporting as of December 31, 2020. If MoneyLion is unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results after the Business Combination in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of an entity’s annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
As of December 31, 2020, MoneyLion identified a material weakness in its internal control over financial reporting. MoneyLion did not maintain an effective control environment as there were certain areas in which the accounting function did not operate as expected, resulting in an audit adjustment, an entry on the schedule of uncorrected misstatements or a restatement of previously issued financial statements.
Effective internal controls are necessary to provide reliable financial reports and prevent fraud. MoneyLion continues to evaluate steps to remediate the material weakness and is in the process of remediating the control deficiencies that relate to the material weakness. We intend to have this remediation completed and the appropriate controls in place by the end of 2021. There is no assurance that we will be able to complete this remediation and put the appropriate controls in place within this timeframe. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If MoneyLion identifies any new material weaknesses in the future, any such newly identified material weakness could limit its ability to prevent or detect a misstatement of its accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain
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compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures MoneyLion has taken to date, or any measures it may take in the future, will be sufficient to avoid potential future material weaknesses.
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 our business, and negatively impact our results of operations.
We may evaluate and consider strategic transactions, combinations, acquisitions, dispositions or alliances. These transactions could be material to our financial condition and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be successful in negotiating favorable terms and/or consummating the transaction and, even if we do consummate such a transaction, we may be unable to obtain the benefits or avoid the difficulties and risks of such transaction.
Any strategic transaction, combination, acquisition, disposition or alliance will involve risks encountered in business relationships, including:
• difficulties in assimilating and integrating the operations, personnel, systems, data, technologies, products and services of the acquired business;
• inability of the acquired technologies, products or businesses to achieve expected levels of revenue, profitability, productivity or other benefits;
• difficulties in retaining, training, motivating and integrating key personnel;
• diversion of management’s time and resources from our normal daily operations;
• difficulties in successfully incorporating licensed or acquired technology and rights into our platform;
• difficulties in maintaining uniform standards, controls, procedures and policies within the combined organizations;
• difficulties in retaining relationships with customers, employees and suppliers of the acquired business;
• risks of entering markets in which we have no or limited direct prior experience;
• regulatory risks, including remaining in good standing with existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators with oversight over an acquired business;
• assumption of contractual obligations that contain terms that are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability;
• failure to successfully further develop the acquired technology;
• liability for activities of the acquired or disposed of business before the acquisition or disposition, including patent and trademark infringement claims, violations of laws, regulatory actions, commercial disputes, tax liabilities and other known and unknown liabilities;
• difficulty in separating assets and replacing shared services;
• assumption of exposure to performance of any acquired loan portfolios;
• potential disruptions to our ongoing businesses; and
• unexpected costs and unknown risks and liabilities associated with the acquisition.
We may not make any transactions, combinations, acquisitions, dispositions or alliances, or any future transactions, combinations, acquisitions, dispositions or alliances may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may not otherwise result in the
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intended benefits. It may take us longer than expected to fully realize the anticipated benefits and synergies of these transactions, and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which could adversely affect our business and operating results.
Any transactions, combinations, acquisitions, dispositions or alliances may also require us to issue additional equity securities, spend our cash, or incur debt (and increased interest expense), liabilities, and amortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders and the interests of holders of our indebtedness.
In addition, we cannot assure you that any future acquisition of new businesses or technology will lead to the successful development of new or enhanced products and services or that any new or enhanced products and services, if developed, will achieve market acceptance or prove to be profitable. Further, we may also choose to divest certain businesses or product lines that no longer fit with our strategic objectives. If we decide to sell assets or a business, we may have difficulty obtaining terms acceptable to us in a timely manner, or at all. Additionally, the terms of such potential transactions may expose the Company to ongoing obligations and liabilities.
Our risk management processes and procedures may not be effective.
Our risk management processes and procedures seek to appropriately balance risk and return and mitigate risks. We have established processes and procedures intended to identify, measure, monitor and control the types of risk to which we are subject, including credit risk, deposit risk, market risk, liquidity risk, strategic risk, operational risk, cybersecurity risk, and reputational risk. Credit risk is the risk of loss that arises when a loan obligor fails to meet the terms of a loan repayment obligation, the loan enters default, and if uncured results in financial loss of remaining principal and interest to the investor. Our exposure to credit risk mainly arises from our lending activities. Deposit risk refers to accelerated availability of depositor funds, prior to settlement, risk of ACH returns or merchant settlements, and transactional limits that may be applied to deposit accounts. Market risk is the risk of loss due to changes in external market factors, such as interest rates, asset prices, and foreign exchange rates. Liquidity risk is the risk that financial condition or overall safety and soundness are adversely affected by an inability, or perceived inability, to meet obligations (e.g., current and future cash flow needs) and support business growth. We actively monitor our liquidity position. Strategic risk is the risk from changes in the business environment, ineffective business strategies, improper implementation of decisions or inadequate responsiveness to changes in the business and competitive environment.
Our management is responsible for defining the priorities, initiatives, and resources necessary to execute our strategic plan, the success of which is regularly evaluated by the board of directors. Operational risk is the risk of loss arising from inadequate or failed internal processes, controls, people (e.g., human error or misconduct) or systems (e.g. technology problems), business continuity or external events (e.g., natural disasters), compliance, reputational, regulatory, or legal matters and includes those risks as they relate directly to us, fraud losses attributed to applications, transaction processing, or employees, as well as to third parties with whom we contract or otherwise do business. Operational risk is one of the most prevalent forms of risk in our risk profile. We strive to manage operational risk by establishing policies and procedures to accomplish timely and efficient processing, obtaining periodic internal control attestations from management, conducting internal process risk control self-assessments and audit reviews to evaluate the effectiveness of internal controls.
In order to be effective, among other things, our enterprise risk management capabilities must adapt and align to support any new product or loan features, capability, strategic development, or external change. Cybersecurity risk is the risk of a malicious technological attack intended to impact the confidentiality, availability, or integrity of our systems and data, including, but not limited to, sensitive client data. Our technology and information security teams rely on a layered system of preventive and detective technologies, practices, and policies to detect, mitigate, and neutralize cybersecurity threats. In addition, our information security team and third-party consultants regularly assess our cybersecurity risks and mitigation efforts. Cyberattacks can also result in financial and reputational risk.
Reputational risk is the risk arising from possible negative perceptions of us, whether true or not, among our current and prospective customers, counterparties, employees, and regulators. The potential for either enhancing or damaging our reputation is inherent in almost all aspects of business activity. We manage this risk through our commitment to a set of core values that emphasize and reward high standards of ethical behavior, maintaining a culture of compliance, and by being responsive to customer and regulatory requirements.
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Risk is inherent in our business, and therefore, despite our efforts to manage risk, there can be no assurance that we will not sustain unexpected losses. We could incur substantial losses and our business operations could be disrupted to the extent our business model, operational processes, control functions, technological capabilities, risk analyses, and business/product knowledge do not adequately identify and manage potential risks associated with our strategic initiatives. There also may be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated, including when processes are changed or new products and services are introduced. If our risk management framework does not effectively identify and control our risks, we could suffer unexpected losses or be adversely affected, which could have a material adverse effect on our business.
We have a history of losses and may not achieve profitability in the future.
Our net losses were $41.6 million and $79.1 million for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, we had a total accumulated deficit of $327.6 million. We may continue to incur net losses in the future, and such losses may fluctuate significantly from quarter to quarter. We will need to generate and sustain significant revenues for our business generally, and achieve greater scale and generate greater operating cash flows in future periods in order to achieve, maintain or increase our level of profitability. We intend to continue to invest in sales and marketing, technology and new products and services in order to enhance our brand recognition and our value proposition to our customers, and these additional costs will create further challenges to generating near term profitability. We also expect general and administrative expenses to increase to meet the increased compliance and other requirements associated with operating as a public company and evolving regulatory requirements.
Our efforts to grow our business may be more costly than we expect, and we may not be able to increase our revenue sufficiently to offset our higher operating expenses. We may continue to incur losses and not achieve future profitability or, if achieved, be unable to maintain such profitability, due to a number of reasons, including the risks described in this proxy statement/prospectus, unforeseen expenses, difficulties, complications and delays, and other unknown events.
Our ability to use our deferred tax assets to offset future taxable income may be subject to certain limitations that could subject our business to higher tax liabilities.
We may be limited in the portion of net operating loss carryforwards (“NOLs”) that we can use in the future to offset taxable income for U.S. federal and state income tax purposes. The Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, makes broad and complex changes to the U.S. tax code. While future interpretative guidance of the Tax Act and how many U.S. states will incorporate these federal law changes may have an impact on our business, the Tax Act’s reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018, has reduced our deferred tax asset associated with NOLs. A lack of future taxable income would adversely affect our ability to utilize our NOLs.
In addition, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs to offset future taxable income. Future changes in our stock ownership as well as other changes that may be outside of our control, could result in additional ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of state law.
We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. On the basis of this evaluation, a full valuation allowance has historically been recorded to recognize only deferred tax assets that are more likely than not to be realized.
Finally, further changes to the federal or state tax laws or technical guidance relating to the Tax Act that would further reduce the corporate tax rate could operate to effectively reduce or eliminate the value of any deferred tax asset. Our tax attributes as of December 31, 2020 may expire unutilized or underutilized, which could prevent us from offsetting future taxable income.
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Risks Relating to Fusion and the Business Combination
Directors and officers of Fusion have potential conflicts of interest in recommending that stockholders vote in favor of approval of the Business Combination and approval of the other proposals described in this proxy statement/prospectus.
When considering the Fusion Board’s recommendation that the Fusion Stockholders vote in favor of the approval of the Business Combination, Fusion Stockholders should be aware that directors and officers of Fusion have interests in the Business Combination that may be different from, or in addition to, the interests of Fusion Stockholders. These interests include:
• Our Sponsor officers and directors will lose their entire investment in us if we do not complete a business combination by December 31, 2021. If we are unable to complete our initial business combination by December 31, 2021, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, liquidate and dissolve, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to our warrants, which will expire worthless if we fail to complete our initial business combination by December 31, 2021. Our Sponsor purchased the founder shares prior to our initial public offering for an aggregate purchase price of $25,000. Upon the Closing, such founder shares will be converted into 8,750,000 shares of New MoneyLion Class A common stock (assuming no founder shares are forfeited by the Sponsor at Closing), and such shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would have an aggregate market value of approximately $87.1 million based upon the closing price of $9.95 per public share on the NYSE on June 7, 2021, but, given the restrictions on such shares, we believe such shares have less value.
• Simultaneously with the closing of our initial public offering, we consummated the sale of 8,100,000 private placement warrants at a price of $1.00 per warrant in a private placement to our Sponsor. The warrants are each exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020, for one share of New MoneyLion Class A common stock at $11.50 per share. If we do not consummate a business combination transaction by December 31, 2021, then the proceeds from the sale of the private placement warrants will be part of the liquidating distribution to the public stockholders and the warrants held by our Sponsor will be worthless. The warrants held by our Sponsor had an aggregate market value of approximately $10.1 million based upon the closing price of $1.25 per warrant on the NYSE on June 7, 2021.
• Jeff Gary is expected to continue to serve as a director of New MoneyLion after the Closing. As such, in the future he may receive any cash fees, stock options or stock awards that the New MoneyLion Board determines to pay to its directors.
• Our Sponsor, directors and executive officers at the time of our IPO have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if Fusion fails to complete a business combination by December 31, 2021.
• In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have entered into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act.
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• Following the Closing, our Sponsor would be entitled to the repayment of any working capital loan and advances that have been made to Fusion and remain outstanding. As of the date of this proxy statement/prospectus, our Sponsor has not made any advances to us for working capital expenses. If we do not complete an initial business combination within the required period, we may use a portion of our working capital held outside the Trust Account to repay the working capital loans, but no proceeds held in the Trust Account would be used to repay the working capital loans.
• Following the consummation of the Business Combination, we will continue to indemnify our existing directors and officers and will maintain a directors’ and officers’ liability insurance policy.
• Upon the Closing, subject to the terms and conditions of the Merger Agreement, our Sponsor, directors and executive officers and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Fusion from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination.
These financial interests of the Sponsor, officers and directors and entities affiliated with them may have influenced their decision to approve the Business Combination. You should consider these interests when evaluating the Business Combination and the recommendation of the Fusion Board to vote in favor of the Business Combination Proposal and other proposals to be presented to the stockholders.
Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting.
The aggregate consideration to be paid to MoneyLion stockholders will be (i) shares of Class A common stock of New MoneyLion (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the Merger Agreement) exceeds $260,000,000 and (B) $100,000,000, and (ii) the contingent right to receive a pro rata portion of up to 17,500,000 shares of Class A common stock of New MoneyLion (the “Earn Out Shares”).
For illustrative purposes, assuming no redemptions by Fusion’s public stockholders and all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and (i) assuming MoneyLion stockholders elect to receive $100.0 million of merger consideration in cash at Closing, we will issue 210,000,000 shares of New MoneyLion Class A common stock to the MoneyLion stockholders at Closing and New MoneyLion will have approximately $450,000,000 of cash on its balance sheet after Closing; (ii) assuming MoneyLion stockholders elect to receive $50.0 million of merger consideration in cash at Closing, we will issue 215,000,000 shares of New MoneyLion Class A common stock to the MoneyLion stockholders at Closing and New MoneyLion will have approximately $500,000,000 of cash on its balance sheet after Closing; and (iii) assuming MoneyLion stockholders elect to receive no merger consideration in cash at Closing, we will issue 220,000,000 shares of New MoneyLion Class A common stock to the MoneyLion stockholders at Closing and New MoneyLion will have approximately $550,000,000 of cash on its balance sheet after Closing.
Pursuant to the Merger Agreement, the election to receive cash will be made after the Special Meeting of Fusion Stockholders and prior to the Closing. Consequently, at the time of the Special Meeting, you will not know or be able to determine the amount of cash consideration the MoneyLion stockholders will receive at Closing (if any).
Our Sponsor, directors and executive officers have agreed to vote in favor of the Business Combination, regardless of how our public stockholders vote.
Our Sponsor, directors and executive officers have agreed to vote their shares in favor of the Business Combination. The Sponsor owns approximately 20% of our outstanding shares prior to the Business Combination. Accordingly, it is more likely that the necessary stockholder approval for the Business Combination will be received than would be the case if our Sponsor had agreed to vote its shares in accordance with the majority of the votes cast by our public stockholders.
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Our Sponsor, directors, executive officers, advisors and their affiliates may elect to purchase shares or public warrants from public stockholders, which may influence a vote on the Business Combination and reduce the public “float” of our common stock.
Our Sponsor, directors, executive officers, advisors or their affiliates may purchase public shares or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of the Business Combination, although they are under no obligation to do so. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the Trust Account will be used to purchase shares or public warrants in such transactions.
In the event that our Sponsor, directors, executive officers, advisors or their affiliates purchase public shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their public shares. The purpose of any such purchases of public shares could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy a Closing condition in the Merger Agreement that requires us to have a certain amount of cash at the Closing, where it appears that such requirement would otherwise not be met. Any such purchases of our securities may result in the completion of the Business Combination that may not otherwise have been possible.
In addition, if such purchases are made, the public “float” of our common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.
Warrants will become exercisable for New MoneyLion Class A common stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
Following the Business Combination, there will be 17,500,000 outstanding public warrants to purchase 17,500,000 shares of New MoneyLion Class A common stock at an exercise price of $11.50 per share, which warrants will become exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020. In addition, there will be 8,100,000 private placement warrants outstanding exercisable for 8,100,000 shares of New MoneyLion Class A common stock at an exercise price of $11.50 per share. To the extent such warrants are exercised, additional shares of New MoneyLion Class A common stock will be issued, which will result in dilution to the holders of New MoneyLion Class A common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of New MoneyLion Class A common stock, the impact of which is increased as the value of our stock price increases.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
New MoneyLion will have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of New MoneyLion Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we give notice of redemption. If and when the warrants become redeemable by New MoneyLion, New MoneyLion may exercise the redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force holders to (i) exercise the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the warrants at the then-current market price when the holder might otherwise wish to hold onto such warrants or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of the warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers or their permitted transferees.
In addition, New MoneyLion may redeem your warrants after they become exercisable for a number of shares of New MoneyLion Class A common stock determined based on the redemption date and the fair market value of New MoneyLion Class A common stock. Any such redemption may have similar consequences to a cash redemption
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described above. In addition, such redemption may occur at a time when the warrants are “out- of-the-money,” in which case you would lose any potential embedded value from a subsequent increase in the value of our common stock had your warrants remained outstanding.
Even if we consummate the Business Combination, there can be no assurance that the warrants will be in the money at the time they become exercisable, and they may expire worthless.
The exercise price for the outstanding warrants is $11.50 per share of New MoneyLion Class A common stock. There can be no assurance that the warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, the warrants may expire worthless.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our 17,500,000 public warrants and 8,100,000 private placement warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on our consolidated balance sheet as of December 31, 2020 contained elsewhere in this proxy statement/prospectus are derivative liabilities related to embedded features contained within our warrants. Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors that are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in our internal control over financial reporting as of December 31, 2020. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
Following this issuance of the SEC Statement, on April 22, 2021, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that, in light of the SEC Statement, it was appropriate to restate our previously issued audited financial statements as of and for the period ended December 31, 2020 (the “Restatement”). See “— Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” As part of such process, we identified a material weakness in our internal controls over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects. If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
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We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.
Following the issuance of the SEC Statement, after consultation with our independent registered public accounting firm, our management and our audit committee concluded that it was appropriate to restate our previously issued audited financial statements as of December 31, 2020 and for the period from March 6, 2020 (inception) through December 31, 2020. See “— Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.” As part of the Restatement, we identified a material weakness in our internal controls over financial reporting.
As a result of such material weakness, the Restatement, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the Restatement and material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this proxy statement/prospectus, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.
Our stockholders will experience immediate dilution as a consequence of the issuance of New MoneyLion Class A common stock as consideration in the Business Combination. Having a minority share position may reduce the influence that our current stockholders have on the management of New MoneyLion.
Assuming there are no redemptions of our Class A common stock, MoneyLion does not elect to take any cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and all of the Earn Out Shares have been released to the Earn Out Participants, following the Closing: (i) holders of shares of MoneyLion capital stock (the “MoneyLion equityholders”) are expected to hold, in the aggregate, 237,500,000 shares of New MoneyLion Class A common stock, or 77.55% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 11.43% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 2.86% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.16% of the issued and outstanding shares of New MoneyLion common stock.
Assuming there are no redemptions of our Class A common stock, MoneyLion does not elect to take any cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and none of the Earn Out Shares are released to the Earn Out Participants, following the Closing: (i) MoneyLion equityholders are expected to hold, in the aggregate, 220,000,000 shares of New MoneyLion Class A common stock, or 76.19% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 12.12% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 3.03% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.66% of the issued and outstanding shares of New MoneyLion common stock.
Assuming there are no redemptions of our Class A common stock, MoneyLion does elect to take the maximum amount of cash as part of the merger consideration at Closing, all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and all of the Earn Out Shares have been released to the Earn Out Participants, following the Closing: (i) MoneyLion equityholders are expected to hold, in the aggregate, 227,500,000 shares of New MoneyLion Class A common stock, or 76.79% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 11.81% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A
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common stock, or 2.95% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.44% of the issued and outstanding shares of New MoneyLion common stock.
Assuming there are no redemptions of our Class A common stock, MoneyLion does elect to take the maximum amount of cash as part of the merger consideration at Closing , all of the holders of MoneyLion options and MoneyLion warrants that are not automatically exercised in connection with the Business Combination elect to exercise their options or warrants prior to the closing of the Business Combination and none of the Earn Out Shares are been released to the Earn Out Participants, following the Closing: (i) MoneyLion equityholders are expected to hold, in the aggregate, 210,000,000 shares of New MoneyLion Class A common stock, or 75.34% of the issued and outstanding shares of New MoneyLion Class A common stock, (ii) the public stockholders are expected to hold 35,000,000 shares of New MoneyLion Class A common stock, or 12.56% of the issued and outstanding shares of New MoneyLion common stock, (iii) the Sponsor is expected to hold 8,750,000 shares of New MoneyLion Class A common stock, or 3.14% of the issued and outstanding shares of New MoneyLion common stock and (iv) the PIPE Investors are expected to hold 25,000,000 shares of New MoneyLion Class A common stock, or 8.97% of the issued and outstanding shares of New MoneyLion common stock.
There are currently outstanding an aggregate of 25,600,000 warrants to acquire Fusion Class A common stock, which comprise 8,100,000 private placement warrants held by our Sponsor at the time of Fusion’s initial public offering and 17,500,000 public warrants. Each of Fusion’s outstanding whole warrants is exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020, for one share of Fusion Class A common stock in accordance with its terms. Therefore, as of the date of this proxy statement/prospectus, if we assume that each outstanding whole warrant is exercised and one share of Fusion Class A common stock is issued as a result of such exercise, with payment of the exercise price of $11.50 per share, our fully diluted share capital would increase by a total of 25,600,000 shares, with approximately $294,400,000 paid to us to exercise the warrants.
Subsequent to the consummation of the Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
Although Fusion has conducted due diligence on MoneyLion, Fusion cannot assure you that this diligence revealed all material issues that may be present in its business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Fusion’s or MoneyLion’s control will not later arise. As a result, New MoneyLion may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if the due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that New MoneyLion reports charges of this nature could contribute to negative market perceptions about New MoneyLion or its securities. In addition, charges of this nature may cause New MoneyLion to violate net worth or other covenants to which it may be subject. Accordingly, any Fusion Stockholder who chooses to remain a stockholder of New MoneyLion following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by Fusion’s officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the proxy solicitation relating to the Business Combination contained an actionable material misstatement or material omission.
If the Business Combination does not qualify as a tax-free reorganization under Section 368(a) of the Code and/or a transaction governed by Section 351 of the Code, holders of MoneyLion common stock may incur a substantially greater U.S. income tax liability as a result of the Business Combination.
The parties intend for the merger contemplated by the Merger Agreement to be treated for U.S. federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. If the merger qualifies for such treatment, holders of MoneyLion common stock generally will not recognize gain or loss upon their exchange of MoneyLion common stock for New MoneyLion common stock, except to the extent of any gain that must be
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recognized as a result of their receipt of cash consideration (which gain may be treated as a dividend in certain circumstances). However, the obligations of MoneyLion, Fusion and the Merger Sub to complete the merger are not conditioned on the receipt of opinions from Davis Polk & Wardwell LLP or White & Case LLP to the effect that the merger qualifies for such treatment, and the merger may occur even if it does not so qualify. Neither MoneyLion nor Fusion has requested, or intends to request, a ruling from the U.S. Internal Revenue Service (the “IRS”) with respect to the U.S. federal income tax consequences of the merger. Consequently, no assurance can be given that the IRS will not assert, or that a court would not sustain, a position to the contrary. Accordingly, if the IRS or a court determines that the merger neither qualifies as a reorganization under Section 368(a) of the Code nor as a transaction that qualifies for tax-deferred treatment under a different provision of the Code, such as Section 351 of the Code and is therefore a fully taxable transaction for U.S. federal income tax purposes, holders of MoneyLion common stock generally would recognize taxable gain or loss on the total merger consideration (rather than only the cash component) they receive in connection with the merger. For a more complete discussion of U.S. federal income tax consequences of the Business Combination, see the section titled “Material U.S. Federal Income Tax Considerations.”
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of our securities may decline.
If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of Fusion’s securities prior to the Closing may decline. The market values of Fusion’s securities at the time of the Business Combination may vary significantly from their prices on the date the Merger Agreement was executed, the date of this proxy statement/prospectus, or the date on which Fusion Stockholders vote on the Business Combination. Because the number of shares to be issued pursuant to the Merger Agreement is based on the per share value of the amount in the Trust Account and will not be adjusted to reflect any changes in the market price of Fusion’s Class A common stock, the market value of New MoneyLion Class A common stock issued in the Business Combination may be higher or lower than the values of these shares on earlier dates.
In addition, following the Business Combination, fluctuations in the price of New MoneyLion’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for the stock of New MoneyLion and trading in the shares of Fusion’s Class A common stock has not been active. Accordingly, the valuation ascribed to MoneyLion in the Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for our securities develops and continues, the trading price of New MoneyLion securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and New MoneyLion securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.
Factors affecting the trading price of New MoneyLion’s securities may include:
• actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
• changes in the market’s expectations about New MoneyLion’s operating results;
• success of competitors;
• operating results failing to meet the expectations of securities analysts or investors in a particular period;
• changes in financial estimates and recommendations by securities analysts concerning New MoneyLion or the industry in which New MoneyLion operates in general;
• operating and stock price performance of other companies that investors deem comparable to New MoneyLion;
• ability to market new and enhanced products and services on a timely basis;
• changes in laws and regulations affecting our business;
• commencement of, or involvement in, litigation involving New MoneyLion;
• changes in New MoneyLion’s capital structure, such as future issuances of securities or the incurrence of additional debt;
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• the volume of shares of New MoneyLion Class A common stock available for public sale;
• any major change in New MoneyLion’s board or management;
• sales of substantial amounts of New MoneyLion Class A common stock by our or New MoneyLion’s directors, executive officers or significant stockholders or the perception that such sales could occur; and
• general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and the NYSE specifically, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, you may not be able to sell your securities at or above the price at which it was acquired. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to New MoneyLion could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
Our actual financial position and results of operations may differ materially from the unaudited pro forma financial information included in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial information included in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the Business Combination been completed on the dates indicated. See “Unaudited Pro Forma Condensed Combined Financial Information” for more information.
Financial projections with respect to New MoneyLion may not prove to be reflective of actual future results.
In connection with the Business Combination, the Board of Directors of Fusion considered, among other things, financial forecasts for the post-Business Combination company. They speak only as of the date made and will not be updated. These financial projections are subject to significant economic, competitive, industry and other uncertainties, including other risks discussed in this “Risk Factors” section, and may not be achieved in full, at all or within projected timeframes. Further, as a result of unprecedented market uncertainly resulting from COVID-19, these projections are even more uncertain in terms of reflecting actual future results. In addition, the failure of New MoneyLion to achieve projected results could have a material adverse effect on the trading price of New MoneyLion Class A common stock and New MoneyLion’s financial position following the Business Combination.
There can be no assurance that New MoneyLion Class A common stock issued in connection with the Business Combination will be approved for listing on the NYSE following the Closing, or that we will be able to comply with the continued listing standards of the NYSE.
New MoneyLion Class A common stock and warrants are expected to be listed on the NYSE following the Business Combination. New MoneyLion’s continued eligibility for listing may depend on the number of our shares that are redeemed. If, after the Business Combination, the NYSE delists New MoneyLion Class A common stock from trading on its exchange for failure to meet the listing standards, we and our stockholders could face significant material adverse consequences including:
• a limited availability of market quotations for our securities;
• a determination that New MoneyLion Class A common stock is a “penny stock,” which will require brokers trading in New MoneyLion Class A common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for New MoneyLion Class A common stock;
• a limited amount of analyst coverage; and
• a decreased ability to issue additional securities or obtain additional financing in the future.
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The Current Charter states that we must complete our initial business combination by December 31, 2021. If we have not completed an initial business combination by then (or such later date as our stockholders may approve in accordance with the Current Charter), we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any); and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, liquidate and dissolve, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may only receive approximately $10.00 per share and our warrants will expire worthless.
Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.
Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party for services rendered or products sold to us, or a prospective target business with which we have entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per public share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the funds held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under our indemnity of the underwriters of our initial public offering against certain liabilities, including liabilities under the Securities Act. While we currently expect that our independent directors would take legal action on our behalf against the Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.
If our stockholders fail to comply with the redemption requirements specified in this proxy statement/prospectus, they will not be entitled to redeem their shares of our Class A common stock for a pro rata portion of the Trust Account.
Holders of public shares are not required to affirmatively vote against the Business Combination Proposal in order to exercise their rights to redeem their shares for a pro rata portion of the Trust Account. In order to exercise their redemption rights, they are required to submit a request in writing and deliver their stock (either physically or electronically) to our transfer agent prior to [•], New York City time, on [•], 2021. Stockholders electing to redeem their shares will receive their pro rata portion of the funds held in the Trust Account, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), calculated as of two business days prior to the anticipated consummation of the Business Combination.
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The ability of Fusion Stockholders to exercise redemption rights with respect to a large number of shares could increase the probability that the Business Combination would be unsuccessful and that stockholders would have to wait for liquidation in order to redeem their stock.
At the time we entered into the Merger Agreement and related agreements for the Business Combination, we did not know how many stockholders would exercise their redemption rights, and therefore we structured the Business Combination based on our expectations as to the number of shares that will be submitted for redemption. The Merger Agreement requires us to have at least $260,000,000 of cash at the Closing, consisting of cash held in the Trust Account after taking into account the exercise by the holders of shares of Fusion Class A common stock issued in Fusion’s initial public offering of securities of their right to redeem such shares of Fusion Class A common stock in accordance with Fusion’s governing documents, if any, and cash received from PIPE Investors, net of transaction expenses of Fusion and MoneyLion. If a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account. The above considerations may limit our ability to complete the Business Combination or optimize our capital structure.
The Business Combination is subject to conditions, including certain conditions that may not be satisfied on a timely basis, if at all.
The completion of the Business Combination is subject to a number of conditions. The completion of the Business Combination is not assured and is subject to risks, including the risk that approval of the Business Combination by Fusion Stockholders is not obtained or that there are not sufficient funds in the Trust Account, in each case subject to certain terms specified in the Merger Agreement (as described under “The Merger Agreement — Conditions to Closing”), or that other Closing conditions are not satisfied. If Fusion does not complete the Business Combination, Fusion could be subject to several risks, including:
• the parties may be liable for damages to one another under the terms and conditions of the Merger Agreement;
• negative reactions from the financial markets, including declines in the price of our Class A common stock due to the fact that current prices may reflect a market assumption that the Business Combination will be completed; and
• the attention of our management will have been diverted to the Business Combination rather than the pursuit of other opportunities in respect of an initial business combination.
Delaware law and provisions in New MoneyLion’s certificate of incorporation and bylaws could make a takeover proposal more difficult.
If the Business Combination is consummated, New MoneyLion’s organizational documents will be governed by Delaware law. Certain provisions of Delaware law and of New MoneyLion’s certificate of incorporation and bylaws could discourage, delay, defer or prevent a merger, tender offer, proxy contest or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for the shares of Class A common stock held by New MoneyLion’s stockholders. These provisions include the ability of the board of directors to designate the terms of and issue new series of preference shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.
These anti-takeover provisions as well as certain provisions of Delaware law could make it more difficult for a third party to acquire New MoneyLion, even if the third party’s offer may be considered beneficial by many of New MoneyLion’s stockholders. As a result, New MoneyLion’s stockholders may be limited in their ability to obtain a premium for their shares. If prospective takeovers are not consummated for any reason, New MoneyLion may experience negative reactions from the financial markets, including negative impacts on the price of New MoneyLion Class A common stock. These provisions could also discourage proxy contests and make it more difficult for New MoneyLion’s stockholders to elect directors of their choosing and to cause New MoneyLion to take other corporate actions that New MoneyLion’s stockholders desire. See “Description of New MoneyLion Securities.”
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New MoneyLion’s certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by New MoneyLion’s stockholders, which could limit New MoneyLion’s stockholders’ ability to obtain what such stockholders believe to be a favorable judicial forum for disputes with New MoneyLion or New MoneyLion’s directors, officers or other employees.
If the Business Combination is consummated, New MoneyLion’s certificate of incorporation will provide that, unless New MoneyLion consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the “Court of Chancery”) shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of New MoneyLion, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of New MoneyLion to New MoneyLion or New MoneyLion’s stockholders, (iii) any action asserting a claim against New MoneyLion, its directors, officers or employees arising pursuant to any provision of the DGCL or New MoneyLion’s Certificate of Incoroporation or Bylaws, or (iv) any action asserting a claim against New MoneyLion, its directors, officers or employees governed by the internal affairs doctrine and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel, except for, as to each of (i) through (iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) arising under the Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. Notwithstanding the foregoing, these provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Any person or entity purchasing or otherwise acquiring any interest in any security of New MoneyLion shall be deemed to have notice of and consented to these provisions.
These choice-of-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes with New MoneyLion or New MoneyLion’s directors, officers or other employees, which may discourage such lawsuits. We note that there is uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Alternatively, if a court were to find these provisions of New MoneyLion’s certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, New MoneyLion may incur additional costs associated with resolving such matters in other jurisdictions, which could materially adversely affect New MoneyLion’s business, financial condition and results of operations and result in a diversion of the time and resources of New MoneyLion’s management and board of directors.
We will incur significant costs and obligations as a result of being a public company.
As a privately held company, MoneyLion has not been required to comply with many corporate governance and financial reporting practices and policies required of a publicly traded company. As a publicly traded company, New MoneyLion will incur significant legal, accounting and other expenses that MoneyLion was not required to incur in the past. These expenses will increase once New MoneyLion is no longer an “emerging growth company” as defined under the JOBS Act. In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure for public companies, including Dodd Frank, the Sarbanes-Oxley Act, regulations related thereto and the rules and regulations of the SEC and NYSE, have increased the costs and the time that must be devoted to compliance matters. We expect these rules and regulations will increase our legal and financial costs and lead to a diversion of management time and attention from revenue-generating activities.
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MoneyLion is a private company and as such little information is publicly available regarding MoneyLion. This may result in the Business Combination not being as profitable as we expect, or at all.
While we have conducted due diligence on MoneyLion, very little public information exists about private companies. As a result, the Business Combination could be less profitable than we expect, or at all. Furthermore, the relative lack of information about a private company may hinder our ability to properly assess the value of MoneyLion which could result in our overpaying.
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INFORMATION ABOUT THE PARTIES TO THE BUSINESS COMBINATION
Fusion
Fusion is a blank check company whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. For more information regarding Fusion, see the section entitled “Other Information Related to Fusion”.
Merger Sub
Merger Sub is a wholly-owned subsidiary of Fusion formed solely for the purpose of effecting the Business Combination. Merger Sub was incorporated under the DGCL on February 9, 2021. Merger Sub owns no material assets and does not operate any business.
MoneyLion
MoneyLion Inc. is an all-in-one, digital financial platform that provides convenient, low-cost access to banking, borrowing and investing solutions tailored for its customers, rooted in data, and delivered through its proprietary technology platform. MoneyLion addresses its customers from a data-driven perspective of the individual and their specific circumstances. When customers enjoy periods of financial excess, MoneyLion provides tools for them to easily manage their spending and saving goals through its digital banking and automated investing solutions. When customers experience moments of financial need, MoneyLion provides them immediate access to innovative lending or advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health.
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Overview
This proxy statement/prospectus is being provided to Fusion Stockholders as part of a solicitation of proxies by the Fusion Board for use at the Special Meeting to be convened on [•], 2021 and at any adjournments or postponements of such meeting. This proxy statement/prospectus is being furnished to Fusion Stockholders on or about, [•], 2021. In addition, this proxy statement/prospectus constitutes a prospectus for New MoneyLion in connection with the issuance by New MoneyLion of common stock to be delivered to MoneyLion’s stockholders in connection with the Business Combination.
Date, Time and Place of the Special Meeting
The Special Meeting will be a virtual meeting conducted exclusively via live webcast starting at [•], New York City time, on [•], 2021, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals. Stockholders may attend the Special Meeting online, vote, view the list of stockholders entitled to vote at the Special Meeting and submit your questions during the Special Meeting by visiting [•] and entering your 12-digit control number, which is either included on the proxy card you received or obtained through Continental Stock Transfer & Trust Company. Because the Special Meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.
Registering for the Special Meeting
Pre-registration at [•] is recommended but is not required in order to attend.
Any stockholder wishing to attend the virtual meeting should register for the meeting by [•], New York City time, on [•], 2021. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our common stock:
• If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the online-only Special Meeting, go to [•], enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.
• Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five business days prior to the meeting date in order to ensure access.
Proposals
At the Special Meeting, Fusion Stockholders will vote upon:
• the Business Combination Proposal;
• the Charter Proposal;
• the Advisory Charter Proposals;
• the Stock Issuance Proposal;
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• the Incentive Plan Proposal;
• the ESPP Proposal; and
• the Adjournment Proposal.
THE FUSION BOARD HAS UNANIMOUSLY DETERMINED THAT THE BUSINESS COMBINATION PROPOSAL AND THE OTHER PROPOSALS TO BE PRESENTED AT THE SPECIAL MEETING ARE IN THE BEST INTERESTS OF AND ADVISABLE TO THE FUSION STOCKHOLDERS AND RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE PROPOSALS DESCRIBED ABOVE.
Record Date; Outstanding Shares; Shares Entitled to Vote
Fusion has fixed the close of business on [•], 2021 as the “record date” for determining Fusion Stockholders entitled to notice of and to attend and vote at the Special Meeting. As of the close of business on [•], 2021, there were [•] Fusion Shares outstanding and entitled to vote. Each Fusion Share is entitled to one vote per share at the Special Meeting.
Quorum
A quorum of Fusion Stockholders is necessary to hold a valid meeting. A quorum will exist at the Special Meeting with respect to each matter to be considered at the Special Meeting if the holders of a majority of Fusion Shares are present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting. All shares represented by proxy are counted as present for purposes of establishing a quorum.
Vote Required and Fusion Board Recommendation
The Business Combination Proposal
Fusion Stockholders are being asked to consider and vote on a proposal to adopt the Merger Agreement and thereby approve the Business Combination. You should carefully read this proxy statement/prospectus in its entirety for more detailed information concerning the Business Combination. In particular, your attention is directed to the full text of the Merger Agreement and Amendment No. 1, which are attached as Annex A and Annex G to this proxy statement/prospectus, respectively.
Approval of the Business Combination Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal. The Business Combination cannot be completed unless the Business Combination Proposal is adopted by the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Fusion Stockholders of the Class A common stock and Stockholders of the Class B common stock will vote together as a single class on all matters submitted to a vote of our stockholders, except as required by law.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE BUSINESS COMBINATION PROPOSAL.
The Charter Proposal
Approval of the Charter Proposal requires the affirmative vote of a majority of the outstanding Fusion Shares, voting together as a single class. Abstentions and broker non-votes have the same effect as a vote “AGAINST” the proposal.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE CHARTER PROPOSAL.
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The Advisory Charter Proposals
Approval of each of the Advisory Charter Proposals, each of which is a non-binding vote, requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ADVISORY CHARTER PROPOSALS.
The Stock Issuance Proposal
Approval of the Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Broker non-votes have no effect on the outcome of the proposal but, for purposes of NYSE rules, abstentions will have the same effect as votes “AGAINST” this proposal.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE STOCK ISSUANCE PROPOSAL.
The Incentive Plan Proposal
Approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Broker non-votes have no effect on the outcome of the proposal but, for purposes of NYSE rules, abstentions will have the same effect as votes “AGAINST” this proposal.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE INCENTIVE PLAN PROPOSAL.
The ESPP Proposal
Approval of the ESPP Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Broker non-votes have no effect on the outcome of the proposal but, for purposes of NYSE rules, abstentions will have the same effect as votes “AGAINST” this proposal.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ESPP PROPOSAL.
Adjournment Proposal
If the chairman of the Special Meeting does not adjourn the Special Meeting, Fusion Stockholders may be asked to vote on a proposal to adjourn the Special Meeting, or any postponement thereof, to another time or place if necessary or appropriate (i) due to the absence of a quorum at the Special Meeting, (ii) to prevent a violation of applicable law, (iii) to provide to Fusion Stockholders any supplement or amendment to this proxy statement/prospectus and/or (iv) to solicit additional proxies if Fusion reasonably determines that it is advisable or necessary to do so in order to obtain Fusion stockholder approval for the Merger Agreement and thereby approval of the Business Combination.
Approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
FUSION’S BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ADJOURNMENT PROPOSAL.
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Voting Your Shares
Stockholders of Record
If you are a stockholder of record, you may vote by mail or at the Special Meeting. Each share of our common stock that you own in your name entitles you to one vote on each of the proposals on which you are entitled to vote at the Special Meeting. Your one or more proxy cards show the number of shares of our common stock that you own.
Voting by Mail. You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of our common stock will be voted as recommended by our Board. Our Board recommends voting “FOR” the Business Combination Proposal, “FOR” the Charter Proposal, “FOR” the Advisory Charter Proposals, “FOR” the Stock Issuance Proposal, “FOR” the Incentive Plan Proposal, “FOR” the ESPP Proposal and “FOR” the Adjournment Proposal. Votes submitted by mail must be received by the close of business, New York City time, on [•], 2021.
Voting at the Special Meeting. If you attend the Special Meeting, you may also submit your vote at the Special Meeting via the Special Meeting website at [•], in which case any votes that you previously submitted by mail will be superseded by the vote that you cast at the Special Meeting. See “— Registering for the Special Meeting” above for further details on how to attend the Special Meeting.
Beneficial Owners
If your shares are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of shares held in “street name” and this proxy statement is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement. As a beneficial owner, if you wish to vote at the Special Meeting, you will need to obtain a legal proxy from your bank, broker, or other nominee and e-mail a copy (a legible photograph is sufficient) of such legal proxy to proxy@continentalstock.com. You will then be issued a 12-digit meeting control number that will allow you to register to attend and participate in the Special Meeting. See “— Registering for the Special Meeting” above for further details on how to attend the Special Meeting.
Revoking Your Proxy
If you are a Fusion Stockholder of record, you may revoke your proxy at any time before it is voted at the Special Meeting by:
• timely delivering a written revocation letter to the Corporate Secretary of Fusion;
• signing and returning by mail a proxy card with a later date so that it is received prior to the Special Meeting; or
• attending the Special Meeting and voting electronically by visiting the website established for that purpose at [•] and entering the control number found on your proxy card, voting instruction form or notice you previously received. Attendance at the Special Meeting will not, in and of itself, revoke a proxy.
If you are a non-record (beneficial) Fusion Stockholder, you should follow the instructions of your bank, broker or other nominee regarding the revocation of proxies.
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Share Ownership and Voting by Fusion’s Sponsor, Directors and Executive Officers
As of the record date, the Sponsor had the right to vote 8,750,000 Fusion Shares, representing approximately 20% of the Fusion Shares then outstanding and entitled to vote at the meeting. Our Sponsor and our directors and executive officers at the time of our initial public offering have entered into a letter agreement with us to vote “FOR” the approval of the Business Combination Proposal, and, pursuant to the terms of the Sponsor Support Agreement, our Sponsor agreed to vote “FOR” the approval of the Charter Proposal, “FOR” the approval, on an advisory basis, of each of the Advisory Charter Proposals, “FOR” the approval of the Stock Issuance Proposal, “FOR” the approval of the Incentive Plan Proposal, “FOR” the approval of the ESPP Proposal, and “FOR” the approval of the Adjournment Proposal.
Redemption Rights
Public stockholders may seek to redeem the public shares that they hold, regardless of whether they vote for or against the proposed Business Combination or do not vote at the Special Meeting. Any public stockholder may request redemption of their public shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares. If a holder properly seeks redemption as described in this section and the Business Combination is consummated, the holder will no longer own these shares following the Business Combination.
Notwithstanding the foregoing, a public stockholder, together with any affiliate of such holder or any other person with whom such holder is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption rights with respect to 15% or more of the shares of the public shares. Accordingly, if a public stockholder, alone or acting in concert or as a group, seeks to redeem more than 15% of the public shares, then any such shares in excess of that 15% limit would not be redeemed for cash.
Our Sponsor will not have redemption rights with respect to any Fusion Shares owned by it, directly or indirectly.
You will be entitled to receive cash for any public shares to be redeemed only if you:
• (a) hold public shares or (b) hold public shares through units and you elect to separate your units into the underlying public shares and public warrants prior to exercising your redemption rights with respect to the public shares; and
• prior to [•], New York City time, on [•], 2021, (a) submit a written request to the transfer agent that Fusion redeem your public shares for cash and (b) deliver your public shares to the transfer agent, physically or electronically through DTC.
If you hold the shares in street name, you will have to coordinate with your broker to have your shares certificated or delivered electronically. Public shares that have not been tendered (either physically or electronically) in accordance with these procedures will not be redeemed for cash. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $80 and it would be up to the broker whether or not to pass this cost on to the redeeming public stockholder. In the event the proposed Business Combination is not consummated this may result in an additional cost to stockholders for the return of their public shares.
Holders of units must elect to separate the underlying public shares and public warrants prior to exercising redemption rights with respect to the public shares. If holders hold their units in an account at a brokerage firm or bank, holders must notify their broker or bank that they elect to separate the units into the underlying public shares and public warrants, or if a holder holds units registered in its own name, the holder must contact the transfer agent, directly and instruct them to do so.
Any request to redeem public shares, once made, may be withdrawn at any time until the deadline for submitting redemption requests and thereafter, with Fusion’s consent, until the Closing. Furthermore, if a holder of a public share delivers its certificate in connection with an election of its redemption and subsequently decides prior to the deadline for submitting redemption requests not to elect to exercise such rights, it may simply request that Fusion instruct the transfer agent to return the certificate (physically or electronically). The holder can make such request by contacting the transfer agent, at the address or email address listed in this proxy statement/prospectus.
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If the Business Combination is not approved or completed for any reason, then public stockholders who elected to exercise their redemption rights will not be entitled to redeem their shares. In such case, Fusion will promptly return any public shares previously delivered by public holders.
For illustrative purposes, the cash held in the Trust Account on March 31, 2021 was $350,279,969 or $10.00 per public share. Prior to exercising redemption rights, public stockholders should verify the market price of Fusion Shares as they may receive higher proceeds from the sale of their Fusion Shares in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. Fusion cannot assure its stockholders that they will be able to sell their Fusion Shares in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in its securities when its stockholders wish to sell their shares.
If a public stockholder exercises its redemption rights, then it will be exchanging its redeemed public shares for cash and will no longer own those public shares. You will be entitled to receive cash for your public shares only if you properly exercise your right to redeem your public shares and deliver your Fusion Shares (either physically or electronically) to the transfer agent, in each case prior to [•], New York City time, on [•], 2021, the deadline for submitting redemption requests, and the Business Combination is consummated.
Immediately following the Closing, New MoneyLion will pay public stockholders who properly exercised their redemption rights in respect of their public shares.
Appraisal Rights
Neither Fusion Stockholders nor Fusion warrant holders have appraisal rights in connection with the Business Combination under the DGCL.
Potential Purchases of Shares and/or Public Warrants
At any time prior to the Special Meeting, during a period when they are not then aware of any material nonpublic information regarding Fusion or its securities, Sponsor, MoneyLion and/or its affiliates may purchase shares and/or warrants from investors, or they may enter into transactions with such investors and others to provide them with incentives to acquire Fusion Shares or vote their Fusion Shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood that (i) the proposals presented for approval at the Special Meeting are approved and/or (ii) Fusion satisfies the Minimum Proceeds Condition. Any such stock purchases and other transactions may thereby increase the likelihood of obtaining stockholder approval of the Business Combination. This may result in the completion of our Business Combination in a way that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares or rights owned by the Sponsor for nominal value.
Costs of Solicitation
Fusion will bear the cost of soliciting proxies from Fusion Stockholders.
Fusion will solicit proxies by mail. In addition, the directors, officers and employees of Fusion may solicit proxies from Fusion Stockholders by telephone, electronic communication, or in person, but will not receive any additional compensation for their services. Fusion will make arrangements with brokerage houses and other custodians, nominees, and fiduciaries for forwarding proxy solicitation material to the beneficial owners of Fusion Shares held of record by those persons and will reimburse them for their reasonable out-of-pocket expenses incurred in forwarding such proxy solicitation materials.
Fusion has engaged a professional proxy solicitation firm, Morrow, to assist in soliciting proxies for the Special Meeting. Fusion has agreed to pay Morrow a fee of $35,000, plus disbursements. Fusion will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. Fusion will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of our common stock for their expenses in forwarding soliciting
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materials to beneficial owners of our common stock and in obtaining voting instructions from those owners. Fusion’s management team may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.
Other Business
Fusion is not aware of any other business to be acted upon at the Special Meeting. If, however other matters are properly brought before the Special Meeting, the proxies will have discretion to vote or act on those matters according to their best judgment and they intend to vote the shares as the Fusion Board may recommend.
Attendance
Only Fusion Stockholders on the record date or persons holding a written proxy for any stockholder or account of Fusion as of the record date may attend the Special Meeting. The Special Meeting will be held in a virtual meeting format only. You will not be able to attend the Special Meeting physically. Please see “— Registering for the Special Meeting” above for further details on how to register to attend the Special Meeting. If you hold your Fusion Shares in your name as a stockholder of record and you wish to attend the Special Meeting, please visit [•] and enter the control number found on your proxy card. If your Fusion Shares are held in “street name” in a stock brokerage account or by a bank, broker or other holder of record and you wish to attend the Special Meeting, you must obtain a legal proxy from the bank, broker or other holder of record in order to vote your shares electronically at the Special Meeting.
Assistance
If you need assistance in completing your proxy card or have questions regarding the Special Meeting, please contact Morrow Sodali LLC, the proxy solicitation agent for Fusion, by calling (800) 662-5200, or banks and brokers can call collect at (203) 658-9400, or by emailing FUSE.info@investor.morrowsodali.com.
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THE BUSINESS COMBINATION PROPOSAL
The Fusion Stockholders are being asked to approve the Merger Agreement and the transactions contemplated thereby, including the Business Combination. All Fusion stockholders should read carefully this proxy statement/prospectus in its entirety for more detailed information concerning the Merger Agreement and Amendment No. 1, which are attached as Annex A and Annex G to this proxy statement/prospectus, respectively. You are urged to read carefully the Merger Agreement in its entirety before voting on this proposal.
Fusion may consummate the Business Combination only if all of the condition precedent proposals are approved by the Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon.
The Merger Agreement
On February 11, 2021, the parties entered into the Merger Agreement. The Merger Agreement and the transactions contemplated thereby were approved by each of the Fusion Board and the board of directors of MoneyLion.
On June 28, 2021, the parties executed Amendment No. 1, by which the Merger Agreement was amended to permit the New MoneyLion Board to initially consist of ten directors, instead of nine, and to align the exclusive forum provisions of the Proposed Charter with those of the Current Charter. Amendment No. 1 is attached as Annex G to this proxy statement/prospectus.
Structure of the Business Combination
Pursuant to the Merger Agreement, Merger Sub will merge with and into MoneyLion, with MoneyLion surviving the Business Combination. Upon consummation of the foregoing transactions, MoneyLion will be the wholly-owned subsidiary of New MoneyLion (formerly Fusion). In addition, New MoneyLion (formerly Fusion) will amend and restate its charter to be the Proposed Charter, as described in the section of this proxy statement/prospectus titled “Description of New MoneyLion Securities.”
Consideration to MoneyLion Stockholders
The aggregate value of the consideration paid in respect of MoneyLion is $2,200,000,000.00. MoneyLion stockholders will receive shares of New MoneyLion Class A common stock valued at $10.00 per share, and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash exceeds $260,000,000 and (B) $100,000,000, together with a contingent right to receive a pro rata portion of the “Earn Out Shares. See the “Sources and Uses of Funds for the Business Combination” section for more information. Pursuant to the Merger Agreement, the election to receive cash will be made after the Special Meeting of Fusion Stockholders and prior to the Closing. Consequently, at the time of the Special Meeting, Fusion’s stockholders will not know or be able to determine the amount of cash consideration the MoneyLion stockholders will receive at Closing (if any). See “Risk Factors — Risks Related to Fusion and the Business Combination — Because the election by MoneyLion stockholders to receive cash consideration will not occur until after the Special Meeting, you will not know what portion of the merger consideration will be paid in cash to MoneyLion stockholders (if any) prior to casting your vote at the Special Meeting.” for more information.
Pursuant to the Merger Agreement, at the Effective Time of the Business Combination, the stock consideration to be issued to the then current holders of stock in MoneyLion will be in the form of New MoneyLion Class A common stock.
Additionally, each outstanding MoneyLion option that is outstanding and unexercised, whether or not then vested or exercisable, will be assumed by New MoneyLion and will be converted into an option to acquire New MoneyLion Class A common stock with the same terms and conditions as applied to the MoneyLion option immediately prior to the Effective Time; provided that the number of shares underlying such New MoneyLion option will be determined by multiplying the number of shares of MoneyLion common stock subject to such option immediately prior to the Effective Time, by the option exchange ratio, which product shall be rounded down to the nearest whole number of shares, and the per share exercise price of such New MoneyLion option will be determined by dividing the per share exercise price immediately prior to the Effective Time by the option exchange ratio, which quotient shall be rounded up to the nearest whole cent.
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Pursuant to the Merger Agreement, at the Effective Time, each warrant to purchase shares of MoneyLion capital stock that is issued and outstanding prior to the Effective Time and has not been exercised or terminated pursuant to its terms will be assumed and converted into a warrant exercisable for shares of New MoneyLion Class A common stock.
In addition, the Merger Agreement contemplates that the Earn Out Participants, following the closing of the Business Combination and for a period of five years thereafter, will be eligible to receive the Earn Out Shares, subject to a Triggering Event. Upon the occurrence of a Triggering Event, New MoneyLion will release such Earn Out Shares to the Earn Out Participants.
Exchange of Fractional Shares.
No fractional shares of New MoneyLion common stock will be issued as part of the Business Combination. In lieu of the issuance of any such fractional shares, New MoneyLion has agreed to issue to each former holder of MoneyLion common stock who otherwise would be entitled to receive such fractional share (after aggregating all fractional shares of New MoneyLion common stock that otherwise would be received by such stockholder): (i) one share of New MoneyLion common stock if the aggregate amount of fractional shares of New MoneyLion common stock such stockholder would otherwise be entitled to is equal to or exceeds 0.50; or (ii) no shares of New MoneyLion common stock if the aggregate amount of fractional shares of New MoneyLion common stock such stockholder would otherwise be entitled to is less than 0.50.
Earn Out Shares.
Following the Closing and for a period of five years thereafter (the “Earn Out Period”), the Earn Out Participants will be eligible to receive the Earn Out Shares contingent on the occurrence of certain Triggering Events as follows:
• a one-time issuance of 7,500,000 Earn Out Shares, if after the Closing Date (but during the Earn Out Period), the closing price of the shares of New MoneyLion Class A common stock is equal to or greater than $12.50 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, which will be paid within five business days of such Triggering Event;
• a one-time issuance of 10,000,000 Earn Out Shares, if after the Closing Date (but during the Earn Out Period), the closing price of the shares of New MoneyLion Class A common stock is equal to or greater than $16.50 (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period, which will be paid within five business days of such Triggering Event; and
Each Triggering Event may only occur once, if at all, and in no event will the amount of Earn Out Shares distributed in connection with the Triggering Events exceed 17,500,000 aggregate shares. Any Earn Out Shares to be released and distributed shall be released and distributed as shares of New MoneyLion common stock.
The Private Placement
Fusion entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, Fusion agreed to issue and sell in private placements an aggregate of 25,000,000 shares of Fusion Class A common stock to the PIPE Investors for $10.00 per share, generating total gross proceeds of $250,000,000 (the “PIPE Investment Amount”). The PIPE Investment Amount is expected to be used by the Company to (a) pay any cash amounts required to be paid by the Company in connection with the closing of the Business Combination and (b) pay any fees and expenses of the Company, with any remaining amounts to remain on the Company’s balance sheet as working capital.
The Private Placement is expected to close immediately prior to the consummation of the Business Combination. In connection with the Closing, all of the issued and outstanding shares of Fusion Class A common stock, including the shares of Fusion Class A common stock issued to the PIPE Investors, will become shares of New MoneyLion Class A common stock.
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Background of the Business Combination
The terms of the Business Combination are the result of negotiations between the representatives of Fusion and MoneyLion. The following is a brief description of the background of these negotiations and the resulting Business Combination.
Fusion is a blank check company incorporated in Delaware on March 6, 2020 and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. Our intention was to capitalize on the substantial deal sourcing, investing and operating expertise of our management team to identify and combine with one or more businesses with strong growth potential.
On June 26, 2020, we consummated our IPO of 30,500,000 units, at a price of $10.00 per unit, with each unit consisting of one share of Fusion Class A common stock and one-half of one warrant, generating total gross proceeds of $305,000,000. Prior to the consummation of our IPO, the Sponsor purchased 8,768,750 founder shares (after various adjustments) for an aggregate purchase price of $25,000, or approximately $0.004 per share. On June 30, 2020, Fusion announced that the underwriters exercised their over-allotment option in part and issued an additional 4,500,000 units at a price of $10.00 per unit for additional proceeds of $45,000,000. This resulted in a total of 35,000,000 units being issued for total gross proceeds of $350,000,000. As a result of the over-allotment option being exercised in part, the Sponsor forfeited 18,750 founder shares, resulting in the Sponsor holding a total of 8,750,000 founder shares. Simultaneously with the consummation of our IPO, we consummated the private sale of 8,100,000 private placement warrants, to the Sponsors at a price of $1.00 per warrant, generating gross proceeds of approximately $8,100,000.
Prior to the consummation of our IPO, neither Fusion, nor anyone on its behalf, engaged in any substantive discussions, directly or indirectly, with any business combination target with respect to an initial business combination with Fusion.
After our IPO, our officers and directors commenced an active search for prospective businesses or assets to acquire in our initial business combination. Representatives of Fusion were contacted by, and representatives of Fusion contacted, numerous individuals, financial advisors and other entities who offered to present ideas for business combination opportunities. Our officers and directors, and their affiliates, also brought to our attention target business candidates.
During this time, members of Fusion’s management researched companies in the Fintech industry that could be potential targets, including MoneyLion.
During this search process, Fusion reviewed several business combination opportunities and entered into confidentiality agreements with 24 companies (including MoneyLion). Most of the targets considered were located in the United States and operated in the sectors we specified at the time of our IPO, namely financial technology, wealth, investment and asset management, consistent with our original intentions.
We most actively pursued five potential targets, including MoneyLion, which process included meeting with such target’s management teams, conducting due diligence, submitting valuations and/or engaging in discussions regarding a potential business combination. All five of these targets were focused on financial technology and we submitted non-binding letters of intent to four (including MoneyLion) and a non-binding term sheet to the other.
Initial discussions between Fusion and MoneyLion commenced in July 2020, when Jeff Gary, Chief Financial Officer of Fusion, contacted Dee Choubey, the Chief Executive Officer and co-founder of MoneyLion, a conversation facilitated by Ron Suber, a consultant to Fusion and an advisor to MoneyLion. In a subsequent video conference on July 16, 2020, both Mr. Gary and John James, Chief Executive Officer of Fusion, spoke with Mr. Choubey and inquired as to whether MoneyLion might be interested in pursuing a potential business combination with Fusion. During the conversation, Mr. Choubey expressed some interest in a potential transaction, but requested additional time to discuss the matter with his management and board. The parties agreed to further their dialogue and executed a mutual confidentiality agreement on July 23, 2020.
On July 18, 2020, Mr. Gary had a telephone call with Chris Sugden, a member of MoneyLion’s board of directors and a managing partner of Edison Partners, an investor in MoneyLion, to discuss the potential business combination and MoneyLion’s board’s strategic outlook and, on July 27, 2020, Mr. Gary and Mr. Choubey had a brief follow-up telephone call to discuss next steps.
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On August 5, 2020, Mr. James and Mr. Gary spoke with Greg DePetris and Rohit D’Souza, both of whom are members of the board of directors of MoneyLion, to introduce Fusion as a potential opportunity and talk about MoneyLion’s future strategic plans.
On September 17, 2020, Mr. Gary and Mr. Choubey had a brief call to discuss MoneyLion’s internal financial models. On September 18, 2020, Mr. Choubey provided Fusion with MoneyLion’s financial models and having discussed the financial models with Mr. Choubey, Mr. Gary informed him that based on such financial models and their independent research into MoneyLion’s business, he believed that MoneyLion would make an attractive target business for Fusion to complete its initial business combination with. He indicated that Fusion remained very interested in continuing to discuss a potential transaction.
Throughout the next few months, Fusion continued to actively review several other business combination opportunities and communications with MoneyLion ebbed until December 14 and 17, 2020, when Mr. Gary and Mr. Sugden exchanged emails relating to MoneyLion’s updated financial performance and forecasts. Mr. Gary expressed Fusion’s continued interest in a potential business combination with MoneyLion. Following this exchange, on or around December 17, 2020, the Fusion Board agreed that a proactive approach should be made in connection with the potential transaction with MoneyLion and that a letter of intent should be prepared and signed. To prepare for a potential transaction, Fusion engaged various third parties to assist in its due diligence efforts. During late December 2020 and continuing into January 2021, MoneyLion provided Fusion with due diligence materials, including financial information.
In mid-December 2020, Fusion also informed its legal counsel, White & Case LLP (“White & Case”), about the potential transaction with MoneyLion and requested that White & Case prepare a draft non-binding Letter of Intent (“LOI”) for such transaction. On December 17, 2020, Fusion delivered the LOI to MoneyLion. The LOI contemplated a business combination with consideration based on a pre-money enterprise value of MoneyLion of between $2.0 billion to $2.5 billion. The LOI further contemplated that Fusion would enter into subscription agreements for the Private Placement of Fusion Class A common stock, which would close simultaneously with the closing of the business combination, the proceeds of which, together with the amounts retained in the Trust Account, would total approximately $500 million. The LOI stated that all terms were subject to ongoing due diligence by Fusion of MoneyLion. The LOI also provided for an exclusivity period during which the parties could continue to negotiate the transaction agreements. Following receipt of the draft LOI, MoneyLion responded that they would continue to consider the potential business combination and review the LOI, and that they were also considering alternate financing strategies.
On December 21, 2020, the Fusion Board met by video conference with certain representatives of MoneyLion, including several of its officers, directors and financial advisors, and Fusion presented its vision for a business combination. Members of J.P. Morgan Securities LLC (“J.P. Morgan”), financial advisors to Fusion, also attended. Prior to the meeting, Fusion prepared and reviewed with its advisors extensive financial models of MoneyLion’s business in order to generate a view as to the expected near-term financial performance and growth potential within the digital banking and wealth management product offerings. Further research was performed in evaluating the total U.S. addressable market for digital banking and wealth management (relying on third-party sources) and MoneyLion’s performance in the United States.
During the December 21, 2020 meeting, the parties discussed the general terms of a potential transaction, including that the consideration for MoneyLion would consist solely of Fusion equity. The parties also discussed (i) the need to obtain commitments from the PIPE Investors in order to demonstrate investor support for the potential transaction and to ensure that a minimum cash amount would be available at closing and (ii) the need for there to be a condition to closing the potential business combination that Fusion have an excess amount of cash available at Closing from such Private Placement and the proceeds from the Trust Account to pay transaction expenses and certain working capital and growth initiatives following the Closing. Both sides believed that having sufficient capital on the balance sheet of the post-business combination company to market existing products and launch new product offerings was of critical importance.
On December 27, 2020, Fusion delivered a revised LOI to MoneyLion. The LOI contemplated consideration based on a pre-money enterprise value of MoneyLion of between $2.1 billion to $2.25 billion, which reflected Fusion’s revised valuation range based on its review of comparable companies and the results of its preliminary diligence on MoneyLion. The LOI also contemplated that Fusion would enter into a Private Placement, the proceeds of which, together with the amounts retained in the Trust Account, would total approximately $500 million. The LOI stated that all terms were subject to ongoing due diligence by Fusion of MoneyLion. The LOI also provided
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for a period of exclusivity for the parties to negotiate the Merger Agreement and related transaction agreements. MoneyLion responded that while they would continue to consider the potential business combination and review the draft LOI, they were also considering alternate financing strategies.
Over the following days, Fusion continued to speak frequently with executives and representatives of MoneyLion as they considered the LOI, and the parties continued to negotiate the terms of a potential business combination between the two companies. During this time, Fusion engaged in further due diligence of MoneyLion. Fusion and MoneyLion had numerous phone calls, emails, and question and answer sessions with each companies’ respective management and financial advisors. Mr. James also had several discussions with Mr. Choubey about MoneyLion’s readiness to become a public company. This included a discussion as to the status of MoneyLion’s year-end financial audits.
During the period from December 27, 2020 through January 4, 2021, the parties continued to discuss the terms of the proposed transaction and exchanged various drafts of the LOI. The principal terms being negotiated were exclusivity, minimum cash balance, and the amount of the Private Placement. Ultimately, after further negotiation among the parties and receiving investor feedback, on or about December 30, 2020, Fusion and MoneyLion agreed to a valuation of MoneyLion between $2.1 billion and $2.25 billion, which was consistent with Fusion’s evaluation of the business, comparable companies in analogous markets, and feedback from its financial advisors about the then-current view of high-growth companies in the public markets. The LOI also contemplated that Fusion would enter into subscription agreements for the Private Placement of Fusion Class A common stock in a target amount of $181 million in proceeds, which, together with the amounts retained in the Trust Account, would total at least $531 million, prior to paying approximately $31 million in transaction expenses. The LOI also included a minimum cash condition that aggregate cash available from amounts held in the Trust Account (after payment of any redemptions) and obtained in connection with the Private Placement, after payment of any transaction expenses, would be no less than $260 million. There were significant discussions around this minimum cash condition including whether it should be higher. The discussion included recommendations from Fusion’s bankers that a lower minimum cash balance was viewed by the market as all parties having a high conviction in the deal closing. If the minimum cash was set too high, then a low amount of redemptions could cause the deal to fail this condition. As a result, it was determined that investors would view a deal with a higher minimum cash balance as having a lower probability of closing and could discount the pre-Business Combination share price they are willing to pay. In addition, the parties wanted to create an ability for some amount of cash to be available to buy shares from existing MoneyLion equityholders. It was discussed that the minimum cash amount would not be impacted by any cash going to selling shareholders. Therefore, it was decided that the appropriate balance for the best interests of all stakeholders would be to provide that if there was additional cash above the $260 million minimum cash condition, then this excess amount, subject to a maximum amount of $100 million, would be made available to make an offer to existing MoneyLion equityholders to buy their shares at a price of $10 per share. In addition to the consideration paid to MoneyLion, the parties determined that 17.5 million shares of New MoneyLion Class A common stock would be payable to MoneyLion as earn-out shares in three tranches (7.5 million shares at $12.50 per share, 7.5 million shares at $16.50 per share and 2.5 million shares at $18.00 per share). The LOI also anticipated that a new equity incentive plan pursuant to which MoneyLion would grant cash and equity incentive awards and compensation to officers, directors, employees and other eligible service providers would be approved and adopted in connection with the business combination. The LOI stated that all terms were subject to ongoing due diligence by Fusion of MoneyLion.
On January 4, 2021, Fusion convened a special meeting of the Fusion Board to discuss and consider the potential business combination with MoneyLion and vote on entering into the non-binding LOI. Representatives from J.P. Morgan were also in attendance. During the meeting, Messrs. James and Gary updated the Fusion Board on the status of negotiations with MoneyLion and on the principal terms of the transaction, proposed timing for the transaction and additional information about MoneyLion’s business and the proposed business combination. Representatives of J.P. Morgan also discussed the proposed valuation of the transaction. After the discussion, the Fusion Board decided to proceed with entering into a non-binding LOI for the Business Combination with MoneyLion, which included reciprocal exclusivity commitments. Following the meeting, on January 4, 2021, Fusion and MoneyLion entered into a non-binding LOI for the Business Combination. Given its exclusivity commitment in the LOI signed with MoneyLion, Fusion discontinued discussions with other potential targets.
Following execution of the LOI, the parties and their respective legal counsel prepared and then negotiated the Merger Agreement and related agreements, which continued until the Merger Agreement was executed. In addition, the parties began preparing for discussions with potential PIPE Investors.
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On January 6, 2021, Fusion hosted a virtual kick-off meeting with the Fusion Board and the board of directors of MoneyLion, and their respective legal and financial advisors, by video conference to organize the overall business combination process, conduct further due diligence of MoneyLion and analysis on the post-business combination company, identify potential PIPE Investors, and prepare an investor presentation for the Private Placement.
In the week commencing January 11, 2021, the Fusion Board, its advisors and legal counsel, as well as officers, director, representatives and advisors of MoneyLion, held a series of video conferences focused on various diligence areas including legal, cybersecurity and regulatory, business and product offerings, historical financial statements, accounting and audit matters, and other financial information requirements relating to the potential business combination transaction.
Between January 15 and 18, 2021, Fusion engaged J.P. Morgan, Citigroup Global Markets Inc., Cantor Fitzgerald & Co. and Odeon Capital Group LLC to serve as placement agents for the Private Placement.
Beginning the week of January 25, 2021, Fusion arranged for a digital data room to be established to provide certain materials to prospective PIPE Investors. Fusion, through its placement agents, sent data room invitations to potential investors who had a track record of long-term investments and an interest in investing in similar transactions and such investors conducted customary due diligence on MoneyLion. On January 26, 2021, Fusion commenced investor meetings with certain potential PIPE Investors. Mr. James and Mr. Gary represented Fusion, and Mr. Choubey and Rick Correia, Chief Financial Officer of MoneyLion, represented MoneyLion in these meetings.
On January 26, 2021, Fusion and MoneyLion entered into an amendment to the LOI (the “LOI Amendment”). In the LOI Amendment, Fusion and MoneyLion agreed to a company valuation of $2.2 billion, which was consistent with Fusion’s evaluation of the business, comparable companies in analogous markets, and feedback from its financial advisors about the then-current view of high-growth companies in the public markets. The LOI Amendment provided that the earn-out shares of New MoneyLion Class A common stock payable to MoneyLion would be in two tranches (7.5 million shares at $12.50 per share and 10 million shares at $16.50 per share). The LOI Amendment further clarified the terms of the cash and equity incentive awards that would be approved and adopted in connection with the Business Combination and extended the period of exclusivity for the parties to negotiate the transaction agreements.
From the end of January into early February 2021, members of Fusion’s and MoneyLion’s management held numerous video conference meetings and follow-up phone calls with prospective PIPE Investors.
White & Case performed customary red-flags legal due diligence at Fusion’s request and reported its findings to the Fusion Board in a written report delivered on February 7, 2021. White & Case and Fusion followed up on the written report with a discussion on the evening of February 8, 2021, during which members of the Fusion Board asked a number of follow up questions related to the diligence findings. Based on such discussion and Q&A, Fusion determined that it was ready to proceed to execution of definitive documentation.
On February 8, 2021, the management teams of each of Fusion and MoneyLion met by video conference, along with their financial advisors and legal counsels to negotiate a number of commercial and legal matters regarding the potential business combination. Fusion reported that based on feedback from potential investors in the Private Placement, the Private Placement would most likely be oversubscribed and could raise in excess of the expected minimum of $181 million based on a total enterprise value of approximately $2.4 billion.
On February 9, 2021, given the high demand, the parties determined to increase the size of the Private Placement from $181 million to $250 million.
On February 10, 2021, the Fusion Board of directors unanimously approved, by written consent, the entrance into the Merger Agreement and the Business Combination, including the terms of the Private Placement and the Sponsor Support Agreement and MoneyLion Support Agreements. In approving the Merger Agreement, the Fusion Board determined that the aggregate fair market value of the proposed Business Combination was at least 80% of the assets held in the Trust Account.
On February 11, 2021, the parties executed the Merger Agreement, Fusion entered into the Subscription Agreements for the Private Placement, Fusion, the Sponsor and Fusion’s directors and officers entered into the Sponsor Support Agreement and Fusion and certain MoneyLion stockholders entered into the MoneyLion Support Agreements. The next morning, on February 12, 2021, Fusion and MoneyLion issued a joint press release announcing the Business Combination.
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On June 28, 2021, the parties executed Amendment No. 1 to permit the New MoneyLion Board to initially consist of ten directors, instead of nine, and to align the exclusive forum provisions of the Proposed Charter with those of the Current Charter. Amendment No. 1 is attached as Annex G to this proxy statement/prospectus.
The Fusion Board’s Reasons for the Approval of the Business Combination
On February 10, 2021, the Fusion Board unanimously (i) approved the signing of the Merger Agreement and the transactions contemplated thereby and (ii) directed that the Merger Agreement, related transaction documentation and other proposals necessary to consummate the Business Combination be submitted to our stockholders for approval and adoption, and recommended that our stockholders approve and adopt the Merger Agreement, related transaction documentation and such other proposals. Before reaching its decision, the Fusion Board reviewed the results of the due diligence performed by members of its management team and its legal counsel, which included:
• research on industry trends, revenue projections and other industry factors;
• extensive meetings and calls with MoneyLion’s management team and representatives regarding operations, company services, customers, financial prospects, the pipeline of potential new products and possible acquisitions, among other customary due diligence matters;
• review of MoneyLion’s material business contracts and certain other legal, regulatory and commercial diligence;
• financial and accounting diligence; and
• creation of an independent financial model in conjunction with management of MoneyLion, which was generally consistent with the financial model prepared by MoneyLion.
The Fusion Board considered a wide variety of factors in connection with its evaluation of the Business Combination. In light of the complexity of those factors, the Fusion Board did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. Different individual members of the Fusion Board may have given different weight to different factors in their evaluation of the Business Combination.
In the prospectus for our IPO, we identified the following general criteria and guidelines that we believed would be important in evaluating prospective target businesses, although we indicated we may enter into a business combination with a target business that does not meet these criteria and guidelines. We intended to seek to acquire companies that we believed:
• were fundamentally sound and could unlock and enhance stockholder value through a business combination with us, thereby offering attractive risk-adjusted returns for our stockholders;
• had strong, experienced management teams, or provided a platform to assemble an effective management team with a track record of driving growth and profitability;
• were at an inflection point, such as requiring additional management expertise, were able to innovate through new operational techniques, or where we believed we could drive improved financial performance;
• could benefit from the application and exploitation of financial service technologies;
• had a history of, or potential for, strong, stable free cash flow generation, with predictable and recurring revenue streams;
• could grow both organically and where we believed our ability to source proprietary opportunities and execute transactions would help the business grow through additional acquisitions;
• had a leading or niche market position and that demonstrate advantages when compared to their competitors, which could help to create barriers to entry against new competitors;
• could benefit from being a publicly traded company, with access to broader capital markets, to achieve the company’s growth strategy; and
• exhibited unrecognized value or other characteristics that we believed could be enhanced based on our analysis and due diligence review.
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These illustrative criteria were not intended to be exhaustive. We stated in the IPO prospectus that any evaluation relating to the merits of a particular initial business combination would be based, to the extent relevant, on these general guidelines as well as other considerations, factors and criteria that our management may deem relevant. In the event that we decided to enter into a business combination with a target business that does not meet the above criteria and guidelines, we indicated that we would disclose that the target business does not meet the above criteria in our stockholder communications related to our initial business combination.
In considering the Business Combination, the Fusion Board concluded that it met all the above criteria. In particular, the board considered the following positive factors, although not weighted or in any order of significance:
High-Growth Industry. MoneyLion is expected to become one of the fastest growing digital banking and wealth management solutions in the industry. Based on third-party data and industry reports, conventional banks now account for only 72% of the total market value of the global banking and payments industry, down from 81% at the beginning of 2020. While the digital banking and wealth management sector in the United States is nascent, customer dissatisfaction with conventional banking solutions, generational wealth transfer, the acceptance of accessible digital solutions, and increased regulation by the federal and state governments has created a rapidly growing environment and a trend toward digital banking. Fusion believes this represents an opportunity for MoneyLion, which already has a strong market share and a significant funnel of unique users, to grow rapidly.
Business with Revenue and Earnings Growth Potential. MoneyLion has an attractive financial profile characterized by strong existing growth and continued prospects of accelerated growth in the future. From 2020 to 2022E, New MoneyLion expects to achieve an adjusted revenue CAGR of approximately 84% and to grow its adjusted revenue by $182 million in the same period. Fusion believes that MoneyLion is well-positioned to continue its dynamic growth trajectory as it expands its product offerings and marketing efforts.
Compelling Unit Economics. MoneyLion is a high-growth customer facing internet business that features compelling unit economics. This has been demonstrated in its business offerings to date and its expected future rollout of new digital banking and membership subscription offerings. MoneyLion’s business had an overall projected gross profit margin, which is a non-GAAP measure, of 52% for the year ended December 31, 2020 and an overall projected adjusted gross profit margin of 49% for the year ended December 31, 2020, while MoneyLion had an overall estimated gross profit margin of 70% for the year ended December 31, 2022 and an overall estimated adjusted gross profit margin forecast of 71% for the year ended December 31, 2022. Fusion believes that MoneyLion will increase its adjusted gross profit margin in the future as the business achieves greater scale nationally and rolls out new service offerings.
Diversified Revenue Mix. Given the multitude of different products offered by MoneyLion, following the Business Combination, we expect that New MoneyLion will have a diversified revenue mix, which we believe will be well-suited to capture different parts of the value chain in the digital banking and wealth management sector. MoneyLion’s business is customer facing and reliant on marketing outreach to potential customers. Fusion believes that the low customer acquisition cost (due to its data driven-driven approach to its customers utilizing it single-core technology stack), large total addressable market, and diversified product offerings provides a financial advantage to the company to help it outperform its peers and create diversified sources of revenue and has the ability to create geographic dispersion to capture further growth both inside and potentially outside of the United States.
Experienced and Motivated Management Team. MoneyLion is led by a seasoned and motivated team of technologists and financial industry experts that have re-defined digital banking and wealth management in the United States. We believe their experience in innovating technology, coupled with their financial services backgrounds, marketing experience and ability to create new product offerings, will help New MoneyLion in the future.
Although the Fusion Board did not seek a third-party valuation and did not receive any report, valuation or opinion from any third party in connection with the Business Combination, the Fusion Board relied on the following sources: (i) due diligence of MoneyLion’s business operations conducted by Fusion and its advisors; (ii) extensive research reports and data related to the digital banking sector in the United States and internationally; (iii) Fusion management’s collective experience in public markets transactions in constructing and evaluating financial models/projections and conducting valuations of businesses; and (iv) industry expertise and knowledge from its advisors, including J.P. Morgan. The total enterprise value for MoneyLion is $2.4 billion. The Fusion Board concluded that this is fair and reasonable, given the growth prospects, potential industry consolidation and other compelling aspects of the transaction.
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The Fusion Board also gave consideration to the following negative factors (which are more fully described in the “Risk Factors” section of this proxy statement/prospectus), although not weighted or in any order of significance:
The risk that our public stockholders would vote against the Business Combination Proposal or exercise their redemption rights.
The Fusion Board considered the risk that some of the current public stockholders may vote against the Business Combination Proposal or decide to exercise their redemption rights, thereby depleting the amount of cash available in the Trust Account to an amount below the minimum required to consummate the Business Combination. The Fusion Board concluded however, that this risk was substantially mitigated because Fusion has commitments from the PIPE Investors to purchase $250 million of shares of Fusion Class A common stock at Closing, which represents nearly 100% of the minimum proceeds necessary for the Closing. Further, the fact that public stockholders may vote for the Business Combination Proposal while also exercising their redemption rights mitigates against any incentive a public stockholder might have to vote against the Business Combination Proposal, especially to the extent that they hold public warrants which would be worthless if the Business Combination is not completed.
Our management and directors may have different interests in the Business Combination than the public stockholders.
The Fusion Board considered the fact that members of our management and board of directors may have interests that are different from, or are in addition to, the interests of our stockholders generally, including the matters described under “— Interests of Fusion’s Directors and Officers and Others in the Business Combination” below. However, the Fusion Board concluded that the potentially disparate interests would be mitigated because (i) these interests were disclosed in the IPO prospectus and (ii) these disparate interests would exist or may be even greater with respect to a business combination with another target company.
Certain Projected Financial Information
In connection with its consideration of the potential Business Combination, the Fusion Board was provided with prospective financial information prepared by management of MoneyLion and Fusion (collectively, the “Projections”).
The Projections are included in this proxy statement/prospectus solely to provide Fusion’s stockholders access to information made available in connection with the Fusion Board’s consideration of the proposed business combination. The Projections should not be viewed as public guidance. Furthermore, the Projections do not take into account any circumstances or events occurring after the date on which the Projections were prepared, which was February 10, 2021.
The Projections were not prepared with a view toward public disclosure or with a view toward complying with the guidelines established by the SEC or the American Institute of Certified Public Accountants with respect to prospective financial information. The Projections have not been audited. Neither the independent registered public accounting firms of MoneyLion nor Fusion nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or their achievability, and the independent accounting firms of Fusion and MoneyLion assume no responsibility for, and disclaim any association with, the Projections.
The Projections were prepared in good faith by MoneyLion management based on their reasonable best estimates and assumptions with respect to the expected future financial performance of MoneyLion at the time the Projections were prepared and speak only as of that time.
The Projections were developed by MoneyLion and considered various material assumptions, including, but not limited to, the following:
• MoneyLion’s digital banking offerings will continue to be available in the states in which they are currently offered;
• demand for digital banking and wealth management solutions will remain strong and business growth will remain consistent with the rates of recent years;
• MoneyLion will maintain a leading market position; and
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• other general business and market assumptions, including maintaining strong relationships with its current customers; the historical recent performance of MoneyLion; economic and market growth consistent with recent years, including continued expansion and growth in service offerings and capabilities; current and anticipated market position relative to its peers; and other future prospects of MoneyLion as a whole.
While presented with numerical specificity, the Projections are forward-looking and reflect numerous estimates and assumptions with respect to future industry performance under various industry scenarios as well as assumptions for competition, general business, economic, market and financial conditions and matters specific to the business of MoneyLion, all of which are difficult to predict and many of which are beyond the preparing parties’ control including, among other things, the matters described in the sections entitled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”
The Projections were prepared solely for internal use to assist Fusion in its evaluation of MoneyLion and the potential business combination. MoneyLion has not warranted the accuracy, reliability, appropriateness or completeness of the projections to anyone, including Fusion. Neither MoneyLion’s management nor any of their representatives has made or makes any representations to any person regarding the ultimate performance of MoneyLion relative to the Projections. The Projections are not fact. The Projections are not a guarantee of actual future performance. The future financial results of MoneyLion may differ materially from those expressed in the Projections due to factors beyond either of their ability to control or predict.
The Projections are not included in this proxy statement/prospectus in order to induce any Fusion stockholders to vote in favor of any of the proposals at the Special Meeting.
We encourage you to review the financial statements of MoneyLion included in this proxy statement/prospectus, as well as the financial information in the sections entitled “Selected Historical Consolidated Financial Information of MoneyLion” and “Unaudited Pro Forma Condensed Combined Financial Information” in this proxy statement/prospectus and to not rely on any single financial measure.
Neither Fusion nor MoneyLion nor any of their respective affiliates intends to, and, except to the extent required by applicable law, each of them expressly disclaims any obligation to, update, revise or correct the Projections to reflect circumstances existing or arising after the date such Projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying the Projections are shown to be in error or any of the Projections otherwise would not be realized.
(in millions) |
2020P(1) |
2021E |
2022E |
||||||
Adjusted Revenue(2) |
$ |
76 |
$ |
144 |
$ |
258 |
|||
Adjusted Gross Profit(3) |
$ |
39 |
$ |
94 |
$ |
184 |
____________
(1) 2020P represents preliminary year-end results for the 2020 fiscal year.
(2) Adjusted Revenue is a non-GAAP measure. Adjusted Revenue is defined as total revenue, net plus amortization of loan origination costs, less direct charge offs, revenue from phased out products and non-operating income.
(3) Adjusted Gross Profit is a non-GAAP measure. Adjusted Gross Profit is defined as gross profit less revenue from phased out products and non-operating income. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion — Non-GAAP Measures” for further information.
Comparable Public Companies
During the course of valuing MoneyLion, Fusion’s management also identified several comparable public companies. Specifically, it determined that its core peer group consisted of Affirm, Afterpay, Square, Inc., Open Lending, Upstart and SoFi. It also identified other publicly traded high-growth FinTech/Payments companies, including Adyen, bill.com, Lightspeed and Shopify, as well as high-growth Financial SaaS companies, including Avalara, Anaplan, Coupa, Duck Creek Technologies, nCino and Q2 Holdings, Inc. Fusion’s management believes that MoneyLion is likely to be considered to be in one or more of these categories by potential investors based on its business and financial model.
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The following is the financial information of these companies and MoneyLion that was considered by the Fusion Board:
MoneyLion |
Core Peer |
High-Growth |
High-Growth Financial SaaS Companies |
|||||
Firm Value/2021E Revenue |
17x |
25x |
54x |
26x |
||||
Firm Value/2022E Revenue |
9x |
19x |
39x |
22x |
||||
Firm Value/2021E Revenue/2021E growth |
0.2x |
0.5x |
1.4x |
1.1x |
||||
2020P to 2022E Revenue CAGR |
84% |
51% |
38% |
23% |
____________
Source: Information for companies other than MoneyLion have been obtained from public filings and data from Fact Set as of February 10, 2021.
Note: The comparable company figures represent the medians for each peer group.
Regulatory Approvals
The Business Combination is subject to the expiration or termination of the waiting period (or any extension thereof) applicable under the HSR Act. The waiting period expired on March 29, 2021.
Satisfaction of 80% Test
After consideration of the factors identified and discussed in the section entitled “The Business Combination Proposal — the Fusion Board’s Reasons for the Approval of the Business Combination,” the Fusion Board concluded that the Business Combination met all of the requirements disclosed in the prospectus for its initial public offering with respect to Fusion’s initial business combination, including that the Business Combination had a fair market value of at least 80% of the balance of the funds in the Trust Account at the time of execution of the Merger Agreement.
Interests of Fusion’s Directors and Officers in the Business Combination
In considering the recommendation of our board of directors in favor of approval of the Business Combination Proposal, it should be noted that our directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a Fusion Stockholder. These interests include, among other things:
• Our Sponsor will lose its entire investment in us if we do not complete a business combination by December 31, 2021. If we are unable to complete our initial business combination by December 31, 2021, we will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, liquidate and dissolve, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
• There will be no liquidating distributions from the Trust Account with respect to the founder shares if we fail to complete a business combination within the required period. Our Sponsor purchased the founder shares prior to our initial public offering for an aggregate purchase price of $25,000. Upon the Closing, such founder shares will convert into 8,750,000 shares of New MoneyLion Class A common stock (assuming no founder shares are forfeited by the Sponsor at Closing), and such shares will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would have an aggregate market value of approximately $87.1 million based upon the closing price of $9.95 per public share on the NYSE on June 7, 2021, but, given the restrictions on such shares, we believe such shares have less value.
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• Simultaneously with the closing of its initial public offering, Fusion consummated the sale of 8,100,000 private placement warrants at a price of $1.00 per warrant in a private placement to our Sponsor. The warrants are each exercisable commencing the later of 30 days following the Closing and 12 months from the closing of our initial public offering, which occurred on June 30, 2020, for one share of Class A common stock at $11.50 per share. If we do not consummate a business combination transaction by December 31, 2021, then the proceeds from the sale of the private placement warrants will be part of the liquidating distribution to the public stockholders and the warrants held by our Sponsor will be worthless. The warrants held by our Sponsor had an aggregate market value of approximately $10.1 million based upon the closing price of $1.25 per warrant on the NYSE on June 7, 2021.
• Jeff Gary is expected to continue to serve as a director of New MoneyLion after the Closing. As such, in the future he may receive any cash fees, stock options or stock awards that the New MoneyLion Board determines to pay to its directors and/or officers.
• Our Sponsor, directors and executive officers have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their founder shares if Fusion fails to complete a business combination by December 31, 2021.
• In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have entered into a transaction agreement, reduce the amount of funds in the Trust Account. This liability will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account or to any claims under our indemnity of the underwriters of the offering against certain liabilities, including liabilities under the Securities Act.
• Following the Closing, our Sponsor would be entitled to the repayment of any working capital loan and advances that have been made to Fusion and remain outstanding. As of the date of this proxy statement/prospectus, our Sponsor has not made any advances to us for working capital expenses. If we do not complete an initial business combination within the required period, we may use a portion of our working capital held outside the Trust Account to repay the working capital loans, but no proceeds held in the Trust Account would be used to repay the working capital loans.
• Following the consummation of the Business Combination, we will continue to indemnify our existing directors and officers and will maintain a directors’ and officers’ liability insurance policy.
• Upon the Closing, subject to the terms and conditions of the Merger Agreement, our Sponsor, our officers and directors and their respective affiliates may be entitled to reimbursement for any reasonable out-of-pocket expenses related to identifying, investigating and consummating an initial business combination, and repayment of any other loans, if any, and on such terms as to be determined by Fusion from time to time, made by our Sponsor or certain of our officers and directors to finance transaction costs in connection with an intended initial business combination.
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Sources and Uses of Funds for the Business Combination
The following table summarizes the sources and uses for funding the transactions contemplated by the Merger Agreement. Where actual amounts are not known or knowable, the figures below represent MoneyLion’s good faith estimate of such amounts assuming a Closing as of June 8, 2021.
(in millions) |
Assuming |
Assuming |
||||
Sources |
|
|
||||
Proceeds from Trust Account |
$ |
350 |
$ |
350 |
||
Private Placement |
|
250 |
|
250 |
||
Sellers’ Equity |
|
2,100 |
|
2,200 |
||
Fusion Upfront Founder Equity |
|
88 |
|
88 |
||
Total Sources |
$ |
2,788 |
$ |
2,888 |
||
|
|
|||||
Uses |
|
|
||||
Cash on Balance Sheet |
$ |
450 |
$ |
283 |
||
Cash Proceeds to Selling Shareholders |
|
100 |
|
— |
||
Redemptions to Public Investors |
|
— |
|
267 |
||
Sellers’ Equity |
|
2,100 |
|
2,200 |
||
Paydown of MoneyLion Debt |
|
5 |
|
5 |
||
Fusion Upfront Founder Equity |
|
88 |
|
88 |
||
Transaction costs |
|
45 |
|
45 |
||
Total Uses |
$ |
2,788 |
$ |
2,888 |
____________
(1) Assumes MoneyLion elects to receive the maximum amount of cash consideration at the Closing in the no redemption scenario and no cash consideration in the maximum redemption scenario. If MoneyLion elects not to receive any cash consideration at the Closing in the no redemption scenario, then New MoneyLion will have an additional $100 million of Cash on its Balance Sheet and the Sellers’ Equity will increase by an additional $100 million and if MoneyLion elects to receive the maximum amount of cash consideration at the Closing in the maximum redemption scenario, then the amount of Cash on the Balance Sheet of New MoneyLion will decrease by $28,393,770 and the Seller’s Equity will decrease by $28,393,770.
Directors of New MoneyLion After the Business Combination
Pursuant to the Merger Agreement, as amended by Amendment No. 1, the New MoneyLion Board will initially consist of ten directors, one of which will consist of Diwakar Choubey, the Chief Executive Officer of MoneyLion. The remaining members of the board of directors will consist of two directors designated by Fusion who shall qualify as independent under applicable rules and regulations of the SEC and stock exchange rules and regulations (including the applicable rules and regulations of the NYSE), and one of whom shall be mutually acceptable to Fusion and MoneyLion, taking into account relevant public company board composition requirements, and the remaining members of the board of directors will be designated by MoneyLion.
Stock Exchange Listing
Fusion’s units, Class A common stock and public warrants are publicly traded on the NYSE under the symbols “FUSE.U”, “FUSE” and “FUSE WS”, respectively. Fusion intends to apply to list the New MoneyLion Class A common stock and public warrants on the NYSE under the symbols “ML” and “ML WS”, respectively, upon the Closing of the Business Combination. New MoneyLion will not have units traded following the Closing.
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Accounting Treatment
The Business Combination will be accounted for as a reverse recapitalization, in accordance with U.S. GAAP. Under this method of accounting, although Fusion will issue shares for outstanding equity interests of MoneyLion in the Business Combination, Fusion will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of MoneyLion issuing stock for the net assets of Fusion, accompanied by a recapitalization. The net assets of Fusion will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of MoneyLion.
Vote Required for Approval
This Business Combination Proposal (and consequently, the Merger Agreement and the transactions contemplated thereby, including the Business Combination) will be approved and adopted only with the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
The Business Combination is conditioned upon the approval of the Business Combination Proposal, subject to the terms of the Merger Agreement. If the Business Combination Proposal is not approved, the other proposals (except the Adjournment Proposal, as described below) will not be presented to the stockholders for a vote.
Fusion’s Sponsor, along with Fusion’s directors and officers have agreed to vote the founder shares and any public shares owned by them in favor of the Business Combination Proposal. See “Other Agreements — Fusion Letter Agreement” and “Other Agreements — Sponsor Agreement” for more information.
Recommendation of Fusion Board
THE FUSION BOARD UNANIMOUSLY RECOMMENDS THAT THE FUSION STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.
The existence of financial and personal interests of Fusion’s directors may result in a conflict of interest on the part of one or more of the directors between what they may believe is in the best interests of Fusion and its stockholders and what they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section entitled “— Interests of Fusion’s Directors and Officers in the Business Combination” for a further discussion.
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The following describes certain aspects of the Business Combination, including the material provisions of the Merger Agreement. The following description of the Merger Agreement is subject to, and qualified in its entirety by reference to, the Merger Agreement, as amended by Amendment No. 1, both of which are attached to this proxy statement/prospectus as Annex A and Annex G, respectively, and are incorporated by reference into this proxy statement/prospectus. We urge you to read the Merger Agreement carefully and in its entirety, as it is the legal document governing the Business Combination.
Explanatory Note Regarding the Merger Agreement
The Merger Agreement and this summary are included to provide you with information regarding the terms of the Merger Agreement. The Merger Agreement contains representations and warranties by Fusion and MoneyLion. The representations, warranties and covenants made in the Merger Agreement by Fusion and MoneyLion were qualified and subject to important limitations agreed to by Fusion and MoneyLion in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purpose of establishing circumstances in which a party to the Merger Agreement may have the right not to consummate the Business Combination if the representations and warranties of the other party were to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing or attempting to set forth matters as facts. The representations and warranties also may be subject to a contractual standard of materiality different from that generally applicable to stockholders and reports and documents filed with the SEC and some were qualified by the matters contained in the confidential disclosure schedules that Fusion and MoneyLion each delivered in connection with the Merger Agreement and certain documents filed with the SEC. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement/prospectus, may have changed since the date of the Merger Agreement.
For the foregoing reasons, the representations and warranties or any descriptions of those provisions should not be read alone or relied upon as presenting the actual state of facts or condition of Fusion or MoneyLion, or any of their respective subsidiaries or affiliates. Instead, such provisions or descriptions should be read only in conjunction with the other information provided elsewhere in this document or incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Where You Can Find More Information.” Fusion will provide additional disclosures in its public reports to the extent it is aware of the existence of any material facts that are required to be disclosed under federal securities laws and that might otherwise contradict the terms and information contained in the Merger Agreement and will update such disclosure as required by federal securities laws.
Effect of the Business Combination
Pursuant to the Merger Agreement, Merger Sub will merge with and into MoneyLion, with MoneyLion surviving the Business Combination. Upon consummation of the foregoing transactions, MoneyLion will be a wholly-owned subsidiary of Fusion, which will then be renamed as determined by MoneyLion.
Merger Consideration
The aggregate value of the consideration paid in respect of MoneyLion is $2,200,000,000.00. The MoneyLion stockholders shall receive (i) shares of New MoneyLion Class A common stock (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash exceeds $260,000,000 and (B) $100,000,000, and (ii) the contingent right to receive a pro rata portion of the Earn Out Shares.
Pursuant to the Merger Agreement, at the Effective Time, the stock consideration to be issued to the then current holders of stock in MoneyLion will be in the form of New MoneyLion Class A common stock.
Additionally, each MoneyLion option that is outstanding and unexercised, whether or not then vested or exercisable, will be assumed by New MoneyLion and will be converted into an option to acquire New MoneyLion Class A common stock with the same terms and conditions as applied to the MoneyLion option immediately prior to the Effective Time; provided that the number of shares underlying such New MoneyLion option will be determined
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by multiplying the number of shares of MoneyLion common stock subject to such option immediately prior to the Effective Time, by the option exchange ratio, which product shall be rounded down to the nearest whole number of shares, and the per share exercise price of such New MoneyLion option will be determined by dividing the per share exercise price immediately prior to the Effective Time by the option exchange ratio, which quotient shall be rounded up to the nearest whole cent.
Pursuant to the Merger Agreement, at the Effective Time, each warrant to purchase shares of MoneyLion capital stock that is issued and outstanding prior to the Effective Time and has not been exercised or terminated pursuant to its terms will be assumed and converted into a warrant exercisable for shares of New MoneyLion Class A common stock.
In addition, the Merger Agreement contemplates that the Earn Out Participants, following the closing of the Business Combination and for a period of five years thereafter, will be eligible to receive the Earn Out Shares, subject to a Triggering Event. Upon the occurrence of a Triggering Event, New MoneyLion will release such Earn Out Shares to the Earn Out Participants.
Closing and Effective Time of the Business Combination
Unless Fusion and MoneyLion otherwise mutually agree, the Closing will take place on the date which is no later than three business days after the date on which all of the Closing conditions have been satisfied or waived (other than those conditions that by their terms are to be satisfied at the Closing of the Business Combination, but subject to the satisfaction or waiver of those conditions) (such date, the “Closing Date”). See “The Merger Agreement — Conditions to Closing” for a more complete description of the conditions that must be satisfied prior to Closing.
On the Closing Date, Merger Sub and MoneyLion will effect the Business Combination by filing a certificate of merger with the Secretary of State of the State of Delaware, and the Business Combination will become effective at the time the certificate of merger has been duly filed (or such later time as may be agreed in writing by Fusion and MoneyLion and specified in the certificate of merger).
As of the date of this proxy statement/prospectus, the parties expect that the Business Combination will be effective during the third quarter of 2021. However, there can be no assurance as to when or if the Business Combination will occur.
If the Closing (as defined in the Merger Agreement), has not occurred by the date that is nine months following the date of the Merger Agreement, the Merger Agreement may be terminated by either Fusion or MoneyLion. However, a party may not terminate the Merger Agreement pursuant to the provision described in this paragraph if such party’s action or failure to act has been a principal cause of or resulted in the failure of the Closing to occur on or before the Termination Date and such action or failure to act constitutes a breach of the Merger Agreement. See “The Merger Agreement — Termination.”
Covenants and Agreements
Conduct of MoneyLion Prior to the Completion of the Business Combination
MoneyLion has agreed that, prior to the Effective Time of the Business Combination, it will conduct its operations in the ordinary course consistent with past practice and use commercially reasonable efforts to preserve the present business and operations and goodwill of the Company and its subsidiaries, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients and others having business relationships with them.
In addition to the general covenants above, MoneyLion has agreed that prior to the Effective Time, subject to specified exceptions, it will not without the written consent of Fusion:
• except as otherwise required by any existing benefit plan of MoneyLion, the Merger Agreement or applicable legal requirements: (i) materially increase or grant any material increase in the compensation, bonus, fringe or other benefits of, or pay, grant or promise any bonus to, any current or former employee, director or independent contractor except for any such person with an annual base salary or wage rate of less than $400,000 in the ordinary course of business; (ii) grant or pay any severance or
106
change in control pay or benefits to, or otherwise increase the severance or change in control pay or benefits of, any current or former employee, director or independent contractor; (iii) enter into, amend or terminate any benefit plan of MoneyLion or any employee benefit plan, policy, program, agreement, trust or arrangement that would have constituted an benefit plan of MoneyLion if it had been in effect on the date of the Merger Agreement (other than annual renewal of welfare plans in the ordinary course of business consistent with past practice or amendments to welfare plans that do not result in a material increase in cost to MoneyLion); (iv) take any action to accelerate the vesting or payment of, or otherwise fund or secure the payment of, any compensation or benefits under any benefit plan of MoneyLion; (v) grant any equity or equity-based compensation awards; or (vi) hire or terminate any employee or independent contractor (other than for cause), if such new employee or independent contractor will receive, or such terminated employee or consultant does receive, annual base compensation (or annual base wages or fees) in excess of $400,000; transfer, sell, assign, license, sublicense, covenant not to assert, encumber, subject to a lien (other than certain permitted liens), abandon, allow to lapse, or otherwise dispose of, any right, title or interest of MoneyLion in or to any owned intellectual property material to any of the businesses of the Group Companies (other than non-exclusive licenses of such owned intellectual property granted in the ordinary course of business);
• waive or cancel any material rights in or to any intellectual property material to any business of the Group Companies;
• disclose to any third party (excluding, for the avoidance of doubt, employees, officers or directors of any Group Company) who is not subject to a written obligation to maintain the confidentiality thereof any material trade secrets constituting the owned intellectual property of MoneyLion or its subsidiaries;
• knowingly subject any material software constituting owned intellectual property of MoneyLion or its subsidiaries to copyleft terms;
• except for transactions solely among the wholly-owned Group Companies, (i) declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock; (ii) repurchase, redeem or otherwise acquire, or offer to repurchase, redeem or otherwise acquire, any membership interests, capital stock or any other equity interests, as applicable, in any Group Company (other than repurchase, redemptions or other acquisitions or equity interests from directors, officers or employees in accordance with the terms of any equity incentive plans or such person’s employment, grant or subscription agreement or in accordance with the Group Company’s organizational documents); (iii) except in the ordinary course of business, grant, issue sell or otherwise dispose, or authorize to issue sell, or otherwise dispose any membership interests, capital stock or any other equity interests (such as stock options, stock units, restricted stock or other contracts for the purchase or acquisition of such capital stock), as applicable, in any Group Company; or (iv) issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or ownership interests, or subscriptions, rights, warrants or options to acquire any shares of capital stock or other equity securities or ownership interests or any securities convertible into or exchangeable for shares of capital stock or other equity securities or other ownership interests, or enter into other agreements or commitments of any character obligating it to issue any such shares, equity securities or other ownership interests or convertible or exchangeable securities;
• amend its organizational documents;
• (i) merge, consolidate or combine with any person; or (ii) acquire or agree to acquire by merging or consolidating with, purchasing any equity interest in or substantially all of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof;
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• other than with respect to the real property leases of MoneyLion and its subsidiaries and, for clarity, intellectual property, sell, lease, license, sublicense, abandon, divest, transfer, cancel, abandon or permit to lapse or expire, dedicate to the public, or otherwise dispose of, or agree to do any of the foregoing, or otherwise dispose of real or tangible assets or properties, other than in the ordinary course of business or pursuant to contracts existing on the date hereof;
• (i) make, incur, create or assume any loans, advances or capital contributions to, or investments in, or guarantee any indebtedness of, any person other than any of the Group Companies except for loans, advances or capital contributions pursuant to and in accordance with the ordinary course of business or the terms of contracts existing as of the date of the Merger Agreement; (ii) except in the ordinary course of business, create any material liens on any material property or assets of any of the Group Companies in connection with any indebtedness thereof (other than certain permitted liens); or (iii) cancel or forgive any indebtedness owed to any of the Group Companies;
• release, assign, compromise, settle or agree to settle any legal proceeding material to the Group Companies or their respective properties or assets which would require a payment by the Group Companies in excess of $3,000,000, except in the ordinary course of business;
• except in the ordinary course of business: (A) modify, amend or terminate in a manner that is materially adverse to the applicable Group Companies, taken as a whole, any material contract MoneyLion and its subsidiaries; (B) enter into any contract that would have been a material contract MoneyLion and its subsidiaries had it been entered into prior to the date of the Merger Agreement; (C) waive, delay the exercise of, release or assign any material rights or claims under any material contract MoneyLion and its subsidiaries; or (D) incur or enter into a contract requiring MoneyLion to make any capital expenditures in excess of $3,000,000 in any twelve-month period;
• except as required by United States generally accepted accounting principles (or any interpretation thereof) or applicable law (including to obtain compliance with PCAOB auditing standards), make any material change in accounting methods, principles or practices;
• (i) make or change any material tax election; (ii) change (or request to change) any material method of accounting for tax purposes; (iii) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of material taxes may be issued (other than any extension pursuant to an extension to file any tax return or requested in the ordinary course of business); or (iv) enter into any “closing agreement” as described in Section 7121 of the Code (or any similar legal requirement) with any governmental entity with respect to a material amount of taxes;
• authorize, recommend, propose or announce an intention to adopt a plan of complete or partial liquidation, restructuring, recapitalization, dissolution or winding-up of MoneyLion or its subsidiaries;
• enter into or amend any agreement with any of its officers, directors, material stockholders or other affiliates (other than Group Companies), other than (i) payments or distributions relating to obligations in respect of arm’s-length commercial transactions, (ii) employee benefit plans and (iii) employment arrangements entered into in the ordinary course.
• engage in any material new line of business other than as set forth in the investor presentation of MoneyLion provided to Fusion;
• implement any employee layoffs, plant closings, or similar events that individually or in the aggregate would give rise to any obligations or liabilities on the part of the Group Companies under the Worker Adjustment and Retraining Notification Act or any similar state or local “mass layoff” or “plant closing” legal requirement;
• enter into, amend or terminate any collective bargaining agreement or other agreement with a labor union, works council or similar organization; or
• agree in writing or otherwise agree or commit to take any of the actions listed above.
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Conduct of Fusion Prior to the Completion of the Business Combination
Fusion has agreed that, until the earlier of the termination of the Merger Agreement pursuant to its terms or the Closing, it and its subsidiaries will conduct their operations in the ordinary course and use commercially reasonable efforts to preserve the present business and operations and goodwill of the Fusion and its subsidiaries, keep available the services of their officers and employees and maintain satisfactory relationships with licensors, suppliers, distributors, clients and others having business relationships with them.
In addition to the general covenants above, Fusion has agreed that prior to the Effective Time, subject to specified exceptions, it will not without the written consent of MoneyLion:
• declare, set aside or pay dividends on or make any other distributions (whether in cash, stock, equity securities or property) in respect of any capital stock (or warrant) or split, combine or reclassify any capital stock (or warrant), effect a recapitalization or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock or warrant, or effect any like change in capitalization;
• purchase, redeem or otherwise acquire, directly or indirectly, any equity securities of Fusion or any of its subsidiaries;
• other than pursuant to the Subscription Agreements, grant, issue, deliver, sell, authorize, pledge or otherwise encumber, or agree to any of the foregoing with respect to, any shares of capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities, or subscriptions, rights, warrants or options to acquire any shares of capital stock or other equity securities or any securities convertible into or exchangeable for shares of capital stock or other equity securities, or enter into other agreements or commitments of any character obligating it to issue any such shares of capital stock or equity securities or convertible or exchangeable securities;
• amend its organizational documents or form or establish any subsidiary;
• (i) merge, consolidate or combine with any person; or (ii) acquire or agree to acquire by merging or consolidating with, or by purchasing any equity interest in or a portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or otherwise acquire or agree to acquire any assets, or enter into any joint ventures, strategic partnerships or alliances; incur any indebtedness or guarantee any such indebtedness of another person or persons, issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities, enter into any “keep well” or other agreement to maintain any financial statement condition; provided, however, that Fusion will be permitted to incur indebtedness (which shall constitute Fusion transaction costs) from its affiliates and stockholders in order to meet its reasonable capital requirements, with any such loans to be made only as reasonably required by the operation of Fusion in due course on a non-interest basis and otherwise on arm’s-length terms and conditions and repayable at Closing;
• except as required by United States generally accepted accounting principles (or any interpretation thereof) or applicable legal requirements, make any change in accounting methods, principles or practices;
• (i) make or change any material tax election; (ii) change (or request to change) any material method of accounting for tax purposes; (iii) waive or extend any statute of limitations in respect of a period within which an assessment or reassessment of material taxes may be issued (other than any extension pursuant to an extension to file any tax return or requested in the ordinary course of business); or (iv) enter into any “closing agreement” as described in Section 7121 of the Code (or any similar legal requirement) with any governmental entity with respect to a material amount of taxes;
• create any material liens on any material property or assets of Fusion or Merger Sub;
• liquidate, dissolve, reorganize or otherwise wind up the business or operations of Fusion or Merger Sub;
• commence, settle or compromise any legal proceeding;
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• engage in any material new line of business;
• amend the Trust Agreement or Subscription Agreements or enter into or amend any other agreement related to the Trust Account or the PIPE Investment; or
• agree in writing or otherwise agree, commit or resolve to take any of the actions listed above.
HSR Act and Regulatory Approvals
Fusion and MoneyLion have agreed to each prepare and file the notification required of it under the HSR Act in connection with the Business Combination as promptly as practicable after the date of the Merger Agreement, and no later than ten business days after such date, and to promptly and in good faith respond to all information requested of it by the U.S. Federal Trade Commission (the “FTC”), U.S. Department of Justice, or any other governmental entity in connection with such notification and otherwise cooperate in good faith with each other and such governmental entities.
Each of Fusion and MoneyLion have agreed to promptly furnish to the other such information and assistance as the other may reasonably request in connection with its preparation of any filing or submission that is necessary under the HSR Act and to use reasonable best efforts to cause the expiration or termination of the applicable waiting periods or obtain the applicable approvals as soon as practicable.
Each of Fusion and MoneyLion have agreed to promptly provide the other with copies of all written communications (and memoranda setting forth the substance of all substantive oral communications) between each of them, any of their affiliates and their respective agents, representatives and advisors, on the one hand, and any governmental entity, on the other hand, with respect to the Merger Agreement or the Business Combination.
Without limiting the foregoing, each of Fusion and MoneyLion have agreed that it will: (i) promptly inform the other of any communication to or from the FTC, the U.S. Department of Justice or any other Governmental Entity regarding the Business Combination; (ii) permit each other to review in advance any proposed written communication to any such governmental entity and incorporate reasonable comments thereto; (iii) give the other prompt written notice of the commencement of any legal proceeding with respect to such transactions; (iv) not agree to participate in any substantive meeting or discussion with any such governmental entity in respect of any filing, investigation or inquiry concerning the Merger Agreement or the Business Combination unless, to the extent reasonably practicable, it consults with the other party in advance and, to the extent permitted by such governmental entity, gives the other party the opportunity to attend; (v) keep the other reasonably informed as to the status of any such legal proceeding; and (vi) promptly furnish each other with copies of all correspondence, filings (except for filings made under the HSR Act) and written communications between such party and their affiliates and their respective agents, representatives and advisors, on one hand, and any such governmental entity, on the other hand, in each case, with respect to the Merger Agreement and the Business Combination.
Fusion, on the one hand, and MoneyLion, on the other hand, have agreed to each pay 50% of any filing fees required by governmental entities, including with respect to any registrations, declarations and filings required in connection with the execution and delivery of the Merger Agreement, the performance of the obligations thereunder and the consummation of the Business Combination, including filing fees in connection with filings under the HSR Act.
Except for filings under the HSR Act, each of Fusion and MoneyLion have agreed to, as promptly as reasonably practicable, use reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all governmental entities that may be or become necessary for its execution and delivery of the Merger Agreement and the performance of its obligations pursuant the Merger Agreement (including those required by applicable approvals of the Group Companies (the “Regulatory Filings”)). Each of Fusion and MoneyLion have agreed to use reasonable best efforts to cooperate fully with the other and its affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals and effect any such Regulatory Filing. With respect to the Regulatory Filings, each of Fusion and MoneyLion have agreed to use its reasonable best efforts and cooperate with the other (i) in timely making inquiries with governmental entities regarding the Regulatory Filings, (ii) in determining if any Regulatory Filings are required by governmental entities, and (iii) in timely making all Regulatory Filings (except with respect to such jurisdictions where Fusion and MoneyLion agree that a Regulatory Filing is not required). If Fusion determines that it is required to make any Regulatory Filing or otherwise provide
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information with respect to Fusion or any Fusion personnel or affiliates to a governmental entity in connection with any approval, then MoneyLion will, except as prohibited by applicable legal requirements (in which case MoneyLion will use commercially reasonable efforts to obtain any required permission to allow disclosure), provide upon Fusion’s request relevant portions of all past filings and correspondence with governmental entities with respect to any Approvals related to such Regulatory Filing or information provision requirement that Fusion reasonably determines to be necessary to make a complete, accurate and timely Regulatory Filing or provision of information.
Fusion and MoneyLion have agreed not to willfully take any action that will have the effect of delaying, impairing or impeding in any material respect the receipt of any Regulatory Filings or any other required consents, authorizations, orders and approvals that, if not received, would have or would reasonably be expected to have, a material adverse impact on the business of the Group Companies, taken as a whole.
Proxy Solicitation
Fusion has agreed to, as promptly as practicable after this registration statement is declared effective (i) cause the proxy statement to be filed with the SEC as part of this registration statement (the “Proxy Statement”) to be disseminated to its stockholders in compliance with applicable legal requirements, (ii) duly give notice of and convene and hold the Special Meeting in accordance with the Fusion organizational documents, which meeting shall be held not more than 20 business days after the date on which Fusion mails the Proxy Statement to its stockholders, and (iii) solicit proxies from the holders of Fusion Class A common stock to vote in favor of each of the stockholder matters, and to provide Fusion’s stockholders with the opportunity to redeem shares of Fusion Class A common stock. Fusion has also agreed, through the Fusion Board, to recommend to its stockholders that they approve the proposals contained in this proxy statement/prospectus (the “Fusion board recommendation”) and shall include the Fusion board recommendation in this proxy statement/prospectus, subject to the obligations described in this paragraph. The Fusion Board shall not (and no committee or subgroup thereof shall) withdraw, withhold, qualify or modify, or publicly propose to change, withdraw, withhold, qualify or modify, the Fusion board recommendation, unless the Fusion Board determines in good faith, after consultation with its legal counsel, that a failure to do so would reasonably be expected to constitute a breach by the Fusion Board of its fiduciary obligations to its stockholders. To the fullest extent permitted by applicable law, (x) Fusion’s obligations to establish a record date for, duly call, give notice of, convene and hold the Special Meeting shall not be affected by any change in recommendation by the Fusion Board, (y) Fusion agrees to establish a record date for, duly call, give notice of, convene and hold the Special Meeting and submit for approval the proposals contained in this proxy statement/prospectus and (z) Fusion agrees that if the approvals of the proposals contained in this proxy statement/prospectus shall not have been obtained at any such Special Meeting, then Fusion shall promptly continue to take all such necessary actions, including the actions required by the Merger Agreement, and hold additional Special Meetings in order to obtain such approvals.
MoneyLion has agreed to use commercially reasonable efforts to solicit and obtain the written consent of the MoneyLion supporting stockholders within 24 hours following the effectiveness of this registration statement, or in the event it is not able to obtain such written consent of its stockholders, MoneyLion will convene a meeting of its stockholders for the sole purpose of voting on the approval of the Merger Agreement and the other agreements and the transactions contemplated thereby as soon as reasonably practicable after this registration statement is declared effective. If such meeting is convened, MoneyLion shall obtain the approval of the MoneyLion stockholders at such meeting and take all other action necessary or advisable to secure such approval as soon as reasonably practicable after this registration statement is declared effective.
No Solicitation
During the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement pursuant to its terms or the Closing, MoneyLion has agreed not to, and shall cause its subsidiaries not to, and shall direct its employees, agents, officers, directors, representatives and advisors (collectively, “Representatives”) not to, directly or indirectly:
• solicit, initiate, enter into or continue discussions, negotiations or transactions with, or encourage or respond to any inquiries or proposals by, or provide any information to, any person (other than Fusion and its agents, representatives, advisors) concerning any merger, sale of a majority of the ownership interests and/or assets of MoneyLion, recapitalization or similar transaction involving MoneyLion (each, a “MoneyLion Business Combination”);
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• enter into any agreement regarding, continue or otherwise participate in any discussions or negotiations regarding, or cooperate in any way that would otherwise reasonably be expected to lead to a MoneyLion Business Combination; or
• commence, continue or renew any due diligence investigation regarding a MoneyLion Business Combination.
In addition, MoneyLion has agreed to, and to cause its subsidiaries to, and to cause their respective Representatives to, immediately cease any and all existing discussions or negotiations with any Person with respect to any MoneyLion Business Combination.
During the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement pursuant to its terms or the Closing, Fusion and Merger Sub have agreed not to, and to direct their respective Representatives not to, directly or indirectly:
• solicit, initiate, enter into or continue discussions or transactions with, or encourage or respond to any inquiries or proposals by, or provide any information to, any person (other than MoneyLion, MoneyLion stockholders and their respective Representatives) concerning any merger, purchase of ownership interests or assets of or by Fusion, recapitalization or similar business combination transaction (each, a “Fusion Business Combination”);
• enter into any agreement regarding, continue or otherwise participate in any discussions or negotiations regarding, or cooperate in any way that would otherwise reasonably be expected to lead to a Fusion Business Combination; or
• commence, continue or renew any due diligence investigation regarding a Fusion Business Combination.
Fusion and Merger Sub have agreed to, and to cause their respective Representatives to, immediately cease any and all existing discussions or negotiations with any person with respect to any Fusion Business Combination.
Each of Fusion and MoneyLion have agreed to promptly (and in no event later than 24 hours after becoming aware of such inquiry, proposal, offer or submission) notify the other (and in the case of Fusion’s receipt of a Fusion Business Combination proposal, Fusion will also provide notice to MoneyLion) if it or, to its knowledge, any of its or its Representatives receives any inquiry, proposal, offer or submission with respect to a MoneyLion Business Combination or Fusion Business Combination, as applicable (including the identity of the Person making such inquiry or submitting such proposal, offer or submission), after the execution and delivery of the Merger Agreement.
If either Fusion or MoneyLion or its Representatives receives an inquiry, proposal, offer or submission with respect to a MoneyLion Business Combination or Fusion Business Combination, as applicable, such party shall provide the other with a copy of such inquiry, proposal, offer or submission (and in the case of Fusion’s receipt, Fusion will also provide copies to MoneyLion). Notwithstanding anything to the contrary, either Fusion or MoneyLion may respond to any unsolicited proposal regarding a MoneyLion Business Combination or Fusion Business Combination only indicating that such party has entered into a binding definitive agreement with respect to a business combination and is unable to provide any information related to such party or any of its subsidiaries or entertain any proposals or offers or engage in any negotiations or discussions concerning a MoneyLion Business Combination or Fusion Business Combination, as applicable.
The NYSE Listing
Through the Closing, Fusion has agreed to use commercially reasonable efforts to ensure Fusion remains listed as a public company on, and for shares of Fusion Class A common stock and public warrants to be listed on, the NYSE. Fusion has agreed to use commercially reasonable efforts to cause the New MoneyLion Class A common stock to be issued in connection with the Business Combination (including the Earn Out Shares) to be approved for listing on the NYSE.
Indemnification of Directors and Officers
Fusion has agreed that all rights to exculpation, indemnification and advancement of expenses now existing in favor of the current or former directors or officers, as the case may be, of any Group Company (each, together with such person’s heirs, executors or administrators, a “D&O Indemnified Party”), as provided in their respective
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organizational documents or in any indemnification agreement with any Group Companies will survive the Closing and continue in full force and effect for a period of six years from the Closing Date. For a period of six years from the Closing Date, New MoneyLion will cause the Group Companies to maintain in effect the exculpation, indemnification and advancement of expenses provisions of such Group Company’s organizational documents as in effect immediately prior to the Closing Date or in any indemnification agreements of each Group Company with any D&O Indemnified Party as in effect immediately prior to the Closing Date.
New MoneyLion has agreed not to amend, repeal or otherwise modify any exculpation, indemnification or advancement of expenses provisions in any manner that would adversely affect the rights of any D&O Indemnified Party for a period of six years from the Closing Date, except that New MoneyLion will continue to honor the terms of the aforementioned provision in the event a legal proceeding was brought within the six-year period.
Prior to the Closing, MoneyLion is required to purchase a so-called D&O tail insurance policy to cover the acts or omissions of the directors and officers of the Group Companies that may have occurred prior to the Effective Time (the “D&O Tail”). The D&O Tail that MoneyLion is required to purchase must be as good as, if not better, than the D&O insurance policy that was in effect prior to the Effective Date, and is required to maintain the D&O Tail for a period of six years following the Closing. If New MoneyLion enters into a separate merger or acquisition after the Business Combination, then New MoneyLion is required to ensure that the D&O Tail is maintained by the acquiring entity (or entity into which New MoneyLion is merging, if applicable) for the remainder of the six years.
Other Covenants and Agreements
The Merger Agreement contains other covenants and agreements, including covenants related to:
• MoneyLion and Fusion cooperating on the preparation and efforts to make effective this proxy statement/prospectus;
• Fusion keeping current and timely filing all reports required to be filed or furnished with the SEC and otherwise complying in all material respects with its reporting obligations under applicable securities laws;
• The preparation of a joint press release by Fusion and MoneyLion;
• Each of MoneyLion and Fusion providing access, subject to certain specified restrictions and conditions, to the other party and its respective representatives reasonable access to MoneyLion’s and Fusion’s (as applicable) and its subsidiaries’ properties, books, records and personnel;
• MoneyLion agreeing not to engage in transactions involving securities of Fusion without Fusion’s prior consent if MoneyLion possesses material nonpublic information of Fusion;
• Fusion and MoneyLion agreeing to keep each other apprised of any events, developments or conditions that would (a) be reasonably likely to prevent the consummation of the Business Combination or (b) would require any amendment or supplement to this proxy statement/prospectus;
• MoneyLion waiving claims to the Trust Account in the event that the Business Combination does not consummate;
• Fusion agreeing not to amend or modify any of the Subscription Agreements without MoneyLion’s prior written consent;
• Fusion taking steps to exempt the acquisition of Fusion Class A common stock from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 thereunder;
• Fusion and MoneyLion agreeing to take all actions necessary or appropriate to cause certain appointments to the board of New MoneyLion and the Surviving Company;
• Agreement between Fusion and MoneyLion relating to the intended tax treatment of the transactions contemplated by the Merger Agreement;
• The termination of certain affiliate agreements of MoneyLion; and
• Confidentiality and publicity relating to the Merger Agreement and the transactions contemplated thereby.
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Representations and Warranties
The Merger Agreement contains representations and warranties made by MoneyLion to Fusion relating to a number of matters, including the following:
• corporate organization, qualification to do business, good standing and corporate power;
• corporate organization, qualification to do business, good standing and corporate power of its subsidiaries;
• capitalization;
• requisite corporate authority to enter into the Merger Agreement and to complete the contemplated transactions;
• absence of conflicts with organizational documents, applicable laws or certain agreements and instruments as a result of entering into the Merger Agreement or consummating the Business Combination;
• required governmental and regulatory consents necessary in connection with the Business Combination;
• compliance with applicable law;
• possession of all licenses, permits and approvals;
• financial statements;
• absence of undisclosed liabilities;
• absence of any material adverse effect and absence of certain other material changes;
• absence of legal proceedings, governmental investigations, settlements and governmental orders;
• employee compensation and benefits matters;
• labor matters;
• properties and assets;
• tax matters;
• environmental matters;
• broker’s and finder’s fees related to the Business Combination;
• intellectual property and information technology systems;
• data privacy matters;
• material contracts;
• insurance;
• related party transactions;
• accuracy of MoneyLion’s information provided in this proxy statement/prospectus; and
• anti-corruption matters.
Certain of these representations and warranties are qualified as to “materiality” or “material adverse effect.” For purposes of the Merger Agreement, a “material adverse effect” with respect to MoneyLion means any change, event, circumstance, fact or occurrence, that, individually or when aggregated with other changes, events, or occurrences, has had or would be reasonably likely to have a material adverse effect on (a) the business, assets, financial condition or results of operations of the Group Companies, taken as a whole; or (b) the ability of MoneyLion to consummate the Business Combination on or prior to the Termination Date; provided, however,
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that no change, event, circumstance, fact or occurrence or effect arising out of or related to any of the following, alone or in combination, shall be taken into account in determining whether a material adverse effect pursuant to clause (a) has occurred or would be reasonably likely to occur: (i) acts of war, sabotage, civil unrest, cyberattacks or terrorism, or any escalation or worsening of any such acts of war, sabotage, civil unrest or terrorism, or changes in global, national, regional, state or local political or social conditions; (ii) earthquakes, hurricanes, tornados, pandemics (including COVID-19 or any regulations, measures, recommendations, directives, guidelines or orders promulgated or issued by any governmental entity to address COVID-19) or other natural or man-made disasters; (iii) changes attributable to the execution, announcement, performance or pendency or consummation of the Business Combination (including the impact thereof on relationships with customers, suppliers, employees or governmental entities); (iv) changes or proposed changes in applicable legal requirements, regulations or interpretations thereof or decisions by courts or any governmental entity after the date of the Merger Agreement; (v) changes or proposed changes in United States generally accepted accounting principles (or any interpretation thereof) after the date of the Merger Agreement; (vi) general economic, political, regulatory or legal conditions, including changes in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets), in each case, in the United States or anywhere else in the world; (vii) events or conditions generally affecting the industries and markets in which any Group Company operates; (viii) any failure in and of itself to meet any projections, forecasts, guidance, estimates, milestones, budgets or financial or operating predictions of revenue, earnings, cash flow or cash position, provided that this clause (viii) shall not prevent a determination that any change, event, or occurrence underlying such failure has resulted in a material adverse effect; or (ix) any actions (A) required to be taken, or required not to be taken, pursuant to the terms of the Merger Agreement, other than as a result of compliance with the first sentence of Section 6.01 of the Merger Agreement or (B) taken with the prior written consent of or at the prior written request of Fusion or Merger Sub; provided, however, that if a change or effect related to clauses (iv) through (vii) disproportionately adversely affects the Group Companies, taken as a whole, compared to other persons operating in the same industry as the Group Companies, then such disproportionate impact may be taken into account in determining whether a material adverse effect has occurred.
The Merger Agreement also contains representations and warranties made by Fusion and Merger Sub to MoneyLion relating to a number of matters, including the following:
• corporate organization, qualification to do business, good standing and corporate power;
• corporate organization, qualification to do business, good standing and corporate power of its subsidiaries;
• capitalization;
• requisite corporate authority to enter into the Merger Agreement and to complete the contemplated transactions;
• absence of conflicts with governing documents, applicable laws or certain agreements and instruments as a result of entering into the Merger Agreement or consummate the Business Combination;
• required governmental and regulatory consents necessary in connection with the Business Combination;
• compliance with applicable law;
• possession of all licenses, permits and approvals;
• compliance with SEC required filings and preparation of financial statements;
• absence of any material adverse effect and absence of certain other material changes;
• legal proceedings and absence of governmental orders; business activities; absence of operations;
• no undisclosed material contracts;
• the NYSE stock market quotation;
• the PIPE investment;
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• the Trust Account;
• tax matters;
• accuracy of Fusion’s information provided in this proxy statement/prospectus;
• employee benefit plans; and
• Fusion Board approval and advisability of Merger Agreement to stockholders;
• affiliate transactions; and
• broker’s and finder’s fees related to the Business Combination.
Certain of these representations and warranties are qualified as to “materiality” or “material adverse effect.” For purposes of the Merger Agreement, a “material adverse effect” with respect to Fusion means any change, event, circumstance, fact or occurrence, that, individually or when aggregated with other changes, events, or occurrences, has had or would be reasonably likely to have a material adverse effect on (a) the business, assets, financial condition or results of operations of Fusion and Merger Sub, taken as a whole; or (b) the ability of Fusion or Merger Sub to consummate the Business Combination on or prior to the Termination Date; provided, however, that no change, event, circumstance, fact or occurrence or effect related to any of the following, alone or in combination, shall be taken into account in determining whether a material adverse effect pursuant to clause (a) has occurred or would be reasonably likely to occur: (i) changes or proposed changes in applicable legal requirements, regulations or interpretations thereof or decisions by courts or any governmental entity after the date of the Merger Agreement; (ii) changes or proposed changes in United States generally accepted accounting principles (or any interpretation thereof) after the date of the Merger Agreement; or (iii) any downturn in general economic conditions, including changes in the credit, debt, securities, financial, capital or reinsurance markets (including changes in interest or exchange rates, prices of any security or market index or commodity or any disruption of such markets), in each case, in the United States or anywhere else in the world; provided, however, that if a change or effect related to clauses (i) through (iii) disproportionately adversely affects Fusion and Merger Sub, taken as a whole, compared to other persons operating in the same industry as Fusion and Merger Sub, then such disproportionate impact may be taken into account in determining whether a material adverse effect has occurred.
The representations and warranties in the Merger Agreement do not survive the Effective Time and, as described below under “— Termination”, if the Merger Agreement is validly terminated, there will be no liability under the representations and warranties of the parties, or otherwise under the Merger Agreement, unless a party willfully breached the Merger Agreement prior to such termination.
Conditions to Closing
The completion of the Business Combination is subject to various conditions. There can be no assurance as to whether or when all of the conditions will be satisfied or waived.
Conditions to Each Party’s Obligations
The obligations of the parties to consummate, or cause to be consummated, the Business Combination are subject to the satisfaction of the following conditions, any one or more of which may be waived (if legally permitted) in writing by all of such parties:
• HSR Act. The applicable waiting period under the HSR Act in respect of the Business Combination shall have expired or been terminated.
• Government Approvals. Fusion and MoneyLion will have received or have been deemed to have received all other necessary pre-closing authorizations, consents, clearances, waivers and approvals of all governmental entities in connection with the execution, delivery and performance of the Merger Agreement and the Business Combination.
• No Prohibition. There shall not have been enacted or promulgated any governmental order, statute, rule or regulation prohibiting, enjoining, restricting or making illegal the consummation of the Business Combination.
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• Fusion Stockholder Approval. The adoption and approval by Fusion Stockholders of the Merger Agreement, the Business Combination and other proposals, other than the Adjournment Proposal, set forth in this proxy statement/prospectus.
• MoneyLion Stockholder Approval. The adoption and approval by MoneyLion stockholders of the Merger Agreement and the Business Combination as required by applicable law, MoneyLion’s organizational documents and all other agreements relating to securities of MoneyLion and the conversion of all MoneyLion preferred stock issued and outstanding into a number of shares of MoneyLion common stock in accordance with MoneyLion’s organizational documents immediately prior to the Effective Time.
• NYSE. New MoneyLion Class A common stock to be issued in connection with the Closing shall have been approved for listing upon the Closing on the NYSE, subject only to official notice of issuance thereof and the requirement to have a sufficient number of round lot holders.
• Registration Statement. This registration statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of this registration statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC and not withdrawn.
Additional Conditions to the Obligations of Fusion and Merger Sub
The obligations of Fusion to consummate, or cause to be consummated, the Business Combination are subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by Fusion:
• Representations and Warranties.
• Certain of the representations and warranties of MoneyLion regarding due incorporation, company subsidiaries, due authorization, capitalization and brokers’ fees shall be true and correct (without giving any effect to any limitation as to “materiality” or “material adverse effect” or any similar limitation set forth therein) in all material respects as of the date of the Merger Agreement and as of the Closing as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be so true and correct on and as of such earlier date).
• All of the other representations and warranties of MoneyLion shall be true and correct (without giving any effect to any limitation as to “materiality” or “material Adverse Effect” or any similar limitation set forth therein) as of the date of the Merger Agreement and as of the Closing as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be so true and correct on and as of such earlier date), except, in either case, where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a material adverse effect.
• Agreements and Covenants. Each of the agreements and covenants of MoneyLion to be performed or complied with as of or prior to the Closing shall have been performed or complied with in all material respects.
• MoneyLion Material Adverse Effect. No material adverse effect with respect to MoneyLion shall have occurred since the date of the Merger Agreement.
• Officer’s Certificate. MoneyLion shall have delivered to Fusion a certificate signed by an executive officer of MoneyLion, dated as of the Closing Date, certifying that the conditions relating to the accuracy of MoneyLion’s representations and warranties, no material adverse effect, and the performance of its obligations under the Merger Agreement have been fulfilled.
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Additional Conditions to the Obligations of MoneyLion
The obligations of MoneyLion to consummate the Business Combination is subject to the satisfaction of the following additional conditions, any one or more of which may be waived in writing by MoneyLion:
• Representations and Warranties.
• The representations and warranties of Fusion and Merger Sub regarding due incorporation, parent subsidiaries, due authorization, capitalization, business activities and brokers’ fees shall be true and correct (without giving any effect to any limitation as to “materiality” or “material adverse effect” or any similar limitation set forth therein) in all material respects as of the date of the Merger Agreement and as of the Closing as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be so true and correct on and as of such earlier date).
• All of the other representations and warranties of Fusion and Merger Sub shall be true and correct (without giving any effect to any limitation as to “materiality” or “material Adverse Effect” or any similar limitation set forth therein) as of the date of the Merger Agreement and as of the Closing as though then made (except to the extent such representations and warranties expressly relate to an earlier date, and in such case, shall be so true and correct on and as of such earlier date), except, in either case, where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had, and would not reasonably be expected to result in, a material adverse effect.
• Agreements and Covenants. Each of the agreements and covenants of Fusion and Merger Sub to be performed or complied with as of or prior to the Closing shall have been performed or complied with in all material respects.
• Fusion and Merger Sub Material Adverse Effect. No material adverse effect with respect to Fusion and Merger Sub shall have occurred since the date of the Merger Agreement.
• Officer’s Certificate. Fusion and Merger Sub shall have delivered to MoneyLion a certificate signed by an executive officer of Fusion, dated the Closing Date, certifying that the conditions relating to the accuracy of Fusion’s and Merger Sub’s representations and warranties, no material adverse effect, and the performance of Fusion’s and Merger Sub’s obligations under the Merger Agreement have been fulfilled.
• Resignation from Office. Certain individuals shall have resigned from all of their positions and offices with Fusion and Merger Sub.
• Proposed Charter. The existing charter of Fusion shall be amended and restated to the Proposed Charter and the existing bylaws of Fusion shall be amended and restated to the Proposed Bylaws.
• Trust Account. Fusion shall have made appropriate arrangements to have the Trust Account, less amounts paid and payable (A) to stockholders who elect to have their Fusion Class A common stock converted to cash in accordance with the provisions of Fusion’s organizational documents; (B) for income tax or other tax obligations of Fusion prior to Closing; (C) for any transaction costs of Fusion; and (D) as repayment of loans and reimbursement of expenses to directors, officers and stockholders of Fusion, if any, available to Fusion for payment of the cash portion of the consideration to be paid to the MoneyLion stockholders, if any, the transaction costs of MoneyLion and the transaction costs of Fusion at the Closing.
• Minimum Cash Condition. The aggregate cash available to Fusion at the Closing, consisting of cash held in the Trust Account after taking into account the exercise by the holders of shares of Fusion Class A common stock issued in Fusion’s initial public offering of securities of their right to redeem such shares of Fusion Class A common stock in accordance with Fusion’s governing documents, if any, and cash actually received from PIPE Investors, net of transaction expenses of Fusion and MoneyLion shall equal or exceed $260,000,000.
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Termination
Mutual Termination Rights
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
• by mutual written agreement of Fusion and MoneyLion at any time;
• by either MoneyLion or Fusion if the Closing shall not have occurred by the date that is nine months following the date of the Merger Agreement; provided, however, a party may not terminate the Merger Agreement pursuant to this provision if such party’s action or failure to act has been a principal cause of or resulted in the failure of the Closing to occur on or before the Termination Date and such action or failure to act constitutes a breach of the Merger Agreement;
• by either MoneyLion or Fusion if a governmental entity issues an order or takes any other action, which would permanently restrain, enjoin or otherwise prohibit the consummation of the Business Combination, if such action is final and nonappealable; or
• by either MoneyLion or Fusion, if, at the Special Meeting, the stockholder matters, other than the Adjournment Proposal, are not duly adopted by Fusion’s stockholders by the requisite vote under the DGCL and Fusion’s organizational documents.
Termination Rights of Fusion
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
• prior to the Closing, by written notice to MoneyLion from Fusion if (i) there is any breach of any representation, warranty, covenant or agreement on the part of MoneyLion or if any representation or warranty of MoneyLion shall have become untrue, in either case such that the conditions to closing of Fusion would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that if such breach is curable by MoneyLion prior to the Closing, then Fusion must first provide written notice of such breach and may not terminate the Merger Agreement until the earlier of (i) 30 days after delivery of written notice of the breach; and (ii) the Termination Date; provided, further that MoneyLion continues to exercise commercially reasonable efforts to cure such breach (it being understood that Fusion may not terminate the Merger Agreement pursuant to this provision if: (A) it has materially breached the Merger Agreement and such breach has not been cured or (B) if such breach by MoneyLion is cured during such 30-day period); or
• by Fusion if the approval of MoneyLion’s stockholders is not obtained within 48 hours following the effectiveness of this registration statement.
Termination Rights of MoneyLion
The Merger Agreement may be terminated and the transactions contemplated thereby abandoned:
• prior to the Closing, by written notice to Fusion from MoneyLion if (i) there is any breach of any representation, warranty, covenant or agreement on the part of Fusion or Merger Sub or if any representation or warranty of Fusion or Merger Sub shall have become untrue, in either case such that the conditions to Closing of MoneyLion would not be satisfied as of the time of such breach or as of the time such representation or warranty shall have become untrue, provided that if such breach is curable by Fusion or Merger Sub prior to the Closing, then MoneyLion must first provide written notice of such breach and may not terminate the Merger Agreement until the earlier of (i) 30 days after delivery of written notice of the breach; and (ii) the Termination Date; provided, further that Fusion and Merger Sub continues to exercise commercially reasonable efforts to cure such breach (it being understood that MoneyLion may not terminate the Merger Agreement pursuant to this provision if: (A) it has materially breached the Merger Agreement and such breach has not been cured or (B) if such breach by Parent or Merger Sub is cured during such 30-day period).
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Effect of Termination
If the Merger Agreement is validly terminated, the agreement will become void without any liability on the part of any of the parties unless a party willfully breaches or engages in actual and intentional fraud in the making of the representations and warranties in the Merger Agreement prior to such termination. The provisions of the Merger Agreement (i) requiring MoneyLion and Fusion to keep certain information confidential and cooperate with each other in the making of any public statements related to the Business Combination, (ii) whereby MoneyLion waived any right, title, interest or claim to the Trust Account, (iii) regarding notice and the effect of termination and (iv) certain other general provisions, along with the confidentiality agreement by and between Fusion and MoneyLion, shall in each case survive the termination of the Merger Agreement.
Amendment
The Merger Agreement may be amended by the parties at any time by execution of a document in writing that is signed by all the parties.
Specific Performance
The parties to the Merger Agreement agree that they shall be entitled to seek an injunction, specific performance and other equitable relief to prevent breaches of the Merger Agreement and to enforce specifically the terms of provisions thereof prior to valid termination of the Merger Agreement.
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ANCILLARY AGREEMENTS RELATED TO THE BUSINESS COMBINATION
Sponsor Support Agreement
In connection with the execution of the Merger Agreement, the Sponsor entered into a support agreement (the “Sponsor Support Agreement”) with Fusion, MoneyLion and Fusion’s directors and officers, pursuant to which the Sponsor agreed, among other things, to vote all shares of Subject Securities (as defined in the Sponsor Support Agreement) in favor of the Business Combination, against a business combination not relating to the Business Combination, against any change in the business, management and Fusion board of directors, other than in connection with the Business Combination and against any adjournment proposal, except as permitted pursuant to the Sponsor Support Agreement. In addition, Fusion, the Sponsor and Fusion’s directors and officers agreed to amend that certain letter agreement, dated as of June 25, 2020, so that the Lock-Up Period (as defined in the Sponsor Support Agreement) applicable to the Subject Securities (other than any private placement warrants) held by the Sponsor will end on the earlier of (a) 180 days after the Closing Date and (b) the date on which the closing price of the shares of New MoneyLion Class A common stock is equal to or greater than $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period; provided that, for purposes of this clause (b), the measurement period for determining the closing price of the share of New MoneyLion Class A common stock shall commence no earlier than 60 days following the Closing Date.
MoneyLion Support Agreements
In connection with and following the execution of the Merger Agreement, Fusion entered into the MoneyLion Support Agreements, pursuant to which such MoneyLion stockholders agreed, among other things, to vote (whether pursuant to a duly convened meeting of MoneyLion’s stockholders or pursuant to an action by written consent) in favor of the adoption and approval of the Business Combination and any of the documents and transactions contemplated by the Merger Agreement thereto following the time at which the registration statement to which this proxy statement/prospectus forms a part shall have been declared effective under the Securities Act and delivered or otherwise made available to the MoneyLion stockholders. The shares of MoneyLion common stock and MoneyLion preferred stock held by the MoneyLion stockholders that entered into the MoneyLion Support Agreements represent (i) a majority of the outstanding voting power of the MoneyLion preferred stock, voting as a separate class, and (ii) a majority of the outstanding voting power of MoneyLion common stock and MoneyLion preferred stock (on an as converted basis), voting together as a single class. The shares of MoneyLion common stock and MoneyLion preferred stock subject to the MoneyLion Support Agreements represent the requisite majority to approve the Business Combination and any of the documents and transactions contemplated by the Merger Agreement thereto.
Registration Rights Agreement
At the Closing, New MoneyLion will enter into a registration rights agreement (the “Registration Rights Agreement”) with the Sponsor and certain former stockholders of New MoneyLion with respect to the shares of New MoneyLion Class A common stock that will be issued and outstanding following the Business Combination. The Registration Rights Agreement will replace the registration rights agreement that Fusion, the Sponsor and Fusions’ directors and officers entered into in connection with Fusion’s initial public offering and will require New MoneyLion to, among other things, file a resale shelf registration statement on behalf of such stockholders promptly after the Closing. The Registration Rights Agreement will also provide certain demand rights and piggyback rights to such stockholders, subject to customary underwriter cutbacks and issuer blackout periods. New MoneyLion will agree to pay certain fees and expenses relating to registrations under the Registration Rights Agreement.
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Subscription Agreements
Fusion entered into the Subscription Agreements with the PIPE Investors, pursuant to which the PIPE Investors have agreed to purchase immediately prior to the Closing an aggregate of 25,000,000 shares of Fusion Class A common stock at a purchase price of $10.00 per share. In connection with the Closing, all of the issued and outstanding shares of Fusion Class A common stock, including the shares of Fusion Class A common stock issued to the PIPE Investors, will be exchanged, on a one-for-one basis, for shares of New MoneyLion common stock.
Pursuant to the terms of the Subscription Agreements, New MoneyLion is required to file a registration statement to register the resale of the shares issued to the PIPE Investors within 30 calendar days following the Closing Date and to use its commercially reasonable efforts to keep such registration statement effective until the earlier of (i) three (3) years from the effective date of the registration statement, (ii) the date on which all of the shares issued pursuant to the Subscription Agreements have been sold or (iii) on the first date on which the PIPE Investors can sell all of the shares it received pursuant to the Subscription Agreements (or shares received in exchange therefor) under Rule 144 of the Securities Act without limitation as to the manner of sale or the amount of such securities that may be sold and without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable).
Omnibus Incentive Plan
At the Closing, New MoneyLion will adopt an omnibus incentive plan (the “Incentive Plan”) pursuant to which New MoneyLion will make grants to eligible individuals in amounts determined by the board of directors of New MoneyLion. The Incentive Plan will be effective upon the closing of the Business Transaction. Following the closing, and upon effectiveness the registration statement, New MoneyLion will register shares under the Incentive Plan on Form S-8. For a more fulsome description of the Incentive Plan, please see the “Incentive Plan Proposal” below.
Lock-Up
The Proposed Bylaws contain certain restrictions on transfer with respect to holders of (i) any share of New MoneyLion Class A common stock that was received as consideration in connection with the Business Combination by holders of MoneyLion common stock (including, for the avoidance of doubt, any Earn Out Shares issued during the Lockup Period (as defined below)), (ii) stock options, other equity awards or warrants in respect of shares of New MoneyLion, in each case received pursuant to the Merger Agreement and outstanding as of immediately following the Closing (“ML Equity”) or (iii) shares of New MoneyLion Class A common stock underlying ML Equity (collectively, the “Lockup Securities”). Such restrictions begin at the Effective Time and end on the date that is the earlier of (a) 180 days after the Closing Date and (b) the date on which the closing price of the shares of Class A common stock of New MoneyLion is equal to or greater than $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period (provided that, for purposes of this clause (b), the measurement period for determining the closing price of the share of New MoneyLion Class A common stock shall commence no earlier than 60 days following the Closing Date) (the “Lockup Period”). Following the expiration of such lock-up, holders of Lockup Securities will not be restricted from selling Lockup Securities held by them, other than by applicable securities laws.
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Overview
In connection with the Business Combination, Fusion is asking its stockholders to approve the adoption of the Proposed Charter, in the form attached hereto as Annex B. If the Business Combination and the Charter Proposal are approved, the Proposed Charter would replace the Current Charter.
Comparison of Current Charter to Proposed Charter
The following is a summary of the key changes effected by the Proposed Charter relative to the Current Charter, as well as the Fusion Board’s reasons for approval of the Charter Proposal. This summary is qualified in its entirety by reference to the full text of the Proposed Charter, a copy of which is included as Annex B.
• Change the post-combination company’s name to MoneyLion Inc. Currently, Fusion’s name is Fusion Acquisition Corp. If the Charter Proposal is approved, Fusion’s name will be changed to MoneyLion Inc. Our board of directors believes the name of the post-combination company should more closely align with the name of the post-Business Combination operating business and therefore has proposed this name change. In addition, our board of directors believes that having the MoneyLion Inc. name as our own going forward will strengthen our reputation, brand and, as a result, stockholder value.
• Removal of blank check company provisions. Our board of directors has determined that it is in the best interest of Fusion to eliminate provisions of our Current Charter that are specific to our status as a blank check company. Removal of these provisions is desirable because these provisions will serve no purpose following consummation of the Business Combination, and many of these provisions cease to apply upon the consummation of Fusion’s initial business combination. For example, these proposed amendments remove the prohibition on Fusion entering into an initial Business Combination with another blank check company or a similar company with nominal operations. In addition, certain other provisions in our Current Charter require that proceeds from Fusion’s initial public offering be held in the Trust Account until a business combination or liquidation of merger has occurred.
• Change stock classes and total number of authorized shares of common stock to 2,000,000,000 shares. Our Current Charter authorizes the issuance of 380,000,000 shares of Fusion Class A common stock and 20,000,000 shares of Fusion Class B common stock. The Proposed Charter authorizes the issuance of 2,000,000,000 shares of New MoneyLion Class A common stock. As part of the transactions contemplated by the Merger Agreement, all shares of Fusion Class B common stock shall be automatically converted on a one-for-one basis into shares of Fusion Class A common stock, and all shares of Fusion Class A common stock shall become shares of New MoneyLion Class A common stock under the Proposed Charter. Our board of directors determined that there was no longer a need to continue with two series of common stock and, therefore, the Proposed Charter eliminates the dual classes of our common stock as described above. The Proposed Charter also provides adequate authorized capital and flexibility for future issuances of common stock if determined by New MoneyLion Board to be in the best interests of the post-combination company, without incurring the risk, delay and potential expense incident to obtaining stockholder approval for a particular issuance.
• Change stockholder vote required to 66⅔% in voting power of then outstanding shares of New MoneyLion Class A common stock to (1) alter, amend or repeal the bylaws, (2) remove a director and (3) amend, alter or repeal certain provisions of the Proposed Charter. Our Current Charter requires the affirmative vote of holders of at least a majority of the voting power of outstanding shares for stockholders to adopt, amend, alter or repeal the Bylaws and the Current Charter and to remove a director from office. The Proposed Charter will require an affirmative supermajority vote of the outstanding shares for the stockholders to amend, alter or repeal the Bylaws, to remove a director from office, and to amend certain provisions of the Proposed Charter. Our board of directors believes that this change protects such provisions from arbitrary amendment and prevents a simple majority of stockholders from taking actions that may be harmful to the majority of our stockholders.
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• Provide that stockholders may not take action by written consent. The Current Charter permits only holders of Class B common stock to take action by written consent in lieu of taking action at a meeting of stockholders. The Proposed Charter instead prohibits stockholder action by written consent by specifying that any action required or permitted to be taken by stockholders must be effected by a duly called annual or special meeting and may not be effected by written consent of stockholders without a meeting. Our board of directors determined that upon the elimination of separate classes of stock and the conversion of all Class B common stock to Class A common stock, there was no longer a need for a provision applicable to the Class B common stock held by our Sponsor. In addition, our board of directors believes that prohibiting stockholder action by written consent is a prudent corporate governance measure to reduce the possibility that a block of stockholders could take corporate actions without the benefit of a stockholder meeting to consider important corporate issues.
Vote Required for Approval
The Charter Proposal is conditioned on the approval of the Business Combination Proposal and the other condition precedent proposals. Therefore, if the Business Combination Proposal is not approved, the Charter Proposal will have no effect, even if approved by the Fusion Stockholders. Approval of the Charter Proposal requires the affirmative vote of a majority of the outstanding Fusion Shares, voting together as a single class. Abstentions and broker non-votes have the same effect as a vote “AGAINST” the proposal.
Recommendation of Fusion Board
THE FUSION BOARD UNANIMOUSLY RECOMMENDS THAT FUSION STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE CHARTER PROPOSAL.
The existence of financial and personal interests of one or more of Fusion’s directors may result in a conflict of interest on the part of such director(s) between what they may believe is in the best interests of Fusion and its stockholders and what they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section entitled “The Business Combination Proposal — Interests of Fusion’s Directors and Officers in the Business Combination” for a further discussion.
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THE ADVISORY CHARTER PROPOSALS
Overview
In connection with the Business Combination, Fusion is asking its stockholders to vote upon, on a non-binding advisory basis, proposals to approve certain governance provisions contained in the Proposed Charter. This separate vote is not otherwise required by Delaware law separate and apart from the Charter Proposal but, pursuant to SEC guidance, Fusion is required to submit these provisions to its stockholders separately for approval, allowing stockholders the opportunity to present their separate views on important governance provisions. However, the stockholder votes regarding these proposals are advisory votes, and are not binding on Fusion or the Fusion Board (separate and apart from the approval of the Charter Proposal). In the judgment of the Fusion Board, these provisions are necessary to adequately address the needs of the post-Business Combination company. Furthermore, the Business Combination is not conditioned on the separate approval of the Advisory Charter Proposals (separate and apart from approval of the Charter Proposal).
Advisory Charter Proposals
Advisory Charter Proposal |
Current Charter |
Proposed Charter |
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Advisory Charter Proposal A — |
The Current Charter authorizes 401,000,000 shares of capital stock, consisting of 380,000,000 shares of Fusion Class A common stock and 20,000,000 shares of Fusion Class B common stock, and 1,000,000 shares of preferred stock. |
The Proposed Charter would authorize 2,200,000,000 shares of capital stock, consisting of 2,000,000,000 shares of New MoneyLion Class A common stock and 200,000,000 shares of preferred stock. |
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Advisory Charter Proposal B — |
The Current Charter provides that any or all of the directors may be removed from office at any time, but only for cause and only by the affirmative vote of holders of a majority of the voting power of all then outstanding shares of Fusion capital stock entitled to vote generally in the election of directors, voting together as a single class. |
The Proposed Charter would provide that no director may be removed from office by the stockholders except for cause with the affirmative vote of the holders of at least 66⅔% of the voting power of the outstanding shares of stock of New MoneyLion entitled to vote on the election of such director, voting together as a single class. |
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Advisory Charter Proposal C — |
The Current Charter requires the affirmative vote of holders of at least a majority of the voting power of outstanding shares to adopt, amend, alter or repeal the Current Charter and Fusion’s bylaws. |
The Proposed Charter would require the approval by affirmative vote of the holders of at least 66⅔% in voting power of the then outstanding shares of common stock of New MoneyLion to amend certain provisions of the Proposed Charter as follows: Article 4, Section 4(B), which addresses the voting rights of holders of MoneyLion Class A common stock and holders of MoneyLion preferred stock; Article 5, which addresses requirements relating to the amendment of our Bylaws; Article 6, which addresses the number, election, terms and removal of the classified board structure and any directors thereof; Article 7, which addresses the conduct of our annual meetings and special meetings, the requirement that special meetings be called only by |
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Advisory Charter Proposal |
Current Charter |
Proposed Charter |
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the New MoneyLion Board; and the requirement that stockholders take action at a meeting rather than by written consent; and Article 9, which addresses requirements to amend, alter, change or repeal certain provisions of the Proposed Charter. |
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Advisory Charter Proposal D — Vote Required to Amend Proposed Bylaws |
Our Current Charter requires the affirmative vote of holders of at least a majority of the voting power of outstanding shares to adopt, amend, alter or repeal the bylaws. |
The Proposed Charter would require the approval by affirmative vote of the holders of at least 66% of the common stock of New MoneyLion to adopt, amend, alter or repeal the bylaws. |
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Advisory Charter Proposal E — Stockholder Action by Written Consent |
The Current Charter permits only holders of Class B common stock to take action by written consent in lieu of taking action at a meeting of stockholders. |
The Proposed Charter would prohibit stockholder action by written consent by specifying that any action required or permitted to be taken by stockholders must be effected by a duly called annual or special meeting and may not be effected by written consent. |
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Advisory Charter Proposal F — |
The Current Charter contains various provisions applicable only to blank check companies. |
The Proposed Charter would (i) change the post-business combination company’s corporate name from “Fusion Acquisition Corp.” to “MoneyLion Inc.” and making the Company’s corporate existence perpetual and (ii) remove certain provisions related to our status as a blank check company that will no longer apply upon consummation of the business combination. |
Reasons for Approval of the Advisory Charter Proposals
Advisory Charter Proposal A — Change in Capital Stock
Our board of directors determined that there was no longer a need to continue with two series of common stock and, therefore, the Proposed Charter eliminates the dual classes of our common stock as described above. The Proposed Charter also provides adequate authorized capital and flexibility for future issuances of common stock if determined by the New MoneyLion Board to be in the best interests of the post-combination company, without incurring the risk, delay and potential expense incident to obtaining stockholder approval for a particular issuance.
The authorized but undesignated preferred stock will allow the post-combination company to discourage unsolicited and hostile attempts to obtain control by means of a merger, tender offer, proxy context or otherwise without incurring the risk, delay and potential expense incident to obtaining stockholder approval to amend the certificate of incorporation to authorize preferred stock or other defensive measures at the time of an unsolicited and hostile attempt to obtain control. As a result of this amendment, the New MoneyLion Board will have the authority, without further action by the holders of common stock, to issue up to 200,000,000 shares of preferred stock in one or more series, and to establish the number of shares to be included in each such series and to fix the rights and preferences, including voting rights, designated from time to time by the board of directors.
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Advisory Charter Proposal B — Director Removal
Our board of directors believes that supermajority voting requirements are appropriate at this time to protect all stockholders against the potential self-interested actions by one or a few large stockholders. Our board of directors believes that, going forward, a supermajority voting requirement encourages the person seeking control of New MoneyLion to negotiate with the board of directors to reach terms that are appropriate for all stockholders.
Advisory Charter Proposal C — Vote Required to Amend Certain Provisions of the Proposed Charter
Our board of directors believes that this change protects such provisions from arbitrary amendment and prevents a simple majority of stockholders from taking actions that may be harmful to the majority of our stockholders or making changes to provisions that are intended to protect all stockholders.
Advisory Charter Proposal D — Vote Required to Amend the Proposed Bylaws
Our board of directors believes that this change protects such provisions from arbitrary amendment and prevents a simple majority of stockholders from taking actions that may be harmful to the majority of our stockholders or making changes to provisions that are intended to protect all stockholders.
Advisory Charter Proposal E — Stockholder Action by Written Consent
Our board of directors determined that upon the elimination of separate classes of stock and the conversion of all Class B common stock to Class A common stock, there was no longer a need for a provision applicable to the Class B common stock held by our Sponsor. In addition, our board of directors believes that prohibiting stockholder action by written consent is a prudent corporate governance measure to reduce the possibility that a block of stockholders could take corporate actions without the benefit of a stockholder meeting to consider important corporate issues.
Advisory Charter Proposal F — Changes in Connection with Adoption of the Proposed Charter
Our board of directors believes that changing the post-business combination corporate name from “Fusion Acquisition Corp.” to “MoneyLion Inc.” and making the post-business combination company’s corporate existence perpetual is desirable to reflect the Business Combination with MoneyLion and to clearly identify the post-business combination company as the publicly traded entity. Additionally, perpetual existence is the usual period of existence for corporations, and our board of directors believes that it is the most appropriate period for New MoneyLion following the Business Combination.
Furthermore, our board of directors has determined it is in the best interest of Fusion to eliminate provisions specific to our status as a blank check company. This deletion is desirable because these provisions will serve no purpose following consummation of the business combination. For example, these proposed amendments remove the requirement to dissolve Fusion and allow us to continue as a corporate entity with perpetual existence following consummation of the business combination. Perpetual existence is the usual period of existence for corporations, and our board of directors believes it is the most appropriate period for the Company.
Vote Required for Approval
Approval of each of the Advisory Charter Proposals, each of which is a non-binding vote, requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Abstentions and broker non-votes have no effect on the outcome of the proposal.
Recommendation of Fusion Board
THE FUSION BOARD UNANIMOUSLY RECOMMENDS THAT FUSION STOCKHOLDERS VOTE “FOR” THE APPROVAL OF EACH OF THE ADVISORY CHARTER PROPOSALS.
The existence of financial and personal interests of one or more of Fusion’s directors may result in a conflict of interest on the part of such director(s) between what they may believe is in the best interests of Fusion and its stockholders and what they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section entitled “The Business Combination Proposal — Interests of Fusion’s Directors and Officers in the Business Combination” for a further discussion.
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In connection with the Business Combination, we intend to effect the issuance of shares of New MoneyLion Class A common stock to the stockholders of MoneyLion pursuant to the Merger Agreement.
Why Fusion Needs Stockholder Approval
We are seeking stockholder approval in order to comply with Rule 312.03 of the NYSE Listed Company Manual.
Under Rule 312.03 of the NYSE Listed Company Manual, stockholder approval is required prior to the issuance of shares of common stock in certain circumstances, including if the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance. The maximum aggregate number of shares of Fusion Class A common stock issuable pursuant to the Merger Agreement and the Subscription Agreements will represent greater than 20% of the number of shares of Fusion Class A common stock before such issuance and could result in a change of control of Fusion. As a result, stockholder approval of the issuance of shares Fusion Class A common stock issuable pursuant to the Merger Agreement is required under the NYSE regulations.
Vote Required for Approval
If the Business Combination Proposal is not approved, the Stock Issuance Proposal will not be presented at the Special Meeting. The approval of the Stock Issuance Proposal requires the majority of the votes cast by the Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting.
Failure to submit a proxy at the Special Meeting or a broker non-vote will have no effect on the Stock Issuance Proposal. However, the NYSE considers abstentions as “votes cast” and, therefore, abstentions will have the same effect as votes “AGAINST” this proposal.
The Business Combination is conditioned upon the approval of the Stock Issuance Proposal, subject to the terms of the Merger Agreement. Notwithstanding the approval of the Stock Issuance Proposal, if the Business Combination is not consummated for any reason, the actions contemplated by the Stock Issuance Proposal will not be effected.
Fusion’s Sponsor has agreed to vote the founder shares and any public shares owned by them in favor of the Stock Issuance Proposal. See “Other Agreements — Sponsor Agreement” for more information.
Recommendation of the Fusion Board
THE FUSION BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE “FOR” THE STOCK ISSUANCE PROPOSAL.
The existence of financial and personal interests of one or more of Fusion’s directors may result in a conflict of interest on the part of such director(s) between what they may believe is in the best interests of Fusion and its stockholders and what they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section entitled “The Business Combination Proposal — Interests of Fusion’s Directors and Officers in the Business Combination” for a further discussion.
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Overview
Assuming that the Business Combination is approved, our shareholders are also being asked to approve and adopt the MoneyLion Inc. Omnibus Incentive Plan (the “Incentive Plan”). In designing the Incentive Plan, the anticipated future equity needs were considered and the number of shares of New MoneyLion Class A common stock that may be subject to awards granted under the Incentive Plan was determined to be 17,712,158 and up to 38,985,776 shares of New MoneyLion Class A common stock subject to outstanding prior awards. Our board of directors has approved the Incentive Plan, subject to receiving shareholder approval. A summary of the principal features of the Incentive Plan is provided below. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the complete text of the Incentive Plan. A copy of the Incentive Plan is attached to this proxy statement/prospectus as Annex E. If the Business Combination closes and the Plan is approved by our shareholders, the Incentive Plan will be administered by the compensation committee or the New MoneyLion Board, as applicable (the “Committee”), which will have the authority to make awards under the Incentive Plan.
If the Incentive Plan is not approved by shareholders, New MoneyLion will be unable to make equity grants to its employees, consultants and directors, and therefore New MoneyLion will be at a significant competitive disadvantage in attracting, retaining and motivating talented individuals who contribute to its success.
Considerations for the Approval of the Incentive Plan
The Incentive Plan incorporates corporate governance best practices to align New MoneyLion’s equity compensation program with the interests of its shareholders. Certain of the corporate governance best practices included in the Incentive Plan are as follows:
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Restricted dividends on awards. The Incentive Plan prohibits the payment of dividends in respect of an award (other than awards of restricted stock) prior to the time such award (or the applicable portion thereof) vests (and, in the case of performance awards, the applicable performance condition is achieved). |
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No repricings. Repricing of stock options and stock appreciation rights (“SARs”) is not permitted without shareholder approval, except for adjustments with respect to certain specified extraordinary corporate transactions. |
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No “liberal” change in control definition. The change in control definition under the Incentive Plan is only triggered in those instances where an actual change in control occurs, such as a 50% or greater change in beneficial ownership (see “Change in Control,” below). |
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Clawback of awards. The Incentive Plan provides that awards granted thereunder are subject to any clawback or recoupment policies that we have in effect from time to time. |
Summary of the Incentive Plan
Purpose
The purpose of the Incentive Plan is to enable New MoneyLion to offer its employees, directors and other individual service providers long-term equity-based incentives, thereby attracting, retaining and rewarding such individuals, and strengthening the mutuality of interests between such individuals and New MoneyLion shareholders.
Eligibility
New MoneyLion’s employees, non-employee directors, individual consultants, advisors and other service providers are eligible to receive awards under the Incentive Plan based on the Committee’s determination, in its sole discretion, that an award to such individual will further the Incentive Plan’s stated purpose (as described above). Awards of incentive stock options will be limited to New MoneyLion’s employees or employees of certain of its affiliates. As of March 31, 2021, there are approximately 241 employees and 20 individual consultants, directors, advisers and other service providers eligible to receive awards under the Incentive Plan.
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Authorized Shares
Subject to adjustment (as described below), the number of shares of Class A common stock that may be subject to awards granted under the Incentive Plan is 17,712,158 and up to 38,985,776 shares of Class A common stock subject to outstanding prior awards. No less than 9,840,088 shares of such Class A Common Stock will be available for grants pursuant to awards of restricted stock and restricted stock units, as described below. The number of shares of Class A common stock that may be subject to incentive stock options granted under the Incentive Plan is 58,410,395. The number of shares of New MoneyLion common stock reserved for issuance under the Incentive Plan will automatically increase on each of January 1, 2022 (assuming the Incentive Plan becomes effective in 2021) and January 1, 2023, by the least of (i) 2% of the total number of shares of all classes of New MoneyLion common stock outstanding on December 31 of the immediately preceding calendar year or (ii) such smaller number of shares of New MoneyLion common stock as determined by the Committee in its discretion. If an award expires or is canceled or forfeited, or is otherwise settled without the issuance of shares, the shares covered by the award will again be available for issuance under the Incentive Plan. Shares tendered or withheld to pay or satisfy the exercise price of a stock option or SAR or to pay taxes in respect of any stock option or SAR, will again be available for issuance under the Incentive Plan. Shares underlying replacement awards (i.e., awards granted as replacements for awards granted by a company that we acquire or with which we combine) will not reduce the number of shares available for issuance under the Incentive plan. The Incentive Plan limits non-employee director compensation, including cash fees and incentive equity awards (based on their grant-date fair value), to a maximum of (i) $1,000,000 during the initial annual period following a non-employee director’s appointment or election to the board of directors and (ii) $750,000 per each subsequent calendar year, in each case, in respect of their service as non-employee directors. The limitation on non-employee director compensation applies beginning the first calendar year following the effective date of the Incentive Plan.
Administration
The Incentive Plan is administered by the Committee. The Committee (or its delegate) has authority under the Incentive Plan to:
• designate participants;
• determine the types of awards to grant, the number of shares to be covered by awards, the terms and conditions of awards, the circumstances under which awards may be canceled, forfeited or suspended, and whether awards may be deferred;
• amend the terms of any outstanding awards;
• correct any defect, supply any omission or reconcile any inconsistency in the Incentive Plan or any award agreement, in the manner and to the extent it shall deem desirable to carry the Incentive Plan into effect;
• interpret and administer the Incentive Plan and any instrument or agreement relating to, or award made under, the Incentive Plan; and
• make any other determination and take any other action that it deems necessary or desirable to administer the Incentive Plan, in each case, as it deems appropriate for the proper administration of the Incentive Plan and compliance with applicable law, stock market or exchange rules and regulations or accounting or tax rules and regulations.
The Committee may delegate some or all of its authority under the Incentive Plan, to the extent permitted by applicable law, to (i) one or more of New MoneyLion’s officers (except that such delegation will not be applicable to grant awards to a person then covered by Section 16 of the Exchange Act) and (ii) one or more committees of the board of directors.
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Establishment of Sub-plans
The Committee has the authority to establish one or more sub-plans under the Incentive Plan to facilitate the local administration of the Incentive Plan in any jurisdiction in which New MoneyLion and its affiliates operate and to conform the Incentive Plan to the legal requirements of any such jurisdiction or to allow for favorable tax treatment under any applicable provision of tax law. The Committee may establish such sub-plans by adopting supplements setting forth (i) such limitations on the committee’s discretion under the Incentive Plan as the Committee deems necessary or desirable and (ii) such additional terms and conditions not otherwise inconsistent with the Incentive Plan as the Committee deems necessary or desirable. All sub-plans adopted by the Committee will be deemed to be part of the Incentive Plan, but each such sub-plan will only apply to participants within the affected jurisdiction.
Types of Awards
The Incentive Plan provides for grants of stock options (both nonqualified and incentive stock options), SARs, restricted stock, restricted stock units, performance awards and other cash-based and other stock-based awards. Any award may be granted alone or in tandem with other awards, and may be granted in addition to, or in substitution for, other types of awards.
Stock Options. A stock option is a contractual right to purchase shares at a future date at a specified exercise price. The per share exercise price of a stock option will be determined by the Committee and may not be less than the fair market value of a share of New MoneyLion common stock on the grant date. The Committee will determine the date after which each stock option may be exercised, the method and form by which each option is to be exercised, and the expiration date of each option, provided that no option will be exercisable more than ten years after the grant date. Options intended to be incentive stock options under Section 422 of the Code may not be granted to any person who is not an employee of New MoneyLion or of any parent or subsidiary, as defined in Section 424 of the Code. There have not yet been any options granted under the Incentive Plan, and so there are no options currently outstanding under the Incentive Plan.
Stock Appreciation Rights. Stock appreciation rights (SARs) represent a contractual right to receive, in cash or shares, an amount equal to the appreciation of one share from the grant date. The terms and conditions applicable to stock options also apply to SARs.
Restricted Stock. Restricted stock is an award of shares that are subject to restrictions on transfer and a substantial risk of forfeiture. Recipients of restricted stock generally have the rights and privileges of a shareholder, including the right to vote such shares of restricted stock and to receive dividends.
Restricted Stock Units. A restricted stock unit award is a right to receive a specified number of shares of New MoneyLion common stock (or the fair market value thereof in cash, other property or any combination thereof, as determined by the Committee), subject to the expiration of a specified restriction period and/or the achievement of any performance measures selected by the Committee, consistent with the terms of the Incentive Plan. The restricted stock unit award agreement will specify whether the award recipient is entitled to receive dividend equivalents with respect to the number of shares of New MoneyLion common stock subject to the award. Prior to the settlement of a restricted stock unit award in New MoneyLion common stock, the award recipient will have no rights or privileges as a shareholder of New MoneyLion with respect to its common stock subject to the award.
Performance Awards. Performance awards, which may be denominated in cash, shares or units (including restricted stock units) (or a combination thereof), will be earned on the satisfaction of performance goals specified by the Committee. With respect to any performance award that becomes settled in New MoneyLion common stock upon achievement or satisfaction of the applicable performance conditions, prior to such settlement the award recipient will have no rights or privileges as a shareholder of New MoneyLion with respect to its common stock subject to the award.
Other Cash-Based and Other Stock-Based Awards. The Committee is authorized to grant other cash-based and other stock-based awards that are payable in cash or New MoneyLion common stock (or a combination thereof) and may be granted either independently or as an element of or supplement to any other award under the Incentive Plan. Other stock-based awards are valued in whole or in part by reference to New MoneyLion common stock, including restricted stock units, phantom stock and similar units.
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Dividends and Dividend Equivalents
Other than with respect to awards of restricted stock, awards granted under the Incentive Plan may not provide for any dividend to be payable to the participant in respect of such award prior to the time such award (or the applicable portion thereof) vests (and, in the case of performance awards, the applicable performance condition is achieved). The Committee may, in its discretion, provide for dividend equivalents on awards of restricted stock units.
Adjustments
In the event the Committee determines that, as a result of any dividend or other distribution (other than an ordinary dividend or distribution), recapitalization, stock split, reverse stock split, reorganization, merger, amalgamation, consolidation, separation, rights offering, split-up, spin-off, combination, repurchase or exchange of shares of New MoneyLion Class A common stock or other securities, or other similar corporate transaction or event affecting New MoneyLion Class A common stock or of changes in applicable laws, regulations or accounting principles, an adjustment is necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Incentive Plan, the Committee will adjust equitably any or all of: (i) the number and type of shares or other securities that thereafter may be made the subject of awards, including the aggregate limit under the Incentive Plan; (ii) the number and type of shares or other securities subject to outstanding awards; (iii) the grant, purchase, exercise or hurdle price for any award or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding award; and (iv) the terms and conditions of any outstanding awards, including the performance criteria of any performance awards.
Change in Control
In the event of a “change in control” (as described below and as defined in the Incentive Plan), except as otherwise provided in the applicable award agreement, the Committee may provide for:
• continuation or assumption of outstanding awards under the Incentive Plan by New MoneyLion (if New MoneyLion is the surviving corporation) or by the successor or surviving corporation or its parent;
• substitution or replacement of any outstanding award by the successor or surviving entity or its parent for a cash payment, securities, rights or other property to be paid or issued, as the case may be, by the successor or surviving entity (or a parent or subsidiary thereof);
• acceleration of the vesting (including the lapse of any restriction) and exercisability of outstanding awards, in each case, either (i) immediately prior to or as of the date of the change in control, (ii) upon a participant’s involuntary termination of service on or within a specified period following the change in control, or (iii) upon the failure of the successor or surviving corporation (or its parent) to continue or assume such outstanding awards;
• in the case of a performance award, determination of the level of attainment of the applicable performance conditions; and
• cancellation of outstanding awards under the Incentive Plan in consideration of a payment, with the form, amount and timing of such payment to be determined by the Committee in its sole discretion, provided that (i) such payment is made in cash, securities, rights and/or other property, (ii) the amount of such payment equals the value of the award, as determined by the Committee in its sole discretion (provided that the Committee may cancel out-of-the-money options or SARs for no consideration) and (iii) such payment will be made promptly following the change in control, in compliance with Section 409A of the Code.
A “change in control” under the Incentive Plan generally means (i) the acquisition of 50% or more of New MoneyLion Class A common stock or combined voting power of voting securities; (ii) a change in the composition of the New MoneyLion Board such that, during any twelve-month period, the individuals who as of the beginning of such period constitute the New MoneyLion Board cease for any reason to constitute at least 50% of the New MoneyLion Board (provided that any individual becoming a member of the New MoneyLion Board after the beginning of such twelve-month period whose election or nomination for election by New MoneyLion’s shareholders was approved by a vote of at least a majority of the directors immediately prior to the date of such appointment or election will be considered as though such individual were a member of the New MoneyLion Board at the beginning
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of such twelve-month period); (iii) New MoneyLion’s merger or consolidation with another entity after which New MoneyLion’s voting securities outstanding immediately prior to such transaction do not continue to represent 50% or more of the total voting power of New MoneyLion’s stock or of the surviving entity or parent entity thereof (if New MoneyLion is not the surviving entity in such merger or consolidation); or (iv) a disposition of all or substantially all of New MoneyLion’s assets.
Amendment and Termination
The New MoneyLion Board may amend, modify, suspend, discontinue or terminate the Incentive Plan (or any portion thereof) at any time. However, no such action may, without the consent of the participant, materially adversely affect the rights of such participant under any award previously granted (other than to apply with applicable law or to impose any clawback or recoupment provisions on any awards). Additionally, no such action may be made without New MoneyLion shareholder approval, if such approval is required by applicable law or by the rules of the stock market or exchange on which New MoneyLion Class A common shares are principally quoted or traded (including the NYSE). No award may be granted pursuant to the Incentive Plan after the tenth anniversary of the date on which the Incentive Plan was approved by our shareholders.
Prohibition on Repricing
Subject to the adjustment provision described above, the Committee may not directly or indirectly, through cancellation or re-grant or any other method, reduce, or have the effect of reducing, the exercise or hurdle price of any award established at the time of grant without approval of our shareholders.
Cancellation or “Clawback” of Awards
The Committee may, to the extent permitted by applicable law and stock exchange rules or by any of New MoneyLion’s policies (including any recoupment policy it may adopt from time to time or pursuant to the recoupment provisions in any award agreement), cancel or require reimbursement of any awards granted, shares issued or cash received upon the vesting, exercise or settlement of any awards granted under the Incentive Plan or the sale of shares underlying such awards.
Term
The Incentive Plan expires ten years after the date on which the Business Combination is consummated, unless earlier terminated (x) upon the maximum number of shares of common stock available for issuance under the Incentive Plan having been issued or (y) by the New MoneyLion Board at its discretion (and in accordance with the terms of the Incentive Plan).
U.S. Federal Income Tax Consequences of Equity Awards
The following is a general summary under current law of certain United States federal income tax consequences to New MoneyLion and participants who are citizens or individual residents of the United States relating to awards granted under the Incentive Plan. This summary deals with the general tax principles that apply to such awards and is provided only for general information. Certain kinds of taxes, such as foreign taxes, state and local income taxes, payroll taxes and the alternative minimum tax, are not discussed. This summary is not tax advice and it does not discuss all aspects of federal taxation that may be relevant to us and participants. Accordingly, we urge each participant to consult his or her own tax advisor as to the specific tax consequences of participation in the Incentive Plan under federal, state, local and other applicable laws. In addition, we may be subject to limits on tax deductibility relating to compensation described herein under certain statutory provisions, including Sections 162(m) and 280G of the Code.
Non-Qualified Stock Options
A non-qualified stock option is an option that does not meet the requirements of Section 422 of the Code. A participant generally will not recognize taxable income when granted a non-qualified stock option. When the participant exercises the stock option, he or she generally will recognize taxable ordinary income equal to the excess of the fair market value of the shares received on the exercise date over the aggregate exercise price of the shares. The participant’s tax basis in the shares acquired on exercise of the option will be increased by the amount of such
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taxable income. We generally will be entitled to a corresponding federal income tax deduction. When the participant sells the shares acquired on exercise, the participant generally will realize long-term or short-term capital gain or loss, depending on whether the participant holds the shares for more than one year before selling them.
Incentive Stock Options
An incentive stock option (or “ISO”) is an option that meets the requirements of Section 422 of the Code. A participant will not have taxable income when granted an ISO or when exercising an ISO. If a participant exercises an ISO and does not dispose of the shares until the later of two years after the grant date and one year after the exercise date, the entire gain, if any, realized when the participant sells the shares will be taxable as long-term capital gain. However, even though a participant will not have taxable income when exercising an ISO, the exercise of an ISO is taken into account for purposes of determining whether the participant has any alternative minimum tax liability (described below). We generally will not be entitled to a corresponding federal income tax deduction.
If a participant disposes of the shares received upon exercise of an ISO within the one-year or two-year periods described above, it will be considered a “disqualifying disposition.” Under such circumstances, the participant generally will realize ordinary income in the year of the disposition, and we generally will be entitled to a corresponding federal income tax deduction. The amounts of the participant’s ordinary income and our deduction will equal the excess of the lesser of the amount, if any, realized on the disposition and the fair market value of the shares on the exercise date over the aggregate exercise price of the ISO. Any additional gain or loss that the participant realizes on the disposition will be long-term or short-term capital gain or loss, depending on whether the participant holds the shares for more than one year before selling them.
If a participant exercises an ISO more than three months after the participant’s employment terminates, the option will be treated as a non-qualified stock option for federal income tax purposes. If a participant is disabled and terminates employment because of his or her disability, the three-month period is extended to one year. The three-month period does not apply in the case of a participant’s death.
SARs
A participant does not recognize income at the time a SAR is granted. A participant will recognize income at the time cash or stock representing the amount of the appreciation is transferred to the participant pursuant to exercise of a SAR. The amount of income will equal the amount of cash or fair market value of shares paid or transferred to the participant and will be ordinary income. New MoneyLion generally will be entitled to a corresponding federal income tax deduction.
Restricted Stock
Unless a participant makes an election to accelerate recognition of the income to the date of grant as described below, the participant generally will not recognize income, and New MoneyLion generally will not be entitled to a corresponding federal income tax deduction at the time restricted stock is granted. When the restrictions lapse, the participant generally will recognize ordinary income equal to the fair market value of the shares as of that date, less any amount paid for the restricted stock, and New MoneyLion generally will be entitled to a corresponding federal income tax deduction at that time. If the participant files an election under Section 83(b) of the Code within 30 days after the date of grant of the restricted stock, the participant generally will recognize ordinary income as of the date of grant equal to the fair market value of the common shares as of that date, less any amount the participant paid for the restricted stock, and New MoneyLion generally will be entitled to a corresponding federal income tax deduction at that time. Any future appreciation in the shares generally will be taxable to the participant at capital gains rates. However, if the restricted stock is later forfeited, the participant generally will not be able to recover the tax previously paid pursuant to his Section 83(b) election.
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Registration with the SEC
If our shareholders approve the Incentive Plan, New MoneyLion plans to file a registration statement on a Form S-8 with the SEC, as soon as reasonably practicable after such approval, to register the shares available for issuance under the Incentive Plan.
New Plan Benefits
As described above, the Committee, in its discretion, will select the participants who receive awards and the size and types of those awards under the Incentive Plan, if the Incentive Plan is approved by our shareholders. Therefore, the awards (or associated benefits or amounts) that will be made to particular individuals or groups of individuals in the future under the Incentive Plan are not currently determinable.
Equity Compensation Plan Information
Fusion did not maintain, or have any securities authorized for issuance under, any equity compensation plans as of December 31, 2020.
Vote Required for Approval
The approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Failure to submit a proxy at the Fusion Special Meeting and a broker non-vote will have no effect on the outcome of the Incentive Plan Proposal. However, the NYSE considers abstentions as “votes cast” and, therefore, abstentions will have the same effect as votes “AGAINST” this proposal. The Incentive Plan Proposal is conditioned upon the approval of the Business Combination Proposal, the Charter Proposal and the Stock Issuance Proposals. If the Business Combination Proposal, the Charter Proposal or the Stock Issuance Proposals are not approved, the Incentive Plan Proposal will have no effect, even if approved by our stockholders.
Recommendation of the Board of Directors
THE FUSION BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUSION STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE INCENTIVE PLAN PROPOSAL.
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Overview
Assuming that the Business Combination is approved, our shareholders are also being asked to approve and adopt the MoneyLion Inc. 2021 Employee Stock Purchase Plan (the “ESPP”). In designing the ESPP, the anticipated future equity needs were considered, and a total of 3,936,035 shares of New MoneyLion Class A common stock will be reserved for issuance under the ESPP. Our board of directors has approved the ESPP, subject to receiving shareholder approval. A summary of the principal features of the ESPP is provided below. This summary does not purport to be complete and is subject to, and qualified in its entirety by, the complete text of the ESPP. A copy of the ESPP is attached to this proxy statement/prospectus as Annex F. If the Business Combination closes and the ESPP is approved by our shareholders, the ESPP will be administered by the Committee which will have the authority to make awards under the ESPP.
If the ESPP is not approved by shareholders, we will be unable to provide a means by which New MoneyLion employees will be given an opportunity to purchase shares of New MoneyLion Class A common stock, and therefore we will be at a significant competitive disadvantage in attracting, retaining and motivating talented individuals who contribute to New MoneyLion’s success.
Purpose
The purpose of the ESPP is to provide a means by which New MoneyLion employees may be given an opportunity to purchase shares of New MoneyLion Class A common stock, to assist it in retaining the services of New MoneyLion employees, to secure and retain the services of new employees and to provide incentives for such persons to exert maximum efforts for New MoneyLion’s success. The ESPP includes two components: (i) one component (the “423 Component”) is designed to allow eligible U.S. employees to purchase shares of New MoneyLion Class A common stock in a manner that is intended to qualify for favorable tax treatment under Section 423 of the Code, and (ii) the other component (the “Non-423 Component”) provides for purchase rights which do not by operation of law qualify for such favorable tax treatment to permit participation by eligible employees who are foreign nationals or employed outside of the U.S. Any Non-423 Component will operate and be administered in the same manner as the 423 Component unless otherwise required under applicable foreign laws.
Administration
Unless otherwise determined by the New MoneyLion Board, the Committee will administer the ESPP. The Committee has the power, subject to the provisions of the ESPP, to construe and interpret both the ESPP and the rights granted under it; to determine when and how rights to purchase our common stock will be granted and the provisions of each offering of such rights (which need not be identical); to designate whether employees of New MoneyLion subsidiary companies will be eligible to participate in the ESPP; to adopt sub-plans or special rules applicable to participants in particular designated subsidiaries or locations, which special rules may be designed to be outside the scope of Section 423 of the Code and under the Non-423 Component; and to amend, suspend or terminate the ESPP.
Shares Subject to the ESPP
Subject to adjustment for certain changes in New MoneyLion’s capitalization, the maximum number of shares of New MoneyLion Class A common stock that may be issued pursuant to rights granted under the ESPP is 3,936,035 shares. The number of shares of New MoneyLion Class A common stock reserved for issuance under the ESPP will automatically increase on the first day of each calendar year during the term of the ESPP, commencing on January 1, 2022 (assuming the ESPP becomes effective in 2021) through January 1, 2032, by the least of (i) 3,936,035 shares of New MoneyLion Class A common stock, (ii) 1.5% of the total number of shares of all classes of New MoneyLion common stock outstanding on December 31 of the immediately preceding calendar year, or (iii) such smaller number of shares of New MoneyLion common stock as determined by the New MoneyLion Board. If any rights granted under the ESPP terminate without being exercised in full, the shares of common stock not purchased under such rights shall again become available for issuance under the ESPP. The shares of common stock issuable under the ESPP will be shares of authorized but unissued or reacquired common stock, including shares repurchased by New MoneyLion on the open market.
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Offerings
The ESPP will be implemented by offerings of rights to purchase shares of New MoneyLion Class A common stock to all eligible employees. The Committee will determine the duration of each offering period, provided that in no event may an offering period exceed 27 months, and the terms and conditions of each offering period will be set forth in an offering document. The Committee may establish separate offerings which vary in terms (although not inconsistent with the provisions of the ESPP or the requirements of applicable laws). Each offering period will have one or more purchase dates, as determined by the Committee prior to the commencement of the offering period. The Committee has the authority to alter the terms of an offering prior to the commencement of the offering period, including the duration of subsequent offering periods. When an eligible employee elects to join an offering period, he or she is granted a right to purchase shares of New MoneyLion Class A common stock on each purchase date within the offering period. On the purchase date, all contributions collected from the participant are automatically applied to the purchase of New MoneyLion common stock, subject to certain limitations (which are described further below under “Eligibility”).
The Committee has the discretion to structure an offering so that if the fair market value of New MoneyLion Class A common stock on the first trading day of a new purchase period within the offering period is less than or equal to the fair market value of New MoneyLion Class A common stock on the first day of the offering period, then that offering will terminate immediately as of that first trading day, and the participants in such terminated offering will be automatically enrolled in a new offering beginning on the first trading day of such new purchase period.
Eligibility — Broad-Based Participation
Any individual who is employed by New MoneyLion (or by any of its subsidiary companies if such company complies with Section 423 and is designated by the Committee as eligible to participate in the ESPP) may participate in offerings under the ESPP, provided such individual has been employed by New MoneyLion (or its subsidiary, if applicable) for such continuous period preceding the first day of the offering period as the compensation committee may require, but in no event may the required period of continuous employment be equal to or greater than two years. In addition, the Committee may provide that an employee will not be eligible to be granted purchase rights under the ESPP unless such employee is customarily employed for more than 20 hours per week and five months per calendar year. The Committee may also provide in any offering that certain of New MoneyLion’s employees who are “highly compensated” as defined in the Code are not eligible to participate in the ESPP. New MoneyLion’s non-employee directors will not be eligible to participate in the ESPP.
No employee will be eligible to participate in the ESPP if, immediately after the grant of purchase rights, the employee would own, directly or indirectly, stock possessing 5% or more of the total combined voting power or value of all classes of New MoneyLion stock or of any of its subsidiary companies, including any stock which such employee may purchase under all outstanding purchase rights and options. In addition, no employee may purchase more than $25,000 worth of New MoneyLion Class A common stock (determined based on the fair market value of the shares at the time such rights are granted) in each calendar year during which such rights are outstanding.
As of March 31, 2021, approximately 110 employees would have been eligible to participate in the ESPP.
Participation in the ESPP; Limits on Employee Contributions
An eligible employee may enroll in the ESPP by delivering to New MoneyLion, prior to the date selected by the Committee as the beginning of an offering period, an agreement authorizing contributions in the form of payroll deductions which must equal a whole percentage (and which may not be less than 1%) of such employee’s earnings (as defined in the ESPP) during the offering period and which may not exceed the maximum amount specified by the Committee, but in any case, which may not exceed 15% of such employee’s earnings during the offering period. Each participant will be granted a separate purchase right for each offering in which he or she participates. Unless an employee’s participation is discontinued, his or her purchase right will be exercised automatically at the end of each purchase period at the applicable purchase price.
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Purchase Price and Limits; Payroll Deductions
The purchase price per share at which shares of New MoneyLion Class A common stock are sold on each purchase date during an offering period will not be less than the lower of (i) 85% of the fair market value of a share of New MoneyLion common stock on the first day of the offering period or (ii) 85% of the fair market value of a share of New MoneyLion Class A common stock on the purchase date.
The purchase of shares during an offering period generally will be funded by a participant’s payroll deductions accumulated during the offering period. A participant may decrease his or her rate of contributions, as determined by the Committee and set forth in the offering document. All contributions made for a participant are credited to his or her account under the ESPP and deposited with New MoneyLion’s general funds.
In connection with each offering made under the ESPP, the Committee may specify (i) a maximum number of shares of New MoneyLion Class A common stock that may be purchased by any participant on any purchase date pursuant to such offering, which, in any case, may not exceed 15% of such employee’s eligible earnings during the offering period, (ii) a maximum aggregate number of shares of New MoneyLion Class A common stock that may be purchased by all participants pursuant to such offering, and/or (iii) a maximum aggregate number of shares of New MoneyLion Class A common stock that may be purchased by all participants on any purchase date pursuant to such offering. If the aggregate purchase of shares of New MoneyLion Class A common stock issuable upon exercise of purchase rights granted under such offering would exceed any such maximum aggregate number, then the Committee will make a pro rata allocation of available shares in a uniform and equitable manner.
Withdrawal; Termination of Employment; Restrictions on Transfer
Participants may withdraw from a given offering by delivering a withdrawal form to New MoneyLion and terminating their contributions. Such withdrawal may be elected generally at any time prior to the end of an offering (but no later than one week prior to the end of the applicable offering period), except as otherwise provided by the Committee and set forth in the offering document. Upon such withdrawal, New MoneyLion will distribute to the employee his or her accumulated but unused contributions without interest, and such employee’s right to participate in that offering will terminate. However, an employee’s withdrawal from an offering does not affect such employee’s eligibility to participate in subsequent offerings under the ESPP.
A participant’s rights under any offering under the ESPP will terminate immediately if the participant either (i) is no longer employed by New MoneyLion or any of its subsidiary companies (subject to any post-employment participation period required by law) or (ii) is otherwise no longer eligible to participate. In such event, New MoneyLion will distribute to the participant his or her accumulated but unused contributions without interest.
Rights granted under the ESPP are not transferable except by will, by the laws of descent and distribution, or if permitted by New MoneyLion, by a beneficiary designation. During a participant’s lifetime, such rights may only be exercised by the participant.
Changes in Capitalization and Effect of Certain Corporate Transactions
In the event that there occurs a change in New MoneyLion’s capital structure through such actions as a dividend or other distribution, reorganization, merger, amalgamation, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of New MoneyLion’s assets, or sale or exchange of New MoneyLion Class A common stock or other securities, or other similar corporate transaction or event, affects New MoneyLion Class A common stock such that the Committee determines that an adjustment is appropriate in order to prevent dilution or enlargement of benefits or potential benefits intended to be made available under the ESPP or with respect to any outstanding purchase rights under the ESPP, the Committee will appropriately adjust: (i) the type and maximum number of securities subject to the ESPP; (ii) the class(es) and number of securities subject to, and the purchase price applicable to, outstanding purchase rights; and (iii) the class(es) and number of securities that are the subject of any purchase limits under each ongoing offering.
In the event of a corporate transaction (as defined in the ESPP and described above), (i) any surviving or acquiring corporation (or its parent company) may assume or continue outstanding purchase rights granted under the ESPP or may substitute similar rights (including a right to acquire the same consideration paid to the stockholder
138
in the corporate transaction) for such outstanding purchase rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such outstanding purchase rights or does not substitute similar rights for such outstanding purchase rights, then the participants’ accumulated contributions will be used to purchase shares of New MoneyLion Class A common stock under such purchase rights, and such purchase rights and the ESPP will terminate immediately after such purchase.
Duration, Amendment and Termination
The compensation committee may amend, suspend or terminate the ESPP at any time. However, for certain capitalization adjustments, any such amendment must be approved by New MoneyLion stockholders if such approval is required by applicable law, including any listing requirements. Stockholder approval is required for the following amendments: (i) to increase the aggregate number, or change the type, of shares that may be sold pursuant to rights under the ESPP (other than upon certain specified adjustments), (ii) to change the corporations or classes of corporations whose employees may be granted rights under the ESPP, or (iii) to change the ESPP in any manner that would cause the 423 Component to no longer be an “employee stock purchase plan” within the meaning of Section 423(b) of the Code. Upon termination of the ESPP, each participant’s balance will be refunded as soon as practicable without interest.
Any outstanding purchase rights granted before an amendment or termination of the ESPP will not be materially impaired by any such amendment or termination, except (i) with the consent of the employee to whom such purchase rights were granted, (ii) as necessary to comply with applicable laws, including any listing requirements or governmental regulations (including Section 423 of the Code), or (iii) as necessary to obtain or maintain favorable tax, listing or regulatory treatment.
Notwithstanding anything in the ESPP or any offering to the contrary, the Committee will be entitled to: (i) change the offering periods, (ii) limit the frequency and/or number of changes in amounts withheld from employee earnings during an offering period, (iii) establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, if applicable; (iv) permit contributions in excess of the amount designated by a participant to adjust for delays or mistakes in processing of properly completed contribution elections; (v) establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of common stock for each participant properly correspond with that participant’s contributions; and (vi) establish other limitations or procedures as the Committee determines in its sole discretion advisable that are consistent with the ESPP; provided in each case that such actions qualify under and/or comply with Section 423 of the Code.
Federal Income Tax Information
The following is a summary of the principal United States federal income tax consequences to participants and New MoneyLion with respect to participation in the ESPP. This summary is not intended to be exhaustive and does not discuss the income tax laws of any local, state or foreign jurisdiction in which a participant may reside. The information is based upon current federal income tax rules and therefore is subject to change when those rules change. Because the tax consequences to any participant may depend on his or her particular situation, each participant should consult the participant’s tax adviser regarding the federal, state, local, and other tax consequences of the grant or exercise of a purchase right or the sale or other disposition of New MoneyLion Class A common stock acquired under the ESPP. The ESPP is not qualified under the provisions of Section 401(a) of the Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974, as amended.
The ESPP, and the rights of participant employees to make purchases thereunder, qualify for treatment under the provisions of Sections 421 and 423 of the Code. Under these provisions, no income will be taxable to a participant until the shares purchased under the ESPP are sold or otherwise disposed of.
Upon sale or other disposition of the shares, the participant will generally be subject to tax and the amount of the tax will depend upon the holding period. If the shares are sold or otherwise disposed of more than two years from the first day of the relevant offering period (and more than one year from the date the shares are purchased), then the participant generally will recognize ordinary income measured as the lesser of:
(i) the excess of the fair market value of the common stock at the time of such sale or disposition over the purchase price of such shares, or
139
(ii) an amount equal to 15% of the fair market value of the shares as of the first day of the applicable offering period.
Any additional gain should be treated as long-term capital gain. If the shares are held for at least the holding periods described above but are sold for a price that is less than the purchase price, there will be no ordinary income and the difference will be a long-term capital loss. New MoneyLion will not be entitled to an income tax deduction with respect to the grant or exercise of a right to purchase the shares, or the sale of such shares by a participant, where such participant holds such shares for at least the holding periods described above.
Any sale or other disposition of shares before the expiration of the holding periods described above will be a “disqualifying disposition,” and the participant will recognize ordinary income at the time of such disposition generally measured as the excess of the fair market value of the shares on the date the shares are purchased over the purchase price, and New MoneyLion will be entitled to an income tax deduction for such ordinary income. Any additional gain or loss on such sale or disposition will be long-term or short-term capital gain or loss, depending on the holding period following the date the shares were purchased by the participant prior to such sale or disposition, and New MoneyLion will not be entitled to an income tax deduction for any such capital gain.
New Plan Benefits
Participation in the ESPP is voluntary and each eligible employee will make his or her own decision regarding whether and to what extent to participate in the ESPP. In addition, the New MoneyLion Board and the Committee have not granted any purchase rights under the ESPP that are subject to stockholder approval of this ESPP Proposal. Accordingly, the benefits or amounts that will be received by or allocated to New MoneyLion executive officers and other employees under the ESPP are not determinable.
Registration with the SEC
If the ESPP is approved by our stockholders and becomes effective, New MoneyLion is expected to file a registration statement on Form S-8 registering the shares reserved for issuance under the ESPP as soon as reasonably practicable after becoming eligible to use such form.
Vote Required for Approval
The approval of the ESPP Proposal requires the affirmative vote of a majority of the votes cast by Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting and entitled to vote thereon. Failure to submit a proxy at the Fusion Special Meeting and a broker non-vote will have no effect on the outcome of the ESPP Proposal. However, the NYSE considers abstentions as “votes cast” and, therefore, abstentions will have the same effect as votes “AGAINST” this proposal. The ESPP Proposal is conditioned upon the approval of the Business Combination Proposal, the Charter Proposal and the Stock Issuance Proposals. If the Business Combination Proposal, the Charter Proposal or the Stock Issuance Proposals are not approved, the ESPP Proposal will have no effect, even if approved by our stockholders.
Recommendation of the Board
THE FUSION BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUSION STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ESPP PROPOSAL.
140
Overview
The Adjournment Proposal, if adopted, will allow Fusion’s board of directors to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Charter Proposals, the Stock Issuance Proposal or the Incentive Plan Proposal, or holders of Fusion Class A common stock have elected to redeem an amount of Fusion Class A common stock such that Fusion would have less than $5,000,001 of net tangible assets or the Minimum Proceeds Condition would not be satisfied or waived by MoneyLion. In no event will Fusion’s board of directors adjourn the Special Meeting or consummate the Business Combination beyond the date by which it may properly do so under the Current Charter and Delaware law.
Consequences if the Adjournment Proposal is Not Approved
If the Adjournment Proposal is not approved by the Fusion Stockholders, Fusion’s board of directors may not be able to adjourn the Special Meeting to a later date in the event that there are insufficient votes for the approval of the Business Combination Proposal, the Charter Proposals, the Stock Issuance Proposal or the Incentive Plan Proposal, or holders of Fusion Class A common stock have elected to redeem an amount of Fusion Class A common stock such that Fusion would have less than $5,000,001 of net tangible assets or the Minimum Proceeds Condition would not be satisfied or waived by MoneyLion, and may be unable to consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by December 31, 2021 (subject to the requirements of law), we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the public stockholders.
Vote Required for Approval
The approval of the Adjournment Proposal requires the majority of the votes cast by the Fusion Stockholders present in person (which would include presence at the virtual Special Meeting) or represented by proxy at the Special Meeting.
Failure to submit a proxy or to vote in person at the Special Meeting, an abstention from voting or a broker non-vote will have no effect on the Adjournment Proposal.
The Business Combination is not conditioned upon the approval of the Adjournment Proposal.
The Sponsor has agreed to vote the founder shares and any public shares owned by them in favor of the Adjournment Proposal (if necessary). See “Other Agreements — Sponsor Agreement” for more information.
Recommendation of the Fusion Board
THE FUSION BOARD UNANIMOUSLY RECOMMENDS THAT ITS STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.
The existence of financial and personal interests of one or more of Fusion’s directors may result in a conflict of interest on the part of such director(s) between what they may believe is in the best interests of Fusion and its stockholders and what they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals. See the section entitled “The Business Combination Proposal — Interests of Fusion’s Directors and Officers in the Business Combination” for a further discussion.
141
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below have the same meaning as terms defined and included elsewhere in this proxy statement/prospectus.
The following selected unaudited pro forma condensed combined financial data is derived from the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statement of operations included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements are based on Fusion’s historical financial statements and MoneyLion’s historical condensed consolidated financial statements as adjusted to give effect to the Business Combination, the Private Placement. The unaudited pro forma condensed combined balance sheet gives pro forma effect to the Business Combination, treated as a reverse recapitalization for accounting purposes and the Private Placement as if they had been consummated on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021, give effect to the Business Combination and the Private Placement as if they had occurred on January 1, 2021.
The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or reasonably expected to occur (“Management’s Adjustments”). Fusion has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the Business Combination and the Private Placement.
The unaudited pro forma condensed combined financial statements are for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. Fusion and MoneyLion have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
This information should be read together with Fusion’s and MoneyLion’s historical condensed consolidated financial statements and related notes, “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fusion,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion,” and other financial information relating to Fusion and MoneyLion included elsewhere in this proxy statement/prospectus.
The selected unaudited pro forma condensed combined financial data below presents two redemption scenarios as follows:
• Assuming no redemptions: This presentation assumes that no Fusion public stockholders exercise their rights to redeem any of their public shares for a pro rata portion of the funds in the Trust Account. Thus, the full amount held in the Trust Account as of Closing is available for the Business Combination, and MoneyLion stockholders elect to receive $100.0 million of merger consideration in cash at Closing.
• Assuming maximum redemptions: This presentation assumes that Fusion public stockholders holding 26,675,623 shares of Class A common stock exercise their rights to redeem their public shares for a pro rata portion of the funds in the Trust Account. This scenario gives effect to redemptions of 26,675,623 shares of Class A common stock of Fusion for aggregate redemption payments of $266.7 million, using a per-share redemption price of $10.00, which is the maximum redemption amount after which the closing conditions of the Merger Agreement are still achieved. Under this maximum redemption scenario, MoneyLion stockholders will receive $0.1 million of merger consideration in cash at Closing.
142
Pro Forma |
||||||||
Three Months Ended March 31, 2021 |
||||||||
Scenario 1 |
Scenario 2 |
|||||||
(in thousands) |
||||||||
Combined Statement of Operations data: |
|
|
|
|
||||
Net revenue |
$ |
33,155 |
|
$ |
33,155 |
|
||
Loss from operations |
|
(73,827 |
) |
|
(73,827 |
) |
||
Net loss |
|
(37,615 |
) |
|
(37,615 |
) |
||
Net loss attributable to common stockholders |
|
(45,224 |
) |
|
(45,224 |
) |
Pro Forma |
||||||
Three Months March 31, 2021 |
||||||
Scenario 1 |
Scenario 2 |
|||||
(in thousands) |
||||||
Combined Balance Sheet data: |
|
|
||||
Total assets |
$ |
620,606 |
$ |
425,326 |
||
Total debt |
|
40,166 |
|
40,166 |
||
Total liabilities |
|
129,173 |
|
129,173 |
||
Total stockholders’ equity |
|
491,433 |
|
296,153 |
The following unaudited pro forma condensed combined financial information is provided to aid you in your analysis of the financial aspects of the Business Combination and the Private Placement.
The following unaudited pro forma condensed combined balance sheet as of March 31, 2021 combines the unaudited historical balance sheet of Fusion as of March 31, 2021 with the unaudited historical consolidated balance sheet of MoneyLion as of March 31, 2021, giving effect to the Business Combination and the Private Placement as if they had been consummated as of that date.
The following unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 combines the unaudited historical statement of operations of Fusion and the unaudited historical consolidated statement of operations of MoneyLion for such period, giving effect to the Business Combination and the Private Placement as if they had been consummated on January 1, 2021.
The unaudited pro forma condensed combined financial statements have been derived from and should be read in conjunction with:
• the accompanying notes to the unaudited pro forma condensed combined financial statements;
• the unaudited historical condensed financial statements of Fusion for the three months ended March 31, 2021, and the related notes thereto, included elsewhere in this proxy statement/prospectus;
• the unaudited historical condensed consolidated financial statements of MoneyLion for the three months ended March 31, 2021, and the related notes thereto, included elsewhere in this proxy statement/prospectus; and
• the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fusion,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation of MoneyLion,” and other financial information relating to Fusion and MoneyLion included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements are for illustrative purposes only and are not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and the Private Placement taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the combined company.
143
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2021
(Dollars in thousands, except share and per share amounts)
Historical |
Scenario 1 |
Scenario 2 |
||||||||||||||||||||||||||||
5(A) |
5(B) |
Business Combination |
Pro Forma |
Additional |
Pro Forma |
|||||||||||||||||||||||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Cash |
$ |
593 |
|
$ |
57,759 |
|
$ |
450,130 |
|
5 |
(a) |
$ |
508,482 |
|
$ |
(195,280 |
) |
5 |
(i) |
$ |
313,202 |
|
||||||||
Restricted cash |
|
— |
|
|
2,057 |
|
|
— |
|
|
|
2,057 |
|
|
— |
|
|
|
2,057 |
|
||||||||||
Finance and membership receivables |
|
— |
|
|
77,685 |
|
|
— |
|
|
|
77,685 |
|
|
— |
|
|
|
77,685 |
|
||||||||||
Allowance for losses on finance receivables |
|
— |
|
|
(10,227 |
) |
|
— |
|
|
|
(10,227 |
) |
|
— |
|
|
|
(10,227 |
) |
||||||||||
Finance and membership receivables, net |
|
— |
|
|
67,458 |
|
|
— |
|
|
|
67,458 |
|
|
— |
|
|
|
67,458 |
|
||||||||||
Property and equipment, net |
|
— |
|
|
464 |
|
|
— |
|
|
|
464 |
|
|
— |
|
|
|
464 |
|
||||||||||
Intangible assets, net |
|
— |
|
|
8,834 |
|
|
— |
|
|
|
8,834 |
|
|
— |
|
|
|
8,834 |
|
||||||||||
Goodwill |
|
— |
|
|
21,565 |
|
|
— |
|
|
|
21,565 |
|
|
— |
|
|
|
21,565 |
|
||||||||||
Due from related party |
|
— |
|
|
8 |
|
|
— |
|
|
|
8 |
|
|
— |
|
|
|
8 |
|
||||||||||
Other assets |
|
— |
|
|
11,617 |
|
|
— |
|
|
|
11,617 |
|
|
— |
|
|
|
11,617 |
|
||||||||||
Prepaid expenses |
|
121 |
|
|
— |
|
|
— |
|
|
|
121 |
|
|
— |
|
|
|
121 |
|
||||||||||
Security deposit |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
||||||||||
Marketable securities held in trust account |
|
350,280 |
|
|
— |
|
|
(350,280 |
) |
5 |
(b) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Total assets |
$ |
350,994 |
|
$ |
169,762 |
|
$ |
99,850 |
|
|
$ |
620,606 |
|
$ |
(195,280 |
) |
|
$ |
425,326 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Secured debt agreements |
$ |
— |
|
$ |
23,268 |
|
$ |
— |
|
|
$ |
23,268 |
|
$ |
— |
|
|
$ |
23,268 |
|
||||||||||
Secured loans |
|
— |
|
|
16,563 |
|
|
— |
|
|
|
16,563 |
|
|
— |
|
|
|
16,563 |
|
||||||||||
Accounts payable and accrued liabilities |
|
335 |
|
|
— |
|
|
— |
|
|
|
335 |
|
|
— |
|
|
|
335 |
|
||||||||||
Subordinated convertible notes |
|
— |
|
|
90,689 |
|
|
(90,689 |
) |
5 |
(c) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Related party loan |
|
— |
|
|
5,000 |
|
|
(5,000 |
) |
5 |
(d) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Warrant liability |
|
29,889 |
|
|
55,897 |
|
|
— |
|
|
|
85,786 |
|
|
— |
|
|
|
85,786 |
|
||||||||||
Other debt |
|
— |
|
|
3,207 |
|
|
— |
|
|
|
3,207 |
|
|
— |
|
|
|
3,207 |
|
||||||||||
Income tax payable |
|
14 |
|
|
— |
|
|
— |
|
|
|
14 |
|
|
— |
|
|
|
14 |
|
||||||||||
Deferred underwriting fee payable |
|
13,150 |
|
|
— |
|
|
(13,150 |
) |
5 |
(e) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Total liabilities |
|
43,388 |
|
|
194,624 |
|
|
(108,839 |
) |
|
|
129,173 |
|
|
— |
|
|
|
129,173 |
|
||||||||||
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
MoneyLion redeemable convertible preferred stock |
|
— |
|
|
293,025 |
|
|
(293,025 |
) |
5 |
(f) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Fusion Class A common stock subject to possible redemption |
|
302,606 |
|
|
— |
|
|
(302,606 |
) |
5 |
(g) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Stockholders’ Equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
MoneyLion common stock, $0.0001 par value |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
||||||||||
Fusion preferred stock, $0.0001 par value |
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
||||||||||
Fusion Class A common stock, $0.0001 par value |
|
— |
|
|
— |
|
|
24 |
|
5 |
(h) |
|
24 |
|
|
(2 |
) |
5 |
(i) |
|
22 |
|
||||||||
Fusion Class B common stock, $0.0001 par value |
|
1 |
|
|
— |
|
|
(1 |
) |
5 |
(h) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Additional paid-in capital |
|
8,418 |
|
|
— |
|
|
800,028 |
|
5 |
(h) |
|
808,446 |
|
|
(195,278 |
) |
5 |
(i) |
|
613,168 |
|
||||||||
Accumulated deficit |
|
(3,419 |
) |
|
(407,881 |
) |
|
3,269 |
|
5 |
(h) |
|
(408,031 |
) |
|
— |
|
|
|
(408,031 |
) |
|||||||||
Treasury stock |
|
— |
|
|
(1,000 |
) |
|
1,000 |
|
5 |
(h) |
|
— |
|
|
— |
|
|
|
— |
|
|||||||||
Total stockholders’ deficit attributable to common stockholders |
|
5,000 |
|
|
(408,881 |
) |
|
804,320 |
|
5 |
(h) |
|
400,439 |
|
|
(195,280 |
) |
|
|
205,159 |
|
|||||||||
Noncontrolling interests |
|
— |
|
|
90,994 |
|
|
— |
|
|
|
90,994 |
|
|
— |
|
|
|
90,994 |
|
||||||||||
Total stockholders’ equity |
|
5,000 |
|
|
(317,887 |
) |
|
804,320 |
|
|
|
491,433 |
|
|
(195,280 |
) |
|
|
296,153 |
|
||||||||||
Total liabilities and stockholders’ equity |
$ |
350,994 |
|
$ |
169,762 |
|
$ |
99,850 |
|
|
$ |
620,606 |
|
$ |
(195,280 |
) |
|
$ |
425,326 |
|
See accompanying notes to the unaudited pro forma condensed combined financial information.
144
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2021
(Dollars in thousands, except share and per share amounts)
Historical |
Scenario 1 |
Scenario 2 |
||||||||||||||||||||||||||||||
6(A) |
6(B) |
Business Combination |
Pro Forma Statement of Operations |
Additional |
Pro Forma Statement of Operations |
|||||||||||||||||||||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net interest income on finance receivables |
$ |
— |
|
$ |
1,662 |
|
$ |
— |
|
|
$ |
1,662 |
|
|
$ |
— |
$ |
1,662 |
|
|
||||||||||||
Membership subscription revenue |
|
— |
|
|
7,446 |
|
|
— |
|
|
|
7,446 |
|
|
|
— |
|
7,446 |
|
|
||||||||||||
Affiliates income |
|
— |
|
|
997 |
|
|
— |
|
|
|
997 |
|
|
|
— |
|
997 |
|
|
||||||||||||
Fee income |
|
— |
|
|
23,026 |
|
|
— |
|
|
|
23,026 |
|
|
|
— |
|
23,026 |
|
|
||||||||||||
Other income |
|
— |
|
|
24 |
|
|
— |
|
|
|
24 |
|
|
|
— |
|
24 |
|
|
||||||||||||
Total revenues, net |
|
— |
|
|
33,155 |
|
|
— |
|
|
|
33,155 |
|
|
|
— |
|
33,155 |
|
|
||||||||||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Marketing |
|
— |
|
|
4,363 |
|
|
— |
|
|
|
4,363 |
|
|
|
— |
|
4,363 |
|
|
||||||||||||
Provision for loss on receivables |
|
— |
|
|
5,708 |
|
|
— |
|
|
|
5,708 |
|
|
|
— |
|
5,708 |
|
|
||||||||||||
Other direct costs |
|
— |
|
|
2,801 |
|
|
— |
|
|
|
2,801 |
|
|
|
— |
|
2,801 |
|
|
||||||||||||
Interest expense |
|
— |
|
|
1,471 |
|
|
150 |
|
6 |
(a) |
|
1,621 |
|
|
|
— |
|
1,621 |
|
|
|||||||||||
Personnel expenses |
|
— |
|
|
7,070 |
|
|
— |
|
|
|
7,070 |
|
|
|
— |
|
7,070 |
|
|
||||||||||||
Underwriting expenses |
|
— |
|
|
1,621 |
|
|
— |
|
|
|
1,621 |
|
|
|
— |
|
1,621 |
|
|
||||||||||||
Information technology expenses |
|
— |
|
|
1,875 |
|
|
— |
|
|
|
1,875 |
|
|
|
— |
|
1,875 |
|
|
||||||||||||
Bank and payment processor fees |
|
— |
|
|
5,244 |
|
|
— |
|
|
|
5,244 |
|
|
|
— |
|
5,244 |
|
|
||||||||||||
Change in fair value of warrant liability |
|
— |
|
|
31,230 |
|
|
— |
|
|
|
31,230 |
|
|
|
— |
|
31,230 |
|
|
||||||||||||
Change in fair value of subordinated convertible notes |
|
— |
|
|
39,939 |
|
|
— |
|
|
|
39,939 |
|
|
|
— |
|
39,939 |
|
|
||||||||||||
Professional fees |
|
— |
|
|
3,586 |
|
|
— |
|
|
|
3,586 |
|
|
|
— |
|
3,586 |
|
|
||||||||||||
Depreciation expense |
|
— |
|
|
514 |
|
|
— |
|
|
|
514 |
|
|
|
— |
|
514 |
|
|
||||||||||||
Occupancy expense |
|
— |
|
|
384 |
|
|
— |
|
|
|
384 |
|
|
|
— |
|
384 |
|
|
||||||||||||
Gain on foreign currency translation |
|
— |
|
|
(4 |
) |
|
— |
|
|
|
(4 |
) |
|
|
— |
|
(4 |
) |
|
||||||||||||
Other operating expenses |
|
— |
|
|
734 |
|
|
— |
|
|
|
734 |
|
|
|
— |
|
734 |
|
|
||||||||||||
Formation and operating costs |
|
446 |
|
|
— |
|
|
(150 |
) |
6 |
(b) |
|
296 |
|
|
|
— |
|
296 |
|
|
|||||||||||
Total operating expenses |
|
446 |
|
|
106,536 |
|
|
— |
|
|
|
106,982 |
|
|
|
— |
|
106,982 |
|
|
||||||||||||
Loss from operations |
|
(446 |
) |
|
(73,381 |
) |
|
— |
|
|
|
(73,827 |
) |
|
|
— |
|
(73,827 |
) |
|
||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Interest earned on investments held in Trust Account |
|
61 |
|
|
— |
|
|
(61 |
) |
6 |
(c) |
|
— |
|
|
|
— |
|
— |
|
|
|||||||||||
Change in fair value of warrant liability |
|
36,238 |
|
|
— |
|
|
— |
|
|
|
36,238 |
|
|
|
— |
|
36,238 |
|
|
||||||||||||
Loss before provision for income taxes |
|
35,853 |
|
|
(73,381 |
) |
|
(61 |
) |
|
|
(37,589 |
) |
|
|
— |
|
(37,589 |
) |
|
||||||||||||
Income tax (expense) benefit |
|
(1 |
) |
|
(25 |
) |
|
— |
|
|
|
(26 |
) |
|
|
— |
|
(26 |
) |
|
||||||||||||
Net loss |
|
35,852 |
|
|
(73,406 |
) |
|
(61 |
) |
|
|
(37,615 |
) |
|
|
— |
|
(37,615 |
) |
|
||||||||||||
Net loss attributable to noncontrolling interests |
|
— |
|
|
(2,767 |
) |
|
— |
|
|
|
(2,767 |
) |
|
|
— |
|
(2,767 |
) |
|
||||||||||||
Accrued dividends on redeemable convertible |
|
— |
|
|
(4,842 |
) |
|
— |
|
|
|
(4,842 |
) |
|
|
— |
|
(4,842 |
) |
|
||||||||||||
Net loss attributable to common stockholders |
$ |
35,852 |
|
$ |
(81,015 |
) |
$ |
(61 |
) |
|
$ |
(45,224 |
) |
|
$ |
— |
$ |
(45,224 |
) |
|
||||||||||||
Weighted average common shares outstanding, |
|
8,750,000 |
|
|
2,946,660 |
|
|
|
|
|
241,137,636 |
|
6 |
(d) |
|
|
221,639,139 |
|
6 |
(d) |
||||||||||||
Loss per common share, basic and diluted |
$ |
4.10 |
|
$ |
(27.49 |
) |
|
|
|
$ |
(0.19 |
) |
6 |
(d) |
|
$ |
(0.20 |
) |
6 |
(d) |
See accompanying notes to the unaudited pro forma condensed combined financial information.
145
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
1. Description of the Transactions
The Business Combination
On February 11, 2021, Fusion Acquisition Corp., a Delaware corporation (“Fusion” or the “Company”), entered into an agreement and plan of merger by and among Fusion, ML Merger Sub Inc., a wholly owned subsidiary of Fusion (“Merger Sub”), and MoneyLion Inc. (“MoneyLion”) (as amended on June 28, 2021 and as it may be further amended and/or restated from time to time, the “Merger Agreement”), which provides for Merger Sub to merge with and into MoneyLion with MoneyLion surviving the merger as a wholly owned subsidiary of Fusion (the “Business Combination”). In addition, in connection with the consummation of the Business Combination, Fusion will be renamed “MoneyLion Inc.” and is referred to herein as “New MoneyLion” as of the time following such change of name.
Under the Merger Agreement, Fusion has agreed to acquire all of the outstanding equity interests of MoneyLion for $2.2 billion in aggregate consideration. The aggregate consideration to be paid to MoneyLion stockholders shall be (i) shares of Class A common stock of New MoneyLion (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the Merger Agreement) exceeds $260 million and (B) $100 million, and (ii) the contingent right to receive a pro rata portion of up to 17,500,000 shares of Class A common stock of New MoneyLion (the “Earn Out Shares”).
The Private Placement
On February 11, 2021, concurrently with the execution of the Merger Agreement, Fusion entered into the Subscription Agreements with the PIPE Investors, pursuant to which, among other things, Fusion agreed to issue and sell in private placements an aggregate of 25,000,000 shares of Fusion Class A common stock to the PIPE Investors for $10.00 per share.
The Private Placement is expected to close immediately prior to the Closing. In connection with the Closing, all of the issued and outstanding shares of Fusion Class A common stock, including the shares of Fusion Class A common stock issued to the PIPE Investors, will become shares of New MoneyLion Class A common stock.
2. Basis of Presentation
The unaudited pro forma condensed combined financial statements were prepared in accordance with Article 11 of SEC Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or reasonably expected to occur (“Management’s Adjustments”). Fusion has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial statements. The adjustments presented in the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an understanding of the combined company upon consummation of the Business Combination and the Private Placement.
The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives effect to the Business Combination and the Private Placement as if they occurred on March 31, 2021. The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2021 gives effect to the Business Combination and the Private Placement as if they occurred on January 1, 2021.
The pro forma adjustments reflecting the consummation of the Business Combination and the Private Placement are based on certain currently available information and certain assumptions and methodologies that Fusion believes are reasonable under the circumstances. The pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that the difference
146
may be material. Fusion believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and the Private Placement based on information available to management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial statements do not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. Fusion and MoneyLion have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The unaudited pro forma condensed combined financial information presents two redemption scenarios as follows:
• Assuming no redemptions: This presentation assumes that no Fusion public stockholders exercise their rights to redeem any of their public shares for a pro rata portion of the funds in the Trust Account. Thus, the full amount held in the Trust Account as of Closing is available for the Business Combination, and MoneyLion stockholders elect to receive $100.0 million of merger consideration in cash at Closing.
• Assuming maximum redemptions: This presentation assumes that Fusion public stockholders holding 26,675,623 shares of Class A common stock exercise their rights to redeem their public shares for a pro rata portion of the funds in the Trust Account. This scenario gives effect to redemptions of 26,675,623 shares of Class A common stock of Fusion for aggregate redemption payments of $266.7 million, using a per-share redemption price of $10.00, which is the maximum redemption amount after which the closing conditions of the Merger Agreement are still achieved. Under this maximum redemption scenario, MoneyLion stockholders will receive $0.1 million of merger consideration in cash at Closing.
These unaudited pro forma condensed combined financial statements and related notes have been derived from and should be read in conjunction with:
• the unaudited historical condensed financial statements of Fusion as of and for the three months ended March 31, 2021 (as restated), and the related notes thereto, included elsewhere in this proxy statement/prospectus;
• the unaudited historical condensed consolidated financial statements of MoneyLion for the three months ended March 31, 2021, and the related notes thereto, included elsewhere in this proxy statement/prospectus; and
• the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Fusion,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation of MoneyLion,” and other financial information relating to Fusion and MoneyLion included elsewhere in this proxy statement/prospectus.
The unaudited pro forma condensed combined financial statements are for illustrative purposes only and are not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and the Private Placement taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the combined company.
3. Accounting for the Business Combination
The Business Combination will be accounted for as a reverse recapitalization, in accordance with GAAP. Under this method of accounting, although Fusion will issue shares for outstanding equity interests of MoneyLion in the Business Combination, Fusion will be treated as the “acquired” company for financial reporting purposes. Accordingly, the Business Combination will be treated as the equivalent of MoneyLion issuing stock for the net assets of Fusion, accompanied by a recapitalization. The net assets of Fusion will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of MoneyLion.
147
MoneyLion has been determined to be the accounting acquirer based on the evaluation of the following facts and circumstances under both the no and maximum redemption scenarios:
• The former owners of MoneyLion hold the largest portion of voting rights in the combined company;
• MoneyLion has the right to appoint a majority of the directors in the combined company;
• MoneyLion’s existing senior management team will comprise senior management of the combined company;
• The operations of the combined company will represent the operations of MoneyLion;
• The combined company will assume MoneyLion’s name and headquarters.
4. Capitalization
The following summarizes the pro forma ownership of Class A common stock of Fusion following the Business Combination and the Private Placement under both the no redemption and maximum redemption scenarios:
Scenario 1 |
Scenario 2 |
|||||||||
Equity Capitalization Summary |
Shares |
% |
Shares |
% |
||||||
MoneyLion stockholders(1) |
172,387,636 |
71.5 |
% |
182,387,636 |
82.3 |
% |
||||
Fusion public stockholders(2) |
35,000,000 |
14.5 |
% |
5,501,503 |
2.5 |
% |
||||
Fusion Sponsor |
8,750,000 |
3.6 |
% |
8,750,000 |
3.9 |
% |
||||
PIPE Investors(3) |
25,000,000 |
10.4 |
% |
25,000,000 |
11.3 |
% |
||||
Total Class A common stock |
241,137,636 |
100.0 |
% |
221,639,139 |
100.0 |
% |
____________
(1) Under Scenario 1, assumes stock consideration of 172,387,636 shares of Class A common stock and cash consideration of $100.0 million based on the balance of the Trust Account as of March 31, 2021 and resulting Parent Closing Cash. Under Scenario 2, assumes that 26,675,623 shares of Class A common stock are redeemed for aggregate redemption payments of $266.7 million using a per-share redemption price of $10.00, resulting in stock consideration of 180,087,326 shares of Class A common stock and cash consideration of $0.1 million.
(2) Under Scenario 2, assumes redemptions of 26,675,623 shares of Class A common stock of Fusion for aggregate redemption payments of $266.7 million using a per-share redemption price of $10.00.
(3) Under Scenario 1 and Scenario 2, assumes the Private Placement is consummated in accordance with its terms for aggregate proceeds of $250.0 million in connection with the issuance of 25,000,000 shares of Class A common stock to the PIPE Investors.
5. Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2021
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma notes
(A) Derived from the unaudited balance sheet of Fusion as of March 31, 2021 (as restated).
(B) Derived from the unaudited consolidated balance sheet of MoneyLion as of March 31, 2021.
148
Pro forma adjustments
(a) To reflect the net cash proceeds from the Business Combination and the Private Placement as follows (in thousands):
|
|
|||||||
Release of Trust Account |
$ |
350,280 |
|
5(b) |
||||
Proceeds from Private Placement |
|
250,000 |
|
5(h) |
||||
Payment of cash consideration |
|
(100,000 |
) |
5(h) |
||||
Payment of transaction expenses |
|
(31,850 |
) |
5(h) |
||||
Payment of Fusion deferred underwriting fee payable |
|
(13,150 |
) |
5(e) |
||||
Repayment of MoneyLion debt |
|
(5,000 |
) |
5(d) |
||||
Early payment penalty on MoneyLion debt |
|
(150 |
) |
5(h) |
||||
Cash |
$ |
450,130 |
|
(b) To reflect the release of $350.2 million from the Trust Account (see Note 5(a)).
(c) To reflect the conversion of MoneyLion’s subordinated convertible notes into Class A common stock, including $14.0 million outstanding at December 31, 2020 and $76.7 million Additional Convertible Notes issued during the first quarter of 2021 (see Notes 5(h)).
(d) To reflect the repayment of MoneyLion’s related party loan of $5.0 million (see Note 5(a)).
(e) To reflect the settlement of $13.2 million of deferred underwriting fees incurred during Fusion’s IPO that are contractually due upon completion of the Business Combination (see Note 5(a)).
(f) To reflect the exchange of $288.2 million of MoneyLion’s redeemable convertible preferred stock as a result of the Business Combination (see Note 5(h)).
(g) In Scenario 1, which assumes no Fusion public shares are redeemed, the Fusion common shares subject to possible redemption of $266.8 million would be reclassified to permanent equity immediately prior to the consummation of the Business Combination (see Note 5(h)).
(h) To reflect the recapitalization of the combined company through the exchange of all of the outstanding share capital of MoneyLion for Class A common stock of Fusion and the following equity transactions (in thousands):
|
|
|||||||
Exchange of MoneyLion redeemable convertible preferred stock |
$ |
293,025 |
|
5(f) |
||||
Reclassification of Fusion common stock subject to possible redemption |
|
302,606 |
|
5(g) |
||||
Proceeds from Private Placement |
|
250,000 |
|
5(a) |
||||
Payment of cash consideration |
|
(100,000 |
) |
5(a) |
||||
Payment of transaction expenses |
|
(31,850 |
) |
5(a) |
||||
Conversion of MoneyLion subordinated convertible notes |
|
906,890 |
|
5(c) |
||||
Early payment penalty on MoneyLion related party loan |
|
(150 |
) |
5(a) |
||||
Total stockholders’ equity |
$ |
804,320 |
|
(i) In Scenario 2, which assumes the maximum number of shares are redeemed for cash by the Fusion Public Shareholders, $266.7 million would be paid out in cash. The $266.7 million or 26,675,623 shares of Fusion Class A common stock represents the maximum redemption amount after which the closing conditions of the Merger Agreement are still achieved. Additionally, cash consideration paid to MoneyLion stockholders would be reduced to $27.9 million, resulting in an offsetting adjustment of $72.1 million.
149
6. Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations for the Three Months Ended March 31, 2021
The pro forma notes and adjustments, based on preliminary estimates that could change materially as additional information is obtained, are as follows:
Pro forma notes
(A) Derived from the unaudited statement of operations of Fusion for the three months ended March 31, 2021 (as restated).
(B) Derived from the unaudited consolidated statement of operations of MoneyLion for the three months ended March 31, 2021.
Pro forma adjustments
(a) To recognize the payment of early-payment penalties as of January 1, 2021 on MoneyLion’s related party loan to be repaid upon closing of the Business Combination.
(b) To eliminate fees incurred by Fusion under the administrative support and management agreements which will cease upon closing of the Business Combination.
(c) To eliminate interest income earned on the Trust Account which will be released upon closing of the Business Combination.
(d) The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of Fusion shares outstanding at the closing of the Business Combination and Private Placement, assuming the Business Combination and Private Placement occurred on January 1, 2021. As the unaudited pro forma condensed combined statement of operations is in a loss position, anti-dilutive instruments were not included in the calculation of diluted weighted average number of common shares outstanding.
150
OTHER INFORMATION RELATED TO FUSION
Introduction
Fusion is a blank check company incorporated on March 6, 2020 as a Delaware corporation whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Prior to executing the Merger Agreement, Fusion’s efforts were limited to organizational activities, completion of its initial public offering and the evaluation of possible business combinations.
Initial Public Offering
Fusion has neither engaged in any operations nor generated any revenue to date. Based on Fusion’s business activities, Fusion is a “shell company” as defined under the Exchange Act because it has no operations and nominal assets consisting almost entirely of cash.
On June 30, 2020, Fusion consummated its initial public offering of 35,000,000 units (“units”), including the issuance of 4,500,000 units as a result of the underwriters’ partial exercise of their over-allotment option. Each unit consists of one share of Class A common stock and one-half of one redeemable warrant. Each whole warrant entitles the holder thereof to purchase one share of Class A common stock for $11.50 per share, subject to adjustment. The units were sold at an offering price of $10.00 per unit, generating gross proceeds, before expenses, of $350,000,000. Prior to the consummation of the initial public offering, on March 10, 2020, Fusion Sponsor LLC (our “Sponsor”) purchased 5,750,000 shares of Fusion Class B common stock for an aggregate purchase price of $25,000, or approximately $0.004 per share. On May 28, 2020, we effected a 1:1.25 stock split of our Class B common stock, resulting in our Sponsor holding an aggregate of 7,187,500 founder shares. On June 24, 2020, we effected a 1:1.20 stock split of our Class B common stock, resulting in our Sponsor holding an aggregate of 8,625,000 founder shares. On June 25, 2020, we effected a 1:1.01666 stock split of our Class B common stock, resulting in our Sponsor holding an aggregate of 8,768,750 founder shares. The number of founder shares issued was determined based on the expectation that the initial public offering would be a maximum of 35,075,000 units and therefore that such founder shares would represent on an as-converted basis, 20% of the outstanding shares of Class A common stock under the initial public offering. On June 30, 2020, in connection with the underwriters’ partial exercise of its over-allotment option and forfeiture of the balance, our Sponsor forfeited 18,750 shares of Fusion Class B common stock, resulting in it holding 8,750,000 founder shares.
Simultaneously with the consummation of the initial public offering, Fusion consummated the private sale of an aggregate of 8,100,000 warrants, each exercisable to purchase one share of Fusion Class A common stock at $11.50 per share, to Sponsor at a price of $1.00 per warrant, generating gross proceeds, before expenses, of approximately $8,100,000 (the “private placement warrants”). The private placement warrants are identical to the warrants included in the units sold in the initial public offering, except that, so long as they are held by their initial purchasers or their permitted transferees, (i) they will not be redeemable by Fusion, (ii) they (including the shares of Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold until 30 days after Fusion completes its initial business combination, (iii) they may be exercised by the holders on a cashless basis and (iv) they will be entitled to registration rights.
Upon the closing of the initial public offering and the private placement warrants, $350,000,000 was placed in a Trust Account maintained by Continental Stock Transfer & Trust Company, acting as trustee. Except for the withdrawal of interest to pay taxes, if any, the Current Charter provides that none of the funds held in trust will be released from the Trust Account until the earlier of (i) the completion of an initial business combination; (ii) the redemption of any of the public shares properly submitted in connection with a stockholder vote to amend the Current Charter to modify the substance or timing of Fusion’s obligation to redeem 100% of the public shares if Fusion does not complete an initial public offering within 18 months from the closing of its initial public offering or with respect to any other material provisions relating to stockholders’ rights or pre-initial business combination activity or (iii) the redemption of 100% of the public shares if Fusion is unable to complete an initial business combination within 18 months from the closing of Fusion’s initial public offering, subject to applicable law. The proceeds held in the Trust Account may only be invested in United States “government securities” within the
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meaning of Section 2(a)(16) of the Investment Company Act, having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations.
The net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest. As of March 31, 2021, there was $350,279,969 in investments and cash held in the Trust Account.
Fair Market Value of MoneyLion’s Business
Fusion’s initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the Business Combination. Fusion will not complete a business combination unless it acquires a controlling interest in a target company or is otherwise not required to register as an investment company under the Investment Company Act. Fusion’s board of directors determined that this test was met in connection with the proposed Business Combination.
Stockholder Approval of Business Combination
Under the Current Charter, in connection with any proposed business combination, Fusion must seek stockholder approval of an initial business combination at a meeting called for such purpose at which public stockholders may seek to redeem their public shares, subject to the limitations described in the prospectus for Fusion’s initial public offering. Accordingly, in connection with the Business Combination, the Fusion Stockholders may seek to redeem the public shares that they hold in accordance with the procedures set forth in this proxy statement/prospectus.
Voting Restrictions in Connection with Stockholder Meeting
In connection with the execution of the Merger Agreement, our Sponsor and our directors and executive officers entered into the Sponsor Support Agreement, pursuant to which, among other things, our Sponsor agreed to vote its shares in favor of the Business Combination Proposal and all of the other proposals being presented at the Special Meeting. As of the date hereof, our Sponsor owns 20% of the total outstanding Fusion Shares.
At any time prior to the Special Meeting, during a period when they are not then aware of any material nonpublic information regarding Fusion or its securities, the Sponsor, MoneyLion and/or its affiliates may purchase shares and/or warrants from investors, or they may enter into transactions with such investors and others to provide them with incentives to acquire shares of Fusion Class A common stock or vote their shares in favor of the Business Combination Proposal. The purpose of such share purchases and other transactions would be to increase the likelihood that (i) the proposals presented to stockholders for approval at the Special Meeting are approved and/or (ii) Fusion satisfy the Minimum Proceeds Condition. Any such stock purchases and other transactions may thereby increase the likelihood of obtaining stockholder approval of the Business Combination. This may result in the completion of the Business Combination in a way that may not otherwise have been possible. While the exact nature of any such incentives has not been determined as of the date of this proxy statement/ prospectus, they might include, without limitation, arrangements to protect such investors or holders against potential loss in value of their shares, including the granting of put options and the transfer to such investors or holders of shares or rights owned by Fusion’s Sponsor for nominal value.
Liquidation if No Business Combination
Fusion has until December 31, 2021 to complete an initial business combination. If it is unable to complete its initial business combination by that date (or such later date as its stockholders may approve in accordance with the Current Charter), Fusion will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any) and (iii) as promptly as reasonably possible following such redemption, subject to the approval of Fusion’s remaining
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stockholders and its board of directors, liquidate and dissolve, subject, in each case, to Fusion’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the private placement warrants, which will expire worthless if Fusion fails to complete its initial business combination by December 31, 2021.
Fusion’s Sponsor and its directors and executive officers have entered into a letter agreement with it, pursuant to which they have waived their rights to liquidating distributions from the Trust Account with respect to their founder shares if Fusion fails to complete its initial business combination within the required time frame. However, if Fusion’s Sponsor, independent directors and executive officers acquire public shares in or after the initial public offering, they will be entitled to liquidating distributions from the Trust Account with respect to such public shares if Fusion fails to complete its initial business combination by December 31, 2021.
Fusion’s Sponsor and its directors and executive officers have also agreed, pursuant to a written agreement with Fusion, that they will not propose any amendment to the Current Charter that would affect the substance or timing of Fusion’s obligation to redeem 100% of the public shares if it does not complete its initial business combination by December 31, 2021 or with respect to any other material provisions relating to stockholders’ rights or pre-initial business combination activity, unless Fusion provides its public stockholders with the opportunity to redeem their public shares upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, calculated as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the Trust Account (which interest shall be net of taxes payable and up to $100,000 of interest to pay dissolution expenses), divided by the number of then issued and outstanding public shares. However, Fusion may not redeem the public shares in an amount that would cause its net tangible assets to be less than $5,000,001 (so that it is not subject to the SEC’s “penny stock” rules).
Fusion expects that all costs and expenses associated with implementing its plan of dissolution, as well as payments to any creditors, will be funded from amounts remaining out of the approximately $1,250,000 of proceeds held outside the Trust Account, although it cannot assure you that there will be sufficient funds for such purpose. However, if those funds are not sufficient to cover the costs and expenses associated with implementing the plan of dissolution, to the extent that there is any interest accrued in the Trust Account not required to pay taxes on interest income earned on the Trust Account balance, Fusion may request the trustee to release to it an additional amount of up to $100,000 of such accrued interest to pay those costs and expenses.
If Fusion was to expend all of the net proceeds of its initial public offering, other than the proceeds deposited in the Trust Account, and without taking into account interest, if any, earned on the Trust Account, the per-share redemption amount received by stockholders upon its dissolution would be $10.00. The proceeds deposited in the Trust Account could, however, become subject to the claims of its creditors, which would have higher priority than the claims of its public stockholders. Fusion cannot assure you that the actual per-share redemption amount received by stockholders will not be less than $10.00. While Fusion intends to pay such amounts, if any, it cannot assure you that it will have funds sufficient to pay or provide for all creditors’ claims.
Although Fusion will seek to have all vendors, service providers, prospective target businesses and other entities with which it does business execute agreements with it waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of its public stockholders, there is no guarantee that they will execute such agreements or even if they execute such agreements that they would be prevented from bringing claims against the Trust Account including but not limited to fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against Fusion’s assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the monies held in the Trust Account, Fusion’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to Fusion than any alternative. Examples of possible instances where Fusion may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. As of the date of this proxy statement/prospectus, Fusion is not a party to any agreement that does not contain such a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements
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with Fusion and will not seek recourse against the Trust Account for any reason. In order to protect the amounts held in the Trust Account, our Sponsor has agreed that it will be liable to Fusion if and to the extent any claims by a third party for services rendered or products sold to Fusion, or a prospective target business with which Fusion has entered into a written letter of intent, confidentiality or other similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable; provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under Fusion’s indemnity of the underwriters of its initial public offering against certain liabilities, including liabilities under the Securities Act. However, Fusion has not asked our Sponsor to reserve for such indemnification obligations, nor has Fusion independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and Fusion believes that our Sponsor’s only assets are Fusion’s securities. Therefore, Fusion cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Business Combination and redemptions could be reduced to less than $10.00 per public share. In such event, Fusion may not be able to complete the Business Combination, and Fusion’s public stockholders would receive such lesser amount per share in connection with any redemption of their public shares. None of Fusion’s officers or directors will indemnify Fusion for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.00 per share due to reductions in the value of the trust assets, in each case less taxes payable, and our Sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, Fusion’s independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While Fusion currently expects that its independent directors would take legal action on its behalf against our Sponsor to enforce its indemnification obligations to Fusion, it is possible that Fusion’s independent directors in exercising their business judgment may choose not to do so in any particular instance. Accordingly, Fusion cannot assure you that due to claims of creditors the actual value of the per-share redemption price will not be less than $10.00 per share.
Fusion will seek to reduce the possibility that our Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers, prospective target businesses or other entities with which it does business execute agreements with Fusion waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account. The Sponsor will also not be liable as to any claims under Fusion’s indemnity of the underwriters of its initial public offering against certain liabilities, including liabilities under the Securities Act. Fusion has access to up to approximately $750,000 held outside the Trust Account with which it may pay any such potential claims (including costs and expenses incurred in connection with its liquidation, currently estimated to be no more than approximately $100,000). In the event that Fusion liquidates, and it is subsequently determined that the reserve for claims and liabilities is insufficient, stockholders who received funds from the Trust Account could be liable for claims made by creditors.
If Fusion files a bankruptcy petition or an involuntary bankruptcy petition is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of Fusion’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, Fusion cannot assure you it will be able to return $10.00 per share to its public stockholders. Additionally, if Fusion files a bankruptcy petition or an involuntary bankruptcy petition is filed against Fusion that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by Fusion’s stockholders. Furthermore, Fusion’s board may be viewed as having breached its fiduciary duty to Fusion’s creditors and/or may have acted in bad faith, and thereby exposing itself and the company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. Fusion cannot assure you that claims will not be brought against it for these reasons.
Fusion’s public stockholders will be entitled to receive funds from the Trust Account only (i) in the event of the redemption of the public shares if Fusion does not complete its initial business combination by December 31,
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2021, (ii) in connection with a stockholder vote to amend the Current Charter to modify the substance or timing of Fusion’s obligation to redeem 100% of the public shares if it does not complete its initial business combination by December 31, 2021 or with respect to any other material provisions relating to stockholders’ rights or pre-initial business combination activity or (iii) if they redeem their respective shares for cash upon the completion of Fusion’s initial business combination. In no other circumstances will a stockholder have any right or interest of any kind to or in the Trust Account. In the event Fusion seeks stockholder approval in connection with an initial business combination, a stockholder’s voting in connection with the Business Combination alone will not result in a stockholder’s redeeming its shares to Fusion for an applicable pro rata share of the Trust Account. Such stockholder must have also exercised its redemption rights described above. These provisions of the Current Charter, like all provisions of the Current Charter, may be amended with a stockholder vote.
Properties
Fusion currently sub-leases its executive offices at 667 Madison Avenue, 5th Floor, New York, New York 10065, from the Sponsor. Fusion has agreed to reimburse the Sponsor for office space, secretarial and administrative services provided to members of its management team in an amount not to exceed $10,000 per month in the event such space and/or services are utilized and Fusion does not pay a third party directly for such services. Fusion believes, based on rents and fees for similar services, that this amount is at least as favorable as it could have obtained from an unaffiliated person. Fusion considers its current office space adequate for its current operations.
Employees
Fusion currently has two executive officers. These individuals are not obligated to devote any specific number of hours to Fusion’s matters but they intend to devote as much of their time as they deem necessary to Fusion’s affairs until it has completed an initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for an initial business combination and the stage of the Business Combination process it is in. Fusion does not intend to have any full time employees prior to the completion of its initial business combination.
Directors and Executive Officers
Fusion’s directors and executive officers are as follows:
Name |
Age |
Position |
||
Jim Ross |
55 |
Non-Executive Chairman |
||
John James |
42 |
Chief Executive Officer and Director |
||
Jeffrey Gary |
58 |
Chief Financial Officer and Director |
||
Kelly Driscoll |
61 |
Director |
||
Ben Buettell |
58 |
Director |
Jim Ross, 55, has been Fusion’s Non-Executive Chairman since April 2020 and a senior adviser to State Street since May 2020. He was most recently an executive vice president of SSGA (from December 2013 to March 2020) and chairman of the Global SPDR ETF business (“SPDR business”) (from May 2016 to March 2020). Prior to becoming chairman, Mr. Ross was global head of the SPDR business (from February 2012 to May 2016), responsible for all aspects of the SPDR business including Profit and loss management, product innovation, sales and marketing. Throughout his 27-year career, Mr. Ross served in numerous executive positions, such as director and chairman of the board for State Street Global Advisors Funds Management, Inc. and SSGA’s registered investment advisor from February 2012 to March 2020, as director of State Street Global Markets, LLC, State Street’s registered broker dealer, from May 2013 to April 2017 and as chairman and chief executive officer of State Street Global Advisors Funds Distributors, LLC, SSGA’s registered broker dealer, from May 2017 to March 2020. He was a member of SSGA’s executive management group as well as SSGA’s global product committee from July 2015 to March 2020 and from October 2009 to March 2020, respectively. In these roles, Mr. Ross was responsible for leading SSGA’s engagement with ETF stakeholders, including regulators, mutual fund and ETF boards of directors, industry associations, key clients, partners, and the media. Mr. Ross served as the trustee of various SSGA mutual funds from February 2007 and continues to serve as a trustee of Select Sector SPDR Trust ETFs and as a trustee of SPDR Series Trust ETFs since November 2005. In addition, Mr. Ross has served as a board member of various Irish self-managed investment companies from November 2016 to March 2020. Mr. Ross also served on the Board
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of Governors of the Investment Company Institute (“ICI”) from May 2011 to March 2020 and was chairman of ICI’s Exchange Traded Funds Committee from June 2010 to January 2020. Prior to joining State Street Bank & Trust Company in 1992, he worked as a senior accountant for Ernst & Young, responsible for auditing investment companies and insurance companies. Mr. Ross received a Bachelor of Science in Accountancy from Bentley College in 1988. We believe Mr. Ross’s deep asset management industry background, coupled with broad operational and transactional experience, make him well qualified to serve as Non-Executive Chairman of our board of directors.
John James, 42, has served as Fusion’s Chief Executive Officer and as a director since March 2020. Mr. James has also served as Chief Executive Officer of Fusion Acquisition Corp. II since January 2021. Mr. James has 20 years’ experience as a successful institutional investor, asset manager, and founder and operator of multiple technology businesses. Since November 2015, Mr. James has served as chairman and chief executive officer of BetaSmartz Global Pty Ltd (“BetaSmartz”), a global financial technology business serving financial services organizations. Mr. James has also served as a director of Strawberry Hill Consulting Pty Ltd since July 2012. Prior to founding BetaSmartz, Mr. James co-founded Boka Group (“Boka”) in October 2005, an emerging market fund management and sovereign advisory company, where he oversaw Boka’s investments and fund administration until the term of Boka’s closed-ended funds came to an end in 2010. In 2010, Mr. James relocated to Australia where he began structuring new financial products, including a first home buyer mortgage product for La Trobe Financial Services, which is now a subsidiary of Blackstone Group, and a real estate ETF. After serving as a reserve officer in the U.K. Royal Naval Reserve, Mr. James began his career at London-based Anglo-Suisse Capital in February 2002 where he managed equities portfolios and advised on M&A transactions until starting Boka. Mr. James received a Bachelor of Arts (Hons) and a Master of Arts from the University of Oxford with further studies in Law at the University of London and Managerial Accounting and Digital Marketing at the University of Illinois at Urbana-Champaign — College of Business. He is a fellow of the Financial Services Institute of Australasia (F Fin) and a Chartered Member of the Chartered Institute for Securities and Investment (Chartered MCSI). We believe Mr. James’s entrepreneurial experience and deep financial services background, make him well qualified to serve as a director.
Jeffrey Gary, 58, has served as Fusion’s Chief Financial Officer and as a director since March 2020. Mr. Gary has also served as Chief Financial Officer of Fusion Acquisition Corp. II since January 2021. Mr. Gary has a 30-year track record in the investment and financial services industry, including significant merger and acquisition (“M&A”) experience. He is an experienced board member and investor, having worked on numerous transactions with SPACs and public and private equity companies and has directly led audit, fiduciary, and corporate governance committees of these companies. He currently sits on the boards of directors of National Holdings Corporation (Nasdaq: NHLD) (since February 2019), where he also serves as chair of the audit committee, and Arca US Treasury Mutual Fund (since December 2019). Mr. Gary also sits on the advisory boards for Monroe Capital (since January 2020) and two FinTech companies, DealBox (since May 2019) and Total Network Service/Digital Names (since May 2019). From October 2018 to March 2020, Mr. Gary served on the board of directors of the Axonic Alternative Income Mutual Fund. Previously, Mr. Gary was a senior portfolio manager and led investment teams at Avenue Capital Group (from January 2012 to July 2018), Third Avenue (from May 2009 to December 2010), BlackRock, Inc. (NYSE: BLK) (“BlackRock”) (from September 2003 to December 2008), AIG/American General (NYSE: AIG) (from May 1998 to September 2003), and Koch Industries (from September 1996 to April 1998) where he invested across all asset classes with a focus on the high-yield, bank loan and distressed markets. During this time, he operated in a variety of roles, which included presenting each quarter on regulatory, compliance, shareholder, the Sarbanes-Oxley Act of 2002, and other U.S. Securities and Exchange Commission (“SEC”) matters to the Board. His role also included making investments and negotiating capital structures for numerous corporate buyout and acquisition transactions. He also successfully launched and managed ten new investment businesses between 1996 and 2018, and was an angel investor/advisor for a start-up healthcare company. For over 15 years, Mr. Gary was the portfolio manager for numerous NYSE-listed funds. Mr. Gary also sat as an investment committee member at BlackRockKelso Capital BDC (Nasdaq: BKCC) (“BKCC”) from February 2005 to December 2008, where he was involved with the review and approval of all private equity and credit investments, and was a team member in the launch and initial public offering of BKCC. Additionally, Mr. Gary was employed at Avenue Capital from January 2012 to July 2018, where he worked closely with the SPAC investment team on their two completed SPAC transactions in 2015 and in 2017. He started his career at PricewaterhouseCoopers as a senior auditor from September 1984 to June 1987 and later as a senior analyst at Citigroup (NYSE: C) from July 1987 to July 1988. From August 1988 to December 2002, Mr. Gary was an investment banker at Mesirow Financial. From
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January 1993 to August 1996, he was a senior distressed analyst at Cargill, Inc. Mr. Gary earned a Bachelor of Science in Accounting from Penn State University in 1984 and a Master of Business Administration in Finance and International Business from Northwestern University (Kellogg) in 1991. Mr. Gary is a Certified Public Accountant.
Kelly Driscoll, 61, has served on Fusion’s board of directors since March 2020. Ms. Driscoll has over 30 years’ experience as an asset management and financial services executive with international board experience, fiduciary expertise, and a proven track record of driving business growth. In May 2020, she became a principal of Fiduciary Resolutions Inc., an ERISA advisory and consulting firm specializing in fiduciary responsibilities and best practices. Previously, she held a number of leadership roles at State Street and SSGA, including senior vice president in global services (from July 2017 to December 2018) and office of regulatory initiatives (from June 2014 to July 2017), senior managing director of SSGA as head of public policy and governance from 2012 to 2014, where she developed and implemented SSGA’s first public policy platform, and senior managing director as head of SSGA Asia ex-Japan, located in Hong Kong, from 2008 to 2012, where she led the investment management business across that region and grew the assets under management of that group. Prior to moving to Hong Kong, Ms. Driscoll built and led SSGA’s fiduciary business negotiating numerous leveraged employee stock ownership plan (“ESOP”) and ERISA transactions as an independent fiduciary and managing company stock portfolios for corporate clients. Ms. Driscoll earned a Master of Laws degree in banking law from the Boston University School of Law in 1991, a Juris Doctor degree from Suffolk University Law School in 1987, and a Bachelor of Arts degree from Catholic University in 1981. Ms. Driscoll is a licensed attorney in the Commonwealth of Massachusetts and the Commonwealth of Pennsylvania. We believe that Ms. Driscoll’s extensive executive and legal expertise make her well qualified to serve as a director.
Ben Buettell, 58, has served on Fusion’s board of directors since March 2020. Mr. Buettell is a mergers and acquisitions professional who brings strategic, financial and transactional experience to the team, having spent 24 years (from August 1988 to September 2012) with Houlihan Lokey (NYSE: HLI), where he was instrumental in its growth from a boutique firm into a global investment bank. While at Houlihan Lokey, he led numerous corporate engagements, including mergers, acquisitions, recapitalizations, equity reorganizations, and strategic alternative assessments to start-ups, public and private companies, boards of directors, and independent fiduciaries. He also served in numerous senior management positions, including serving as co-head of Houlihan Lokey’s Fairness and Solvency Opinion Practices, co-chair of the Fairness Engagement Committee, and was a senior member of the Financial Advisory Services Management Committee. Mr. Buettell co-founded Chicago-based R7 Partners, an early-stage technology venture capital firm, in May 2013 and is a former partner. He has sat on the board of directors of 6fusion USA, Inc., Airy3D, Inc. and Tanvas, Inc. since 2016, 2017 and 2015, respectively, and as a board observer at AEye, Inc., Carrot, Inc. and More Labs, Inc. since 2017, 2017 and 2018, respectively. In addition, since December 2020, Mr. Buettell has also served on the board of directors of Trulite, Inc. (OTC: TRUL). Mr. Buettell received a Bachelor of Arts from Northwestern University in 1984 and a Master of Business Administration from Northwestern University’s Kellogg School of Management in 1988. We believe that Mr. Buettell’s deep financial services background make him well qualified to serve as a director.
Executive Compensation and Director Compensation
Except as set forth below, none of Fusion’s executive officers or directors have received any cash compensation for services rendered to Fusion. We have agreed to pay our Sponsor for $10,000 per month for office space, secretarial and administrative services provided to members of our management team. Upon completion of Fusion’s initial business combination or liquidation, it will cease paying these monthly fees. Our Sponsor, directors and executive officers, or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made to our Sponsor, executive officers or directors, or our or their affiliates. Any such payments prior to an initial business combination will be made from funds held outside the Trust Account.
Number and Terms of Office of Officers and Directors
Fusion’s board of directors consists of five members and is divided into three classes with only one class of directors being elected in each year, and with each class (except for those directors appointed prior to Fusion’s first annual meeting of stockholders) serving a three-year term. In accordance with the NYSE corporate governance requirements, Fusion is not required to hold an annual meeting until one year after its first fiscal year end following
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its listing on the NYSE. The term of office of the first class of directors, consisting of Mr. Buettell, will expire at Fusion’s first annual meeting of stockholders. The term of office of the second class of directors, consisting of Mr. Ross and Ms. Driscoll, will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Mr. James and Mr. Gary, will expire at the third annual meeting of stockholders.
Fusion’s officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Fusion’s board of directors is authorized to appoint officers as it deems appropriate pursuant to the Current Charter.
Director Independence
The rules of the NYSE require that a majority of Fusion’s board of directors be independent. An “independent director” is defined generally as a person who, in the opinion of the company’s board of directors, has no material relationship with the listed company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the company). Fusion’s board of directors has determined that Mr. Jim Ross, Ms. Kelly Driscoll and Mr. Ben Buettell are “independent directors” as defined in the rules of the NYSE and applicable SEC rules. Fusion’s independent directors will have regularly scheduled meetings at which only independent directors are present.
Legal Proceedings
There is no material litigation, arbitration or governmental proceeding currently pending against Fusion or any members of its management team in their capacity as such, and Fusion and the members of its management team have not been subject to any such proceeding in the 12 months preceding the date of this proxy statement/prospectus.
Periodic Reporting and Audited Financial Statements
Fusion has registered its securities under the Exchange Act and has reporting obligations, including the requirement to file annual and quarterly reports with the Securities and Exchange Commission. In accordance with the requirements of the Exchange Act, Fusion’s annual reports contain consolidated financial statements audited and reported on by Fusion’s independent registered public accounting firm.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF FUSION
The following discussion and analysis of the financial condition and results of operations of Fusion Acquisition Corp. (for purposes of this section, “Fusion,” “we,” “us” and “our”) should be read in conjunction with the financial statements and related notes of Fusion included elsewhere in this prospectus/proxy statement. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this prospectus/proxy statement.
Overview
We are a blank check company formed under the laws of the State of Delaware on March 6, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.
Recent Developments
On February 11, 2021, the Company entered into a Merger Agreement, by and among the Company, Merger Sub and MoneyLion, which provides for Merger Sub to merge with and into MoneyLion with MoneyLion surviving the merger as a wholly owned subsidiary of the Company (the “Business Combination”). In addition, in connection with the consummation of the Business Combination, the Company will be renamed as determined by MoneyLion and is referred to herein as “New MoneyLion” as of the time following such change of name.
Under the Merger Agreement, we have agreed to acquire all of the outstanding shares of common stock of MoneyLion for $2,200,000,000 in aggregate consideration. MoneyLion stockholders will receive shares of Class A common stock of New MoneyLion (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the Merger Agreement) exceeds $260,000,000 and (B) $100,000,000, together with a contingent right to receive a pro rata portion of up to 17,500,000 shares of Class A common stock of New MoneyLion (the “Earn Out Shares”).
The Merger Agreement contains customary representations, warranties and covenants by the parties thereto and the closing is subject to certain conditions as further described in the Merger Agreement.
Results of Operations
We have neither engaged in any operations (other than searching for a Business Combination after our Initial Public Offering) nor generated any revenues to date. Our only activities from March 6, 2020 (inception) through March 31, 2021, were organizational activities, those necessary to prepare for the Initial Public Offering, identifying a target for our Business Combination, and activities in connection with the proposed acquisition of MoneyLion. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended March 31, 2021, we had net income of $35,849,811, which consists of operating costs of $446,461 and a provision of income taxes of $2,233, offset by interest income on marketable securities held in the Trust Account of $60,633 and a change in the fair value of derivative warrant liabilities of $36,237,872.
For the period from March 6, 2020 (inception) through March 31, 2020, we had a net loss of $1,000, which consists of formation costs of $1,000.
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Liquidity and Capital Resources
On June 30, 2020, we consummated the Initial Public Offering of 35,000,000 Units at a price of $10.00 per Unit, which includes the partial exercise by the underwriters of their over-allotment option in the amount of 4,500,000, generating gross proceeds of $350,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 8,100,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant in a private placement to our stockholders, generating gross proceeds of $8,100,000.
Following the Initial Public Offering, the partial exercise of the over-allotment option by the underwriters’ and the sale of the Private Placement Warrants, a total of $350,000,000 was placed in the Trust Account. We incurred $19,834,039 in transaction costs, including $6,100,000 of underwriting fees, $13,150,000 of deferred underwriting fees and $584,039 of other offering costs.
For the three months ended March 31, 2021, cash used in operating activities was $357,597. Net income of $35,849,811 was offset by interest earned on marketable securities held in the Trust Account of $60,633 and changes in the fair value of the derivative warrant liabilities of $36,237,872. Changes in operating assets and liabilities provided $91,097 of cash.
As of March 31, 2021, we had marketable securities held in the Trust Account of $350,279,969. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of March 31, 2021, we had $592,940 of cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity. The warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.
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Going Concern
We have until December 31, 2021 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution. Management has determined that the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after December 31, 2021.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, secretarial and administrative support to the Company. We began incurring these fees on June 25, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.
The underwriters are entitled to a deferred fee of (i) 3.5% of the gross proceeds of the initial 30,500,000 Units sold in the Initial Public Offering, or $10,675,000, and (ii) 5.5% of the gross proceeds from the Units sold pursuant to the over-allotment option, or $2,475,000. Up to 10% of the deferred commission relating to the base offering may be paid at the sole discretion of the Company to third parties not participating in the Initial Public Offering (but who are members of FINRA) that assist us in consummating the Business Combination. The deferred fee will be forfeited by the underwriters solely in the event that we fail to complete a Business Combination, subject to the terms of the underwriting agreement.
Our board of directors approved payments of up to $15,000 per month to our Chief Financial Officer for services rendered to the Company commencing on June 25, 2020 and continuing through the earlier of consummation of a Business Combination or our liquidation.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the public warrants and the private placement warrants in accordance with the guidance contained in ASC 815-40 and determined that the warrants do not meet the criteria for equity treatment thereunder. As such, each Warrant must be recorded as a liability and is subject to re-measurement at each balance sheet date and any change in fair value is recognized in our statements of operations.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the private placement warrants was estimated using a Black-Scholes Option Pricing Model. The public warrants were valued using the instrument’s publicly listed trading price.
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Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A Common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Net Loss Per Common Share
We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, by the weighted average number of shares of Class A redeemable common stock outstanding for the periods. Net loss per common share, basic and diluted for Class B non-redeemable common stock is calculated by dividing net income less income attributable to Class A redeemable common stock, by the weighted average number of shares of Class B non-redeemable common stock outstanding for the periods presented.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 as of January 1, 2021 and the adoption did not have an impact on our financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
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Throughout this section, unless otherwise specified, “we”, “us”, “our”, and the “Company” refer to MoneyLion Inc. and its consolidated subsidiaries prior to the consummation of the Business Combination.
Mission
Provide financial access and advice to every hard-working American by rewiring the banking system.
Company Overview
MoneyLion was founded on a simple observation: the current financial system fails to meet the needs of 100 million middle-class Americans. We believe these Americans deserve a better alternative in financial services, and MoneyLion can be a partner in improving their financial well-being. We offer an all-in-one, digital financial platform that provides convenient, low-cost access to banking, borrowing and investing solutions tailored for our customers, rooted in data, and delivered through our proprietary technology platform.
We address our customers from a data-driven perspective of the individual and their specific circumstances. When our customers enjoy periods of financial excess, we provide tools for them to easily manage their spending and saving goals through our digital banking and automated investing solutions. When our customers experience moments of financial need, we provide them immediate access to innovative lending or advance products and credit improvement programs that can bridge these times of financial stress and improve their financial health.
Our platform approach was purpose-built to better serve our customers in contrast to the incumbent providers of financial services. Consumer financial services remains oriented around siloed service providers with incomplete customer data and fee-first product delivery models. We believe consumers benefit when their financial partner understands their entire financial life and can provide both access and advice at the right time and place. Traditional providers generally attempt to sell consumers specific financial products, only seeking to qualify them as a suitable buyer and generate a fee. With a deep, data-driven understanding of our customers and a broad set of integrated, tailor made products, we can guide our customers to use our products when and if appropriate for their needs, creating a mutually beneficial partnership.
We address large, pervasive problems in the $3.5 trillion financial services industry by focusing on the largest segment of consumers, the middle class. American consumers face enormous costs to obtain the basic elements of financial life — spend, save, and advice — that in aggregate generate over $250 billion in fees for the financial services industry on an annual basis. With 100 million middle-class Americans as our core focus — defined as individuals with household incomes up to $150,000 and FICO scores up to 750 — the breadth of our potential customers, and the costs they face in obtaining financial services, are substantial.
We have only just begun to address these problems, but our progress to date demonstrates the demand for MoneyLion to rewire the banking system. Since inception and through the date of this filing, over 1.8 million customers have opened an account on our platform to use at least one of our current products. We added approximately 1.5 million of these customers since the beginning of 2019, and we believe that we have a substantial opportunity to grow our customer base going forward. We focus on delivering the benefits of our all-in-one, digital financial platform to our customers. We believe the value proposition of our platform approach will continue to accelerate as a result of our data-driven perspective of our customers, allowing us to introduce products and guidance that address their changing life circumstances.
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The following diagram depicts the organizational structure of New MoneyLion.
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(1) We have 37 subsidiaries through which we conduct our consumer lending business. Those entities make loans pursuant to state licenses or applicable exemptions under state law. The loans we originate pursuant to our state licenses or exemptions are subject to state interest rate and other restrictions and regulations. See “Business of New MoneyLion — Regulatory Environment — State licensing requirements and regulation.”
(2) ML Plus LLC is the subsidiary that provides MoneyLion membership services to our customers, and is also the subsidiary that makes Instacash cash advances to our customers. ML Plus LLC is also party to the Account Servicing Agreement with MetaBank, which governs our RoarMoney deposit accounts and to the Service Agreement with Galileo Financial Technologies, Inc. (“Galileo”), which governs processing activity relating to the RoarMoney accounts.
(3) ML Wealth LLC is an entity registered as an investment adviser under the Investment Advisers Act of 1940 and is the principal subsidiary for the advisory services provided in connection with our MoneyLion Investing product. ML Wealth LLC is also party to the Carrying Agreement with DriveWealth, which governs brokerage and related services relating to our MoneyLion Investing product.
(4) MoneyLion Securities LLC is a broker-dealer registered with the SEC and a member of FINRA. We currently do not engage in any business activity through MoneyLion Securities LLC.
(5) IIA is currently our source of funding for originated receivables. IIA’s membership interests are issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors own all non-voting Class B Units of the applicable series they invest in, which entitles them to a targeted, non-guaranteed, preferred return of typically 12% per year. ML Capital III LLC (“ML Capital III”), an indirect wholly owned MoneyLion subsidiary, is the managing member of IIA and owns the Class A Units of each series, which entitles ML Capital III to returns that exceed the targeted preferred return on the Class B Units (if any). IIA uses proceeds from the sale of its non-voting Class B Units to purchase payment-dependent collateralized notes from Invest in America Notes SPV I LLC (“IIA Notes SPV I”) and Invest in America Notes SPV IV LLC (“IIA Notes SPV IV”). MoneyLion Inc. has identified IIA Notes SPV I and IIA Notes SPV IV as variable interest entities (“VIEs”) due to the fact that the Class A Units are entitled to residual income/loss in IIA. The Company has identified itself as the primary beneficiary of these VIEs because it directs the activities of the VIEs that most significantly impact the VIEs’ economic performance. As the primary beneficiary of the VIEs, the Company has consolidated the balances of the VIEs into its financial statements. The IIA Class B Units are reflected in the Company’s consolidated financial statements as noncontrolling interests.
(6) We acquired 100% of the outstanding common stock and Series A preferred shares of Wealth Technologies Inc. in December 2020. Wealth Technologies Inc. is a technology company specializing in market-leading wealth management decisioning and administration.
(7) MoneyLion Malaysia SDN BHD is our foreign subsidiary in Malaysia that employs engineering and technical development teams who work out of our office in Kuala Lumpur, Malaysia. This entity does not generate any revenue.
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Our Strategy
We address our customers’ needs by pursuing a differentiated strategy. We attempt to rectify complex and long-standing problems in consumer financial services through solutions supported by the following approach:
1) Team: Backgrounds across both technology and financial services;
2) Data: Products designed from a data-driven understanding of our customers and their needs;
3) Technology: Built to underpin all our products and support constant innovation;
4) Platform: Complementary set of products to address our customers’ entire financial lives; and
5) Guidance: Real-time and automated, spanning saving, spending, borrowing and investing.
Organize a Team to Address the Problem: The complexity of the problems faced by our customers required a different type of team to address them. The American middle class is under tremendous, ongoing financial stress with many living paycheck to paycheck without enough savings to navigate through a small financial setback, even before COVID-19. We believed building yet another provider of standard financial products, whether delivered digitally or at a branch, was unlikely to impact their financial well-being for the better.
What was required were individuals who understood the current system in detail, including its legacy technology, exorbitant pricing models, and myopic view of customers. But understanding the problem was only the beginning. Experience in solving seemingly intractable problems through the application of data and technology was necessary. Our team grew to include individuals who had built advanced technologies to algorithmically identify and eliminate inefficiencies in some of the most demanding and competitive markets. To this team, we added experts in product development and financial planning to translate these solutions into a data-driven platform that maximized the benefit of these innovations for our customers.
Organizing a team that understands the complex problems of both our customers and the financial system and has the experience to address such problems was our foundation. However, to generate meaningful benefit for our customers we had to go farther. Customers required a partner who could deliver products that were transparent and made addressing their problems both easy and enjoyable. We added team members experienced in delivering best-in-class consumer digital services, bringing to market a beautiful, easy-to-use interface for our customers to access our platform, consume our products and receive advice.
Lastly, as we established an institution built for the long-term, we hired team members to develop technologies that introduce MoneyLion to our prospective consumers in a cost-effective manner, allowing us to offer our products at fair prices while building a growing, sustainable business. We believe our innovations in customer acquisition have provided us with a competitive advantage that we expect to continue as we scale technologies in which we have made substantial historical investments.
Understand the Problem Through Data: We build innovative consumer financial products that address our customers’ complex problems by leveraging advancements in data science from both Silicon Valley and Wall Street and applying those advancements for the benefit of America’s middle class. We believe this approach separates us both from incumbent providers and new market entrants.
MoneyLion begins and ends every conversation with data. Data drives our approach to understanding the problems of our customers, how we can address these problems with products and guidance, and how we approach prospective customers in a timely, cost effective manner.
We consume an enormous flow of data about the American middle class to understand their problems. Since inception, we have engaged with over 7.5 million Americans through our web and mobile applications, linked to over 14 million bank accounts, and integrated over 100 external data sources, coming to understand the cycle of financial excess and deficit that permeates our prospective customer base. Each day we ingest one billion transactional data points such that our understanding grows, and with it, our ability to address both legacy and emerging problems in our customers’ lives. We are constantly analyzing this data reservoir through our 55 machine learning models to generate three billion inferences, categorizations, and predictions per day that we distill into over 14,000 insights for each of our customers.
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These insights allow us to understand our customers and drives the development of innovative products. On a standalone basis, our products reflect deep insights in our customers’ needs:
• RoarMoneySM Banking product: premium features with no minimums, ability to get paid two days early with direct deposit and credit-card like rewards;
• MoneyLion Investment product: the first investment account for 60% of our customers, automatically manages their investments in custom portfolios from leading providers like Global X Management Company LLC (“Global X”) and Wilshire Advisors, LLC (“Wilshire”), and offered without account minimums;
• InstacashSM Earned Income Advance product: 0% APR advances against expected salary or other recurring income deposits; always there in moments of need, providing funds to help avoid overdraft fees or finance daily transactions; and
• Credit Builder Plus membership product: a suite of services that help customers establish or repair credit, gain financial literacy, and track financial health in a bundled membership subscription that includes banking and investing accounts, a loyalty rewards program and access to cost-effective credit.
Our data-driven customer insights drive the power of our platform, where our current products can work in conjunction to drive better outcomes for our customers. Selected examples include:
• Customers can track their account balances from the MoneyLion mobile application so they can request a 0% APR Instacash advance to be delivered to their account to avoid costly overdraft fees;
• When a customer earns a cashback reward using their MoneyLion debit card, it is automatically invested in a fully managed investment account where it can be withdrawn and spent or remain invested; and
• Credit Builder Plus loans are collateralized in part by assets in the customers’ investment account, allowing a customer to enjoy the benefits of a lower rate while leaving their assets invested.
Lastly, we use our data advantage to drive our efficient customer acquisition strategy. Drawing upon the best practices of advertising technology, we use our deep understanding of our prospective customers to cost effectively introduce the MoneyLion platform at the right time and place.
Build Technology to Scale and Innovate: When we started MoneyLion, we recognized that both incumbent providers of financial services and new market entrants generally chose to build technology to deliver a single product to market. While certainly an easier path than building a platform, a monoline product model can never deliver a fully integrated platform experience or support rapid product innovation. We chose to build differently.
We built a single core platform from an array of microservices that allows us to deliver both our current products as well as all those we have in development. We believe this technology development model is more in line with the best practices of leading global technology companies, rather than the legacy models still largely employed in the financial services industry.
The primary beneficiary of our technology strategy is our customers. Products we have introduced are integrated across our platform. Customers can move money from their bank account to their investment account and invest that money into an ETF. Customers can request a salary advance and deposit that money in their bank account. These seamless product experiences can occur within a single app, without friction, in real-time, and reflects the benefit of our original design decision.
We have experienced additional benefits from our decision to build a truly integrated technology platform, that we believe will only compound as we add additional products and features:
• Deliver new products to our customers, from prototype to onboarding, in under six months;
• Reduce our cost to deliver our products and service on an ongoing basis;
• Approve customer requests for new accounts, loans, advances, etc. in under ten seconds;
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• Transact across the platform on our own payment rails, allowing for instantaneous, costless transfers; and
• Utilize decision engines that automate over 99% of our customer interactions.
We built this platform to deliver a uniform customer experience alongside near complete flexibility in terms of the regulated and unregulated partners we utilize to support our products. For example, MoneyLion is not a bank. However, our customers can open and utilize an FDIC-insured digital demand deposit account, provided by a partner bank, that is fully integrated into our platform. This model allows MoneyLion to adopt best-of-breed partners to support an ever-increasing range of financial activities, shortening the time to deliver new products to our customers, while maintaining a seamless customer experience.
We utilize Amazon Web Services (“AWS”) to host and deliver our platform to customers. Delivery through AWS allows for reliable, secure, cost-effective, and high-performance scaling.
We have also invested in specific technologies to attract prospective customers to MoneyLion and convert those individuals into customers. Our technological approach to customer acquisition is a core competitive advantage of MoneyLion and an area in which we will continue to invest resources to maintain what we believe is a material advantage in our cost of marketing.
Solve with a Platform, not a Product: Many new companies have entered the market since our inception that seek to provide an individual financial product to American consumers, while fewer, if any, have attempted to deliver a complete platform of products as we do. We continue to believe that a single product strategy is neither advantageous for consumers nor a tenable long-term strategy for the providers of these products.
Our customers require a variety of products and services to successfully manage their financial lives. By providing a complete platform for these customers, they can address these financial needs both conveniently and seamlessly, and we are able to architect a unique user experience, personalized to the individual customer. Most importantly, by addressing the complete financial life of our customers, we can provide much needed guidance to our customers as to their saving, spending, borrowing and investing decisions, with substantially better insight into their life circumstances. We believe a valuable financial partner needs to both see and provide guidance based on the whole problem, rather than only a portion, and our platform approach is fundamental to achieving our mission to improve financial outcomes for the American middle class.
In addition to being a better alternative for our customers, we believe that our platform approach is a substantially better long-term model as a business. The cost to acquire customers in a competitive market such as consumer financial services is a material portion of the variable cost structure for both incumbent providers as well as new market entrants. A platform approach allows us as a provider to allocate these acquisition costs over multiple products that our customers may use, initially or over time, on our platform. We can generate multiple income streams from a single customer and deliver our products at pricing levels that we believe will be comparatively lower over the long-term while maintaining attractive operating margins. Lastly, as we continue to mature our customer relationships, we believe that we will continue to grow wallet share with our customers in a manner only available to a full-service platform.
Similarly, our platform approach has also proved advantageous in acquiring new customers. We believe our ability to selectively market multiple products at once allows us to more cost effectively reach prospective customers initially seeking at least one of the products on our platform.
Guidance Brings it All Together: Providing our customers with access to financial products is fundamental to our mission, however, products alone will not adequately address the financial requirements of our customers. We believe that guidance is an essential component of the required service model of a functioning all-in-one, digital financial platform.
When we refer to guiding our customers, we are not referring to an asset allocation strategy or a specific investment opportunity. Those are both comparatively easy and largely irrelevant for our customers. We use the term guidance to reflect a holistic, customer-centric set of automated suggestions, behavioral nudges, goal ingestion and adjustment, planning tips, and reporting across the entire spectrum of saving, spending, borrowing and investing activities driven by our knowledge of the customer, their peers, and our customers’ own goals.
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Our model is most similar to goals-based planning, a methodology used by certain incumbent providers of financial planning services to address multiple customer objectives across different time horizons. Historically, goals-based planning has been used by financial planning providers to assist high-net-worth customers navigate their allocation of resources across current and future objectives. However, through our acquisition of Wealth Technologies Inc. (acquisition discussed below) and our prior partnership with their team, we have a version of goals-based planning we call fGPS® (Financial Goals Positioning System) that is both customized for our middle-class American customers and we believe to be more advanced than those employed by even the most sophisticated financial planning organizations. Amongst our many advancements, we expect to deliver real-time goals-based planning services, customized to the individual customer and their goals, on a fully automated basis, covering millions of concurrent customers and goals.
To date, we have focused our guidance on addressing the immediate and near-term problems of our customers to assist them in making decisions to place them on a path to a better financial future. Examples include:
• Avoiding overdraft fees;
• Managing surprise expenses;
• Improving their credit score;
• Building a rainy-day fund;
• Paying bills; and
• Opening an investment account.
As our customers make progress on the basic elements of managing their financial lives, we will assist them in setting and maintaining progress towards longer-dated goals and aspirations. Examples of longer-dated goals we will seek to assist our customers achieve include:
• Purchasing insurance;
• Planning for a vacation;
• Buying a car;
• Saving for college;
• Buying a home; and
• Retirement planning.
Our platform utilizes affiliates, third party providers of products and services to whom we may introduce our customers from our network to assist customers in making purchases in-line with their goals. We expect to grow our affiliate network over time to address the range of customer-defined goals. We earn revenue from fees from our affiliate partners in exchange for meeting certain success metrics related to their campaigns such as customers’ clicks, impressions or completed transactions. This revenue is reflected in affiliates income.
Our Product Platform
Once consumers download the free MoneyLion app, they are ready to improve their financial health, with a full range of financial services across banking, borrowing and investing, delivered through an all-in-one, easy-to-use digital financial platform.
Our intuitive and user-friendly app provides a fast, seamless experience across all our products. We continually listen to our customers’ feedback and implement improvements on an accelerated release cycle, always remaining committed to delivering a delightful customer experience. As of December 31, 2020, we had received over 85,000 five-star ratings across all app stores, with a 4.7 average on Apple, a 4.3 average on Google, a 4.6 average on TrustPilot, and a Net Promoter Score (“NPS”) of over 80 for our earned income advance product, InstacashSM.
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MoneyLion’s current product platform includes:
• RoarMoneySM: Modern mobile banking that enables customers who set up direct deposit to get paid up to two days early and manage their day-to-day spending, with cashback rewards and robust security controls;
• MoneyLion Investing: Full featured, automated investing tools with a variety of investment options, including environmental, social and governance (“ESG”) portfolios, so customers can invest in strategies that match their personal preferences;
• InstacashSM Earned Income Advances: Interest-free advances based on anticipated salary or other recurring deposits to help customers bridge short-term timing gaps in their income, enabling them to pay their bills on time or cover unexpected expenses without incurring costly overdraft fees;
• Credit Builder Plus: Membership program designed to help customers build or rebuild their credit, gain access to cost-effective credit, establish financial literacy and track financial health; and
• Financial Heartbeat®: Intelligent, automated platform that evaluates a customer’s financial situation across four key dimensions and delivers personalized guidance that helps them decide what actions to take and which products to use to improve their financial health.
Premium Mobile Banking: RoarMoney
RoarMoney is our FDIC-insured digital demand deposit account with zero minimums, premium features, and rewards. Our RoarMoney demand deposit accounts are currently issued by MetaBank, a South Dakota-based, nationally chartered bank owned by Meta Financial Group, Inc. (NASDAQ: CASH).
Customers can open a RoarMoney account in minutes through the MoneyLion mobile application, add funds to their account and begin spending using a RoarMoney virtual debit card. RoarMoney accounts also include a physical MoneyLion Debit Mastercard that can be used at any of the 55,000 Allpoint ATM network locations to make no-fee withdrawals.
RoarMoney accounts can be funded with a direct deposit, an external debit card, an external bank account, or mobile check capture. For an additional retail service fee of up to $4.95 paid to the retailer, customers may also make cash deposits to their RoarMoney debit cards through a network of over 90,000 retailers across the country, a service provided by Green Dot Corporation (“Green Dot”). Under our network membership agreement with Green Dot, all transactions made by customers through the Green Dot network are settled by MetaBank. MoneyLion does not pay Green Dot any fees for this service, nor does MoneyLion receive any of the retail service fee revenue collected by retailer; Green Dot may have revenue sharing arrangements with the retailer.
Our RoarMoney account includes some of the best features and rewards in banking, including:
• Zero account minimums;
• 55,000 Allpoint ATM network locations to make no-fee withdrawals;
• Paychecks delivered up to two days earlier than the scheduled payment date with direct deposit into the RoarMoney account, a feature accessible with no additional mandatory fees;
• Price Protection, a Mastercard sponsored insurance benefit, worth up to $1,000 in individual coverage limits per year per MoneyLion Debit Mastercard cardholder;
• Access to mobile wallets such as Apple Pay and Google Pay;
• Shake ‘N’ BankTM cashback rewards, simply shake the phone after purchases of $10 or more for a reward. Shake ‘N’ Bank rewards allow customers to earn up to the full amount of the purchase back, subject to a cap of $120. Shake ‘N’ Bank rewards are deposited automatically into a customer’s MoneyLion investment account. Maintaining an investment account is a requirement in order to earn Shake ‘N’ Bank rewards; and
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• Other cashback rewards opportunities when customers make qualified purchases with eligible merchants using their debit card. Rewards are automatically added to the RoarMoney account or to a MoneyLion investment account, where a customer can either withdraw the cash reward or keep it invested. RoarMoney customers may receive 1-3% cashback on transactions at eligible merchants or merchant categories that are determined by MoneyLion.
RoarMoney offers robust security controls such as multi-factor authentication, contactless payment, instant card lock and robust protection against unauthorized purchases if cards are lost or stolen.
Each RoarMoney account is charged a $1 per month administrative fee, which is deducted from the customer’s RoarMoney account. The account administrative fee is retained by MoneyLion and is not shared with any of its third-party partners/vendors. If a customer’s account has less than $1 on deposit, the account will not be charged the administrative fee. We began charging this fee in 2020 and for the year ended December 31, 2020 approximately 20% of our RoarMoney accounts have been charged the administrative fee.
Our RoarMoney demand deposit accounts are currently issued by MetaBank. MetaBank is also the issuer of all RoarMoney debit cards and sponsors access to debit networks for payment transactions, funding transactions and associated settlement of funds under a sponsorship agreement with MoneyLion. MetaBank also provides sponsorship and support for ACH and associated funds settlement. Under the agreement between MoneyLion and MetaBank, MetaBank receives all of the program revenue and transaction fees, and passes them on to MoneyLion, minus any obligations owed to MetaBank. MoneyLion pays all payment network fees and other program-specific expenses associated with RoarMoney. These payment network fees are set directly by the various payment networks and based on the transactions processed on their respective network. See “Our Business Model” for additional information.
Shake ‘N’ Bank and other cashback rewards are paid for by MoneyLion and included in our marketing expense on our consolidated statement of operations. We pay a nominal fee to MetaBank for our customers to access their direct deposits up to two days earlier than the scheduled payment date. As part of a fee arrangement between MoneyLion and Allpoint, MoneyLion pays Allpoint a fee to provide RoarMoney customers with access to 55,000 Allpoint ATM network locations at no additional cost to RoarMoney customers. Price Protection is an insurance benefit sponsored by Mastercard and provided to MoneyLion Debit Mastercard cardholders by the Member Companies of AIG Insurance Company and paid for by MoneyLion.
Personalized Investing: MoneyLion Investing
MoneyLion Investing is an online investment account that offers access to separately managed accounts invested based on model portfolios comprised of ETFs and managed on a discretionary basis. Advisory services related to the MoneyLion investment account are provided by ML Wealth, an SEC registered investment adviser and wholly owned subsidiary of MoneyLion Inc. Brokerage and custodial services are provided by DriveWealth, a third-party provider. See “Our Business Model” below for additional information regarding our agreement with DriveWealth.
This fully-managed account model allows customers to set their investment strategy and let ML Wealth and its partners manage investment decisions to implement that strategy on a discretionary basis. An investment account holder simply identifies their investing comfort zone to receive a personalized portfolio, a mix of stock and bond ETFs. The customer is then free to make the portfolio more or less aggressive, if their preferences or goals change. Additionally, accounts are monitored on an ongoing basis and are managed to and rebalanced toward target allocations whenever there is money movement within an account, when model allocations are updated, as well as on a periodic basis. Auto-investing allows customers to automatically contribute into their investment account with recurring deposits directly into the account.
Investment strategies range from Steady-Income (most conservative; consistent investment income with an all-bond ETF portfolio and minimal exposure to market fluctuation) to Equity Only (most aggressive; taking on higher potential risk by investing in equity ETFs, in pursuit of the highest long-term potential gains). Thematic investing allows customers to invest in their interests and passions, with thematic ETFs aligned to specific topics such as technology innovation and social responsibility, by adding additional models to their investment account to be incorporated as part of their target allocations alongside their core allocation model.
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Each active investment account is charged a $1 per month administrative fee, which is deducted from the customer’s investment account. The account administrative fee is retained by MoneyLion and is not shared with any of its third-party partners/vendors. If a customer’s account has no balance, the account will not be charged the administrative fee. We began charging this fee in the fourth quarter of 2019 and for the year ended December 31, 2020 and 2019, approximately 87% and 50%, respectively, of our investment accounts have been charged the administrative fee. There are no management fees charged or minimum balance required to maintain an investment account.
Portfolios are powered by two of the leading global investment solution providers in the industry, Wilshire and Global X. Wilshire provides ML Wealth with consulting services with respect to the development and maintenance of risk-based asset allocation and ETF selection for the core allocation models that ML Wealth offers to customers. Global X and Wilshire each provide research and consulting regarding the construction of the thematic portfolios that ML Wealth offers to customers. ML Wealth compensates Wilshire directly through a flat fee investment consulting arrangement for these services, including asset allocation research and advice, as well as security due diligence and selection. ML Wealth does not compensate Global X for these services.
As of February 28, 2021, ML Wealth had assets under management of approximately $16.7 million. Certain cashback rewards offered by MoneyLion (or its affiliates) may be added directly to the MoneyLion investment account. In those cases, the customer is required to maintain an investment account to be eligible for the reward. These rewards are offered and funded by MoneyLion and not by ML Wealth. See “— Premium Mobile Banking: RoarMoney” above.
Access to Earned Money: Instacash
Instacash is our 0% APR advance product that gives customers early access to their recurring income deposits. Customers can access Instacash advances at any time during a regular deposit period up to their advance limit, providing customers with the flexibility to cover temporary cash needs and avoid costly overdraft fees. When customers link their RoarMoney account or an external checking account, they can qualify for Instacash. No credit check is required.
Eligibility for Instacash is based on the verification of the customer’s checking account and the customer’s identity, and the advance limit is primarily based on a percentage of income or other recurring deposit amounts detected through the linked checking account. This process is fully automated unless there are any issues flagged via our customer identification processes. MoneyLion has the sole authority to make Instacash advances.
There are no fees associated with either regular delivery of funds to a RoarMoney account (typically delivered within 12-48 hours) or an external checking account (typically delivered within two to five business days). Should a customer wish to receive their funds on an expedited basis (typically within minutes or less), there is a $3.99 instant transfer fee for delivery to RoarMoney accounts and $4.99 instant transfer fee for delivery to an external checking account. Use of this expedited transfer feature is entirely optional. Customers may also choose to leave MoneyLion an optional tip for use of the Instacash service.
Instacash advances are included in finance and membership receivables in our consolidated balance sheets.
Building Credit History and Giving Access to Credit: Credit Builder Plus
Our Credit Builder Plus membership offers a proven path for our customers to access credit and establish or rebuild history, build savings, establish financial literacy, and track their financial health.
For a monthly cost of $19.99, customers receive a suite of services including banking and investment accounts, credit tracking and financial literacy content, rewards programs and access to loans of up to $1,000 at competitive rates offered by MoneyLion lending subsidiaries, allowing our customers to establish up to twelve months of payment history with all three credit bureaus. Credit Builder Plus members do not pay additional recurring fees for the services included in the membership program — the $1 per month administrative fees for the RoarMoney account and MoneyLion investment account are waived. Credit Builder Plus members may incur certain fees or other charges for using specific features of the membership services, such as interest charges on a loan they choose to borrow, or non-recurring convenience fees associated with their RoarMoney account.
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We offer our Credit Builder Plus members access to the Lion’s Share Loyalty Program, where members can earn up to $19.99 per month. The size of the Lion’s Share reward depends on a customer’s number of logins into the MoneyLion app and purchases using their RoarMoney account in that month. Expenses related to our Lion’s Share Loyalty Program are included in our marketing expense. For the year ended December 31, 2020, on average approximately 40% of our Credit Builder Plus customers who met the minimum eligibility criteria received this benefit.
While most other credit builder products in the market do not give the consumer any of the loan funds upfront, MoneyLion provides a portion of the loan proceeds right away alongside access to Instacash advances to help cover everyday expenses. The rest of the loan funds are saved for the customer in a credit reserve account, an account in the customer’s name maintained by ML Wealth and held at DriveWealth (“Credit Reserve Account”). Based on the customer’s credit profile, the MoneyLion lending subsidiary will disburse a portion of the loan principal to the customer’s selected bank account, with the remainder deposited in a Credit Reserve Account. Funds in the Credit Reserve Account serve as collateral for the loan that may not be withdrawn while the loan is outstanding and may be liquidated if the customer defaults on their loan obligations. Funds in the Credit Reserve Account become fully accessible to the customer once the full loan amount has been repaid. With the membership, customers receive their credit score as well as key credit factors, such as credit utilization, to track their progress.
For the year ended December 31, 2020, the average Credit Builder Plus loan was $668, with a weighted average APR of 20.4%. Credit Builder Plus loans range in size from $500 to $1,000 with an interest rate range from 5.99% to 29.99%. All Credit Builder Plus loans have 12-month terms. Our underwriting is driven by proprietary models that combine applicants’ prior credit history, based on credit bureau data, with bank account and income data and their repayment history with MoneyLion. We do not have a minimum FICO score for approval of the Credit Builder Plus loans. MoneyLion develops and executes all credit policies and risk management strategies directly. While MoneyLion does not provide a guarantee for the performance of loans and other receivables that we originate, we sell these loans and other receivables at a discount of approximately 10% to IIA. The receivables are included in finance and membership receivables on our consolidated balance sheet.
For the year ended December 31, 2020, the average ML Plus loan was $500, with a weighted average APR of 17.0%. ML Plus loans were fixed at $500, with an interest rate range from 5.99% to 29.99%. All ML Plus loans have 12-month terms. Our underwriting was driven by proprietary models that combine applicants’ prior credit history, based on credit bureau data, with bank account and income data and their performance history with MoneyLion. MoneyLion develops and executes all credit policies and risk management strategies directly. While MoneyLion does not provide a guarantee for the performance of loans and other receivables that we originate, we sell these loans and other receivables at a discount of approximately 10% to IIA. See Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion — Net Interest Income on Finance Receivables” below for more information on ML Plus loans.
Advice and financial wellness: Financial Heartbeat
In addition to offering a complementary suite of financial products, MoneyLion has pioneered a new approach to personal financial management with Financial Heartbeat, an intelligent, automated advice platform that guides customers on their financial journey.
Financial Heartbeat evaluates customers’ financial situation across four key dimensions: SAVE (savings and financial preparedness), SPEND (spending and personal budget), SHIELD (insurance needs and coverage) and SCORE (credit tracking and health). Through our easy-to-use interface, customers can review the key issues impacting their financial situation, decide what actions to take, evaluate which products to use and receive guidance on how to stay motivated on their journey towards financial wellness.
Our Business Model
We offer a range of financial products and services through a single platform delivered via a mobile application.
Our adjusted revenue is primarily broken into the following categories:
• Fees: in 2020, 80% of adjusted revenue, $61 million in adjusted revenue
• Instacash (instant transfer convenience fees, tips)
• Credit Builder Plus (monthly recurring membership fees, loan instant transfer convenience fees)
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• Payments: in 2020, 9% of adjusted revenue, $7 million in adjusted revenue
• RoarMoney (interchange fees, out-of-network ATM fees, administration fees)
• Advice: in 2020, 4% of adjusted revenue, $3 million in adjusted revenue
• MoneyLion Investing (administration fees), affiliates (affiliate fees)
• Interest: in 2020, 7% of adjusted revenue, $5 million in adjusted revenue
• Credit Builder Plus (loan interest income)
Our revenue is primarily broken into the following categories:
• Fee income: in 2020, 59% of revenue, $47 million in revenue
• MoneyLion Investing (administration fees),
• RoarMoney (interchange fees, out-of-network ATM fees, administration fees)
• Instacash (instant transfer convenience fees, tips)
• Credit Builder Plus (loan instant transfer convenience fees)
• Credit-related decision servicing (fees)
• Membership subscription revenue: in 2020, 33% of revenue, $26 million in revenue
• Credit Builder Plus (monthly recurring membership fees)
• Net interest income on finance receivables: in 2020, 5% of revenue, $4 million in revenue
• Credit Builder Plus (loan interest income)
• Unsecured personal loans (loan interest income)
• Affiliates income: in 2020, 3% of revenue, $3 million in revenue
• Affiliates (affiliate fees)
Adjusted revenue is a non-GAAP measure. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion — Non-GAAP Measures” for a reconciliation of adjusted revenue to total revenues, net.
We originate loans directly under our lending licenses or pursuant to applicable exemptions across various states in the U.S., and we service all of the loans that we originate.
Receivables originated on our platform are currently financed through IIA. IIA was formed in 2016 and is an indirect wholly owned subsidiary of MoneyLion Inc. As of December 31, 2020, IIA had assets of approximately $86 million, primarily from institutional investors, and for 2020 and 2019, approximately 90% of our originated receivables have been funded through IIA. IIA is organized as a Delaware limited liability company and is treated as a partnership for United States income tax purposes. IIA’s membership interests are issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors own all non-voting Class B Units of the applicable series they invest in, which entitles them to a targeted, non-guaranteed, preferred return of typically 12% per year. ML Capital III, an indirect wholly owned MoneyLion subsidiary, is the managing member of IIA and owns the Class A Units of each series, which entitles ML Capital III to returns that exceed the targeted preferred return on the Class B Units (if any). IIA uses proceeds from the sale of Class B Units to investors to purchase borrower payment dependent promissory notes from Invest in America Notes I SPV LLC and Invest in America Notes SPV IV LLC, each an indirect wholly owned MoneyLion subsidiary. The collateral consists of a portfolio of underlying MoneyLion loans and advance receivables. Investors in Class B Units fund their investment into IIA at the time of subscription, which proceeds are used to finance receivables originated on MoneyLion’s platform.
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In addition, we depend on certain key third-party partners to provide certain of our products and services. Our RoarMoney demand deposit accounts and associated debit cards are currently issued by MetaBank. Our subsidiary, ML Plus LLC, is party to an Account Servicing Agreement with MetaBank, which has an initial three-year term ending January 2023, which automatically renews for successive two-year periods unless either party provides written notice of non-renewal, which may be provided without cause to the other party at least 180 days prior to the end of any such term. In addition, upon the occurrence of certain early termination events, either we or MetaBank may terminate the agreement immediately upon written notice to the other party. The Account Servicing Agreement does not prohibit MetaBank from working with our competitors or from offering competing services, nor does it prevent us from working with other banks to provide similar services. Our partnership with MetaBank allows us to provide deposit accounts and debit cards while complying with various federal, state, and other laws. MetaBank also sponsors access to debit networks and ACH for payment transactions, funding transactions and associated settlement of funds. Under the terms of the Account Servicing Agreement, MetaBank has the right to supervise, oversee, monitor and review our performance, and we have to comply with applicable laws and regulations, including data privacy, BSA/AML and Customer Identification Program requirements. MetaBank receives all of the program revenue and transaction fees, and passes it on to MoneyLion, minus any obligations owed to MetaBank. In addition, we are generally responsible for any expenses related to this arrangement, including payment network fees, marketing expenses, vendor management expenses, and taxes.
In connection with our arrangements with MetaBank, we have also entered into a multi-year service agreement with Galileo Financial Technologies, LLC (f/k/a Galileo Financial Technologies, Inc.) (“Galileo”), in which Galileo has agreed to process all of our transactions for our RoarMoney accounts and debit cards, and to handle corresponding payments and adjustments. Galileo also maintains cardholder information, implements certain fraud control processes and procedures, and provides related services in connection with the RoarMoney accounts and debit cards. We pay the greater of actual fees or the minimum monthly fee for these services. Following the initial term, the service agreement renews for successive two-year periods unless either party provides written notice of non-renewal, which may be provided without cause, to the other party at least 180 days prior to the end of any such term. The occurrence of certain events would provide each party with an early termination right under the agreement.
Our MoneyLion Investing offering is currently reliant upon DriveWealth, a third-party broker-dealer partner, which provides brokerage and related services for the investment accounts facilitated through our platform. Under the terms of ML Wealth’s amended and restated Carrying Agreement with DriveWealth, which was entered into in October 2020, DriveWealth provides brokerage and custodial services to ML Wealth’s advisory customers, including by executing orders successfully submitted by ML Wealth via its master trading account. The Carrying Agreement has an initial three-year term ending October 2023, which automatically renews for successive one-year periods unless either party provides written notice of non-renewal, which may be provided without cause, to the other party at least 60 days prior to the end of any such term. In addition, upon the occurrence of certain early termination events, either we or DriveWealth may terminate the agreement immediately upon written notice to the other party. The Carrying Agreement does not prohibit DriveWealth from working with our competitors or from offering competing services, and DriveWealth currently provides similar services to a variety of other financial institutions. Under our arrangement, our customers must sign a Customer Account Agreement with DriveWealth, and DriveWealth maintains ultimate authority on whether to reject the opening of an account, or to take any actions related to an account, including closing any account, liquidating the assets under an account or limiting the activities of any account, if DriveWealth deems it necessary to comply with applicable laws or if there is a reasonable risk-based justification for doing so.
Our Growth Strategy
We believe we are in the early innings of realizing the full value of our existing platform. We seek to capitalize on the structural advantages inherent in being a digitally native, customer-centric, and built-to-scale platform as we continue capturing market share and economic gains. Our multi-pronged growth strategy is designed to continue building upon the momentum we have generated to date to create even greater value for consumers:
• Continue penetrating our large addressable market;
• Increase top-of-funnel conversion;
• Accelerate cross-sell and attachment rates with our platform approach;
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• Deliver new products and features;
• Grow our affiliate network and expand our corporate partnerships; and
• Evaluate additional strategic acquisitions.
Continue penetrating our large addressable market: Our target market is the 100 million middle-class Americans whose needs are not well-addressed by the current financial system. We define this market as individuals with household incomes up to $150,000 and FICO scores up to 750. While we have achieved significant growth and scale to date through developing an all-in-one, digital financial platform to meet the needs of our customers, the addressable market is vast, and we have a long runway for future growth. With the over $500 million in cash raised from the Business Combination (including approximately $350 million in cash held in the Trust Account immediately prior to Closing and an additional $250 million in cash proceeds received at Closing from the PIPE Investment, less, among other things, transaction expenses, redemptions, repayment of all or a portion of MoneyLion’s outstanding indebtedness and, if elected by MoneyLion, cash consideration paid at Closing to the MoneyLion stockholders of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the merger agreement) exceeds $260,000,000.00 and (B) $100,000,000.00), we will have the ability to substantially increase our marketing spend versus our historical expenditure levels. We believe we have developed a highly efficient customer acquisition approach that will allow us to effectively deploy the expanded marketing spend and drive new customer growth.
Increase top-of-funnel conversion: We have a significant opportunity to increase the rate at which we convert consumers we reach through various marketing channels into customers. While we have invested in a technology-based approach to customer acquisition that is highly efficient, we believe scale will allow us to further enhance top-of-funnel conversion. Expanding market presence and consumer awareness of our brand should result in higher rates of customer conversion. In addition, a growing customer base and associated financial and transactional data points will enhance our consumer insights and allow us to better address the needs of our target market, the middle class. Those insights will allow us to innovate and offer an even broader suite of financial products, attracting more customers onto the MoneyLion platform.
Accelerate cross-sell and attachment rates with our platform approach: We take a platform approach to address our customers’ entire financial lives. The combination of a deep, data-driven understanding of our customers’ pain points and a broad suite of products allows us to help improve our customers’ financial well-being while producing strong revenue growth and profitability. We believe the number of customers using two or more products will further expand as more customers see value in our holistic platform approach, and as we continue to innovate and launch new products. Not only does multiple product engagement increase revenue per customer and drive revenue growth, it also further enhances our profitability, driving a lower cost to acquire and service customers.
Deliver new products and features: Our product and engineering teams are constantly innovating, leveraging both our data-driven understanding of our customers and our existing technology infrastructure to build new, impactful products and features. Our products and services follow established product development steps, including research and development, design, validation and testing. For each product launch, we generally anticipate expenses related to technology, product design and implementation, including compensation and benefits, to amount to approximately $1.5 to $2.0 million on average. In 2021, we are developing several new products and services to continue our mission to better serve our customers.
Buy Now Pay Later (“BNPL”): BNPL will provide further financial flexibility for MoneyLion customers, allowing purchases they have made to be financed in installments. BNPL will be offered to our customers as a way to obtain a different financing alternative for their e-commerce or offline purchases. We believe BNPL will be a valuable product addition for our customers, particularly for their e-commerce-related activity, and for MoneyLion, as McKinsey estimates that there will be $162 billion in point-of-sale lending in 2021, representing 11% of the total U.S. unsecured lending market. We are currently evaluating the business and regulatory implications of a number of potential BNPL product offerings, and we intend to launch a BNPL product to a limited population during 2021.
Crypto Platform: To expand our customers’ access to the emerging digital asset ecosystem, we intend to introduce certain digital currency-related products or services to our platform under a partnership model in 2021. On March 26, 2021, we signed a licensing and cooperation agreement with Zero Hash LLC and its affiliate, Zero Hash Liquidity Services LLC (collectively, “Zero Hash”). Both Zero Hash entities are registered as money services
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businesses and have the required state-level licenses for engaging in digital assets activities where the Zero Hash services are offered. The multi-year agreement has customary renewal and termination provisions. Pursuant to the agreement, Zero Hash will pay us a monthly fee in exchange for enabling Zero Hash to effect digital currency-related transactions for our customers with RoarMoney accounts that reside in states where Zero Hash is authorized to conduct digital assets activities. As part of the account opening process, each such customer will be required to enter into a separate user agreement with Zero Hash. Under the terms of the agreement, MoneyLion will not be directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency taking place at or through Zero Hash. In developing the platform, we and Zero Hash have contractually agreed to limit the types of cryptocurrencies that are available on the platform. At launch, we and Zero Hash have agreed to limit the available cryptocurrencies on MoneyLion’s platform to Bitcoin and Ether. Transactions in additional digital assets may only be made on the platform should we and Zero Hash both agree to facilitate such transactions. We also expect to introduce a cryptocurrency rewards program through the Zero Hash arrangement that would allow our customers to receive digital assets instead of certain current cashback rewards. At present, only Bitcoin rewards are anticipated. MoneyLion will carefully consider any other potential rewards structures and will evaluate such rewards in light of applicable laws and regulatory guidance on differing types of cryptocurrency and digital assets. In general, under the terms of our agreement with Zero Hash, the parties must consent in writing before adding any additional digital assets to the program. If MoneyLion objects to the offering of any specific digital asset, then it will not be offered. MoneyLion’s evaluation of whether to provide any additional digital currency-related products or services on our platform will depend on customer demand, estimated costs, potential risks and applicable regulatory requirements, among other factors.
MoneyLife: Consistent with our vision of establishing MoneyLion as a lifestyle brand, we will be introducing MoneyLife, an online financial education content destination. MoneyLife will be an influencer focused, video content-driven education platform where customers can share and discover ideas, advice and insights regarding their financial lives. With high usability and sleek design, MoneyLife will include content driven by financial advice and education influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Through MoneyLife, we expect to provide MoneyLion an additional daily destination site for current customers, drive additional prospective customers to MoneyLion, and increase customer engagement and cross-sell opportunities for both MoneyLion and its affiliate partners. We expect to launch MoneyLife in 2021.
MoneyLion Credit Card: We anticipate developing a credit card product that would allow our customers to receive a low-cost line of credit. The credit card product would be provided under a partnership model with one or more credit card issuing banks and offered in conjunction with one or more of our existing or new product offerings. We may need to meet additional compliance obligations based on the terms of our partnership and the legal and regulatory requirements applicable to credit cards under federal and state law. We are exploring what structure for our credit card product would be most beneficial to our customer base, and we expect to start originating credit card receivables to a limited population of consumers within the next 24 months.
Grow our affiliate network and expand our corporate partnerships: We have established an affiliate network to offer products and services to our customers as guided by our platform. We will continue to dramatically expand our pool of affiliate partners to provide our customers an ever-growing selection of products that can lower their cost of living and improve their quality of life.
MoneyLion partners with companies to provide company-sponsored financial wellness programs that are designed to decrease financial stress and bolster productivity by offering employees the financial products, education and tailored advice they require. We expect to continue to add corporate partners to deliver our products in a cost-effective manner to our targeted customer segment.
Evaluate additional strategic acquisitions: We acquired Wealth Technologies Inc. (“WTI”) in December 2020, contributing meaningfully to our strategies. WTI was an early stage B2B digital finance company delivering personalized algorithmic financial planning through partnerships with global financial institutions. WTI’s proprietary fGPS® financial planning platform, which is now fully integrated into MoneyLion’s platform, provides our customers dynamic personal financial guidance and decision-making assistance for individuals at scale. Through analysis of personal assets, liabilities and cash flows in the context of the customer’s financial goals, the fGPS platform provides hyper-customized guidance that puts the customer at the center of financial planning. Options range from defining and prioritizing goals, managing expenses, making credit and financing decisions, and optimizing insurance coverage.
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We will continue to evaluate opportunistic acquisitions that would allow us to either expand our product offering to our existing customers or allow us to enter new verticals.
Marketing
Our customer acquisition channels combine a mix of online and offline, as well as paid and unpaid, channels. They include marketing affiliates, sponsorships, radio, direct mail, organic web traffic, email marketing, and online advertising, among others.
MoneyLion applies a full-funnel marketing approach both in media and in content creation. By creating complete marketing programs, we believe we generate a sustainable cost advantage across our various customer acquisition channels. We create multiple secondary content pieces from an original long-form content asset, and then cycle these content assets and marketing narratives across earned media channels and our own platforms, including our MoneyLion mobile application.
Customer Service
We are dedicated to addressing the needs of our customers. We believe that our multi-pronged approach to providing cost-effective customer service helps to support customer satisfaction. We offer a searchable, robust self-service Frequently Asked Questions database within our help center, where most questions can be easily answered 24 hours a day, seven days a week. In addition, we offer both a chatbot and a live chat service with an agent, either through the home screen of the MoneyLion app or on the MoneyLion web dashboard. Finally, should a customer wish to speak with a live agent over the phone or email their inquiries to our customer support team, we offer those support services as well.
Competitive Landscape
Consumer financial services is a large, fragmented, and competitive market, and we compete in varying degrees with a range of existing providers of consumer-focused banking, lending, investing and other financial products. Our competitors are generally large, well-capitalized financial services companies. Some of our current and potential competitors have longer operating histories, particularly with respect to financial products similar to what we offer, significantly greater financial, technical, marketing and other resources, and a larger customer base.
Banking Competitors: Traditional banks and credit unions (e.g., Chase and Wells Fargo), new entrants obtaining banking licenses (e.g., Varo Money), and other non-bank digital providers that white label regulated products, offering banking-related services (e.g., Chime);
Lending and Earned Income Advance Competitors: Traditional banks and credit unions, specialty finance and other non-bank providers, offering consumer lending-related or advance products (e.g., Upstart and Dave); and
Investing Competitors: Online wealth management platforms, such as robo-advisors, offering consumer investment services (e.g., Betterment and Stash).
We believe other market participants do not adequately meet the needs of the 100 million middle-class Americans who make up our target market. We feel our data-driven approach, single-core technology stack, holistic product offering, and financial guidance focus represent compelling competitive differentiators that will allow us to continue to capture market share and drive growth.
Management Team
We are a founder-led business with a diverse management team that brings together experienced viewpoints from both technology and financial services. See “New MoneyLion Management after the Business Combination” for more information.
Employees and Culture
We believe we have built a unique company culture. We attract smart, talented individuals, who possess a passion for innovation and flourish when provided the opportunity to learn and grow. We provide our employees with support programs designed to allow employees to thrive and our teams to outperform. Incentives are further aligned through a broad-based equity compensation program across the employee base.
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In operating multiple offices across the globe, bringing together some of the best talent from both the U.S. and around the world, we place significant emphasis on having a seamless, one-firm culture and employee experience. This model has paid dividends for our global team members as reflected in our employee engagement and retention.
As the focal point of our human capital strategy, we attract and retain a diverse, talented and motivated employee base. Career growth at MoneyLion may include manager skills and leadership training, peer-based recognition and rewards, transparent incentive and promotion processes, and time and budget allocated to learning and development initiatives.
We place special emphasis on diversity, from our recruitment process to our career development programs. Our management team members come from diverse backgrounds and seek to build a company with diversity clearly established as an organization priority. Here Women Roar is an employee resource group that aims to champion the growth and advancement of women at MoneyLion by investing in their social, personal and professional development. In early 2021, we launched an additional employee resource group to further support our employees of color.
As of December 31, 2020, we had a total of 234 employees across all locations. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
Privacy and Security
Our business involves the collection, storage, processing, use, sharing and transmission of PII and other sensitive data, including customer and employee information, financial information and information about how customers interact with our platform. We collect, store, process, use, share and transmit data while maintaining physical, electronic and procedural safeguards. We maintain physical security measures designed to guard against unauthorized access to systems and use safeguards such as firewalls and data encryption. We also enforce physical access controls to our facilities, and we authorize access to PII only for those employees or agents who require it to fulfill the responsibilities of their jobs.
To prevent against fraud, we have built fraud detection capabilities to protect our customers and merchants. We first seek to establish the consumer’s identity using basic information following our KYC protocols. The consumer is then evaluated by our fraud model, and we will then either move forward in the approval processes or request additional data from the consumer. Our sophisticated fraud models use approximately 40-80 other data points to make a near-instantaneous decision on whether to block a transaction. There are also secondary rules that, when triggered, are designed to ensure a transaction is sent to fraud investigators.
The technology infrastructure supporting our platform optimizes the storage and processing of large amounts of data and facilitates the deployment and operations of large-scale products and services in our cloud computing. Our technology infrastructure is designed around industry practices intended to reduce downtime in the event of outages or disaster recovery occurrences. We incorporate multiple layers of protection for business continuity and system redundancy purposes to address cybersecurity risks and loss of data. We have a cybersecurity program designed to protect our technology, including regularly testing our systems to identify and address potential vulnerabilities. We strive to continually improve our technology infrastructure to enhance the customer experience and to increase efficiency, scalability, and security.
As a result of our collection, storage, processing, use, sharing and transmission of PII and other sensitive data, we are subject to certain privacy and information security laws, including, for example, the GLBA, the CCPA, the CPRA and other state privacy regulations, and other laws, rules and regulations designed to regulate consumer information and data privacy, security and protection, and mitigate identity theft. These laws impose obligations with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PII, and some may require that financial services providers have in place policies regarding information privacy and security. In addition, under certain of these laws, we must provide notice to consumers of our policies and practices for sharing PII with third parties, provide notice of changes to our policies and, with limited exceptions, give consumers the right to prevent use of their PII and disclosure of it to third parties. Further, all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to notify affected individuals in the event of a data or security breach or compromise of our systems, including when their
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PII has or may have been accessed by an unauthorized person. These laws may also require us to notify relevant law enforcement, regulators or consumer reporting agencies in the event of a data breach. Some laws may also impose physical and electronic security requirements regarding the safeguarding of PII. Privacy and information security laws evolve regularly, and complying with these various laws, rules, regulations and standards, and with any new laws or regulations or changes to existing laws, could cause us to incur substantial costs that are likely to increase over time, requiring us to adjust our compliance program on an ongoing basis, change our business practices in a manner adverse to our business, divert resources from other initiatives and projects, and restrict the way products and services involving data are offered. See “Risk Factors — Risks Relating to MoneyLion’s Business and Industry — The collection, processing, use, storage, sharing and transmission of PII and other sensitive data are subject to stringent and changing state, federal and international laws, regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.”
Regulatory Environment
We operate in a rapidly evolving regulatory environment and are subject to extensive and complex regulation under U.S. federal law and the laws of the states in which we operate. These cover most aspects of our business and include laws, regulations, rules and guidance relating to consumer finance and protection, privacy and data protection, banking, payments, and investment advisory services, among other areas. For example, with respect to our lending business, certain state laws may, if applicable, regulate interest rates and other charges and require certain disclosures to our customers, and may also require licensing for certain activities. In addition, other federal and state laws, public policy, and general principles of equity, such as with respect to the protection of consumers, unfair and deceptive acts or practices, and debt collection practices, may apply to our activities involving the origination, servicing and collection of consumer loans, as well as to our activities in banking, cash advances, payments, investment advisory services and other areas. We are impacted by these laws and regulations both directly and indirectly, including by way of our partnership with MetaBank, which provides deposit accounts and debit cards to our customers. Ensuring compliance with these laws and regulations imposes significant burdens on our business operations.
We could become subject to additional legal or regulatory requirements if laws or regulations change in the jurisdictions in which we operate, or if we were to release new products or services, such as BNPL, credit card or digital currency-related products or services, under applicable laws or regulations to which we are not currently subject today. In addition, the regulatory framework for our products and services is evolving and uncertain as federal and state governments and regulators consider the application of existing laws and potential adoption of new laws. Although some of the products and services that we offer are relatively novel, we are typically required to comply with the existing regulatory regimes for consumer financial products and services. New laws and regulations, as well as continued uncertainty regarding the application of existing laws and regulations to our products and services, may negatively affect our business. This could include the need to obtain new or different types of licenses or comply with additional laws and regulations in order to conduct our business.
State licensing requirements and regulation
Our lending operations must satisfy the laws and standards of each individual U.S. state in which we operate. This means that when individual states differ in how they regulate consumer lending activity, we must operate in accordance with those jurisdictional-specific requirements.
We are subject to state licensing and other requirements with respect to loans that we originate, and we have obtained necessary licenses or conduct operations pursuant to relevant exemptions in order to originate loans in the jurisdictions in which we do so. Licensing statutes and regulations vary from state to state and prescribe different requirements, including restrictions on loan origination and servicing practices (including limits on the type, amount, and manner of our fees), interest rate limits, disclosure requirements, periodic examination requirements, surety bond and minimum specified net worth requirements, periodic financial reporting requirements, notification requirements for changes in principal officers, stock ownership or corporate control, restrictions on advertising, and requirements that loan forms be submitted for review. The application of state licensing requirements to our business model is not always clear, and while we believe we are in compliance
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with applicable licensing requirements, state regulators may request or require that we obtain additional licenses or otherwise comply with additional requirements in the future, which may result in changes to our business practices.
In addition, we are currently evaluating the business and regulatory implications of offering a BNPL product to our customers directly through MoneyLion-controlled lending subsidiaries or offering it through a partnership with an originating bank. If we decide to offer the BNPL product through MoneyLion-controlled lending subsidiaries, we may need additional or different state lending licenses or be subject to additional or different regulatory requirements in certain states, but we would be largely subject to the same state lending licensing and regulatory regimes as those that already apply to our existing lending operations. If we offer the BNPL product through an originating bank, we may need to comply with additional contractual obligations based on our agreements with the originating bank, legal and regulatory requirements under federal or state law, or industry lending standards.
Below, we summarize several of the material federal consumer protection and other laws applicable to our business. Many states have laws and regulations that are similar to the federal laws referred to below, but the degree and nature of such laws and regulations vary from state to state. In addition to legal or regulatory inquiries relating to these laws, we may be subject to supervision and examination by state regulatory authorities in the jurisdictions where we operate. We have experienced, are currently and will likely continue to be subject to and experience exams by state regulators. These examinations have and may continue to result in findings or recommendations that have required us, and may continue to require us, to modify our internal controls and/or business practices. If we are found to have engaged in activities that require a state license without having the requisite license or in activities that are otherwise deemed to be in violation of state lending laws, the licensing authority may impose fines, impose restrictions on our operations in the relevant state, or seek other remedies for activities conducted in the state.
U.S. federal consumer protection requirements
We must comply with various federal consumer protection regimes, both pursuant to the financial products and services we provide directly and as a service provider to our bank partner, including those set forth in the risk factor entitled “Risk Factors — 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.”
We are subject to regulation by the CFPB, which oversees compliance with and enforces federal consumer financial protection laws. The CFPB directly and significantly influences the regulation of consumer financial services, including the origination, brokering, servicing, transfer, and collection of consumer loans, including personal loans, and other consumer financial services we may provide. The CFPB has substantial power to regulate financial products and services received by consumers from both bank and non-bank providers of consumer financial products or services and their respective service providers, including rulemaking authority in enumerated areas of federal law applicable to consumer financial products or services such as truth in lending, fair credit reporting and fair debt collection. Under Title X of the Dodd-Frank Act, the CFPB has the authority to pursue enforcement actions against companies that offer or provide consumer financial products or services that engage in unfair, deceptive or abusive acts or practices, which can be referred to as “UDAAP.” The CFPB may also seek a range of other remedies, including rescission of contracts, refund of money, return of real property, restitution, disgorgement of profits or other compensation for unjust enrichment, damages, public notification of the violation, and “conduct” restrictions (i.e., future limits on the target’s activities or functions). Where a company has violated Title X of the Dodd-Frank Act or CFPB regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to enforce such laws and regulations.
The CFPB also has enforcement authority with respect to the conduct of third parties that provide services to financial institutions. The CFPB has made it clear that it expects non-bank entities to maintain an effective process for managing risks associated with vendor relationships, including compliance-related risks. In connection with this vendor risk management process, we are expected to perform due diligence reviews of potential vendors, review their policies and procedures and internal training materials to confirm compliance-related focus, include enforceable consequences in contracts with vendors regarding failure to comply with consumer protection requirements, and take prompt action, including terminating the relationship, in the event that vendors fail to meet our expectations.
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Our business activities are also subject to applicable requirements under other federal statutes and regulations, including but not limited to:
• Federal Trade Commission Act. The Federal Trade Commission Act prohibits “unfair” and “deceptive” acts and practices in business or commerce and give the FTC enforcement authority to prevent and redress violations of this prohibition. Whether a particular act or practice violates these laws or the UDAAP-prevention laws enforced by the CFPB frequently involves a highly subjective and/or fact-specific judgment.
• Truth in Lending Act. The Truth in Lending Act (“TILA”) and Regulation Z, which implements it, require lenders to provide consumers with uniform, understandable information concerning certain terms and conditions of their loan and credit transactions prior to the consummation of a credit transaction and, in the case of certain open-end loans, at the time of a loan solicitation, application, approval, and origination of a credit transaction. TILA also regulates the advertising of credit and gives borrowers, among other things, certain rights regarding updated disclosures and periodic statements, security interests taken to secure the credit, the right to rescind certain loan transactions, a right to an investigation and resolution of billing errors, and the treatment of credit balances.
• Equal Credit Opportunity Act. The federal Equal Credit Opportunity Act (“ECOA”) prohibits creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act or any applicable state law. Regulation B, which implements ECOA, restricts creditors from requesting certain types of information from loan applicants and from using advertising or making statements that would discourage on a prohibited basis a reasonable person from making or pursuing an application. ECOA also requires creditors to provide consumers and certain small businesses with timely responses to applications for credit, including notices of adverse action taken on credit applications.
• Fair Credit Reporting Act. The federal Fair Credit Reporting Act (“FCRA”), as amended by the Fair and Accurate Credit Transactions Act, promotes the accuracy, fairness and privacy of information in the files of consumer reporting agencies. FCRA requires a permissible purpose to obtain a consumer credit report and requires persons that furnish loan payment information to credit bureaus to report such information accurately. FCRA also imposes disclosure requirements on creditors who take adverse action on credit applications based on information contained in a consumer report or received from a third party and requires creditors who use consumer reports in establishing loan terms to provide risk-based pricing or credit score notices to affected consumers. The FCRA also imposes rules and disclosure requirements on creditors’ use of consumer reports for marketing purposes, which impacts our ability to use consumer reports and prescreened lists to market consumer loans through direct mail and other means.
• Military Lending Act. The Military Lending Act (“MLA”) restricts, among other things, the interest rate and other terms that can be offered to active military personnel and their dependents. The MLA caps the interest rate that may be offered to a covered borrower for most types of consumer credit to a 36% military annual percentage rate, or “MAPR,” which includes certain fees such as application fees, participation fees and fees for add-on products. The MLA also requires certain disclosures and prohibits certain terms, such as mandatory arbitration if a dispute arises concerning the consumer credit product.
• Electronic Fund Transfer Act and NACHA Rules. The federal Electronic Fund Transfer Act (“EFTA”) and Regulation E that implements it provide guidelines and restrictions on the provision of electronic fund transfer services to consumers, and on making an electronic transfer of funds from consumers’ bank accounts. In addition, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (“NACHA”). Most transfers of funds in connection with the origination and repayment of loans are performed by electronic fund transfers, such as ACH transfers. EFTA requires that lenders make available loan payment methods other than automatic preauthorized electronic fund transfers and prohibits lenders from conditioning the approval of a loan transaction on the borrower’s agreement to repay the loan through automatic fund transfers. Recently, the NACHA Board of Directors approved a change in the NACHA Operating Rules that requires ACH Originators to utilize commercially reasonable fraudulent transaction detection systems. The rule change, effective on March 19, 2021, will
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require ACH Originators, including lenders, to perform account validation as part of their commercially reasonable fraudulent transaction detection system. This rule change may require changes to our fraud detection systems and increase our costs associated with ACH electronic transfers.
• GLBA. The GLBA includes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties, in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by nonaffiliated third parties to whom they disclose such information, and requires financial institutions to disclose certain privacy policies and practices with respect to information sharing with affiliated and nonaffiliated entities, as well as to safeguard personal customer information.
The federal regulatory framework applicable to consumer financial services providers such as us is evolving and uncertain. Additional or different requirements may apply to our business in the future. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, no assurance is given that our compliance policies and procedures will be effective or will be adequate as laws change or are applied in a new manner.
Investment adviser and broker-dealer regulation
We offer investment management services through our wholly owned subsidiary ML Wealth, an internet-based investment adviser that is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and is subject to regulation by the SEC. ML Wealth is subject to, among other things, the anti-fraud provisions of the Advisers Act and fiduciary duties derived from these provisions, which apply to our relationships with our advisory clients. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our clients and the investments we manage, including, for example, disclosure of any conflicts of interest. ML Wealth has in the past and will in the future be subject to periodic SEC examinations. A regular or routine SEC examination will typically involve, at a minimum, a careful review of the adviser’s books and records and may include interviewing employees. The SEC examination staff may also conduct more frequent examinations focusing on a limited number of specific issues or conduct an examination “for cause.” ML Wealth is also subject to other requirements under the Advisers Act and related regulations primarily intended to protect advisory clients. These additional requirements include maintaining effective and comprehensive compliance programs and written policies and procedures, record-keeping, reporting and disclosure, advertising and solicitation rules, safeguards for protecting client funds and securities, limitations on agency cross and principal transactions between an adviser and its advisory clients, restrictions on advisory contract assignments, privacy protection regulations, and anti-corruption rules relating to investors associated with U.S. state or local governments.
The Advisers Act generally grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements include the prohibition of individuals from associating with an investment adviser, the revocation of registrations, significant monetary penalties, disgorgement of gains, cease-and-desist orders and other censures. The SEC may bring civil actions against investment advisers, and seek damages or other relief, in a U.S. district court or before an administrative law judge. Even if an investigation or proceeding did not result in a sanction or the sanction imposed against us or our personnel by the SEC were small in monetary amount, the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us to lose existing clients or fail to gain new clients.
One of our subsidiaries, MoneyLion Securities LLC, is a broker-dealer and is therefore registered with the SEC and a member of FINRA. Although we do not currently engage in any business activity through MoneyLion Securities LLC, as a broker-dealer, it is subject to SEC and FINRA rules and regulations. The principal purpose of regulating broker-dealers is the protection of clients and securities markets. The regulations cover all aspects of the broker-dealer business and operations, including, among other things, sales and trading practices, client onboarding, communications with the public, publication or distribution of research, margin lending, uses and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping, reporting, fee arrangements, disclosures to clients, suitability, acting in retail customers’ best interests when making recommendations to them, customer privacy, data protection, information security and cybersecurity, the safeguarding of customer information, the sharing of customer information, best execution of customer orders, public offerings, customer qualifications for margin and options transactions, registration of personnel, business continuity planning, transactions with affiliates, conflicts, and the conduct of directors, officers, and employees.
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MoneyLion Securities LLC is subject to Rule 15c3-1 under the Exchange Act (the “Uniform Net Capital Rule”) and related self-regulatory organization (“SRO”) requirements. The Uniform Net Capital Rule specifies minimum capital requirements that measure the general financial soundness and liquidity of broker-dealers. SEC and FINRA rules require notification to these regulators when net capital falls below certain defined criteria, or when withdrawals of capital exceed certain thresholds. These rules also dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer. If MoneyLion Securities LLC fails to maintain specified levels of net capital, we could be subject to sanctions, which may include immediate suspension or revocation of registration, and suspension or expulsion. MoneyLion Securities LLC has been and currently is in compliance with the Uniform Net Capital Rule and has net capital in excess of the minimum requirements.
The SEC, FINRA, and applicable state securities authorities also have the authority to conduct periodic examinations of MoneyLion Securities LLC and may also conduct administrative proceedings that could result in sanctions being imposed. To the extent any applicable SEC, state or FINRA rules or regulations change, MoneyLion Securities LLC will need to adapt to those changes.
Regulation of our bank partnership model
Pursuant to our partnership with MetaBank, we offer to our customers FDIC-insured, non-interest-bearing deposit accounts and debit cards with which customers can access their account balances, both of which are provided by MetaBank. Under the terms of our program agreement with MetaBank as well as the agreements between participating customers and MetaBank, each of the participating customers has a deposit account at MetaBank and a debit card issued by MetaBank. We act as the service provider to, among other things, provide customer support and technology features for customers utilizing their MetaBank account through our platform.
MetaBank is chartered as a national bank and subject to regulation and supervision as such by the OCC and the FDIC. Many laws and regulations that apply directly to MetaBank are indirectly applicable to us as a service provider to MetaBank. Our partnership with MetaBank is also subject to the supervision and enforcement authority of the OCC, MetaBank’s primary banking regulator. Additionally, in order for each participating customer’s deposits to be covered by FDIC insurance up to the applicable maximum deposit insurance amount, we and MetaBank must meet certain eligibility requirements established by the FDIC, such as adequately evidencing participating customers’ ownership of each account.
We are also currently exploring the business and regulatory implications of offering a BNPL product to our customers through an originating bank. If we decide to adopt this business model, depending on the bank we choose and our agreements with that bank, we may need to comply with additional obligations based on our agreements with the originating bank, legal and regulatory requirements under federal or state law, or industry lending standards.
In addition, we anticipate launching a credit card product in the future, which would also be provided in partnership with a credit card issuing bank. Depending on the terms of the credit card product, we may need to comply with additional obligations based on our agreements with the issuing bank, legal and regulatory requirements under federal or state law or industry standards applicable to credit cards, including card association rules.
Other requirements
In addition to the requirements described above, we are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending and other consumer financial and services, including additional requirements relating to loan disclosure, credit discrimination, credit reporting, debt collection and UDAAP prevention. These laws and regulations may be enforced by state banking or consumer protection regulatory agencies, state attorneys general, the CFPB, and private litigants, among others. Given our novel business model and the subjective nature of some of these laws and regulations, particularly UDAAP-prevention laws, we may become subject to regulatory scrutiny or legal challenge with respect to our compliance with these requirements.
Given the nature of our business and our arrangements with third parties, we are subject to compliance obligations related to U.S. anti-money laundering (“AML”) laws and regulations. We have developed and currently operate an AML program designed to prevent our products from being used to facilitate money laundering, terrorist financing, and other financial crimes. Our program is also designed to prevent our products from being used to
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facilitate business in certain countries or territories, or with certain individuals or entities, including those on designated lists promulgated by the U.S. Department of the Treasury’s Office of Foreign Assets Controls and other U.S. and non-U.S. sanctions authorities. Our AML and sanctions compliance programs include policies, procedures, reporting protocols, and internal controls, including the designation of a BSA/AML compliance officer to oversee the programs. Our programs are designed to address these legal and regulatory requirements and to assist in managing risk associated with money laundering and terrorist financing.
In 2021, we anticipate making certain digital currency-related products or services available to our customers on our platform through one or more regulated partner(s). On March 26, 2021, we signed a licensing and cooperation agreement with Zero Hash LLC and its affiliate, Zero Hash Liquidity Services LLC, both of which are registered as money services businesses and have the required state-level licenses for engaging in digital assets activities where the Zero Hash services are offered. Under the terms of our agreement, we would not engage directly in any transactions involving the exchange of fiat currency for digital currencies taking place at or through Zero Hash or the provision of money transmission services on behalf of our customers or of MoneyLion. The initial digital currency product offerings are limited to Bitcoin and Ether. Therefore, we do not currently expect to be required to be registered as a money services business or be subject to money transmitter licensing requirements or other regulatory requirements specific to transactions relating to virtual currencies. Other laws and regulations may apply to us as a service provider to one or more regulated partner(s) providing virtual currency services, including BSA/AML requirements, but these would be similar to the legal and regulatory regimes to which we are already subject. However, federal and state laws and regulations applicable to digital assets involving distributed ledger technology, such as cryptocurrencies and cryptocurrency exchanges, remains uncertain and will continue to evolve, and changes in applicable laws and regulations, or in the interpretations of legal or regulatory requirements, may result in significant changes to the terms on which we may offer access to any digital currency-related product or service or the anticipated timeline for its launch. State regulators have also created new regulatory frameworks to cover virtual currencies, and changes to the applicable laws, regulations or guidance in this area may require us to meet additional licensing, registration or other requirements in connection with potential new products or services.
We collect, store, use, disclose, transfer, and otherwise process a wide variety of information, including PII, for various purposes in our business, including to help ensure the integrity of our services and to provide features and functionality to our customers. This aspect of our business, including the collection, storage, use, disclosure, transfer, processing, and protection of the information, including PII, we acquire in connection with our consumers’ use of our services, is subject to numerous privacy, cybersecurity, and other laws and regulations in the United States, including the GLBA as well as state laws such as the CCPA. Accordingly, we publish our privacy policies and terms of service, which describe our practices concerning the collection, storage, use, disclosure, transmission, processing, and protection of information. For additional discussion, please see the risk factors related to regulation of our business and regulation in the areas of privacy and data use, under the section titled “Risk Factors — The collection, processing, use, storage, sharing and transmission of PII and other sensitive data are subject to stringent and changing state, federal and international laws, regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate to our customers.”
The legal and regulatory framework for privacy and security issues worldwide is rapidly evolving, and, although we endeavor to comply with these laws and regulations and our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to privacy or security, or any failure to protect the information that we collect from our customers, including PII, from cyber-attacks, or any such actual or perceived failure by our third-party partners and service providers, may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate.
In addition, there are federal and state laws and regulations on marketing activities conducted over the internet, or by mail, email or telephone, including without limitation the federal Telephone Consumer Protection Act (“TCPA”), the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act (“CAN-SPAM Act”), FTC regulations and guidelines that implement the FTC’s Do-Not-Call Registry and impose other
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requirements in connection with telemarketing activities, and state telemarketing laws. Our marketing activities may subject us to some of these laws and regulations. MoneyLion’s policies address the requirements of the TCPA and other laws and regulations limiting telephone outreach, and we do not engage in certain activities covered by the TCPA. Our email communications with all consumers are formulated to comply with the CAN-SPAM Act and other applicable requirements.
The offerings of membership interests in designated series of IIA described under “Business of New MoneyLion — Our Business Model” are not offered publicly to retail investors and are not registered under the Securities Act. IIA membership interests are offered in private placements only to “accredited investors” within the meaning of the Securities Act, pursuant to the exemption provided in Regulation D thereunder, or to non-US persons in offshore transactions, pursuant to the exemption provided in Regulation S thereunder.
Various federal and state regulatory agencies in the United States continue to examine a wide variety of issues that are applicable to us and may impact our business. These issues include account management guidelines, antidiscrimination, consumer protection, identity theft, privacy, disclosure rules, electronic transfers, cybersecurity, and marketing. As our business continues to develop and expand, we continue to monitor the additional rules and regulations that may become relevant.
Intellectual Property
We rely on a combination of trademark, trade secrets and copyright laws, as well as confidentiality procedures and contractual restrictions, to establish, maintain and protect our proprietary rights. Despite substantial investment in research and development activities, we have not focused on patents and patent applications historically. In addition to the intellectual property that we own, we license certain third-party technologies and intellectual property, which are incorporated into some of our products and services.
The efforts we have taken to protect our intellectual property may not be sufficient or effective. It may be possible for other parties to copy or otherwise obtain and use the content of our solutions or other technology without authorization. Moreover, others may independently develop technologies or services that are competitive with ours or that infringe, misappropriate, or otherwise violate our intellectual property and proprietary rights. Failure to protect our intellectual property or proprietary rights adequately could significantly harm our competitive position, business, financial condition and results of operations. See “Risk Factors — Risks Relating to MoneyLion’s Business and Industry — We may be unable to sufficiently obtain, maintain, protect, or enforce our intellectual property and other proprietary rights, which could reduce the value of our platform, products, services and brand, impair our competitive position and cause reputational harm.”
In addition, third parties may initiate litigation against us alleging infringement, misappropriation or other violation of their proprietary rights or declaring their non-infringement of our intellectual property. Companies in the internet and technology industries, and other patent and trademark holders seeking to profit from royalties in connection with grants of licenses, own large numbers of patents, copyrights, trademarks, and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property. We may from time to time receive notices that claim we have misappropriated or misused other parties’ intellectual property. There may be intellectual property held by others, including issued or pending patents and trademarks, that cover significant aspects of our solutions. Any intellectual property claim against us, regardless of merit, could be time consuming and expensive to settle or litigate and could divert our management’s attention and other resources. These claims could also subject us to significant liability for damages and could result in our having to stop using solutions found to be in violation of another party’s rights. We might be required or may opt to seek a license for rights to intellectual property held by others, which may not be available on commercially reasonable terms or at all. Even if a license is available, we could be required to pay significant royalties, which would increase our operating expenses. We may also be required to develop alternative non-infringing solutions, which could require significant effort and expense and which we may not be able to perform efficiently or at all. If we cannot license the intellectual property at issue or develop non-infringing solutions for any allegedly infringing aspect of our business, we may be unable to compete effectively. See “Risk Factors — Risks Relating to MoneyLion’s Business and Industry — We
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may be sued by third parties for alleged infringement, misappropriation, or other violation of their intellectual property or other proprietary rights which may be costly and may subject us to significant liability and increased costs of doing business.”
Facilities
Our principal corporate headquarters are located in New York City, and we maintain additional offices in Salt Lake City and Kuala Lumpur. We lease all our facilities and do not own any real property. We believe our facilities are adequate and suitable for our current needs and that, should it become necessary, suitable additional or alternative space will be available to accommodate our operations.
Location |
Approximate Square Footage |
|
New York, New York |
10,690 |
|
Salt Lake City, Utah |
10,975 |
|
Kuala Lumpur, Malaysia |
8,925 |
Legal and Regulatory Proceedings
From time to time, we are subject to various claims and legal proceedings in the ordinary course of business, including 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 legal and regulatory matters 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, and could materially and adversely impact our business, financial condition, operating results and cash flows. See “Risk Factors — Unfavorable outcomes in legal proceedings may harm our business and results of operations.”
DiCarlo Class Action Lawsuit
In July 2019, a putative class action was filed against us in the United States District Court for the Central District of California in DiCarlo v. MoneyLion Inc. et al. alleging that our membership and other fees are a finance charge under Regulation Z and that terms of membership and loans were not sufficiently disclosed, along with other state law causes. In December 2019, the District Court granted our motion to compel the plaintiff to adhere to the terms of the membership agreement and submit the matter to arbitration. The plaintiff appealed the District Court’s decision to the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit”), where oral arguments were heard in December 2020. In February 2021, the Ninth Circuit affirmed the District Court’s decision.
State Regulatory Examinations and Investigations
We hold a number of state licenses in connection with our business activities and must comply with various licensing, compliance and other requirements in the states in which we operate. In most states in which we operate, one or more regulatory agencies have authority with respect to regulation and enforcement under applicable state laws, and we may also be subject to the supervisory and examination authority of state regulators. 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.
With respect to our activities in California, we received a report of examination in 2020 from the California Department of Financial Protection and Innovation (the “CA DFPI”) regarding MoneyLion of California, LLC, our subsidiary, and a follow-up request for information in May 2021. The report of examination identified certain compliance exceptions and required us to take corrective actions, including customer refunds relating to legacy loan products that we no longer offer. We are in the process of completing the required corrective actions and have enhanced our policies and procedures for compliance with applicable provisions of the California Financial Code going forward. In addition, the CA DFPI is currently conducting an industry-wide investigation of companies that provide earned wage access products and services, including Instacash. We intend to continue cooperating fully in this investigation and to that end entered into a memorandum of understanding (“MOU”) with the CA DFPI on February 23, 2021. The MOU requires us to regularly provide certain information to the CA DFPI and adhere to certain best practices regarding Instacash while the CA DFPI continues to investigate. Any potential impacts on our financial condition or operations relating to the MOU are unknown at this time.
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With respect to our activities in Colorado, we received a report of examination in 2021 from the Colorado Department of Law’s Consumer Protection Unit (“Colorado Consumer Protection Unit”) regarding MoneyLion of Colorado, LLC, our subsidiary. The report of examination identified certain compliance exceptions and required us to take corrective actions relating to our recordkeeping and customer disclosures, and potentially including customer refunds on certain loans. We are in the process of responding to the Colorado Consumer Protection Unit’s report of examination and intend to take all corrective actions required to maintain compliance with applicable Colorado state law going forward.
With respect to our activities in Minnesota, we received information requests in 2019, 2020 and 2021 from the Minnesota Department of Commerce (“Minnesota DOC”) regarding an investigation relating to our lending activity in Minnesota and our membership program. We have provided to the Minnesota DOC all of the information and documents required by the information requests and intend to continue to fully cooperate with the Minnesota DOC in this investigation. The investigation into the lending activity is ongoing and any potential impact on our financial condition or operations are unknown at this time.
CFPB Civil Investigative Demands
In 2019, 2020 and 2021, we received Civil Investigative Demands (the “CIDs”) from the CFPB relating to our compliance with the MLA and our membership model. We have provided to the CFPB all of the information and documents required by the CIDs and intend to continue to fully cooperate with the CFPB in this investigation. The investigation is ongoing and any potential impact on our financial condition or operations are unknown at this time.
SEC Investigation
In February and March 2021, we received investigative subpoenas from the Securities and Exchange Commission concerning IIA, which primarily has assets from institutional investors, and is our current source of funding for originated receivables. We are cooperating with the investigation, which is at an early stage, and we cannot predict its outcome or any potential impact on our financial condition or operations.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF MONEYLION
Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” “Company” or “MoneyLion” refer to MoneyLion Inc. and subsidiaries prior to the consummation of the Business Combination.
You should read the following discussion and analysis of our financial condition and results of operations together with the “Summary Historical Financial Information of MoneyLion” section of this prospectus and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” sections and elsewhere in this proxy statement/prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
MoneyLion offers a full-service digital financial platform (the “Platform”) that provides convenient, low-cost access to banking, borrowing, and investing solutions tailored for our customers, rooted in data, and delivered through our proprietary technology platform. The Platform is based upon analytical models that power recommendations which are designed to help customers achieve their financial goals, ranging from building savings, improving credit health, and managing unexpected expenses. The Platform is delivered through a mobile application and an online dashboard.
The Company’s key product offerings include:
Membership programs — We introduced the ML Plus Membership in late 2017, allowing our customers to, among other things, access affordable credit through asset collateralization, build savings, improve financial literacy, and track their financial health. This program evolved into the Credit Builder Plus Membership, introduced in 2019 and intended to emphasize the program’s ability to help our customers build credit while also saving. We offer these programs directly to our customers. Members also receive access to premium mobile banking services, managed investment services, credit tracking services, rewards, and increased limits to interest-free Instacash advances. We earn revenue from monthly membership fees paid by our customers. These fees are reflected in membership subscription revenue.
Secured personal loans — We provide our customers with access to Credit Builder Plus loans, personal term loans that are partially secured by the customers’ assets maintained by ML Wealth and held at our third-party broker-dealer partner. These loans are provided directly by MoneyLion and accessed as part of the Credit Builder Plus Membership program and are not available on a standalone basis. In addition to a free standard disbursement option, we also offer our customers an option to disburse their funds to their MoneyLion-serviced RoarMoney bank account or external bank account on an expedited basis for an instant transfer fee. We earn revenue from interest income, reflected in net interest income on finance receivables, and instant transfer fees, reflected in fee income.
Instacash — We offer our customers access to Instacash, an interest-free advance product, which allows them to access funds based primarily on a percentage of income or other recurring income amounts detected through a linked external bank account or through direct deposit to their RoarMoney bank account. Instacash is provided directly by MoneyLion and is available to our customers on a standalone basis. While access to Instacash is free for our customers, we provide them the option to leave us a tip. In addition to a free standard disbursement option, we also offer our customers an option to disburse their funds to their RoarMoney bank account or external bank account on an expedited basis for an instant transfer fee. We earn revenue from tips and instant transfer fees, both reflected in fee income.
RoarMoney Premium Mobile Banking — Through our bank partnership with MetaBank, we provide our customers a FDIC-insured digital demand deposit account, which includes issuance of a physical and virtual MoneyLion-branded debit card with features such as up to two-day early direct deposit and rewards. Our RoarMoney account is available to our customers on a standalone basis. We earn revenue from interchange fees from payment networks based on customer expenditures on the debit card. We also earn revenue from cardholder fees such as a small monthly administrative fee charged to our customers and a fee charged to customers when an out-of-network ATM is utilized to withdraw cash. Both interchange fees and cardholder fees are reflected in fee income. We incur direct costs, which include fees paid to the payment networks and our partner bank.
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Affiliate marketing program — We work with various affiliate partners that offer products or services that we may recommend to our customers via display ads, offers or campaigns through our digital platform. Our customers can access these offers on a standalone basis. We earn revenue from fees from our affiliate partners in exchange for meeting certain success metrics related to their campaigns such as customers’ clicks, impressions or completed transactions. This revenue is reflected in affiliates income.
Managed investing — Through our partnership with various third parties, we offer our customers automated investing tools with various diversified investment options tailored to their risk tolerance preferences. Our customers are also able to invest in thematic portfolios, such as ones focused on cash flow growth or innovation. Our managed investment account is available on a standalone basis. We earn revenue from a small monthly administration fee from our customers who use this product, which is reflected in fee income.
Unsecured personal loans — Through our partnership with a third party as well as directly by MoneyLion, we offered unsecured personal loans to our customers of up to $15,000. These loans were available on a standalone basis and their average duration was 13.4 months. For the two years ended December 31, 2020, approximately 62% of the funded volume was done through our partnership with a third party, while the remaining 38% was funded directly by MoneyLion. The funding process for unsecured personal loans was the same as our Credit Builder Plus loans. While we do not provide a guarantee for the performance of loans and other receivables that we originate, we sell these loans and other receivables at a discount of approximately 10% to IIA. The credit policy for automated decisioning and manual reviews was developed and executed by MoneyLion. For loans made within our partnership with a third party, the credit policies were also reviewed and approved by the third party. We earn revenue from interest income, which is reflected in net interest income on finance receivables, and fees, which are reflected in fee income. We phased out this offering in the first quarter of 2020. For the year ended December 31, 2020, unsecured personal loans made up less than 1% of the total finance and membership receivables on our consolidated balance sheets.
Credit-related decision servicing — MoneyLion provided credit-related decision servicing to third parties. We earned revenue from fees generated from this service. These fees are reflected in fee income. We phased out this offering in the first quarter of 2020 and it is not expected to contribute to revenue going forward.
Receivables originated on our platform are currently financed through IIA. IIA was formed in 2016 and is an indirect wholly owned subsidiary of MoneyLion Inc. As of December 31, 2020, IIA had assets of approximately $86 million, primarily from institutional investors, and has been our primary source of funding for originated receivables since 2018. IIA is organized as a Delaware limited liability company and is treated as a partnership for United States income tax purposes. IIA’s membership interests are issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors own all non-voting Class B Units of the applicable series they invest in, which entitles them to a targeted, non-guaranteed, preferred return of typically 12% per year. ML Capital III, an indirect wholly owned MoneyLion subsidiary, is the managing member of IIA and owns the Class A Units of each series, which entitles ML Capital III to returns that exceed the targeted preferred return on the Class B Units. IIA uses proceeds from the sale of Class B Units to investors to purchase borrower payment dependent promissory notes from Invest in America Notes I SPV LLC and Invest in America Notes SPV IV LLC, each an indirect wholly owned MoneyLion subsidiary. The collateral consists of a portfolio of underlying MoneyLion loans and advance receivables. Investors in Class B Units fund their investment into IIA at the time of subscription, which proceeds are used to finance receivables originated on MoneyLion’s platform.
Refer to the “Business of New MoneyLion” section of this document for further details on our business.
Recent Developments
Recent events impacting our business are as follows:
COVID-19 — In March 2020, the World Health Organization recognized a global pandemic known as the coronavirus or COVID-19. Due to the economic uncertainty that this has and can continue to cause, there is an added risk factor in the overall future outlook of the Company. In response to the economic uncertainty caused by the pandemic, we made certain operational changes, including reductions to our marketing activities such as advertising through digital platforms, that have since returned to pre-pandemic levels. We also reduced our sponsorship arrangements with third parties. We implemented underwriting policy changes on a targeted basis as
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pockets of risk and opportunity had been identified, to more closely manage credit risk while we further evaluated market conditions. Our underwriting models are dynamic relative to real time changes in our customer’s income and credit profiles and our credit performance remained steady as our underwriting models quickly adapted to these changes. To further support our customers, we expanded our payment deferral options and reduced certain fees, while providing them with relevant content and resources on topics like unemployment insurance and stimulus checks. For our secured personal loan customers with fewer than three prior missed payments, we offer payment deferrals based on a customer’s payment frequency, ranging from one payment deferral for monthly payments and up to three payment deferrals for weekly payments. For our Instacash customers with an outstanding advance, we allow them to change the scheduled repayment date by up to 14 days. Once the advance is repaid, the customer could request another change to scheduled repayment on another salary advance. While there is no limit to the number of changes a customer may be granted, they are limited to one at a time and per salary advance. These programs are immaterial to our performance.
While there has been an increase in economic uncertainty due to the pandemic, there was an uptick in the number of customers on our platform in the second quarter of 2020 due to factors including government-initiated lockdowns and temporary or continued closure of local branches of many banks and credit unions. We expect this trend to continue although the rate of customer acquisition as a result of COVID-19 may be slower.
In April 2020, the Company borrowed $3.2 million from a bank under the SBA’s Paycheck Protection Program introduced as part of the U.S. Government’s COVID-19 relief efforts (the “PPP Loan”). In June 2021, the SBA approved the Company’s application for forgiveness with respect to the entire outstanding balance of the PPP Loan.
Management will continue to monitor any changes to the business as the pandemic continues throughout 2021.
Business Combinations — During December 2020, we acquired WTI. Additionally, during February 2021, we entered into a definitive agreement to merge with Fusion Acquisition Corp. (“Fusion”). See below for further discussion.
• WTI Acquisition — In December 2020, the Company acquired 100% of the outstanding common stock and Series A redeemable convertible preferred shares of Wealth Technologies, Inc. in exchange for 539,592 shares of the Company Series C-1 Redeemable Convertible Preferred Stock, resulting in total consideration of approximately $27.9 million. WTI is a technology company specializing in market-leading wealth management decisioning and administration. The co-founder and equity holder of WTI is also a significant stockholder of Series A redeemable convertible preferred stock of MoneyLion and was the Chairman of the MoneyLion board of directors as of the date of the transaction. The purchase price has been allocated to the assets acquired and liabilities assumed based upon their respective fair market values. The excess of the aggregate purchase price over the fair values of the net assets acquired was recognized as goodwill of approximately $21.6 million.
• Pending Merger with Fusion — On February 12, 2021, MoneyLion announced that it had entered into an agreement and plan of merger by and among Fusion, a publicly traded special purpose acquisition company and Merger Sub. Under the terms of the proposed transaction, Merger Sub will merge with and into MoneyLion with MoneyLion surviving the merger as a wholly owned subsidiary of Fusion at an estimated combined enterprise value of approximately $2.4 billion. Total consideration paid to MoneyLion’s existing shareholders will be $2.2 billion. MoneyLion stockholders will receive shares of Class A common stock of Fusion (valued at $10.00 per share), and, if elected by MoneyLion, cash consideration of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the merger agreement) exceeds $260 million and (B) $100 million. Existing MoneyLion equity holders will have the potential to receive an earn-out for additional shares of equity if certain price targets are met as set forth in the definitive merger agreement. The transaction is expected to close during the third quarter of 2021 and remains subject to customary closing conditions.
Factors Affecting Our Performance
The Company is subject to a number of risks including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, dependence on key individuals, and risks associated with changes in information technology.
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New customer growth and increasing usage across existing customers
Our ability to effectively acquire new customers through our acquisition and marketing efforts, and drive usage of our products across our existing customers is key to our growth. We invested in the platform approach and believe our customers’ experience is enhanced by using our full product suite as we can better tailor the insights and recommendations. In turn, this generates higher revenue and lifetime value from our customer base.
Product expansion and innovation
We believe in the platform approach and providing relevant products to our customers to help them better manage their financial lives, both in times of need and excess. We will continue to invest in enhancing our existing suite of products and developing new products. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers.
General economic and market conditions
Our performance is impacted by the relative strength of the overall economy, market volatility, consumer spending behavior, and consumer demand for financial products and services. The willingness of our customers to spend, invest, or borrow may fluctuate with their level of disposable income. Other factors such as interest rate fluctuations or monetary policies may also impact our customers’ behavior and our own ability to fund loan volume.
Competition
We compete with several larger financial institutions and technology platforms that offer similar products and services. We compete with those that offer both single point solutions similar to any one of our products as well as more integrated, complete solutions. Some of our competitors may have access to more resources than we do and thus may be able to offer better pricing or benefits to our customers.
Pricing of our products
We derive a substantial portion of our revenue from fees earned from our products. The fees we earn are subject to a variety of external factors such as competition, interchange rates and other macroeconomic factors, such as interest rates and inflation, among others. We may provide discounts to customers who utilize multiple products to expand usage of our platform. We may also lower pricing on our products to acquire new customers. For example, we offer our customers discounts such as Shake ‘N’ Bank cashback and other cashback rewards opportunities as part of our RoarMoney bank account product offering and such discounts are provided to customers based on eligible MoneyLion debit card transactions. On average, approximately 50% of our eligible RoarMoney bank account customers receive this benefit. We also offer our Credit Builder Plus members access to our Lion’s Share Loyalty Program where members can earn up to $19.99 per month. The size of the Lion’s Share reward depends on a customer’s number of logins into the MoneyLion app and purchases using their RoarMoney account in that month. On average, approximately 40% of our Credit Builder Plus members who met the minimum eligibility criteria received a Lion’s Share reward.
Product mix
We provide various products and services on our platform, including a membership program, loans, earned income advances, investment and bank accounts, and each product has a different profitability profile. The relative usage of products with high or low profitability and their lifetime value could have an impact on our performance.
Access and cost of financing
Our credit products and other receivables are currently financed through IIA and associated special purpose vehicles. Loss of one or more of the financing sources we have for our credit products and other receivables could have an adverse impact on our performance, and it could be costly to obtain new financing.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
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Total Payment Volume
We define total payment volume as total customer expenditure on the MoneyLion branded debit card within the stated period. We consider total payment volume to be a key performance metric as it can be used to measure the usage and engagement of the customers of our RoarMoney bank account product and is a significant driver of fee income. Total payment volume was $510 million and $277 million for the years ended December 31, 2020 and 2019, respectively. Total payment volume was $306 million and $99 million for the three months ended March 31, 2021 and 2020, 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 and Instacash products and is a significant driver of net interest income on finance receivables and fee income. Total originations were $410 million and $120 million for the years ended December 31, 2020 and 2019, respectively, and were originated directly by MoneyLion. Total originations were $189 million and $62 million for the three months ended March 31, 2021 and 2020, respectively, and were originated directly by MoneyLion.
Total Customers
We define total customers as those customers that have opened at least one account, including banking, membership subscription, secured personal loan, Instacash advance, or managed investment account. 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 1.4 million and 0.9 million as of December 31, 2020 and 2019, respectively. Total customers were 1.8 million and 1.0 million as of March 31, 2021 and 2020, respectively. For the years ended December 31, 2020 and 2019, approximately 33% and 46%, respectively, of our total customers have funded accounts. For the years ended December 31, 2020 and 2019, approximately 53% and 57%, respectively, of our total customers have engaged in any activity on our platform. For the quarters ended March 31, 2021 and 2020, approximately 23% and 35%, respectively, of our total customers have funded accounts. For the quarters ended March 31, 2021 and 2020, approximately 39% and 29%, respectively, of our total customers have engaged in any activity on our platform.
Adjusted Revenue
Adjusted revenue is defined as total revenues, net plus amortization of loan origination costs less direct charge-offs, revenue from products that have been phased out, and non-operating income. We believe that adjusted revenue provides a meaningful understanding of revenue from ongoing products and recurring revenue for comparability purposes. Adjusted revenue is a non-GAAP measure and should not be viewed as a substitute for total revenues, net. Refer to the “Non-GAAP Measures” section below for further discussion.
Our adjusted revenue is further broken into the following categories:
Years Ended December 31, |
||||||
2020 |
2019 |
|||||
(in thousands) |
||||||
Fees |
$ |
60,955 |
$ |
30,001 |
||
Payments |
|
6,556 |
|
4,707 |
||
Advice |
|
3,388 |
|
3,227 |
||
Interest |
|
5,154 |
|
2,123 |
||
Adjusted Revenue |
$ |
76,053 |
$ |
40,058 |
Three Months Ended March 31, |
||||||
2021 |
2020 |
|||||
(in thousands) |
||||||
Fees |
$ |
25,541 |
$ |
11,484 |
||
Payments |
|
3,805 |
|
1,460 |
||
Advice |
|
1,296 |
|
684 |
||
Interest |
|
1,867 |
|
819 |
||
Adjusted Revenue |
$ |
32,508 |
$ |
14,447 |
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This breakdown of adjusted revenue across the categories of fees, payments, advice, and interest helps provide our management with a better understanding of adjusted revenue by type and may help to inform strategic pricing and resource allocations across our products.
Adjusted Gross Profit
Adjusted gross profit is defined as gross profit less revenue derived from products that have been phased out and non-operating income. We believe that adjusted gross profit provides a meaningful understanding of one aspect of profitability based on our current product portfolio. Adjusted gross profit is a non-GAAP measure and should not be viewed as a substitute for gross profit (loss). Refer to the “Non-GAAP Measures” section below for further discussion.
Results of Operations for the Years Ended December 31, 2020 and 2019
The following table is reference for the discussion that follows.
Years Ended December 31, |
Change |
||||||||||||||
2020 |
2019 |
$ |
% |
||||||||||||
(in thousands, except for percentages) |
|||||||||||||||
Revenue |
|
|
|
|
|
|
|
||||||||
Net interest income on finance receivables |
$ |
4,347 |
|
$ |
11,056 |
|
$ |
(6,709 |
) |
(60.7 |
)% |
||||
Membership subscription revenue |
|
25,994 |
|
|
33,627 |
|
|
(7,633 |
) |
(22.7 |
)% |
||||
Affiliates income |
|
2,234 |
|
|
2,994 |
|
|
(760 |
) |
(25.4 |
)% |
||||
Fee income |
|
46,639 |
|
|
11,711 |
|
|
34,928 |
|
298.2 |
% |
||||
Other income |
|
197 |
|
|
996 |
|
|
(799 |
) |
(80.2 |
)% |
||||
Total Revenues, net |
|
79,411 |
|
|
60,384 |
|
|
19,027 |
|
31.5 |
% |
||||
Operating expenses |
|
|
|
|
|
|
|
||||||||
Marketing |
|
11,060 |
|
|
34,114 |
|
|
(23,054 |
) |
(67.6 |
)% |
||||
Provision for loss on receivables |
|
21,294 |
|
|
29,143 |
|
|
(7,849 |
) |
(26.9 |
)% |
||||
Other direct costs |
|
4,336 |
|
|
3,593 |
|
|
743 |
|
20.7 |
% |
||||
Interest expense (including $91 and $239 accretion of debt issuance costs) |
|
2,950 |
|
|
3,308 |
|
|
(358 |
) |
(10.8 |
)% |
||||
Personnel expenses |
|
24,200 |
|
|
25,646 |
|
|
(1,446 |
) |
(5.6 |
)% |
||||
Underwriting expenses |
|
6,242 |
|
|
14,130 |
|
|
(7,888 |
) |
(55.8 |
)% |
||||
IT expenses |
|
7,041 |
|
|
8,064 |
|
|
(1,023 |
) |
(12.7 |
)% |
||||
Bank and payment processor fees |
|
13,737 |
|
|
7,098 |
|
|
6,639 |
|
93.5 |
% |
||||
Change in fair value of warrant liability |
|
14,419 |
|
|
4,260 |
|
|
10,159 |
|
238.5 |
% |
||||
Change in fair value of subordinated convertible notes |
|
4,000 |
|
|
— |
|
|
4,000 |
|
— |
|
||||
Professional fees |
|
8,396 |
|
|
5,298 |
|
|
3,098 |
|
58.5 |
% |
||||
Depreciation expense |
|
1,108 |
|
|
898 |
|
|
210 |
|
23.4 |
% |
||||
Occupancy expense |
|
1,233 |
|
|
1,360 |
|
|
(127 |
) |
(9.3 |
)% |
||||
Gain on foreign currency translation |
|
(179 |
) |
|
(116 |
) |
|
(63 |
) |
54.3 |
% |
||||
Other operating expenses |
|
1,155 |
|
|
2,733 |
|
|
(1,578 |
) |
(57.7 |
)% |
||||
Total operating expenses |
|
120,992 |
|
|
139,529 |
|
|
(18,537 |
) |
(13.3 |
)% |
||||
Net loss before income taxes |
|
(41,581 |
) |
|
(79,145 |
) |
|
37,564 |
|
(47.5 |
)% |
||||
Income tax benefit |
|
6 |
|
|
(8 |
) |
|
14 |
|
(175.0 |
)% |
||||
Net loss |
$ |