UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-39346
MoneyLion Inc.
(Exact name of registrant as specified in its charter)
Delaware |
|
85-0849243 |
(State or other jurisdiction of |
|
(I.R.S. Employer |
|
|
|
30 West 21st Street, 9th Floor New York, New York |
|
10010 |
(Address of principal executive offices) |
|
(Zip Code) |
(212) 300-9865
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Class A common stock, par value $0.0001 per share |
|
ML |
|
The New York Stock Exchange |
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock, $0.0001 par value |
|
ML WS |
|
The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
☐ |
Accelerated filer |
☒ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☒ |
|
Emerging growth company |
☒ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 8,798,196 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding as of May 5, 2023.
MoneyLion Inc.
TABLE OF CONTENTS
QUARTERLY REPORT ON FORM 10-Q
For the Quarterly Period Ended March 31, 2023
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Page |
PART I – FINANCIAL INFORMATION |
|
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|
|
|
Item 1. |
1 |
|
|
1 |
|
|
2 |
|
|
Unaudited Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity |
3 |
|
4 |
|
|
5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
25 |
Item 3. |
42 |
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Item 4. |
43 |
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PART II - OTHER INFORMATION |
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|
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Item 1. |
46 |
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Item 1A. |
47 |
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Item 2. |
48 |
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Item 3. |
48 |
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Item 4. |
49 |
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Item 5. |
49 |
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Item 6. |
50 |
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51 |
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i
INTRODUCTORY NOTE
General
On September 22, 2021, MoneyLion Inc., formerly known as Fusion Acquisition Corp., consummated a business combination (the “Business Combination”) with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. Following the Business Combination, MoneyLion Inc. became a publicly traded company, with MoneyLion Technologies Inc. continuing the existing business operations as a subsidiary of MoneyLion Inc. MoneyLion Inc.’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “ML.”
As used in this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to “MoneyLion,” the “Company,” “we,” “us,” “our” and similar references refer to MoneyLion Inc. and, as context requires, its consolidated subsidiaries for the period following the Business Combination and to MoneyLion Technologies Inc. and, as context requires, its consolidated subsidiaries for the period prior to the Business Combination. "MALKA" refers to Malka Media Group LLC, a wholly-owned subsidiary of MoneyLion Technologies Inc., and "Engine" refers to ML Enterprise Inc., doing business as the brand "Engine by MoneyLion," a wholly-owned subsidiary of MoneyLion Technologies Inc. which was previously named "Even Financial Inc." and subsequently renamed in February 2023.
For convenience, the trademarks and service marks referred to in this Quarterly Report on Form 10-Q are listed without the ®, TM and SM symbols, but we intend to assert, and notify others of, our rights in and to these trademarks and service marks to the fullest extent under applicable law.
Reverse Stock Split
On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a 1-for-30 reverse stock split (the "Reverse Stock Split") of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), may be converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in this Quarterly Report on Form 10-Q for all periods presented.
ii
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, including the information incorporated herein by reference, contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of MoneyLion Inc. and its wholly-owned subsidiaries. These statements are based on the beliefs and assumptions of the management of MoneyLion. Although MoneyLion believes that its respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, MoneyLion cannot assure you that it will achieve or realize these plans, intentions or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates,” or “intends” or similar expressions. The forward-looking statements are based on projections prepared by, and are the responsibility of, MoneyLion’s management.
Forward-looking statements are inherently subject to known and unknown risks and uncertainties, many of which may be beyond MoneyLion’s control. Forward-looking statements are not guarantees of future performance or outcomes, and MoneyLion’s actual performance and outcomes, including, without limitation, actual results of operations, financial condition and liquidity, and the development of the market in which MoneyLion operates, may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report on Form 10-Q. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:
iii
These and other factors are more fully discussed in our filings with the U.S. Securities and Exchange Commission (the “SEC”), including the “Risk Factors” section in our Annual Report on Form 10-K for the year ended December 31, 2022, and Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q.
These forward-looking statements are based on information available as of the date of this Quarterly Report on Form 10-Q and our management’s current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iv
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, including those we face in connection with the successful implementation of our strategy and the growth of our business. The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of shares of our securities and result in a loss of all or a portion of your investment:
v
The risks described above should be read together with the “Cautionary Statement Regarding Forward-Looking Statements” herein, the other risk factors set forth under Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q, the “Risk Factors” section in the Annual Report on Form 10-K for the year ended December 31, 2022, our consolidated financial statements and the related notes presented in Part I, Item 1 “Financial Statements” in this Quarterly Report on Form 10-Q and the other documents that we file with the SEC. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial.
vi
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
MONEYLION INC.
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except per share amounts)
(Unaudited)
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Assets |
|
|
|
|
|
|
||
Cash |
|
$ |
96,756 |
|
|
$ |
115,864 |
|
Restricted cash, including amounts held by variable interest entities (VIEs) of $12,302 and $36,235 |
|
|
14,000 |
|
|
|
37,845 |
|
Consumer receivables |
|
|
176,211 |
|
|
|
169,976 |
|
Allowance for credit losses on consumer receivables |
|
|
(27,473 |
) |
|
|
(24,841 |
) |
Consumer receivables, net, including amounts held by VIEs of $121,734 and $113,963 |
|
|
148,738 |
|
|
|
145,135 |
|
Enterprise receivables, net |
|
|
22,961 |
|
|
|
19,017 |
|
Property and equipment, net |
|
|
2,682 |
|
|
|
2,976 |
|
Intangible assets, net |
|
|
189,394 |
|
|
|
194,247 |
|
Goodwill |
|
|
26,721 |
|
|
|
26,600 |
|
Other assets |
|
|
55,907 |
|
|
|
54,658 |
|
Total assets |
|
$ |
557,159 |
|
|
$ |
596,342 |
|
Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Equity |
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Secured loans |
|
$ |
88,726 |
|
|
$ |
88,617 |
|
Accounts payable and accrued liabilities |
|
|
50,294 |
|
|
|
58,129 |
|
Warrant liability |
|
|
486 |
|
|
|
337 |
|
Other debt, including amounts held by VIEs of $119,650 and $143,394 |
|
|
119,650 |
|
|
|
143,394 |
|
Other liabilities |
|
|
29,184 |
|
|
|
33,496 |
|
Total liabilities |
|
|
288,340 |
|
|
|
323,973 |
|
(Note 15) |
|
|
|
|
|
|
||
Redeemable convertible preferred stock (Series A), $0.0001 par value; 45,000,000 shares authorized as of March 31, 2023 and December 31, 2022, 25,701,595 and 25,655,579 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively |
|
|
173,328 |
|
|
|
173,208 |
|
Stockholders' equity: |
|
|
|
|
|
|
||
Class A Common Stock, $0.0001 par value; 66,666,666 shares authorized as of March 31, 2023 and December 31, 2022, 8,831,402 and 8,799,069 issued and outstanding, respectively, as of March 31, 2023 and 8,619,678 and 8,587,345 issued and outstanding, respectively, as of December 31, 2022(1) |
|
|
1 |
|
|
|
1 |
|
Additional paid-in capital |
|
|
771,881 |
|
|
|
766,839 |
|
Accumulated deficit |
|
|
(666,691 |
) |
|
|
(657,979 |
) |
Treasury stock at cost, 32,333 shares at March 31, 2023 and December 31, 2022(1) |
|
|
(9,700 |
) |
|
|
(9,700 |
) |
Total stockholders' equity |
|
|
95,491 |
|
|
|
99,161 |
|
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
|
$ |
557,159 |
|
|
$ |
596,342 |
|
The accompanying notes are an integral part of these consolidated financial statements.
1
MONEYLION INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands, except per share amounts)
(Unaudited)
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Revenue |
|
|
|
|
|
||
Service and subscription revenue |
$ |
90,741 |
|
|
$ |
67,146 |
|
Net interest income on loan receivables |
|
2,928 |
|
|
|
2,568 |
|
Total revenue, net |
|
93,669 |
|
|
|
69,714 |
|
Operating expenses |
|
|
|
|
|
||
Provision for credit losses on consumer receivables |
|
16,511 |
|
|
|
23,044 |
|
Compensation and benefits |
|
24,408 |
|
|
|
22,043 |
|
Marketing |
|
6,392 |
|
|
|
11,416 |
|
Direct costs |
|
29,802 |
|
|
|
21,204 |
|
Professional services |
|
4,999 |
|
|
|
7,288 |
|
Technology-related costs |
|
6,038 |
|
|
|
4,505 |
|
Other operating expenses |
|
8,995 |
|
|
|
10,769 |
|
Total operating expenses |
|
97,145 |
|
|
|
100,269 |
|
Net loss before other (expense) income and income taxes |
|
(3,476 |
) |
|
|
(30,555 |
) |
Interest expense |
|
(7,511 |
) |
|
|
(6,174 |
) |
Change in fair value of warrant liability |
|
(149 |
) |
|
|
3,910 |
|
Change in fair value of contingent consideration from mergers and acquisitions |
|
246 |
|
|
|
(4,660 |
) |
Other income (expense) |
|
1,649 |
|
|
|
(916 |
) |
Net loss before income taxes |
|
(9,241 |
) |
|
|
(38,395 |
) |
Income tax benefit |
|
(24 |
) |
|
|
(28,417 |
) |
Net loss |
|
(9,217 |
) |
|
|
(9,978 |
) |
Accrual of dividends on preferred stock |
|
(1,977 |
) |
|
|
(1,028 |
) |
Net loss attributable to common shareholders |
$ |
(11,194 |
) |
|
$ |
(11,006 |
) |
|
|
|
|
|
|
||
Net loss per share, basic and diluted(1) |
$ |
(1.29 |
) |
|
$ |
(1.43 |
) |
Weighted average shares used in computing net loss per share, basic and diluted(1) |
|
8,652,218 |
|
|
|
7,691,243 |
|
The accompanying notes are an integral part of these consolidated financial statements.
2
MONEYLION INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
(amounts in thousands, except share amounts)
(Unaudited)
|
Redeemable Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|||||||||||||||
|
Preferred Stock (Series A) |
|
|
|
Class A Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury |
|
|
Stockholders' |
|
|||||||||||||||
|
Shares |
|
|
|
Amount |
|
|
|
Shares(1) |
|
|
Amount(1) |
|
|
Paid-in Capital(1) |
|
|
Deficit |
|
|
Stock |
|
|
Equity |
|
||||||||
Balances at January 1, 2023 |
|
25,655,579 |
|
|
|
$ |
173,208 |
|
|
|
|
8,587,345 |
|
|
$ |
1 |
|
|
$ |
766,839 |
|
|
$ |
(657,979 |
) |
|
$ |
(9,700 |
) |
|
$ |
99,161 |
|
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
5,705 |
|
|
|
— |
|
|
|
— |
|
|
|
5,705 |
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
|
— |
|
|
|
|
— |
|
|
|
|
100,797 |
|
|
|
— |
|
|
|
(599 |
) |
|
|
— |
|
|
|
— |
|
|
|
(599 |
) |
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
|
— |
|
|
|
|
— |
|
|
|
|
110,925 |
|
|
|
— |
|
|
|
1,913 |
|
|
|
— |
|
|
|
— |
|
|
|
1,913 |
|
Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments |
|
46,080 |
|
|
|
|
120 |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Conversion of preferred stock to common stock |
|
(64 |
) |
|
|
|
— |
|
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Accrued dividends on preferred stock |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(1,977 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,977 |
) |
Other |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
505 |
|
|
|
— |
|
|
|
505 |
|
Net loss |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,217 |
) |
|
|
— |
|
|
|
(9,217 |
) |
Balances at March 31, 2023 |
|
25,701,595 |
|
|
|
$ |
173,328 |
|
|
|
|
8,799,069 |
|
|
$ |
1 |
|
|
$ |
771,881 |
|
|
$ |
(666,691 |
) |
|
$ |
(9,700 |
) |
|
$ |
95,491 |
|
|
Redeemable Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
||||||||||||
|
Preferred Stock (Series A) |
|
|
|
Class A Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Treasury |
|
|
Stockholders' |
|
|||||||||||||||
|
Shares |
|
|
|
Amount |
|
|
|
Shares(1) |
|
|
Amount(1) |
|
|
Paid-in Capital(1) |
|
|
Deficit |
|
|
Stock |
|
|
Equity |
|
||||||||
Balances at January 1, 2022 |
|
— |
|
|
|
$ |
— |
|
|
|
|
7,682,748 |
|
|
$ |
1 |
|
|
$ |
701,256 |
|
|
$ |
(469,873 |
) |
|
$ |
(9,700 |
) |
|
$ |
221,684 |
|
Stock-based compensation |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
3,268 |
|
|
|
— |
|
|
|
— |
|
|
|
3,268 |
|
Exercise of stock options and warrants and vesting of RSUs and PSUs, net of tax withholdings |
|
— |
|
|
|
|
— |
|
|
|
|
29,996 |
|
|
|
— |
|
|
|
421 |
|
|
|
— |
|
|
|
— |
|
|
|
421 |
|
Issuance of common stock in connection with earnout and make-whole provisions related to the acquisition of Malka Media Group LLC |
|
— |
|
|
|
|
— |
|
|
|
|
138,923 |
|
|
|
— |
|
|
|
10,278 |
|
|
|
— |
|
|
|
— |
|
|
|
10,278 |
|
Issuance of options and preferred stock in connection with Engine Acquisition, net of working capital adjustments |
|
28,693,931 |
|
|
|
|
193,647 |
|
|
|
|
— |
|
|
|
— |
|
|
|
8,963 |
|
|
|
— |
|
|
|
— |
|
|
|
8,963 |
|
Accrued dividends on preferred stock |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(1,028 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,028 |
) |
Other |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
(1,087 |
) |
|
|
960 |
|
|
|
— |
|
|
|
(127 |
) |
Net loss |
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,978 |
) |
|
|
— |
|
|
|
(9,978 |
) |
Balances at March 31, 2022 |
|
28,693,931 |
|
|
|
$ |
193,647 |
|
|
|
|
7,851,667 |
|
|
$ |
1 |
|
|
$ |
722,071 |
|
|
$ |
(478,891 |
) |
|
$ |
(9,700 |
) |
|
$ |
233,481 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
MONEYLION INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
||
Net loss |
$ |
(9,217 |
) |
|
$ |
(9,978 |
) |
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |
|
|
|
|
|
||
Provision for losses on receivables |
|
16,511 |
|
|
|
23,044 |
|
Depreciation and amortization expense |
|
6,184 |
|
|
|
3,421 |
|
Change in deferred fees and costs, net |
|
616 |
|
|
|
259 |
|
Change in fair value of warrants |
|
149 |
|
|
|
(3,910 |
) |
Change in fair value of contingent consideration from mergers and acquisitions |
|
(246 |
) |
|
|
4,660 |
|
(Gains) losses on foreign currency translation |
|
(7 |
) |
|
|
29 |
|
Expenses related to debt modification and prepayments |
|
— |
|
|
|
730 |
|
Goodwill impairment loss |
|
— |
|
|
|
— |
|
Stock compensation expense |
|
5,705 |
|
|
|
3,268 |
|
Deferred income taxes |
|
(93 |
) |
|
|
(28,442 |
) |
Changes in assets and liabilities, net of effects of business combination: |
|
|
|
|
|
||
Accrued interest receivable |
|
(27 |
) |
|
|
(34 |
) |
Enterprise receivables, net |
|
(4,130 |
) |
|
|
1,658 |
|
Other assets |
|
(1,250 |
) |
|
|
666 |
|
Accounts payable and accrued liabilities |
|
(9,805 |
) |
|
|
(2,350 |
) |
Other liabilities |
|
(1,710 |
) |
|
|
(1,672 |
) |
Net cash provided by (used in) operating activities |
|
2,680 |
|
|
|
(8,651 |
) |
Cash flows from investing activities: |
|
|
|
|
|
||
Net originations and collections of finance receivables |
|
(19,647 |
) |
|
|
(22,872 |
) |
Purchase of property, equipment and software |
|
(1,037 |
) |
|
|
(823 |
) |
Acquisition of Engine, net of cash acquired |
|
— |
|
|
|
(18,584 |
) |
Settlement of contingent consideration related to mergers and acquisitions |
|
(350 |
) |
|
|
— |
|
Net cash used in investing activities |
|
(21,034 |
) |
|
|
(42,279 |
) |
Cash flows from financing activities: |
|
|
|
|
|
||
Repayments to secured/senior lenders |
|
— |
|
|
|
(24,028 |
) |
Fees related to debt prepayment |
|
— |
|
|
|
(375 |
) |
Net (repayments to) proceeds from special purpose vehicle credit facilities |
|
(24,000 |
) |
|
|
10,000 |
|
Borrowings from secured lenders |
|
— |
|
|
|
69,300 |
|
Payment of deferred financing costs |
|
— |
|
|
|
(1,625 |
) |
(Payments) proceeds from issuance of common stock related to exercise of stock options and warrants |
|
(599 |
) |
|
|
421 |
|
Net cash (used in) provided by financing activities |
|
(24,599 |
) |
|
|
53,693 |
|
Net change in cash and restricted cash |
|
(42,953 |
) |
|
|
2,763 |
|
Cash and restricted cash, beginning of period |
|
153,709 |
|
|
|
246,224 |
|
Cash and restricted cash, end of period |
$ |
110,756 |
|
|
$ |
248,987 |
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
||
Cash paid for interest |
$ |
7,465 |
|
|
$ |
4,990 |
|
|
|
|
|
|
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
||
Accrued dividends on preferred stock |
$ |
1,977 |
|
|
$ |
1,028 |
|
Lease liabilities incurred in exchange for operating right-of-use assets |
$ |
— |
|
|
$ |
6,578 |
|
Equity issued as consideration for mergers and acquisitions |
$ |
120 |
|
|
$ |
202,610 |
|
Equity issued as settlement of contingent consideration related to mergers and acquisitions |
$ |
1,913 |
|
|
$ |
10,278 |
|
Contingent consideration issued related to mergers and acquisitions |
$ |
— |
|
|
$ |
45,336 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
MONEYLION INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except share and per share amounts or as otherwise indicated)
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
MoneyLion Inc. (“MoneyLion” or the “Company”) was founded in 2013 and is headquartered in New York, New York. On September 22, 2021, MoneyLion Inc., formerly known as Fusion Acquisition Corp., consummated a business combination (the “Business Combination”) with MoneyLion Technologies Inc., formerly known as MoneyLion Inc. Following the Business Combination, MoneyLion Inc. became a publicly traded company, with MoneyLion Technologies Inc. continuing the existing business operations as a subsidiary of MoneyLion Inc. MoneyLion Inc.’s Class A common stock, par value $0.0001 per share (the “Class A Common Stock”), is listed on the New York Stock Exchange (the “NYSE”) under the ticker symbol “ML.”
MoneyLion is the go-to destination for consumer financial products and services and marketplace solutions, providing curated money-related content to engage, educate and empower customers. MoneyLion offers its core suite of innovative first-party financial products and services, along with personalized and actionable financial and non-financial offers in its Consumer marketplace. MoneyLion powers leading embedded finance marketplace solutions for its Enterprise Partners (as defined herein), connecting and matching consumers with real-time, personalized product and service recommendations through its proprietary integrative technology, and provides complementary data products and services that optimize their marketplace integrations and competitiveness. MoneyLion also offers creative media and marketing services to clients across industries through its media division and leverages these same creative resources to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings.
On November 15, 2021, MoneyLion completed its acquisition of Malka Media Group LLC ("MALKA" and such transaction, the “MALKA Acquisition”). MALKA forms the basis of MoneyLion's media division and provides MoneyLion with the creative capabilities to produce and deliver engaging and dynamic content in support of MoneyLion's product and service offerings. MALKA also offers creative media and marketing services to clients in MoneyLion's Enterprise business. The MALKA Acquisition accelerated MoneyLion's ability to engage consumers across digital media, allowing it to directly connect with communities natively inside and outside of the MoneyLion platform.
5
On February 17, 2022, MoneyLion completed its acquisition of Even Financial Inc., which was subsequently renamed to ML Enterprise Inc., doing business as the brand Engine by MoneyLion ("Engine" and such acquisition, the “Engine Acquisition”). Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners through which consumers are connected and matched with real-time, personalized financial product and service recommendations. For the over 1,000 Enterprise Partners in MoneyLion's network who integrate MoneyLion's software platform onto their properties, MoneyLion enables a more simple and efficient system of customer acquisition and also provides value-added data analytics and reporting services to enable them to better understand the performance of their marketplace programs and optimize their business over time. The Engine Acquisition expanded MoneyLion's addressable market, extended the reach of its own products and services and diversified its revenue mix.
Basis of Presentation—The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of MoneyLion Inc. and its wholly owned subsidiaries and consolidated variable interest entities (“VIEs”) for which the Company is the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. The Company does not have any items of other comprehensive loss; therefore, there is no difference between net loss and comprehensive loss for the three months ended March 31, 2023 and 2022.
Reverse Stock Split—On April 24, 2023, the Company amended the Company's Fourth Amended and Restated Certificate of Incorporation (as amended from time to time, the "Certificate of Incorporation") to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, a -for-30 reverse stock split (the "Reverse Stock Split") of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Company’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), may be converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in these consolidated financial statements and the accompanying footnotes for all periods presented, which includes adjusting the description of any activity that may have been transacted on a pre-Reverse Stock Split basis.
Receivable Funding—MoneyLion's primary source of funding for originated receivables is special purpose vehicle financings from third-party institutional lenders. For more information, Note 8, “Debt” and Note 7, “Variable Interest Entities” of the Company’s Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility (each as defined in Company’s Annual Report on Form 10-K for the year ended December 31, 2022) and VIE considerations related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility, respectively.
6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In the opinion of the Company, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring adjustments and adjustments to eliminate intercompany transactions and balances, necessary for a fair presentation of its financial position and its results of operations, changes in redeemable convertible preferred stock and stockholders’ equity and cash flows.
The Company’s accounting policies are set forth in Note 2, “Summary of Significant Accounting Policies” of the Company’s Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Included herein are certain updates to those policies and the related disclosures.
Revenue Recognition and Related Receivables—The following table summarizes revenue by type for the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Consumer revenues |
|
|
|
|
|
|
||
Service and subscription fees |
|
$ |
62,438 |
|
|
$ |
46,394 |
|
Net interest income on finance receivables |
|
|
2,928 |
|
|
|
2,568 |
|
Total consumer revenues |
|
|
65,366 |
|
|
|
48,962 |
|
Enterprise service revenues |
|
|
28,303 |
|
|
|
20,752 |
|
Total revenue, net |
|
$ |
93,669 |
|
|
$ |
69,714 |
|
Allowance for Losses on Receivables—An allowance for losses on consumer receivables is established to provide for probable losses incurred in the Company’s consumer receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of many factors, including changes in the nature, volume, and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the consumer’s ability to pay. The allowance is developed on a general basis and each period management assesses each product type by origination cohort in order to determine the forecasted performance of those cohorts and arrive at an appropriate allowance rate for that period. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in any of the factors.
The Company’s charge-off policy is to charge-off finance receivables for loans and related accrued interest receivables, net of expected recoveries, in the month in which the account becomes 90 days contractually past due and charge-off finance receivables for advances and related fee receivables in the month in which the account becomes 90 days past due effective January 1, 2023 and 60 days past due prior to January 1, 2023. If an account is deemed to be uncollectable prior to this date, the Company will charge-off the receivable in the month it is deemed uncollectable.
The Company determines the past due status using the contractual terms of the finance receivables. This is the credit quality indicator used to evaluate the required allowance for losses on finance receivables for each portfolio of products.
An allowance for losses on service and subscription fee receivables is established to provide probable losses incurred in the Company’s service and subscription fee receivables at the balance sheet date and is established through a provision for losses on receivables. Charge-offs, net of recoveries, are charged directly to the allowance. The allowance is based on management’s assessment of historical charge-offs and recoveries on these receivables, as well as certain qualitative factors including current economic conditions that may affect the customers’ ability to pay.
Receivables from enterprise services have a low rate of default, and as such the related allowance is not material. The Company monitors enterprise receivable default rates for any indication of a deterioration in average credit quality that may result in more material levels of allowance for losses.
7
Fair Value of Financial Instruments—Accounting Standards Codification ("ASC") 820, Fair Value Measurement (“ASC 820”), provides a single definition of fair value and a common framework for measuring fair value as well as disclosure requirements for fair value measurements used in financial statements. Under ASC 820, fair value is determined based upon the exit price that would be received by a company to sell an asset or paid by a company to transfer a liability in an orderly transaction between market participants, exclusive of any transaction costs. Fair value measurements are determined by either the principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume for the asset or liability. Absent a principal market to measure fair value, the Company uses the most advantageous market, which is the market from which the Company would receive the highest selling price for the asset or pay the lowest price to settle the liability, after considering transaction costs. However, when using the most advantageous market, transaction costs are only considered to determine which market is the most advantageous and these costs are then excluded when applying a fair value measurement. ASC 820 creates a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below, with Level 1 having the highest priority and Level 3 having the lowest.
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The Company has no assets measured at fair value on a recurring or non-recurring basis as of March 31, 2023 nor December 31, 2022. Liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 are the Private Placement Warrants (as defined herein) and contingent consideration related to mergers and acquisitions, which are further described in Note 13, "Stock Warrants," and Note 16, "Mergers and Acquisitions," respectively. The Company has no liabilities measured at fair value on a non-recurring basis as of March 31, 2023 nor December 31, 2022. There have been no transfers between levels during the three months ended March 31, 2023 and 2022.
The Company also has financial instruments which are not measured at fair value. The Company has evaluated cash, restricted cash, consumer receivables, net, enterprise receivables, net, receivables from payment processors, prepaid expenses, accounts payable and accrued liabilities and other financial instrument assets and liabilities, and believes the carrying value approximates the fair value due to the short-term nature of these balances. The fair value of the secured loans, other debt and lease liabilities approximate their carrying values.
Recently Adopted Accounting Pronouncements—The Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), effective January 1, 2022, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. As permitted by the new guidance, the Company elected the package of practical expedients, which among other things, allowed historical lease classification to be carried forward. Upon adoption of the ASU No. 2016-02, the Company recognized an aggregate lease liability and right-of-use asset of $3,551, calculated based on the present value of the remaining minimum lease payments for qualifying leases as of January 1, 2022. The cumulative-effect adjustment recognized to the beginning balance of accumulated deficit was not material. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statements of operations or cash flows.
8
The Company adopted ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740) during the fourth quarter of fiscal year 2022. The amendments in the updated guidance simplify the accounting for income taxes by removing certain exceptions and improving consistent application of other areas of the topic by clarifying the guidance. The adoption of ASU No. 2019-12 did not have a material impact on the Company's financial statements or the related notes.
The Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which, along with subsequent related ASUs, creates a new credit impairment standard for financial assets measured at amortized cost and available-for-sale debt securities. The ASU requires financial assets measured at amortized cost (including loans, trade receivables and held-to-maturity debt securities) to be presented at the net amount expected to be collected, through an allowance for credit losses that are expected to occur over the remaining life of the asset, rather than incurred losses. The ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a direct write-down. The measurement of credit losses for newly recognized financial assets (other than certain purchased assets) and subsequent changes in the allowance for credit losses are recorded in the statement of income as the amounts expected to be collected change. The Company adopted ASU 2016-13 and the related subsequent ASUs effective January 1, 2023, and applied the changes prospectively, recognizing a cumulative-effect adjustment to the beginning balance of retained earnings as of the adoption date. Upon adoption, the Company increased consumer receivables, net by $692, decreased enterprise receivables, net by $187 and reduced accumulated deficit by $505. The adoption of the new guidance did not impact the Company’s unaudited consolidated interim statements of operations or cash flows.
Recently Issued Accounting Pronouncements Not Yet Adopted—The Company currently qualifies as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012. Accordingly, the Company has the option to adopt new or revised accounting guidance either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods applicable to private companies. The Company has elected to adopt new or revised accounting guidance within the same time period as private companies, unless, as indicated below, management determines it is preferable to take advantage of early adoption provisions offered within the applicable guidance.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitating of the Effects of Reference Rate Reform on Financial Reporting and subsequently issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions in which the reference London Interbank Offered Rate (“LIBOR”) or another reference rate is expected to be discontinued as a result of the Reference Rate Reform. These ASUs are intended to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The new guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022 and the expedients are available through December 31, 2024. Early adoption is permitted. The Company has no significant contracts based on LIBOR as of March 31, 2023. As such, the Company currently does not intend to elect the optional expedients and exceptions.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The updated standard will be effective for the Company on January 1, 2024; however, early adoption of the ASU is permitted on January 1, 2021. The Company is in process of evaluating the impact that the updated standard will have on its consolidated financial statements and related disclosures.
9
3. CONSUMER RECEIVABLES
The Company’s finance receivables consist of secured personal loans and principal amounts of Instacash advances. Secured loan principal balances are partially given to the borrower upon origination while the remaining balance is deposited into an escrow account. The funds in the escrow account may be used to pay the secured personal loan in full or can be released to the borrower once the secured personal loan is paid in full. Until such time, the funds in the escrow account may be collected by the Company in the event the borrower becomes contractually past due. Accrued interest receivables represent the interest accrued on the loan receivables based upon the daily principal amount outstanding except for loans that are on nonaccrual status.
The Company’s policy is to suspend recognition of interest income on secured personal loans and place the secured personal loan on nonaccrual status when the account is more than 60 days past due on a contractual basis or when, in the Company’s estimation, the collectability of the account is uncertain, and the account is less than 90 days contractually past due. Any accrued interest receivable that becomes 90 days past due on a contractual basis is charged-off by reversing net interest income on loan receivables. Net charge-offs of accrued interest income were $307 and $548 for the three months ended March 31, 2023 and 2022.
Fees receivables represent the amounts due to the Company for tips and instant transfer fees related to the Instacash advance product. Subscription receivables represent the amounts billed to customers for subscription services.
The credit quality and future repayment of consumer receivables are dependent upon the customer’s ability to perform under the terms of the agreement. Factors such as unemployment rates and housing values, among others, may impact the customer’s ability to perform under the loan or advance terms though no direct correlation between charge-off rates and these factors has been identified in the Company's analysis. When assessing provision for losses on consumer receivables, the Company takes into account the composition and delinquency status of the outstanding consumer receivables and the related forecasted principal loss rates based on recent historical experience. Recent historical loss rates are updated on a quarterly basis. Charge-offs of consumer receivable balances occur after becoming ninety days past contractually due unless specific circumstances are identified on an individual or group of receivables that indicate charge-off is not appropriate. The level of exceptions to charge-offs occurring once ninety days past due is not material. The tables below show consumer receivables balances as of March 31, 2023 and December 31, 2022 and the consumer receivables activity, charge-off rates and aging by product for the three months ended March 31, 2023 and 2022.
Consumer receivables consisted of the following:
|
March 31, |
|
|
December 31, |
|
||
|
2023 |
|
|
2022 |
|
||
Loan receivables |
|
73,700 |
|
|
|
73,451 |
|
Instacash receivables |
|
84,859 |
|
|
|
77,688 |
|
Finance receivables |
|
158,559 |
|
|
|
151,139 |
|
Fees receivable |
|
13,292 |
|
|
|
14,019 |
|
Subscription receivables |
|
3,185 |
|
|
|
3,419 |
|
Deferred loan origination costs |
|
80 |
|
|
|
331 |
|
Accrued interest receivable |
|
1,095 |
|
|
|
1,068 |
|
Consumer receivables, before allowance for credit losses |
$ |
176,211 |
|
|
$ |
169,976 |
|
10
Changes in the allowance for losses on loan receivables were as follows:
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Beginning balance |
$ |
5,784 |
|
|
$ |
6,494 |
|
Provision for credit losses on receivables |
|
1,520 |
|
|
|
2,796 |
|
Loan receivables charged off |
|
(4,189 |
) |
|
|
(10,458 |
) |
Recoveries |
|
2,676 |
|
|
|
7,408 |
|
Ending balance |
$ |
5,791 |
|
|
$ |
6,240 |
|
Changes in the allowance for losses on Instacash receivables were as follows:
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Beginning balance |
$ |
23,240 |
|
|
$ |
15,131 |
|
Provision for credit losses on receivables |
|
10,081 |
|
|
|
16,706 |
|
Instacash receivables charged off |
|
(19,828 |
) |
|
|
(22,500 |
) |
Recoveries |
|
6,193 |
|
|
|
5,861 |
|
Ending balance |
$ |
19,686 |
|
|
$ |
15,198 |
|
Changes in the allowance for losses on fees receivable were as follows:
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Beginning balance |
$ |
908 |
|
|
$ |
420 |
|
Provision for credit losses on receivables |
|
4,174 |
|
|
|
2,001 |
|
Fees receivable charged off |
|
(4,825 |
) |
|
|
(2,708 |
) |
Recoveries |
|
761 |
|
|
|
779 |
|
Ending balance |
$ |
1,018 |
|
|
$ |
492 |
|
Changes in the allowance for losses on subscription receivables were as follows:
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Beginning balance |
$ |
1,292 |
|
|
$ |
278 |
|
Provision for credit losses on receivables |
|
736 |
|
|
|
1,541 |
|
Subscription receivables charged off |
|
(1,356 |
) |
|
|
(1,618 |
) |
Recoveries |
|
306 |
|
|
|
160 |
|
Ending balance |
$ |
978 |
|
|
$ |
361 |
|
The following is an assessment of the repayment performance of loan receivables as of March 31, 2023 and December 31, 2022 and presents the contractual delinquency of the loan receivables portfolio:
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
64,895 |
|
|
|
88.0 |
% |
|
$ |
63,578 |
|
|
|
86.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
5,133 |
|
|
|
7.0 |
% |
|
|
5,579 |
|
|
|
7.6 |
% |
61 to 90 days |
|
3,672 |
|
|
|
5.0 |
% |
|
|
4,294 |
|
|
|
5.8 |
% |
Total delinquency |
|
8,805 |
|
|
|
12.0 |
% |
|
|
9,873 |
|
|
|
13.4 |
% |
Loan receivables before allowance for credit losses |
$ |
73,700 |
|
|
|
100.0 |
% |
|
$ |
73,451 |
|
|
|
100.0 |
% |
11
Loan receivables that are 61 to 90 days contractually past due are placed on non-accrual status.
The following is an assessment of the repayment performance of Instacash receivables as of March 31, 2023 and December 31, 2022 and presents the contractual delinquency of the Instacash receivables portfolio:
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
72,069 |
|
|
|
84.9 |
% |
|
$ |
70,003 |
|
|
|
90.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
7,434 |
|
|
|
8.8 |
% |
|
|
7,685 |
|
|
|
9.9 |
% |
61 to 90 days |
|
5,356 |
|
|
|
6.3 |
% |
|
|
— |
|
|
|
0.0 |
% |
Total delinquency |
|
12,790 |
|
|
|
15.1 |
% |
|
|
7,685 |
|
|
|
9.9 |
% |
Instacash receivables before allowance for credit losses |
$ |
84,859 |
|
|
|
100.0 |
% |
|
$ |
77,688 |
|
|
|
100.0 |
% |
The following is an assessment of the repayment performance of fees receivable as of March 31, 2023 and December 31, 2022 and presents the contractual delinquency of the fees receivable portfolio:
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
11,005 |
|
|
|
82.8 |
% |
|
$ |
10,645 |
|
|
|
75.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
1,337 |
|
|
|
10.1 |
% |
|
|
3,374 |
|
|
|
24.1 |
% |
61 to 90 days |
|
950 |
|
|
|
7.1 |
% |
|
|
— |
|
|
|
0.0 |
% |
Total delinquency |
|
2,287 |
|
|
|
17.2 |
% |
|
|
3,374 |
|
|
|
24.1 |
% |
Fees receivable before allowance for credit losses |
$ |
13,292 |
|
|
|
100.0 |
% |
|
$ |
14,019 |
|
|
|
100.0 |
% |
12
The following is an assessment of the repayment performance of subscription receivables as of March 31, 2023 and December 31, 2022 and presents the contractual delinquency of the subscription receivables portfolio:
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Current |
$ |
2,295 |
|
|
|
72.0 |
% |
|
$ |
2,487 |
|
|
|
72.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Delinquency: |
|
|
|
|
|
|
|
|
|
|
|
||||
31 to 60 days |
|
489 |
|
|
|
15.4 |
% |
|
|
534 |
|
|
|
15.6 |
% |
61 to 90 days |
|
401 |
|
|
|
12.6 |
% |
|
|
398 |
|
|
|
11.6 |
% |
Total delinquency |
|
890 |
|
|
|
28.0 |
% |
|
|
932 |
|
|
|
27.2 |
% |
Subscription receivables before allowance for credit losses |
$ |
3,185 |
|
|
|
100.0 |
% |
|
$ |
3,419 |
|
|
|
100.0 |
% |
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Leasehold improvements |
|
$ |
1,968 |
|
|
$ |
1,970 |
|
Furniture and fixtures |
|
|
856 |
|
|
|
853 |
|
Computers and equipment |
|
|
2,306 |
|
|
|
2,298 |
|
|
|
|
5,130 |
|
|
|
5,121 |
|
Less: accumulated depreciation |
|
|
(2,448 |
) |
|
|
(2,145 |
) |
Furniture and equipment, net |
|
$ |
2,682 |
|
|
$ |
2,976 |
|
Total depreciation expense related to property and equipment was $304 and $230 for the three months ended March 31, 2023 and 2022, respectively.
5. INTANGIBLE ASSETS
Changes in goodwill were as follows:
|
Goodwill Before Impairment |
|
|
Cumulative Goodwill Impairments |
|
|
Goodwill |
|
|||
Balance at December 31, 2022 |
$ |
163,360 |
|
|
$ |
(136,760 |
) |
|
$ |
26,600 |
|
Other |
|
121 |
|
|
|
- |
|
|
|
121 |
|
Balance at March 31, 2023 |
$ |
163,481 |
|
|
$ |
(136,760 |
) |
|
$ |
26,721 |
|
Intangible assets consisted of the following:
|
|
|
|
March 31, |
|
|
December 31, |
|
||
|
|
Useful Life |
|
2023 |
|
|
2022 |
|
||
Proprietary technology and capitalized internal-use software |
|
3 - 7 years |
|
$ |
38,449 |
|
|
$ |
41,495 |
|
Work in process |
|
|
|
|
1,551 |
|
|
|
1,812 |
|
Customer relationships |
|
10 - 15 years |
|
|
160,500 |
|
|
|
160,500 |
|
Trade names |
|
9 - 15 years |
|
|
15,960 |
|
|
|
16,620 |
|
Less: accumulated amortization |
|
|
|
|
(27,066 |
) |
|
|
(26,180 |
) |
Intangible assets, net |
|
|
|
$ |
189,394 |
|
|
$ |
194,247 |
|
13
The Company capitalizes certain internal-use software development costs, consisting primarily of contractor costs and employee salaries and benefits allocated to the software. Capitalization of costs incurred in connection with internally developed software commences when both the preliminary project stage is completed and management has authorized further funding for the project, based on a determination that it is probable the project will be completed and used to perform the function intended. Costs incurred for enhancements that are expected to result in additional functionalities are capitalized in a similar manner. Capitalization of costs ceases no later than the point at which the project is substantially complete and ready for its intended use, at which point amortization of capitalized costs begins. All other costs are expensed as incurred. Costs capitalized in connection with internally developed software were $1,162 for the three months ended March 31, 2023 and were $758 for the three months ended March 31, 2022.
For the three months ended March 31, 2023 and 2022, total amortization expense was $5,880 and $3,191, respectively.
6. OTHER ASSETS
Other assets consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Receivable from payment processors |
|
$ |
35,280 |
|
|
$ |
32,881 |
|
Prepaid expenses |
|
|
8,229 |
|
|
|
8,804 |
|
Operating lease right-of-use assets |
|
|
8,596 |
|
|
|
9,123 |
|
Other |
|
|
3,802 |
|
|
|
3,850 |
|
Total other assets |
|
$ |
55,907 |
|
|
$ |
54,658 |
|
7. VARIABLE INTEREST ENTITIES
Beginning in the fourth quarter of 2021, the Company’s primary source of funding for originated receivables became special purpose vehicle financings from third-party lenders (the “SPV Credit Facilities”). The Company may sell certain loan and Instacash receivables to wholly owned, bankruptcy-remote special purpose subsidiaries (the “SPV Borrowers”), which pledge such receivables as collateral to support the financing of additional receivables. The underlying loan and Instacash receivables are originated and serviced by other wholly owned subsidiaries of the Company. The SPV Borrowers are required to maintain pledged collateral consisting of loan and Instacash receivables with a net asset balance that equals or exceeds 90% of the aggregate principal amounts of the loans financed through the SPV Credit Facilities. Proceeds received from the SPV Credit Facilities can only be used to purchase loan and Instacash receivables. The payments and interest, as applicable, received from the loan and Instacash receivables held by the SPV Borrowers are used to repay obligations under the SPV Credit Facilities. While the SPV Credit Facilities and related agreements provide assurances to the third-party lenders regarding the quality of loan and Instacash receivables and certain origination and servicing functions to be performed by other wholly owned subsidiaries of the Company, the third-party lender may absorb losses in the event that the payments and interest, as applicable, received in connection with the loan and Instacash receivables are not sufficient to repay the loans made through the SPV Credit Facilities.
14
The Company is required to evaluate the SPV Borrowers for consolidation, which the Company has concluded are VIEs. The Company has the ability to direct the activities of the SPV Borrowers that most significantly impact the economic performance of the wholly owned subsidiaries that act as the originators and servicer of the loan and Instacash receivables held by the SPV Borrowers. Additionally, the Company has the obligation to absorb losses related to the pledged collateral in excess of the aggregate principal amount of the receivables and the right to proceeds related to the excess loan and Instacash receivables securing the SPV Credit Facilities once all loans and interest under such SPV Credit Facilities are repaid, which exposes the Company to losses and returns that could potentially be significant to the SPV Borrowers. Accordingly, the Company determined it is the primary beneficiary of the SPV Borrowers and is required to consolidate them as indirect wholly owned VIEs. For more information, see Note 9, “Debt” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
8. DEBT
The Company’s debt as of March 31, 2023 and December 31, 2022 is presented below:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Monroe Term Loans |
|
|
90,000 |
|
|
|
90,000 |
|
Unamortized discounts and debt issuance costs |
|
|
(1,274 |
) |
|
|
(1,383 |
) |
Total secured loans |
|
$ |
88,726 |
|
|
$ |
88,617 |
|
|
|
|
|
|
|
|
||
ROAR 1 SPV Credit Facility |
|
$ |
63,000 |
|
|
$ |
83,000 |
|
ROAR 2 SPV Credit Facility |
|
|
59,000 |
|
|
|
63,000 |
|
Unamortized discounts and debt issuance costs |
|
|
(2,350 |
) |
|
|
(2,606 |
) |
Total other debt |
|
$ |
119,650 |
|
|
$ |
143,394 |
|
For more information regarding debt instruments outstanding as of December 31, 2022, see Note 9, “Debt” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The Monroe Term Loans (as defined below) are comprised of term loans with a principal balance of $70.0 million (the "Term A-1 Loans") and term loans with a principal balance of $20.0 million (the "Term A-2 Loans" and together with the Term A-1 Loans, the "Monroe Term Loans"). The interest rate as of March 31, 2023 on the Term A-1 Loans and Term A-2 Loans was 14.07% and 13.75%, respectively.
9. LEASES
The Company is party to operating leases for all of our offices. Many leases contain options to renew and extend lease terms and options to terminate leases early. Reflected in the right-of-use asset and lease liability on the consolidated balance sheets are the periods provided by renewal and extension options that we are reasonably certain to exercise, as well as the periods provided by termination options that we are reasonably certain not to exercise. All long-term leases identified by the Company are classified as operating leases. Lease expenses related to long-term leases were $796 and $620 for the three months ended March 31, 2023 and 2022, respectively. Short-term lease expense, variable lease expense and sublease income were not material for the three months ended March 31, 2023 and 2022.
15
Maturities of the Company’s long-term operating lease liabilities, which are included in on the consolidated balance sheet, were as follows:
|
|
March 31, 2023 |
|
|
Remainder of 2023 |
|
$ |
2,483 |
|
2024 |
|
|
3,116 |
|
2025 |
|
|
2,670 |
|
2026 |
|
|
1,268 |
|
2027 |
|
|
904 |
|
Thereafter |
|
|
768 |
|
Total lease payments |
|
|
11,209 |
|
Less: imputed interest |
|
|
2,139 |
|
Lease liabilities |
|
$ |
9,070 |
|
Weighted-average remaining lease term (years) |
|
|
4.0 |
|
Weighted-average discount rate |
|
|
11.8 |
% |
10. INCOME TAXES
As of March 31, 2023 and December 31, 2022, the Company maintained a valuation allowance of $86,120 and $84,952, respectively. The valuation allowance was recorded due to the fact that the Company has incurred operating losses to date.
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $1,200 during the three months ended March 31, 2023 and decreased by approximately $17,100 during the three months ended March 31, 2022.
The effective tax rate differs from the statutory tax rate of 21% due to the effect of stock compensation, accrued dividends on convertible preferred stock, executive compensation, other permanent differences and state taxes.
Total U.S. federal and state operating loss carryforwards as of March 31, 2023 and December 31, 2022 were approximately $787,000 and $786,600, respectively. U.S. federal net operating loss carryforwards begin to expire in 2033, and state operating loss carryforwards begin to expire in 2027. U.S. federal net operating losses of approximately $417,300 carry forward indefinitely.
As of March 31, 2023, the Company’s federal research and development credit carryforwards for income tax purposes were approximately $1,200. If not used, the current carryforwards will expire beginning in 2034.
Due to the net operating loss carryovers, the statute of limitations remains open for federal and state returns.
16
The Company has completed a review to determine whether the future utilization of net operating loss and credit carryforwards will be restricted due to ownership changes that have occurred. Due to the Engine Acquisition, the Company experienced an ownership change on February 17, 2022. Thus, the Company's net operating loss carryforwards are subject to an annual limitation of approximately $8,200 per year. The Company had a net unrealized built-in gain corporation on the ownership change date and had a net unrealized built-in gain of approximately $330,700 at the change date. As a result, under the section 338 Approach of Notice 2003-65, the Company's annual limitation is expected to be increased in the first five years post-change by approximately $121,400. Based on the February 17, 2022 limitation, all of the total net operating loss carryforwards are expected to become utilizable by the tax year ending December 31, 2043.
The Company also acquired federal net operating losses in the Engine Acquisition. It was determined that the Engine net operating losses acquired are also subject to a Section 382 annual limitation of approximately $3,800 due to Engine's ownership changes in both 2018 and 2022. Engine is a net unrealized built-in gains ("NUBIG") corporation and had a NUBIG of approximately $265,200 at the change date. As a result, the Engine annual limitation is expected to be increased in the first five years post-change by an aggregate of approximately $87,800. As of the 2022 ownership change, approximately $3,100 of the net operating losses that were restricted by the 2018 ownership change had freed up and become available for use, and approximately $6,000 remained restricted. A further approximately $55,000 in net operating losses had been generated between the date immediately following the 2018 ownership change and the 2022 ownership change. Of the approximately $58,100 in net operating losses that were now solely limited by the section 382 limitation resulting from the 2022 ownership change, all of the total net operating loss carryforwards are expected to become utilizable by the tax year ending December 31, 2025. The remaining approximately $6,000 in net operating loss carryforwards still subject to the section 382 limitation resulting from the 2018 ownership change are expected to free up and become available for use by the tax year ended December 31, 2049. None of the pre-change net operating losses subject to the July 31, 2018 and February 17, 2022 limitation are expected to expire unutilized as a result of both ownership changes.
11. COMMON AND PREFERRED STOCK
Class A Common Stock—Each holder of the shares of Class A Common Stock is entitled to one vote for each share of Class A Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote, as provide by the Company’s Certificate of Incorporation. The holders of the shares of Class A Common Stock do not have cumulative voting rights in the election of directors. Generally, all matters to be voted on by the holders of Class A Common Stock must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast present in person or represented by proxy, unless otherwise specified by law, the Company’s Certificate of Incorporation or Amended and Restated Bylaws (as amended from time to time).
Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of Class A Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by MoneyLion’s Board of Directors out of funds legally available therefor.
In the event of any voluntary or involuntary liquidation, dissolution or winding up of MoneyLion’s affairs, the holders of the shares of Class A Common Stock are entitled to share ratably in all assets remaining after payment of MoneyLion’s debts and other liabilities, subject to prior distribution rights of preferred stock or any class or series of stock having a preference over the shares of Class A Common Stock, then outstanding, if any.
The holders of shares of Class A Common Stock have no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the shares of Class A Common Stock. The rights, preferences and privileges of holders of shares of Class A Common Stock will be subject to those of the holders of any shares of the preferred stock MoneyLion may issue in the future.
Series A Preferred Stock—Holders of the shares of Series A Preferred Stock (other than certain regulated holders subject to the Bank Holding Company Act of 1956, as amended) are entitled to vote as a single class with the holders of the Class A Common Stock and the holders of any other class or series of capital stock of MoneyLion then entitled to vote.
17
Holders of the Series A Preferred Stock are entitled to a 30 cent cumulative annual dividend per share, payable at the Company’s election in either cash or Class A Common Stock (or a combination thereof), with any dividends on the Class A Common Stock valued based on the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE for the 20 trading days ending on the trading day immediately prior to the date on which the dividend is paid.
Upon a liquidation of the Company, holders of the Series A Preferred Stock will be entitled to a liquidation preference of the greater of $10.00 per share or the amount per share that such holder would have received had the Series A Preferred Stock been converted into Class A Common Stock immediately prior to the liquidation.
Shares of Series A Preferred Stock are convertible into shares of Class A Common Stock on a one-for-thirty basis, subject to customary anti-dilution adjustments. The Series A Preferred Stock (i) is convertible at any time upon the holder’s election and (ii) automatically converts into Class A Common Stock if the per share volume-weighted average price of the shares of Class A Common Stock on the NYSE equals or exceeds $10.00 on any 20 trading days (which may be consecutive or nonconsecutive) within any consecutive 30 trading day period that ends no later than the last day of the lockup period that applies to such shares of Series A Preferred Stock.
12. STOCK-BASED COMPENSATION
Omnibus Incentive Plan
At the Company's 2022 Annual Meeting of Stockholders (the "2022 Annual Meeting"), Company stockholders approved the Company's Amended and Restated Omnibus Incentive Plan (as may be amended or restated from time to time, the “Incentive Plan”), as further described in the Company's Definitive Proxy Statement for the 2022 Annual Meeting, filed with the SEC on April 29, 2022.
Stock-based compensation $5,705 and $3,268 was recognized during the three months ended March 31, 2023 and 2022, respectively.
The number of units awarded under the Incentive Plan are generally based on a weighted average of the Class A Common Stock in the days leading up to the grant. Fair values for restricted stock units ("RSUs") and performance stock units ("PSUs") based on the Company’s operating performance are valued based on the price of the Class A Common Stock at the time of grant. Fair values for options are calculated using a Black-Scholes option pricing model and PSUs with market conditions are fair valued using a Monte Carlo simulation model. The following table represents activity within the Incentive Plan for the three months ended March 31, 2023:
Type |
|
Vesting Conditions |
|
Units Granted |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Strike Price |
||
Restricted Stock Unit |
|
Service-based |
|
|
582,353 |
|
|
$ |
22.31 |
|
|
n/a |
Performance Stock Unit |
|
Service and performance-based |
|
|
169,444 |
|
|
$ |
17.09 |
|
|
n/a |
The following table represents outstanding equity awards as of March 31, 2023:
Type |
|
Vesting Conditions |
|
Units Outstanding |
|
|
Weighted Average Grant Date Fair Value |
|
|
Weighted Average Strike Price |
|
|||
Restricted Stock Unit |
|
Service-based |
|
|
1,044,475 |
|
|
$ |
35.95 |
|
|
n/a |
|
|
Performance Stock Unit |
|
Service and performance-based |
|
|
205,286 |
|
|
$ |
24.74 |
|
|
n/a |
|
|
Performance Stock Unit |
|
Service and market-based |
|
|
336,991 |
|
|
$ |
27.90 |
|
|
n/a |
|
|
Options |
|
Service-based |
|
|
1,051,512 |
|
|
$ |
20.84 |
|
|
$ |
25.73 |
|
18
13. STOCK WARRANTS
Public Warrants and Private Placement Warrants
As a result of the Business Combination, MoneyLion acquired from Fusion Acquisition Corp., as of September 22, 2021, public warrants outstanding to purchase an aggregate of 583,333 shares of the Class A Common Stock (the “Public Warrants”) and private placement warrants outstanding to purchase an aggregate of 270,000 shares of the Class A Common Stock (the “Private Placement Warrants”).
The Public Warrants meet the conditions for equity classification in accordance with ASC 815-40. At the time of the Business Combination, the Public Warrants assumed by the Company were recorded at fair value within additional paid-in capital in the amount of $23,275. The Private Placement Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liability on the consolidated balance sheets. The warrant liability is measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrants liability in the consolidated statement of operations.
The Private Placement Warrants are valued based on the per warrant price of the Public Warrants, subject to adjustments to account for differences in contractual terms between the Private Placement Warrants and the Public Warrants. The per warrant price of the Public Warrants as of March 31, 2023 was $1.80.
The following table presents the changes in the liability related to the Private Placement Warrants:
|
|
Private Placement |
|
|
|
|
Warrants |
|
|
Warrants payable balance, December 31, 2022 |
|
$ |
337 |
|
Mark-to-market adjustment |
|
|
149 |
|
Warrants payable balance, March 31, 2023 |
|
$ |
486 |
|
For more information regarding the Public Warrants and Private Placement Warrants, see Note 14, “Stock Warrants” in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
14. NET LOSS PER SHARE
The following table sets forth the computation of net loss per share of Class A Common Stock for the three months ended March 31, 2023 and 2022:
|
Three Months Ended March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Numerator: |
|
|
|
|
|
||
Net loss |
|
(9,217 |
) |
|
|
(9,978 |
) |
Accrual of dividends on preferred stock |
|
(1,977 |
) |
|
|
(1,028 |
) |
Net loss attributable to common shareholders |
$ |
(11,194 |
) |
|
$ |
(11,006 |
) |
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
||
Weighted-average common shares outstanding - basic and diluted(1) |
|
8,652,218 |
|
|
|
7,691,243 |
|
Net loss per share attributable to common stockholders - basic and diluted(1) |
$ |
(1.29 |
) |
|
$ |
(1.43 |
) |
19
For the three months ended March 31, 2023 and 2022, the Company’s potentially dilutive securities, which include stock options, RSUs, PSUs, preferred stock, the right to receive earnout shares and warrants to purchase shares of common stock, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same for the three months ended March 31, 2023 and 2022.
The following potential common shares have been excluded from the computation of diluted net loss per share for the three months ended March 31, 2023 and 2022:
|
Three Months Ended |
|
|||||
|
March 31, |
|
|||||
|
2023 |
|
|
2022 |
|
||
Conversion of convertible preferred stock(1) |
|
856,720 |
|
|
|
956,464 |
|
Warrants to purchase common stock and redeemable convertible preferred stock(1) |
|
853,330 |
|
|
|
853,330 |
|
PSUs, RSUs and options to purchase common stock(1) |
|
2,638,264 |
|
|
|
2,173,120 |
|
Right to receive earnout shares(1) |
|
583,333 |
|
|
|
583,333 |
|
Total common stock equivalents |
|
4,931,647 |
|
|
|
4,566,247 |
|
15. COMMITMENTS AND CONTINGENCIES
Legal Matters—From time to time, the Company is subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. The Company is also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this Note 15, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact the Company's business, financial condition, operating results and cash flows. See Part I, Item 1A “Risk Factors — Risks Relating to Legal and Accounting Matters — Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flow” in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.
The Company has determined, based on its current knowledge, that the aggregate amount or range of losses that are estimable with respect to its legal proceedings, including the matters described below, would not have a material adverse effect on its business, financial position, results of operations or cash flows. As of March 31, 2023, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to the Company's business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
The Company holds a number of state licenses in connection with its business activities, and must also comply with other applicable compliance and regulatory requirements in the states where it operates. In most states where the Company operates, one or more regulatory agencies have authority with respect to regulation and enforcement of the Company's business activities under applicable state laws, and the Company may also be subject to the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require the Company, among other potential consequences, to provide refunds to customers or to modify its internal controls and/or business practices.
20
In the ordinary course of its business, the Company is and has been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of its activities by state agencies, including the California Department of Financial Protection and Innovation, the Attorney General of the Commonwealth of Virginia, the New York Attorney General’s Office and the Colorado Department of Law, certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. The Company has responded to and cooperated with the relevant state agencies and will continue to do so in the future, as appropriate.
On September 29, 2022, the Consumer Financial Protection Bureau (the “CFPB”) initiated a civil action in the United States District Court for the Southern District of New York against MoneyLion Technologies Inc., ML Plus LLC and the Company's 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, the Company moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. The Company continues to believe the CFPB’s claims are meritless and is vigorously defending the lawsuit. Nonetheless, at this time, the Company cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on its business, financial condition or results of operations.
16. MERGERS AND ACQUISITIONS
Engine—On February 17, 2022, the Company completed the acquisition of all voting interest in Even Financial Inc., which was subsequently renamed to Engine, pursuant to the Amended and Restated Agreement and Plan of Merger, by and among the Company, Epsilon Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of the Company, Even Financial Inc. and Fortis Advisors LLC, a Delaware limited liability company, solely in its capacity as representative of the equityholders of Even Financial Inc. Engine powers the leading embedded finance marketplace solutions MoneyLion offers to its Enterprise Partners through which consumers are connected and matched with real-time, personalized financial product and service recommendations. For the over 1,000 Enterprise Partners in MoneyLion's network who integrate MoneyLion's software platform onto their properties, MoneyLion enables a more simple and efficient system of customer acquisition and also provides value-added data analytics and reporting services to enable them to better understand the performance of their marketplace programs and optimize their business over time. The Engine Acquisition expanded MoneyLion's addressable market, extended the reach of its own products and services and diversified its revenue mix.
At the closing of the Engine Acquisition, the Company (i) issued to the equityholders of Even Financial Inc. an aggregate of 28,164,811 shares of Series A Preferred Stock, along with an additional 529,120 shares of Series A Preferred Stock to advisors of Even Financial Inc. for transaction expenses, valued at $193,721, (ii) paid to certain Even Financial Inc. management equityholders approximately $14,514 in cash and (iii) exchanged 8,883,228 options to acquire Even Financial Inc. common stock for 196,728 options to acquire Class A Common Stock, of which the vested portion at the acquisition date was valued at $8,960. The equityholders and advisors of Even Financial Inc. are also entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Preferred Stock, based on the attributed revenue of Engine’s business during the 13-month period commencing January 1, 2022 (the “Earnout”), and certain recipients of options to acquire shares of the Company’s Class A common stock are entitled to receive dividend equivalents in lieu of receiving Series A Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The combined value of the Earnout and Preferred Stock Equivalents, which represents contingent consideration, was $45,330 as of the closing of the Engine Acquisition. The total purchase price was approximately $271,096, subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately $5,703 of existing indebtedness of Even Financial Inc. and pay $2,868 of seller transaction costs.
21
The fair value of Even Financial Inc.’s acquired assets and liabilities assumed were as follows:
|
|
February 17, |
|
|
|
|
2022 |
|
|
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
4,501 |
|
Enterprise receivables |
|
|
9,863 |
|
Property and equipment |
|
|
441 |
|
Intangible assets |
|
|
182,640 |
|
Goodwill |
|
|
111,474 |
|
Other assets |
|
|
3,354 |
|
Total assets |
|
|
312,273 |
|
Liabilities |
|
|
|
|
Accounts payable and accrued liabilities |
|
|
9,258 |
|
Deferred tax liability |
|
|
29,073 |
|
Other liabilities |
|
|
2,846 |
|
Total liabilities |
|
|
41,177 |
|
Net assets and liabilities acquired |
|
$ |
271,096 |
|
The goodwill related to the Engine Acquisition was not tax deductible and was comprised of expected synergies from combining operations and the value of intangible assets that do not qualify for separate recognition.
The following table presents the changes in the liability related to the Earnout and Preferred Stock Equivalents:
|
|
|
|
|
Preferred Stock |
|
||
|
|
Earnout |
|
|
Equivalents |
|
||
Balance as of December 31, 2022 |
|
$ |
6,946 |
|
|
$ |
1,997 |
|
Change in fair value of contingent consideration |
|
|
(6 |
) |
|
|
(59 |
) |
Balance as of March 31, 2023 |
|
$ |
6,940 |
|
|
$ |
1,938 |
|
The Earnout and Preferred Stock Equivalents were valued using a Monte Carlo simulation model, which is calculated using Level 3 inputs. The primary unobservable inputs utilized in determining the fair value of the Earnout and Preferred Stock Equivalents are the expected volatility of the Class A Common Stock and the revenue levels of Engine.
The following table presents the quantitative information and certain assumptions regarding Level 3 fair value measurement of the Earnout and Preferred Stock Equivalents:
|
March 31, |
|
|
|
2023 |
|
|
Expected Volatility |
|
102 |
% |
Expected Dividend - Class A Common Stock |
|
— |
|
Expected Term in Years |
|
5.00 |
|
Risk Free Interest Rate |
|
3.51 |
% |
22
The Company’s pro forma revenue and net loss for the three months ended March 31, 2022 below has been prepared as if Even Financial Inc. had been purchased on January 1, 2022. The Company made certain pro forma adjustments related to amortization of intangible assets, intercompany activity and interest expense.
|
Three Months Ended March 31, 2022 |
|
|
|
(unaudited) |
|
|
Revenue |
$ |
78,813 |
|
Net loss |
$ |
(14,347 |
) |
The unaudited pro forma financial information above is not necessarily indicative of what the Company’s consolidated results actually would have been if the Engine Acquisition had been completed at January 1, 2022. In addition, the unaudited pro forma information above does not attempt to project the Company’s future results.
MALKA—On November 15, 2021, MoneyLion completed its acquisition (the “MALKA Acquisition”) of MALKA. MALKA is a creator network and content platform that provides digital media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors.
The sellers may earn up to an additional $35 million payable in restricted shares of Class A Common Stock if MALKA’s revenue and EBITDA exceeds certain targets in 2021 and 2022. Any portion of the earnout paid in restricted shares is subject to a make-whole provision pursuant to which the Company was and may be required to issue additional restricted shares of Class A Common Stock or pay additional cash, as determined by the Company in its sole discretion.
The unsettled restricted shares payable based on operating performance and the Closing Make-Whole Provision were valued at $2,444 as of December 31, 2022 and were settled as of March 31, 2023. The $180 decline and $4,292 increase in fair value for the three months ended March 31, 2023 and 2022, respectively, was included on the consolidated statement of operations as a component of the change in fair value of contingent consideration from mergers and acquisitions. The restricted shares payable based on 2021 and 2022 operating performance were valued based on the Class A Common Stock price per share as of December 31, 2022.
17. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through May 9, 2023, the date on which these consolidated financial statements were available to be issued, and concluded that the following subsequent events were required to be disclosed:
Reverse Stock Split—On April 24, 2023, the Company amended the Certificate of Incorporation to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, the -for-30 Reverse Stock Split of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."
23
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Series A Preferred Stock may be converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in these consolidated financial statements and the accompanying footnotes for all periods presented.
Amendment to Monroe Term Loans—As previously reported, the Company is party to that certain Credit Agreement, dated as of March 24, 2022 (as amended by Amendment No. 1 to Credit Agreement, dated as of March 30, 2023, the “Credit Agreement”), by and among certain financial institutions from time to time party thereto (together with their respective successors and permitted assigns, the “Lenders”), as lenders, and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent and lead arranger. Pursuant to the Credit Agreement, on March 24, 2022, the Company borrowed (a) $70.0 million aggregate principal amount of Term A-1 Loans, with a maturity date of March 24, 2026, and (b) $20.0 million aggregate principal amount of Term A-2 Loans, with a maturity date of May 1, 2023.
On April 28, 2023, the Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”) with the Lenders and Monroe Capital in order to extend the maturity date of the Term A-2 Loans and proactively manage the Company's interest expense through the remainder of 2023. Pursuant to Amendment No. 2, the Company, the Lenders and Monroe Capital agreed that the Company would: (i) pay $5.0 million of the outstanding principal balance of the Term A-2 Loans on May 1, 2023, $10.0 million of the outstanding principal balance of the Term A-2 loans on July 15, 2023 and the remaining outstanding principal balance of the Term A-2 Loans in full on October 15, 2023, and (ii) prepay $5.0 million of the outstanding principal balance of the Term A-1 Loans on October 15, 2023, with the remaining outstanding principal balance of the Term A-1 Loans continuing to be due on the original maturity date of March 24, 2026. The Company is and was, prior to the entry into Amendment No. 2, in compliance with all of its covenants under the Credit Agreement.
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations summarizes the significant factors affecting the consolidated operating results, financial condition, liquidity and capital resources of MoneyLion and is intended to help the reader understand MoneyLion, our operations and our present business environment. This discussion should be read in conjunction with MoneyLion’s unaudited consolidated financial statements and notes to those financial statements included in Part I, Item 1 “Financial Statements” within this Quarterly Report on Form 10-Q. References to “we,” “us,” “our,” “Company” or “MoneyLion” refer to MoneyLion Inc. and, as context requires, its wholly-owned subsidiaries.
Overview
MoneyLion is the go-to destination for consumer financial products and services and marketplace solutions, providing curated money-related content to engage, educate and empower customers. We offer our core suite of innovative first-party financial products and services, along with personalized and actionable financial and non-financial offers in our Consumer marketplace from our Product Partners. We power leading embedded finance marketplace solutions for our Enterprise Partners, connecting and matching consumers with real-time, personalized product and service recommendations through our proprietary integrative technology, and provide complementary data products and services that optimize their marketplace integrations and competitiveness. We also offer creative media and marketing services to clients across industries through our media division and leverage these same creative resources to produce and deliver engaging and dynamic content in support of our product and service offerings.
We have purposefully built our platform in pursuit of our mission to rewire the financial system. We aim to build tools to help consumers through all of their financial inflection points through the use of comprehensive, data-driven analytics that connect consumers with the appropriate financial solution for their individual needs, whether through our first-party products or an offering through our marketplace platforms. As of March 31, 2023, we had 7.8 million Total Customers who used 14.7 million Total Products and over 1,000 Enterprise Partners in our network. We utilize innovative approaches to financial advice, education and literacy by delivering our customers dynamic money-related content, positioning ourselves at the forefront of evolving trends in media consumption so that our customers can better understand and manage their finances. By providing both access and ability and shortening the distance between education and action, we empower customers to take control of their money, no matter their financial circumstances – Every Time You Money.
In our Consumer business, we primarily earn revenue as follows:
25
In our Enterprise business, we primarily earn revenue, reflected in enterprise service revenues, as follows:
Recent Developments
Recent events impacting our business are as follows:
Amendment to Monroe Term Loans
As previously reported, the Company is party to that certain Credit Agreement, dated as of March 24, 2022 (as amended by Amendment No. 1 to Credit Agreement, dated as of March 30, 2023, the “Credit Agreement”), by and among certain financial institutions from time to time party thereto (together with their respective successors and permitted assigns, the “Lenders”), as lenders, and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent and lead arranger. Pursuant to the Credit Agreement, on March 24, 2022, the Company borrowed (a) $70.0 million aggregate principal amount of term loans (the “Term A-1 Loans”), with a maturity date of March 24, 2026, and (b) $20.0 million aggregate principal amount of term loans (the “Term A-2 Loans” and together with the Term A-1 Loans, the "Monroe Term Loans"), with a maturity date of May 1, 2023.
On April 28, 2023, the Company entered into Amendment No. 2 to Credit Agreement (“Amendment No. 2”) with the Lenders and Monroe Capital in order to extend the maturity date of the Term A-2 Loans and proactively manage the Company's interest expense through the remainder of 2023. Pursuant to Amendment No. 2, the Company, the Lenders and Monroe Capital agreed that the Company would: (i) pay $5.0 million of the outstanding principal balance of the Term A-2 Loans on May 1, 2023, $10.0 million of the outstanding principal balance of the Term A-2 loans on July 15, 2023 and the remaining outstanding principal balance of the Term A-2 Loans in full on October 15, 2023, and (ii) prepay $5.0 million of the outstanding principal balance of the Term A-1 Loans on October 15, 2023, with the remaining outstanding principal balance of the Term A-1 Loans continuing to be due on the original maturity date of March 24, 2026. The Company is and was, prior to the entry into Amendment No. 2, in compliance with all of its covenants under the Credit Agreement.
Reverse Stock Split
On April 24, 2023, the Company amended the Certificate of Incorporation to effect, effective as of 5:01 p.m. Eastern Time on April 24, 2023, the 1-for-30 Reverse Stock Split of the Class A Common Stock. At the effective time of the Reverse Stock Split, every 30 shares of Class A Common Stock either issued and outstanding or held as treasury stock were automatically reclassified into one new share of Class A Common Stock, and the total number of shares of Class A Common Stock authorized for issuance was reduced by a corresponding proportion from 2,000,000,000 shares to 66,666,666 shares. The Reverse Stock Split was approved by the Company's stockholders at a Special Meeting of Stockholders on April 19, 2023 and approved by the Board of Directors on April 21, 2023. The primary goal of the Reverse Stock Split was to increase the per share price of the Class A Common Stock in order to meet the minimum per share price requirement for continued listing on the NYSE. The Class A Common Stock began trading on the NYSE on an as-adjusted basis on April 25, 2023 under the existing trading symbol "ML."
26
In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of Class A Common Stock underlying the Company’s outstanding equity awards, the number of shares issuable upon the exercise of the Company’s outstanding warrants and the number of shares issuable under the Company’s equity incentive plans and certain existing agreements, as well as the exercise, grant and acquisition prices of such equity awards and warrants, as applicable. Furthermore, proportionate adjustments were made to the conversion factor at which the Series A Preferred Stock may be converted to Class A Common Stock. The total number of shares of preferred stock of the Company authorized for issuance remained at 200,000,000. Stockholders who would have been entitled to receive fractional shares as a result of the Reverse Stock Split were instead entitled to a cash payment in lieu thereof at a price equal to the fraction of one share to which the stockholder was otherwise entitled multiplied by the closing price per share of the Class A Common Stock on the NYSE on the effective date of the Reverse Stock Split.
The effects of the Reverse Stock Split have been reflected in these consolidated financial statements and the accompanying footnotes for all periods presented.
Silicon Valley Bank
On March 10, 2023, the California Department of Financial Protection and Innovation closed Silicon Valley Bank ("SVB") and appointed the Federal Deposit Insurance Corporation (the "FDIC") as receiver. At such time, we held a substantial portion of our cash deposits at SVB and utilized SVB to process payments. On March 12, 2023, the U.S. Department of the Treasury, U.S. Federal Reserve and the FDIC announced that depositors of SVB would have access to all of their cash deposits starting March 13, 2023, and on March 13, 2023, the FDIC announced that it transferred all deposits and substantially all assets of SVB to a newly created, full-service FDIC-operated bridge bank, Silicon Valley Bridge Bank, N.A. On March 13, 2023, we transferred substantially all of our cash deposits at Silicon Valley Bridge Bank, N.A. to new financial institutions. The Company does not anticipate any losses with respect to its cash that had been deposited with SVB or is deposited with Silicon Valley Bridge Bank, N.A., which continues to process payments for the Company.
Business Combinations — Since January 1, 2022, we have completed the following business combinations:
27
At the closing of the Engine Acquisition, we (i) issued to the equityholders of Even Financial Inc. an aggregate of 28,164,811 shares of Series A Preferred Stock, along with an additional 529,120 shares of Series A Preferred Stock to advisors of Even Financial Inc. for transaction expenses, valued at $193.7 million, (ii) paid to certain Even Financial Inc. management equityholders approximately $14.5 million in cash and (iii) exchanged 8,883,228 options to acquire Even Financial Inc. common stock for 196,728 options to acquire Class A Common Stock, of which the vested portion at the acquisition date was valued at $9.0 million. The equityholders and advisors of Even Financial Inc. are also entitled to receive an additional payment from the Company of up to an aggregate of 8,000,000 shares of Series A Preferred Stock, based on the attributed revenue of Engine’s business during the 13-month period commencing January 1, 2022 (the “Earnout”), and certain recipients of options to acquire shares of Class A Common Stock are entitled to receive dividend equivalents in lieu of receiving Series A Preferred Stock, subject to certain conditions (the “Preferred Stock Equivalents”). The combined value of the Earnout and Preferred Stock Equivalents was $45.3 million as of the closing of the Engine Acquisition. The total purchase price was approximately $271.1 million, subject to customary purchase price adjustments for working capital and inclusive of amounts used to repay approximately $5.7 million of existing indebtedness of Even Financial Inc. and pay $2.9 million of seller transaction costs.
Factors Affecting Our Performance
We are subject to a number of risks including, but not limited to, the need for successful development of products, services and functionality; the need for additional capital (or financing) to fund operating losses; competition with substitute products and services from larger companies; protection of proprietary technology and information; dependence on key individuals; and risks associated with changes in information technology. For additional information, see the "Risk Factors" section in our Annual Report on Form 10-K for the year ended December 31, 2022.
New Customer and Client Growth and Increasing Usage Across Existing Customers and Clients
Our ability to effectively acquire new customers and clients through our acquisition and marketing efforts and drive usage of our products and services across our existing customers and clients is key to our growth, particularly as a significant portion of the revenue we generate in our business is derived from transaction-based fees. We believe our customers’ experience is enhanced by using our full suite of first-party financial products and services, complemented by the full spectrum of offers available in our marketplace, as we can better tailor the insights and recommendations we provide to them. In order to grow our business, we must engage and retain customers and continue to expand their use of our platform by cross-selling additional functionality, products and services to them. In our Enterprise business, we are dependent in part on our relationships with our Enterprise Partners, and any failure to effectively match consumers leads from our Channel Partners with product and service offerings from our Product Partners, or any reduced marketing spend by such Product Partners on our Enterprise platform, could adversely affect our business and results of operations.
Expansion and Innovation of Products, Services and Functionality
We will continue to invest in expanding and enhancing the products, services and functionality available through our platform for our customers and clients. Our ability to expand, enhance and sell additional functionality, products and services to our existing customers and clients may require more sophisticated and costly development, sales or engagement efforts. Any factors that impair our ability to do so may negatively impact our efforts towards retaining and attracting customers and clients.
28
General Economic and Market Conditions
Our performance is impacted by the relative strength of the overall economy, market volatility, consumer spending behavior and consumer demand for financial products and services. For example, with respect to our Consumer business, the willingness of our customers to spend, invest or borrow may fluctuate with their level of disposable income. Other factors such as interest rate fluctuations or monetary policies may also impact our customers’ behavior and our own ability to fund advances and loan volume. In addition, in our Enterprise business, adverse macroeconomic conditions, such as significant tightening of credit markets, may cause our Product Partners to reduce their marketing spend or advertising on our platform or may cause a reduction in client spending in our media division, which could adversely affect our business and results of operations.
Seasonality
We may experience seasonal fluctuations in our revenue. During the fourth quarter, revenue in our Consumer business may benefit from increased consumer spending during the holiday season, which may increase demand for our loan and advance products and services as consumers seek additional liquidity. During the first quarter, we may see weaker demand for our loan and advance products and services as a result of the impact of tax refunds on consumers' liquidity needs, but stronger demand for our banking and investment products and services. In our Enterprise business, due to corporate client advertising spending patterns throughout the year, we may generate higher revenue in our media division in the second and fourth quarters compared to other quarters. Adverse events that occur during these months could have a disproportionate effect on our financial results for the year. Seasonal trends may be superseded by market or macroeconomic events, which can have a significant impact on our business, as described above.
Competition
We compete across our business lines with a variety of competitors, including traditional banks and credit unions; new entrants obtaining banking licenses; non-bank digital providers offering banking-related services; specialty finance and other non-bank digital providers offering consumer lending-related or cash advance products; digital wealth management platforms such as robo-advisors offering consumer investment services and other brokerage-related services; and digital financial platform, embedded finance and marketplace competitors, which aggregate and connect consumers to financial product and service offerings. In addition, we face competition in our media division from others in the digital media and content creation industry, which range from large and established media companies, including social media companies and production studios, to emerging start-ups. We expect our competition to continue to increase. The success of our business depends on our ability to compete effectively and attract new and retain existing customers and clients, which depends upon many factors both within and beyond our control.
Pricing of Our Products and Services
We derive a substantial portion of our revenue from fees earned from our products and services. The fees we earn are subject to a variety of external factors such as competition, interchange rates and other macroeconomic factors, such as interest rates and inflation, among others. We may provide discounts or other incentives and rewards that we pay for to customers who utilize multiple products and services to expand usage of our platform. We may also lower pricing on our products and services to acquire new customers. As the market for our platform matures, or as new or existing competitors introduce new products, services or functionality that compete with ours, we may experience pricing pressure and be unable to retain current customers and clients and attract new customers and clients at prices that are consistent with our pricing model and operating budget. Our pricing strategy may prove to be unappealing to our customers and clients, and our competitors could choose to bundle certain products and services competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could adversely affect our business.
29
Product and Service Mix
We offer various products and services on our platform, including our core suite of first-party financial products and services, a broad range of financial and non-financial offers in our Consumer marketplace and embedded finance marketplace solutions and media services in our Enterprise business. Each product and service has a different profitability profile. The relative usage of products and services with high or low profitability and their lifetime value could have an impact on our performance.
Access and Cost of Financing
Our credit products, cash advances and other receivables are primarily financed by special purpose vehicle financings from third-party institutional lenders. The loss of one or more of the financing sources we have for our credit products, cash advances and other receivables could have an adverse impact on our performance, and it could be costly to obtain new financing.
Key Performance Metrics
We regularly review several metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Total Customers
We define Total Customers as the cumulative number of customers that have opened at least one account, including banking, membership subscription, secured personal loan, cash advance, managed investment account, cryptocurrency account and customers that are monetized through our marketplace and affiliate products. Total Customers also include customers that have submitted for, received or clicked on at least one marketplace loan offer. Previously, Total Customers included all customers that submitted for or clicked on an offer through our marketplace but were not necessarily monetized, which we changed beginning in the third quarter of 2022 in order to more accurately reflect management’s view of our customers. We consider Total Customers to be a key performance metric as it can be used to understand lifecycle efforts of our customers, as we look to cross-sell products to our customer base and grow our platform. Total Customers were 7.8 million and 3.9 million as of March 31, 2023 and 2022, respectively. Total Customers for all prior periods have been recast to present the updated definition of Total Customers.
Total Products
We define Total Products as the total number of products that our Total Customers have opened, including banking, membership subscription, secured personal loan, cash advance, managed investment account, cryptocurrency account and monetized marketplace and affiliate products, as well as customers who signed up for our financial tracking services (with either credit tracking enabled or external linked accounts), whether or not the customer is still registered for the product. Total Products also include marketplace loan offers that our Total Customers have submitted for, received or clicked on through our marketplace. If a customer has funded multiple secured personal loans or cash advances or opened multiple products through our marketplace, it is only counted once for each product type. Previously, Total Products included all products for which our Total Customers submitted or clicked on an offer but were not necessarily monetized, which we changed beginning in the third quarter of 2022 in order to more accurately reflect management’s view of our products. We consider Total Products to be a key performance metric as it can be used to understand the usage of our products across our customer base. Total Products were 14.7 million and 9.0 million as of March 31, 2023 and 2022, respectively. Total Products for all prior periods have been recast to present the updated definition of Total Products.
30
Enterprise Partners
Enterprise Partners is comprised of Product Partners and Channel Partners. We define Product Partners as providers of the financial and non-financial products and services that we offer in our marketplaces, including financial institutions, financial services providers and other affiliate partners. We define Channel Partners as organizations that allow us to reach a wide base of consumers, including but not limited to news sites, content publishers, product comparison sites and financial institutions. Enterprise Partners were 1,085 as of March 31, 2023, comprising 494 Product Partners and 591 Channel Partners and were 980 as of March 31, 2022, comprised of 424 Product Partners and 556 Channel Partners.
Total Originations
We define Total Originations as the dollar volume of the secured personal loans originated and cash 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 service and subscription fees. Total Originations were $506 million and $408 million for the three months ended March 31, 2023 and 2022, respectively. All originations were originated directly by MoneyLion.
Adjusted Revenue
Adjusted Revenue is defined as total revenue, net, plus amortization of loan origination costs less provision for loss on subscription receivables, provision for loss on fees receivables and revenue derived from phased out products. Adjusted Revenue is a non-GAAP measure and should not be viewed as a substitute for total revenue, net. Historically, we presented Adjusted Revenue in order to provide an understanding of revenue from ongoing products and revenue for comparability purposes. During the quarter, we determined that Adjusted Revenue was no longer a key performance metric that we use to measure revenue and evaluate our business performance. As a result, we will no longer be presenting Adjusted Revenue for subsequent quarters. Refer to the “— Non-GAAP Measures” section below for further discussion.
Adjusted Gross Profit
Adjusted Gross Profit is defined as gross profit less revenue derived from phased out products. Adjusted Gross Profit is a non-GAAP measure and should not be viewed as a substitute for gross profit. Historically, we presented Adjusted Gross Profit in order to provide an understanding of an aspect of profitability based on our current product portfolio. During the quarter, we determined that Adjusted Gross Profit was no longer a key performance metric that we use to measure profitability and evaluate our business performance. As a result, we will no longer be presenting Adjusted Gross Profit for subsequent quarters. Refer to the “— Non-GAAP Measures” section below for further discussion.
Adjusted EBITDA
Adjusted EBITDA is defined as net income (loss) plus interest expense related to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrants, change in fair value of subordinated convertible notes, change in fair value of contingent consideration from mergers and acquisitions, stock-based compensation and one-time expenses less origination financing cost of capital. We believe Adjusted EBITDA provides a meaningful understanding of an aspect of profitability based on our current product portfolio. Adjusted EBITDA is a non-GAAP measure and should not be viewed as a substitute for net income (loss). Refer to the “— Non-GAAP Measures” section below for further discussion.
31
Results of Operations for the Three Months Ended March 31, 2023 and 2022
Revenues
The following table is reference for the discussion that follows:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
|
(In thousands, except for percentages) |
|
|||||||||||||
Consumer revenues |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Service and subscription fees |
|
$ |
62,438 |
|
|
$ |
46,394 |
|
|
$ |
16,044 |
|
|
|
34.6 |
% |
Net interest income on finance receivables |
|
|
2,928 |
|
|
|
2,568 |
|
|
|
360 |
|
|
|
14.0 |
% |
Total consumer revenues |
|
|
65,366 |
|
|
|
48,962 |
|
|
|
16,404 |
|
|
|
33.5 |
% |
Enterprise service revenues |
|
|
28,303 |
|
|
|
20,752 |
|
|
|
7,551 |
|
|
|
36.4 |
% |
Total revenue, net |
|
$ |
93,669 |
|
|
$ |
69,714 |
|
|
$ |
23,955 |
|
|
|
34.4 |
% |
We generate revenues primarily from various product-related fees, providing membership subscriptions, performing enterprise services and originating loans.
Service and subscription fees
Service and subscription fees increased by $16.0 million, or 34.6%, to $62.4 million for the three months ended March 31, 2023, as compared to $46.4 million for the same period in 2022. The increase in service and subscription fees was primarily driven by increases in fee income related to instant transfer fees and tips from Instacash of $15.4 million, driven by the growth of Instacash advances across both existing and new customers, and an increase of $0.9 million related to interchange, cardholder and administration fees from our bank and investment accounts, driven by higher payment volume, which was slightly offset by lower membership revenues.
Net interest income on finance receivables
Net interest income on finance receivables is generated by interest earned on Credit Builder Plus loans, which is partially offset by the amortization of loan origination costs.
Net interest income on finance receivables increased by $0.4 million, or 14.0%, to $2.9 million for the three months ended March 31, 2023, as compared to $2.6 million for the same period in 2022. The increase in net interest income on finance receivables was driven by origination growth on our Credit Builder Plus loan program across both existing and new customers and less reversals of interest income due to non-collection during the three months ended March 31, 2023, as compared to the same period in 2022. The amortization of loan origination costs decreased by $0.1 million to $0.2 million for the three months ended March 31, 2023, as compared to $0.3 million for the same period in 2022.
Enterprise service revenues
Enterprise service revenues increased by $7.6 million, or 36.4%, to $28.3 million for the three months ended March 31, 2023, as compared to $20.8 million for the same period in 2022. This increase was primarily attributable to a $9.2 million full quarter impact of Engine reflected in the three months ended March 31, 2023 and $0.6 million increase in MALKA revenues, which was partially offset by $2.0 million of lower marketplace revenues.
32
Operating Expenses
The following table is reference for the discussion that follows:
|
|
Three Months Ended March 31, |
|
|
Change |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
|
|
(In thousands, except for percentages) |
|
|||||||||||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Provision for credit losses on consumer receivables |
|
|
16,511 |
|
|
|
23,044 |
|
|
|
(6,533 |
) |
|
|
-28.4 |
% |
Compensation and benefits |
|
|
24,408 |
|
|
|
22,043 |
|
|
|
2,365 |
|
|
|
10.7 |
% |
Marketing |
|
|
6,392 |
|
|
|
11,416 |
|
|
|
(5,024 |
) |
|
|
-44.0 |
% |
Direct costs |
|
|
29,802 |
|
|
|
21,204 |
|
|
|
8,598 |
|
|
|
40.5 |
% |
Professional services |
|
|
4,999 |
|
|
|
7,288 |
|
|
|
(2,289 |
) |
|
|
-31.4 |
% |
Technology-related costs |
|
|
6,038 |
|
|
|
4,505 |
|
|
|
1,533 |
|
|
|
34.0 |
% |
Other operating expenses |
|
|
8,995 |
|
|
|
10,769 |
|
|
|
(1,774 |
) |
|
|
-16.5 |
% |
Total operating expenses |
|
|
97,145 |
|
|
|
100,269 |
|
|
|
(3,124 |
) |
|
|
-3.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other (expense) income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
(7,511 |
) |
|
|
(6,174 |
) |
|
|
(1,337 |
) |
|
|
21.7 |
% |
Change in fair value of warrant liability |
|
|
(149 |
) |
|
|
3,910 |
|
|
|
(4,059 |
) |
|
nm |
|
|
Change in fair value of contingent consideration from mergers and acquisitions |
|
|
246 |
|
|
|
(4,660 |
) |
|
|
4,906 |
|
|
nm |
|
|
Other income (expense) |
|
|
1,649 |
|
|
|
(916 |
) |
|
|
2,565 |
|
|
nm |
|
|
Net loss before income taxes |
|
|
(5,765 |
) |
|
|
(7,840 |
) |
|
|
2,075 |
|
|
|
-26.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income tax benefit |
|
|
(24 |
) |
|
|
(28,417 |
) |
|
|
28,393 |
|
|
|
-99.9 |
% |
Our operating expenses consist of the following:
Provision for credit losses on consumer receivables
Provision for credit losses on consumer receivables consists of amounts charged during the period to maintain an allowance for credit losses. The allowance represents management’s estimate of the credit losses in our consumer receivable portfolio and is based on management’s assessment of many factors, including changes in the nature, volume and risk characteristics of the consumer receivables portfolio, including trends in delinquency and charge-offs and current economic conditions that may affect the customer’s ability to pay.
Provision for credit losses on consumer receivables decreased by $6.5 million, or 28.4%, to $16.5 million for the three months ended March 31, 2023, as compared to $23.0 million for the same period in 2022. This decrease resulted primarily from a decrease to provision related to Instacash advance receivables of $6.6 million, provision related to Credit Builder Plus loan receivables of $1.3 million and $0.8 million provision related to subscription fees, which was partially offset by an increase in provision for Instacash instant transfer fees and tips of $2.2 million.
Compensation and benefits
Compensation and benefits increased by $2.4 million, or 10.7%, to $24.4 million for the three months ended March 31, 2023, as compared to $22.0 million for the same period in 2022. This increase was driven primarily by a $2.4 million increase in stock-based compensation and a $1.9 million increase due to a full quarter impact of Engine in the three months ended March 31, 2023, which was partially offset by a $1.4 million decrease in employee costs and a $0.6 million decrease in incentive compensation related to expense reduction initiatives.
33
Marketing
Marketing decreased by $5.0 million, or 44.0%, to $6.4 million for the three months ended March 31, 2023, as compared to $11.4 million for the same period in 2022. This decrease resulted primarily from lower marketing and lead generation spend across the organization as we continue to lower our reliance on external marketing sources.
Direct costs
Direct costs increased by $8.6 million, or 40.5%, to $29.8 million for the three months ended March 31, 2023, as compared to $21.2 million for the same period in 2022. The increase was primarily driven by $6.9 million of direct costs due to a full quarter impact of Engine in the three months ended March 31, 2023 and an increase in payment processing and bank partner transaction fees of $2.2 million driven by growth in Total Originations and Total Customers, which was partially offset by a $0.5 million decrease in other direct costs.
Professional services
Professional services decreased by $2.3 million, or 31.4%, to $5.0 million for the three months ended March 31, 2023, as compared to $7.3 million for the same period in 2022. This decrease resulted primarily from $1.2 million of lower legal expenses, $0.8 million of lower outside consulting spend and $0.3 million of lower recruiting spend.
Technology-related costs
Technology-related costs increased by $1.5 million, or 34.0%, to $6.0 million for the three months ended March 31, 2023, as compared to $4.5 million for the same period in 2022. The increase was primarily driven by $1.3 million of technology costs due to a full quarter impact of Engine in the three months ended March 31, 2023, software licenses and subscriptions of $0.2 million and costs related to other technology services of $0.1 million, which was partially offset by a decrease in depreciation and amortization related to equipment and software of $0.1 million.
Other operating expenses
Other operating expenses decreased by $1.8 million, or 16.5%, to $9.0 million for the three months ended March 31, 2023, as compared to $10.8 million for the same period in 2022. The decrease was primarily driven by a reduction in costs related to legal matters of $1.4 million and a reduction in expenses related to processing of transactions in our consumer business of $2.8 million, which was partially offset by an increase of $2.0 million of intangible amortization expenses attributable to the Engine Acquisition.
Our other (expense) income consists of the following:
Interest expense
Interest expense increased by $1.3 million, or 21.7%, to $7.5 million for the three months ended March 31, 2023, as compared to $6.2 million for the same period in 2022. This increase resulted from an increase in interest rate on variable rate debt and an increase in the average debt outstanding during the three months ended March 31, 2023 compared to the same period in 2022. See Part I, Item 1 “Financial Statements — Debt” for more information.
Change in fair value of warrant liability
Change in fair value of warrant liability was an expense of $0.1 million for the three months ended March 31, 2023, as compared to a benefit of $3.9 million for the same period in 2022. The change in fair value of warrant liability was due to changes in inputs that drive the warrant liability fair value calculations.
34
Change in fair value of contingent consideration from mergers and acquisitions
Change in fair value of contingent consideration from mergers and acquisitions was a benefit of $0.2 million for the three months ended March 31, 2023, as compared to an expense $4.7 million for the same period in 2022. The reduction in activity was mainly driven by the settlement of contingencies related to the contingent consideration that were unsettled during the three months ended March 31, 2022.
Other income (expense)
Other income (expense) increased by $2.6 million to other income of $1.6 million for the three months ended March 31, 2023, as compared to other expense of $0.9 million for the same period in 2022. The increase in other income (expense) was driven by interest income from interest bearing deposit accounts that were not in place during the three months ended March 31, 2022 and the losses on extinguishment of debt during the three months ended March 31, 2022.
Income tax (benefit) expense
See Part I, Item 1 “Financial Statements — Income Taxes” for an explanation of the tax activity recorded during the three months ended March 31, 2023.
Non-GAAP Measures
In addition to net income (loss), which is a measure presented in accordance with U.S. GAAP, management believes that Adjusted EBITDA provides relevant and useful information which is widely used by analysts, investors and competitors in our industry in assessing performance. Adjusted EBITDA is a supplemental measure of MoneyLion’s performance that is neither required by nor presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as a substitute for U.S. GAAP metrics such as net income (loss) or any other performance measures derived in accordance with U.S. GAAP and may not be comparable to similar measures used by other companies.
We define Adjusted EBITDA as net income (loss) plus interest expense related to corporate debt, income tax expense (benefit), depreciation and amortization expense, change in fair value of warrant liability, change in fair value of subordinated convertible notes, change in fair value of contingent consideration from mergers and acquisitions, stock-based compensation and one-time expenses less origination financing cost of capital. We believe that Adjusted EBITDA provides a meaningful understanding of an aspect of profitability based on our current product portfolio. In addition, Adjusted EBITDA is useful to an investor in evaluating our performance because it:
Historically, in addition to total revenue, net and gross profit, which are measures presented in accordance with U.S. GAAP, we also presented Adjusted Revenue and Adjusted Gross Profit. In particular, we presented Adjusted Revenue in order to provide an understanding of revenue from ongoing products and revenue for comparability purposes, and we presented Adjusted Gross Profit in order to provide an understanding of an aspect of profitability based on our current product portfolio. During the quarter, we determined that Adjusted Revenue was no longer a key performance metric that we use to measure revenue and evaluate our business performance. As a result, we will no longer be presenting Adjusted Revenue for subsequent quarters. In addition, we determined that Adjusted Gross Profit was no longer a key performance metric that we use to measure profitability and evaluate our business performance. As a result, we will no longer be presenting Adjusted Gross Profit for subsequent quarters.
35
The reconciliation of total revenue, net to Adjusted Revenue for the three months ended March 31, 2023 and 2022 is as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Total revenues, net |
|
$ |
93,669 |
|
|
$ |
69,714 |
|
Add back: |
|
|
|
|
|
|
||
Amortization of loan origination costs1 |
|
|
248 |
|
|
|
324 |
|
Less: |
|
|
|
|
|
|
||
Provision for credit losses on receivables - subscription receivables2 |
|
|
(736 |
) |
|
|
(1,541 |
) |
Provision for credit losses on receivables - fees receivables3 |
|
|
(4,174 |
) |
|
|
(2,001 |
) |
Revenue derived from products that have been phased out4 |
|
|
(1 |
) |
|
|
(20 |
) |
Adjusted Revenue |
|
$ |
89,006 |
|
|
$ |
66,477 |
|
36
Adjusted Revenue is further broken down into the following categories:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
|
|
(in thousands) |
|
|||||
Consumer |
|
$ |
60,703 |
|
|
$ |
45,724 |
|
Enterprise |
|
|
28,303 |
|
|
|
20,753 |
|
Adjusted Revenue |
|
$ |
89,006 |
|
|
$ |
66,477 |
|
The reconciliation of gross profit, which is prepared in accordance with U.S. GAAP, to Adjusted Gross Profit for the three months ended March 31, 2023 and 2022 is as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Total revenue, net |
|
$ |
93,669 |
|
|
$ |
69,714 |
|
Less: |
|
|
|
|
|
|
||
Cost of Sales |
|
|
|
|
|
|
||
Direct costs |
|
|
(29,802 |
) |
|
|
(21,204 |
) |
Provision for credit losses on receivables - subscription receivables1 |
|
|
(736 |
) |
|
|
(1,541 |
) |
Provision for credit losses on receivables - fees receivables2 |
|
|
(4,174 |
) |
|
|
(2,001 |
) |
Technology related costs |
|
|
(3,274 |
) |
|
|
(2,461 |
) |
Professional services |
|
|
(1,357 |
) |
|
|
(1,056 |
) |
Compensation and benefits |
|
|
(2,542 |
) |
|
|
(1,014 |
) |
Other operating expenses |
|
|
(130 |
) |
|
|
(104 |
) |
Gross Profit |
|
$ |
51,654 |
|
|
$ |
40,333 |
|
Less: |
|
|
|
|
|
|
||
Revenue derived from products that have been phased out3 |
|
|
(1 |
) |
|
|
(20 |
) |
Adjusted Gross Profit |
|
$ |
51,653 |
|
|
$ |
40,314 |
|
37
The reconciliation of net loss, which is prepared in accordance with U.S. GAAP, to Adjusted EBITDA for the three months ended March 31, 2023 and 2022 is as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net loss |
|
$ |
(9,217 |
) |
|
$ |
(9,978 |
) |
Add back: |
|
|
|
|
|
|
||
Interest related to corporate debt1 |
|
|
3,560 |
|
|
|
1,387 |
|
Income tax benefit |
|
|
(24 |
) |
|
|
(28,417 |
) |
Depreciation and amortization expense |
|
|
6,184 |
|
|
|
3,421 |
|
Changes in fair value of warrant liability |
|
|
149 |
|
|
|
(3,910 |
) |
Change in fair value of contingent consideration from mergers and acquisitions |
|
|
(246 |
) |
|
|
4,660 |
|
Stock-based compensation expense |
|
|
5,705 |
|
|
|
3,268 |
|
One-time expenses2 |
|
|
1,185 |
|
|
|
4,777 |
|
Adjusted EBITDA |
|
$ |
7,296 |
|
|
$ |
(24,792 |
) |
38
Changes in Financial Condition to March 31, 2023 from December 31, 2022
|
|
March 31, |
|
|
December 31, |
|
|
Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
$ |
|
|
% |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash and restricted cash |
|
$ |
110,756 |
|
|
$ |
153,709 |
|
|
$ |
(42,953 |
) |
|
|
-27.9 |
% |
Consumer receivables |
|
|
176,211 |
|
|
|
169,976 |
|
|
|
6,235 |
|
|
|
3.7 |
% |
Allowance for credit losses on consumer receivables |
|
|
(27,473 |
) |
|
|
(24,841 |
) |
|
|
(2,632 |
) |
|
|
10.6 |
% |
Consumer receivables, net |
|
|
148,738 |
|
|
|
145,135 |
|
|
|
3,603 |
|
|
|
2.5 |
% |
Enterprise receivables, net |
|
|
22,961 |
|
|
|
19,017 |
|
|
|
3,944 |
|
|
|
20.7 |
% |
Property and equipment, net |
|
|
2,682 |
|
|
|
2,976 |
|
|
|
(294 |
) |
|
|
-9.9 |
% |
Goodwill and intangible assets, net |
|
|
216,115 |
|
|
|
220,847 |
|
|
|
(4,732 |
) |
|
|
-2.1 |
% |
Other assets |
|
|
55,907 |
|
|
|
54,658 |
|
|
|
1,249 |
|
|
|
2.3 |
% |
Total assets |
|
$ |
557,159 |
|
|
$ |
596,342 |
|
|
$ |
(39,183 |
) |
|
|
-6.6 |
% |
Liabilities and Stockholders' Equity |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Debt agreements |
|
|
208,376 |
|
|
|
232,011 |
|
|
|
(23,635 |
) |
|
|
-10.2 |
% |
Accounts payable and accrued liabilities |
|
|
50,294 |
|
|
|
58,129 |
|
|
|
(7,835 |
) |
|
|
-13.5 |
% |
Warrant liability |
|
|
486 |
|
|
|
337 |
|
|
|
149 |
|
|
|
44.2 |
% |
Other liabilities |
|
|
29,184 |
|
|
|
33,496 |
|
|
|
(4,312 |
) |
|
|
-12.9 |
% |
Total liabilities |
|
|
288,340 |
|
|
|
323,973 |
|
|
|
(35,633 |
) |
|
|
-11.0 |
% |
Series A Preferred Stock |
|
|
173,328 |
|
|
|
173,208 |
|
|
|
120 |
|
|
|
0.1 |
% |
Stockholders' equity: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Common Stock |
|
|
1 |
|
|
|
1 |
|
|
|
- |
|
|
|
0.0 |
% |
Additional paid-in capital |
|
|
771,881 |
|
|
|
766,839 |
|
|
|
5,042 |
|
|
|
0.7 |
% |
Accumulated deficit |
|
|
(666,691 |
) |
|
|
(657,979 |
) |
|
|
(8,712 |
) |
|
|
1.3 |
% |
Treasury stock |
|
|
(9,700 |
) |
|
|
(9,700 |
) |
|
|
- |
|
|
|
0.0 |
% |
Total stockholders' equity |
|
|
95,491 |
|
|
|
99,161 |
|
|
|
(3,670 |
) |
|
|
-3.7 |
% |
Total liabilities, redeemable convertible preferred stock and stockholders' equity |
|
$ |
557,159 |
|
|
$ |
596,342 |
|
|
$ |
(39,183 |
) |
|
|
-6.6 |
% |
Assets
Cash and restricted cash
Cash and restricted cash decreased by $43.0 million, or 27.9%, to $110.8 million as of March 31, 2023, as compared to $153.7 million as of December 31, 2022. Refer to the “— Cash Flows” section below for further discussion on the net change in cash and restricted cash from operating activities, investing activities and financing activities during the period.
Consumer receivables, net
Consumer receivables, net increased by $3.6 million, or 2.5%, to $148.7 million as of March 31, 2023, as compared to $145.1 million as of December 31, 2022. The increase was primarily attributable to an increase in Instacash receivables, net of increases in the related allowance for Instacash receivable credit losses.
Enterprise receivables, net
Enterprise receivables, net increased by $3.9 million, or 20.7%, to $23.0 million as of March 31, 2023, as compared to $19.0 million as of December 31, 2022. This increase was primarily attributable to certain delays in billing collections as we converted to new banking partners and rebranded the Engine business.
39
Goodwill and intangible assets, net
Goodwill and intangible assets, net decreased by $4.7 million, or 2.1%, to $216.1 million as of March 31, 2023, as compared to $220.8 million as of December 31, 2022. This decrease was primarily attributable to amortization of customer relationship and trade name intangibles from mergers and acquisitions.
Other assets
Other assets increased by $1.2 million, or 2.3%, to $55.9 million as of March 31, 2023, as compared to $54.7 million as of December 31, 2022. The increase was primarily driven by increases in receivables from payment processors, which were partially offset by declines in prepaid expenses and operating lease right-of-use assets.
Liabilities
Debt agreements
Debt agreements decreased by $23.6 million, or 10.2%, to $208.4 million as of March 31, 2023, as compared to $232.0 million as of December 31, 2022. The decrease was due to optional principal payments made on the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility during the three months ended March 31, 2023.
Accounts payable and accrued expenses
Accounts payable and accrued expenses decreased by $7.8 million, or 13.5%, to $50.3 million as of March 31, 2023, as compared to $58.1 million as of December 31, 2022. The decrease was primarily attributable to annual bonuses paid and lower litigation during the three months ending March 31, 2023, which was offset by an increase related to dividends on the Series A Preferred Stock.
Warrant liability
Warrant liability increased by $0.1 million, or 44.2%, to $0.5 million as of March 31, 2023, as compared to $0.3 million as of December 31, 2022. Refer to the “— Results of Operations for the Three Months Ended March 31, 2023 and 2022” section above for further discussion on the change in fair value of warrant liability.
Other liabilities
Other liabilities decreased by $4.3 million, or 12.9%, to $29.2 million as of March 31, 2023, as compared to $33.5 million as of December 31, 2022. The decrease was primarily attributable to a reduction in contingent consideration liabilities from mergers and acquisitions due to the settlement of contingent consideration during the three months ended March 31, 2023.
Liquidity and Capital Resources
We believe our existing cash and cash equivalents and cash flows from operating activities will be sufficient to meet our operating working capital needs for at least the next twelve months. Our future financing requirements will depend on several factors, including our growth, the timing and level of spending to support continued development of our platform, the expansion of marketing activities and merger and acquisition activity. In addition, growth of our finance receivables increases our liquidity needs, and any failure to meet those liquidity needs could adversely affect our business. Additional funds may not be available on terms favorable to us or at all. If the Company is unable to generate positive operating cash flows, additional debt and equity financings or refinancing of existing debt financings may be necessary to sustain future operations.
40
Receivables originated on our platform, including Credit Builder Plus loans and Instacash advances, were primarily financed through special purpose vehicle financings from third-party institutional lenders. As of March 31, 2023, there was an outstanding principal balance of $63.0 million under the ROAR 1 SPV Credit Facility and an outstanding principal balance of $59.0 million under the ROAR 2 SPV Credit Facility. For more information, see Note 9, “Debt” and Note 8, “Variable Interest Entities” of the Company’s Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for discussion of the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility and VIE considerations related to the ROAR 1 SPV Credit Facility and the ROAR 2 SPV Credit Facility, respectively.
The following table presents the Company’s cash, restricted cash and receivable from payment processor as of March 31, 2023 and December 31, 2022:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Cash |
|
$ |
96,756 |
|
|
$ |
115,864 |
|
Restricted cash |
|
|
14,000 |
|
|
|
37,845 |
|
Receivable from payment processor |
|
$ |
35,280 |
|
|
$ |
32,881 |
|
Cash Flows
The following table presents net change in cash and restricted cash from operating, investing and financing activities during the three months ended March 31, 2023 and 2022:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash provided by (used in) operating activities |
|
$ |
2,680 |
|
|
$ |
(8,651 |
) |
Net cash used in investing activities |
|
|
(21,034 |
) |
|
|
(42,279 |
) |
Net cash (used in) provided by financing activities |
|
|
(24,599 |
) |
|
|
53,693 |
|
Net change in cash and restricted cash |
|
$ |
(42,953 |
) |
|
$ |
2,763 |
|
Operating Activities
Net cash provided by operating activities was $2.7 million for the three months ended March 31, 2023 compared to net cash used in operating activities of $8.7 million for the three months ended March 31, 2022. This increase in net cash provided by operating activities was primarily driven by an increase in profitability, after adjusting for non-cash activity included in our net loss, of approximately $26.5 million during the three months ended March 31, 2023, which was partially offset by changes in working capital.
Investing Activities
Net cash used in investing activities was $21.0 million for the three months ended March 31, 2023 compared to net cash used in investing activities of $42.3 million for the three months ended March 31, 2022. The decrease in net cash used in investing activities was primarily related to $18.6 million spent on the Engine Acquisition, net of cash received, during the three months ended March 31, 2022 and a reduction in net originations and collections of finance receivables during the three months ended March 31, 2023 compared to the three months ended March 31, 2022.
Financing Activities
Net cash used in financing activities was $24.6 million for the three months ended March 31, 2023 compared to net cash provided by financing activities of $53.7 million for the three months ended March 31, 2022. The increase in cash used in financing activities was primarily attributable to the approximately $79.3 million in new financing during the three months ended March 31, 2022 compared to no new financing during the three months ended March 31, 2023.
41
Financing Arrangements
Refer to Part I, Item 1 “Financial Statements — Debt” for further discussion on financing transactions during the period.
Contractual Obligations
The table below summarizes debt, lease and other long-term minimum cash obligations outstanding as of March 31, 2023:
|
|
Total |
|
|
Remainder of 2023 |
|
|
2024 – 2025 |
|
|
2026 – 2027 |
|
|
Thereafter |
|
|||||
Monroe Term Loans |
|
|
90,000 |
|
|
|
20,000 |
|
|
|
— |
|
|
|
70,000 |
|
|
|
— |
|
ROAR 1 SPV Credit Facility |
|
|
63,000 |
|
|
|
— |
|
|
|
63,000 |
|
|
|
— |
|
|
|
— |
|
ROAR 2 SPV Credit Facility |
|
|
59,000 |
|
|
|
— |
|
|
|
59,000 |
|
|
|
— |
|
|
|
— |
|
Operating lease obligations |
|
|
11,209 |
|
|
|
2,483 |
|
|
|
5,786 |
|
|
|
2,172 |
|
|
|
768 |
|
Vendor unconditional purchase obligations |
|
|
33,750 |
|
|
|
— |
|
|
|
16,750 |
|
|
|
17,000 |
|
|
|
— |
|
Total |
|
$ |
256,959 |
|
|
$ |
22,483 |
|
|
$ |
144,536 |
|
|
$ |
89,172 |
|
|
$ |
768 |
|
Secured Loans and Other Debt
For more information regarding our secured loans and other debt, see Part I, Item 1 “Financial Statements — Debt” in this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
At March 31, 2023, the Company did not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
See Part I, Item 1 “Financial Statements — Summary of Significant Accounting Policies” for a description of critical accounting policies and estimates.
Recently Issued and Adopted Accounting Pronouncements
See Part I, Item 1 “Financial Statements — Summary of Significant Accounting Policies” for a description of recently issued accounting pronouncements that may potentially impact our results of operations, financial condition or cash flows.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates.
Interest Rates Risk
Interest rates may adversely impact our customers’ level of engagement on our platform and ability and willingness to pay outstanding amounts owed to us. While we do not charge interest on a lot of our products, higher interest rates could deter customers from utilizing our credit products and other loans. Moreover, higher interest rates may lead to increased delinquencies, charge-offs and allowances for loans and interest receivable, which could have an adverse effect on our operating results.
42
The Monroe Term Loans, and future funding arrangements may, bear a variable interest rate. The ROAR 1 SPV Credit Facility and ROAR 2 SPV Credit Facility have fixed interest rates. Given the fixed interest rates charged on many of our loans, a rising variable interest rate would reduce our interest margin earned in these funding arrangements. Dramatic increases in interest rates may make these forms of funding nonviable. A one percent change in the interest rate on our variable interest rate debt, based on principal balances as of March 31, 2023, would result in an approximately $0.9 million impact to annual interest expense.
Item 4. Controls and Procedures
Restatement of Q3 2021 Financial Statements
On March 10, 2022, the Company filed Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2021 (the “Q3 10-Q/A”) in order to restate (the “Q3 2021 Restatement”) the financial statements and related financial information contained in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, originally filed with the SEC on November 15, 2021, arising from:
Further information about the Q3 2021 Restatement is described in the Q3 10-Q/A, filed with the SEC on March 10, 2022.
Restatement of FY 2021 and Q1 2022 Financial Statements
On August 11, 2022, the Company filed (a) Amendment No. 1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2021 (the “FY 2021 10-K/A”) in order to restate (the “FY 2021 Restatement”) the financial statements and related financial information contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2021, originally filed with the SEC on March 17, 2022, and (b) Amendment No. 1 to the Quarterly Report on Form 10-Q/A for the quarterly period ended March 31, 2022 (the “Q1 2022 10-Q/A”) in order to restate (the “Q1 2022 Restatement” and together with the Q3 2021 Restatement and the FY 2021 Restatement, the “Restatements”) the financial statements and related financial information contained in the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, originally filed with the SEC on May 16, 2022, in each case arising from the manner in which the Company classified and accounted for the make-whole provision (the “Closing Make-Whole Provision”) relating to certain Class A Common Stock consideration paid and payable to the sellers of MALKA in connection with the closing of the MALKA Acquisition, as the Closing Make-Whole Provision should have been classified as a liability within the scope of Accounting Standards Codification 480, Distinguishing Liabilities from Equity, as of the closing date of the MALKA Acquisition, with subsequent changes in the fair value of such liability recorded in the consolidated statement of operations under change in fair value of contingent consideration from mergers and acquisitions. Further information about the FY 2021 Restatement and the Q1 2022 Restatement is described in the FY 2021 10-K/A and Q1 2022 10-Q/A, respectively, each filed with the SEC on August 11, 2022.
43
Material Weaknesses
We determined that the Restatements described above, as well as the prior restatement of our consolidated financial statements for the years ended December 31, 2020 and December 31, 2019 with respect to the treatment of the noncontrolling interests attributable to the Class B investors of IIA, resulted from a material weakness in our internal control over financial reporting, as we did not maintain an effective control environment as controls over technical and complex accounting did not operate as expected. This material weakness remained un-remediated as of each of the relevant reporting periods. Subsequently, during the audit of our financial statements for the year ended December 31, 2022, our auditors identified control deficiencies in our internal control over financial reporting as a result of a lack of properly designed controls related to the calculation of the fair value of our reporting unit undertaken as a part of goodwill impairment testing as of December 31, 2022. These control deficiencies could result in a misstatement of our goodwill, any related impairment or related disclosures that could result in a material misstatement of our financial results that may not be prevented or detected. We determined that these control deficiencies related to the previously identified material weakness related to technical and complex accounting, which remained un-remediated as of December 31, 2022. We did not maintain an effective control environment, as there were certain areas in which the accounting function did not operate as expected due to a lack of sufficient internal accounting resources, in particular technical accounting expertise with respect to complex financial instruments and fair value calculation, which resulted in undue reliance on third-party accounting and valuation experts, and inadequate level of precision embedded in control activities, as well as lack of sufficient formalization over processes and control evidence.
In addition to the foregoing material weakness, in connection with our assessment of our controls for the year ended December 31, 2022, we identified a separate material weakness in our internal control over financial reporting as of December 31, 2022 relating to a lack of properly designed controls, as well as insufficient written policies and procedures, in connection with our Enterprise revenue recognition accounting in accordance with standards under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. These control deficiencies could result in a misstatement of our Enterprise revenue accounts or disclosures that could result in a material misstatement of our financial results that may not be prevented or detected. Accordingly, we determined that these control deficiencies constitute a material weakness.
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures as of December 31, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, in light of the material weaknesses described above, as of March 31, 2023, our disclosure controls and procedures were not effective. As a result, we performed additional analysis as deemed necessary to ensure that our consolidated financial statements included in this Quarterly Report on Form 10-Q were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, result of operations and cash flows for the periods presented.
44
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Changes in Internal Control over Financial Reporting
There has been no change in our internal control over financial reporting during the quarter ended March 31, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting, other than as described below with respect to our ongoing remediation efforts.
In light of the material weaknesses identified and errors, including those resulting in the Restatements, as described above, we have added additional resources intended to enhance our accounting and financial reporting functions, including hiring additional qualified personnel with technical expertise. We have also begun to design formal processes in consultation with our third-party professional advisors, including formalizing our control evidence and processes, that are intended to ensure a sufficient level of precision is embedded in all financial reporting control activities. In addition, we have enhanced the supervisory review of accounting procedures in financial reporting and expanded and improved our review process for complex securities and transactions and related accounting standards. In order to fully remediate the material weaknesses identified, we intend to continue to re-evaluate the design of, and validate, our internal controls to ensure that they appropriately address changes in our business that could impact our system of internal controls, review our current processes and procedures to identify potential control design enhancements to ensure that our financial reporting is complete and accurate and develop a monitoring protocol to enable management to validate the operating effectiveness of key controls over financial reporting. We believe that these actions will ultimately be effective in remediating the material weaknesses we have identified and will continue to evaluate our remediation efforts and report regularly to the Audit Committee of the Board of Directors on the progress and results of our remediation plan. We intend to complete the remediation by December 31, 2023, but these remediation measures may be time consuming and costly, and there is no assurance that we will be able to complete the remediation and put in place the appropriate controls within this timeframe or that these initiatives will ultimately have the intended effects.
45
Part II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are subject to various claims and legal proceedings in the ordinary course of business, including lawsuits, arbitrations, class actions and other litigation. We are also the subject of various actions, inquiries, investigations and proceedings by regulatory and other governmental agencies. The outcome of any such legal and regulatory matters, including those discussed in this section, is inherently uncertain, and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, which could materially and adversely impact our business, financial condition, operating results and cash flows. See “Risk Factors — Risks Relating to Legal and Accounting Matters — Unfavorable outcomes in legal proceedings may harm our business, financial condition, results of operations and cash flows” in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
We have determined, based on our current knowledge, that the aggregate amount or range of losses that are estimable with respect to our legal proceedings, including the matters described below, would not have a material adverse effect on our business, financial position, results of operations or cash flows. As of March 31, 2023, amounts accrued were not material. Notwithstanding the foregoing, the ultimate outcome of legal proceedings involves judgments, estimates and inherent uncertainties, and cannot be predicted with certainty. It is possible that an adverse outcome of any matter could be material to our business, financial position, results of operations or cash flows as a whole for any particular reporting period of occurrence. In addition, it is possible that a matter may prompt litigation or additional investigations or proceedings by other government agencies or private litigants.
State Regulatory Examinations and Investigations
We hold a number of state licenses in connection with our business activities, and must also comply with other applicable compliance and regulatory requirements in the states where we operate. In most states where we operate, one or more regulatory agencies have authority with respect to regulation and enforcement of our business activities under applicable state laws, and we may also be subject to the supervisory and examination authority of such state regulatory agencies. Examinations by state regulators have and may continue to result in findings or recommendations that require us, among other potential consequences, to provide refunds to customers or to modify our internal controls and/or business practices.
In the ordinary course of our business, we are and have been from time to time subject to, and may in the future be subject to, governmental and regulatory examinations, information requests, investigations and proceedings (both formal and informal) in connection with various aspects of our activities by state agencies, including the California Department of Financial Protection and Innovation, the Attorney General of the Commonwealth of Virginia, the New York Attorney General’s Office and the Colorado Department of Law, certain of which may result in adverse judgments, settlements, fines, penalties, restitution, disgorgement, injunctions or other relief. We have responded to and cooperated with the relevant state agencies and will continue to do so in the future, as appropriate.
CFPB Litigation
On September 29, 2022, the Consumer Financial Protection Bureau (the "CFPB") initiated a civil action in the United States District Court for the Southern District of New York against MoneyLion Technologies Inc., ML Plus LLC and our 38 state lending subsidiaries, alleging violations of the Military Lending Act and the Consumer Financial Protection Act. The CFPB is seeking injunctive relief, redress for allegedly affected consumers and civil monetary penalties. On January 10, 2023, we moved to dismiss the lawsuit, asserting various constitutional and merits-based arguments. The motion has been fully briefed and a decision is pending. We continue to believe the CFPB’s claims are meritless and are vigorously defending the lawsuit. Nonetheless, at this time, we cannot predict or determine the timing or final outcome of this matter or the effect that any adverse determinations the lawsuit may have on our business, financial condition or results of operations.
46
Item 1A. Risk Factors
As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, other than as set forth below. In addition, we may disclose additional changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Our failure to meet the continued listing requirements of the NYSE could result in a delisting of our securities.
On April 24, 2023, we effected a 1-for-30 Reverse Stock Split of the Class A Common Stock, along with a corresponding proportionate reduction in the number of authorized shares of Class A Common Stock, in order to increase the per share market price of the Class A Common Stock to meet the minimum per share price requirement for continued listing on the NYSE. There can be no assurance that we will be able to continue to comply with the NYSE's minimum per share price requirement or other continued listing standards in the future. If we fail to satisfy the continued listing requirements of the NYSE, the NYSE may take steps to delist our securities. In the event the Class A Common Stock is delisted from the NYSE, such a delisting would likely have a negative effect on the price of our securities, including the Class A Common Stock, and would impair your ability to sell or purchase our securities when you wish to do so. In addition, in the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow any of our securities to become listed again, stabilize the market price or improve the liquidity of our securities or prevent future non-compliance with the NYSE’s listing requirements.
Additionally, if our securities are not listed on, or become delisted from, the NYSE for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if it were quoted or listed on the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.
We qualify as an emerging growth company within the meaning of Section 2(a) of the Securities Act, as modified by the JOBS Act. Because we utilize certain exemptions from disclosure requirements available to emerging growth companies, this can make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies. In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised financial accounting standards until such time as those standards apply to private companies. We currently take advantage of this extended transition period under the JOBS Act for adopting new or revised financial accounting standards. For as long as we continue to be an emerging growth company, we may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. As a result, our stockholders may not have access to certain information that they may deem important.
If some investors find the Class A Common Stock less attractive as a result of us taking advantage of these exemptions, there may be a less active trading market for the Class A Common Stock and our share price may be more volatile. If an active, liquid public trading market for the Class A Common Stock does not develop or is not maintained, we may be limited in our ability to raise capital by selling shares of Class A Common Stock and our ability to acquire other companies or assets by using shares of Class A Common Stock or other MoneyLion securities as consideration. We can qualify as an emerging growth company for up to a total of five years, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue exceeds $1.235 billion (as adjusted for inflation from time to time pursuant to SEC rules), if we issue more than $1.0 billion in non-convertible debt securities during any three-year period, or if before that time we are a “large accelerated filer” under U.S. securities laws. There is no guarantee that the exemptions available to us under the JOBS Act will result in significant savings. To the extent that we choose not to use exemptions from various reporting requirements under the JOBS Act or the exemptions are no longer available to us, we will incur additional compliance costs, which may impact our financial condition.
47
The ultimate effect of the Reverse Stock Split on the market price of our Class A Common Stock cannot be predicted with any certainty and may decrease the liquidity of our Class A Common Stock and magnify any decrease in our overall market capitalization.
The ultimate effect of the Reverse Stock Split on the market price of our Class A Common Stock cannot be predicted with any certainty, and we cannot assure you that the Reverse Stock Split will result in any or all of the expected benefits for any meaningful period of time, or at all. While we expect that the reduction in the number of outstanding shares of Class A Common Stock will proportionally increase the market price of our Class A Common Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Class A Common Stock by a multiple of the Reverse Stock Split ratio or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Class A Common Stock depends on multiple factors, many of which are unrelated to the number of shares outstanding, including our business and financial performance, general market conditions and prospects for future success, any of which could have a counteracting effect to the Reverse Stock Split on the per share price.
In addition, the Reverse Stock Split also reduced the total number of outstanding shares of Class A Common Stock, which may lead to reduced trading and a smaller number of market makers for our Class A Common Stock. As a result of a lower number of shares outstanding, the market for our Class A Common Stock may also become more volatile. The Reverse Stock Split also increased the number of stockholders who own “odd lots” of less than 100 shares of Class A Common Stock. A purchase or sale of less than 100 shares of Class A Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Class A Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their Class A Common Stock.
Finally, the decline in the per share price of our Class A Common Stock and the decline in our overall market capitalization may be greater following the Reverse Stock Split than would have occurred in the absence of a Reverse Stock Split. Any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of Class A Common Stock outstanding following the Reverse Stock Split.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On February 17, 2023, in connection with MoneyLion’s prior acquisition of Even Financial Inc., MoneyLion issued 46,080 restricted shares of Series A Preferred Stock to Broadhaven Securities, LLC, as advisors of Even Financial Inc., which shares were previously subject to the indemnification escrow provisions of the Amended and Restated Agreement and Plan of Merger governing the Engine Acquisition. For more information regarding the Series A Preferred Stock, including the terms of conversion, see Part I, Item 1 “Financial Statements — Common and Preferred Stock.”
On March 14, 2023, in connection with MoneyLion’s prior acquisition of MALKA, MoneyLion issued 110,925 restricted shares of Class A Common Stock in aggregate to Jeffrey Frommer, Lyusen Krubich, Daniel Fried and Pat Capra, the former shareholders of MALKA, pursuant to the make-whole provisions of the Membership Interest Purchase Agreement governing the MALKA Acquisition.
Such offers, sales and issuances of MoneyLion securities were deemed to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on Section 4(a)(2) of the Securities Act as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof. No underwriters were involved in any of the foregoing transactions.
Item 3. Default Upon Senior Securities
None.
48
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
49
Item 6. Exhibits
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, the representations, warranties, covenants and agreements contained in such exhibits were made only for the purposes of such agreement and as of specified dates, were solely for the benefit of the parties to such agreement and may be subject to limitations agreed upon by the contracting parties. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to such agreements instead of establishing these matters as facts and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Unless otherwise explicitly stated therein, investors and security holders are not third-party beneficiaries under any of the agreements attached as exhibits hereto and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its affiliates or businesses. Moreover, the assertions embodied in the representations and warranties contained in each such agreement are qualified by information in confidential disclosure letters or schedules that the parties have exchanged. Moreover, information concerning the subject matter of the representations and warranties may change after the respective dates of such agreements, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
Exhibit No. |
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Description |
3.1 |
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3.1.1 |
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10.1*† |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS |
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Inline XBRL Instance Document. |
101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |
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Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
* Filed herewith.
** The certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
† Certain schedules and exhibits to this exhibit have been omitted pursuant to Regulation S-K Item 601(a)(5), or certain portions of this exhibit have been redacted pursuant to Regulation S-K Item 601(b)(10)(iv).
50
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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MONEYLION INC. |
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Date: May 9, 2023 |
By: |
/s/ Richard Correia |
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Richard Correia President, Chief Financial Officer and Treasurer (Principal Financial Officer) |
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Date: May 9, 2023 |
By: |
/s/ Mark Torossian |
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Mark Torossian (Principal Accounting Officer) |
51
Execution Version
AMENDMENT NO. 1
TO CREDIT AGREEMENT
AMENDMENT NO. 1 TO CREDIT AGREEMENT, dated as of March 30, 2023 (this “Amendment”), to the Credit Agreement, dated as of March 24, 2022 (the “Credit Agreement”), among MONEYLION TECHNOLOGIES INC., a Delaware corporation (the “Company” or “Borrower”); the financial institutions that are or may from time to time become parties thereto (together with their respective successors and permitted assigns, the “Lenders”); and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent for the Lenders (the “Agent”).
WHEREAS, the Borrower has requested that the Agent and the Lenders amend certain terms and conditions of the Credit Agreement; and
WHEREAS, the Agent and the Lenders are willing to amend such terms and conditions of the Credit Agreement on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. All terms used herein that are defined in the Credit Agreement and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
2. Amendments. The Credit Agreement is hereby amended to (i) delete the red or green stricken text (indicated textually in the same manner as the following examples: stricken text and stricken text); and (ii) add the blue or green double-underlined text (indicated textually in the same manner as the following examples: double-underlined text and double-underlined text), in each case, as set forth in the marked copy of the Credit Agreement attached as Annex A hereto and made a part hereof for all purposes.
3. Representations and Warranties. The Borrower hereby represents and warrants to the Agent and the Lenders as follows:
(a) Representations and Warranties; No Event of Default. The representations and warranties herein, in Section 9 of the Credit Agreement and in each other Loan Document, certificate or other writing delivered by or on behalf of the Loan Parties to the Agent or any Lender pursuant to the Credit Agreement or any other Loan Document on or immediately prior to the Amendment Effective Date are true and correct in all material respects (unless any such representation or warranty is by its terms qualified by concepts of materiality, in which case that representation or warranty is true and correct in all respects after giving effect to any such materiality qualifier) with the same effect as if then made (except to the extent stated to relate to a specific earlier date, in which case that representation or warranty is true and correct in all material respects or in all respects, as applicable, as of that earlier date); and no Default or Event of Default has occurred and is continuing as of the Amendment Effective Date or would result from this Amendment becoming effective in accordance with its terms.
(b) Authorization, Etc. The Borrower is duly authorized to execute and deliver this Amendment.
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(c) Enforceability of Loan Documents. This Amendment is the legal, valid, and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, subject to bankruptcy, insolvency, and similar laws affecting the enforceability of creditors’ rights generally and to general principles of equity.
4. Conditions to Effectiveness. This Amendment shall become effective only upon satisfaction in full, in a manner satisfactory to the Agent, of the following conditions precedent (the first date upon which all such conditions shall have been satisfied being hereinafter referred to as the “Amendment Effective Date”):
(a) Payment of Fees, Etc. The Borrower shall have paid on or before the Amendment Effective Date all fees, costs and expenses then payable, if any, pursuant to the Credit Agreement and any other Loan Document.
(b) Representations and Warranties. The representations and warranties contained in this Amendment and in Section 9 of the Credit Agreement and in each other Loan Document shall be true and correct in all material respects (unless any such representation or warranty is by its terms qualified by concepts of materiality, in which case that representation or warranty is true and correct in all respects after giving effect to any such materiality qualifier) with the same effect as if then made (except to the extent stated to relate to a specific earlier date, in which case that representation or warranty shall be true and correct in all material respects or in all respects, as applicable, as of that earlier date).
(c) No Default; Event of Default. No Default or Event of Default shall have occurred and be continuing on the Amendment Effective Date or result from this Amendment becoming effective in accordance with its terms.
(d) Delivery of Documents. The Agent shall have received on or before the Amendment Effective Date this Amendment, duly executed by the Borrower, the Agent and the Lenders.
5. Continued Effectiveness of the Credit Agreement and Other Loan Documents. The Borrower hereby (a) acknowledges and consents to this Amendment for itself and each other Loan Party, (b) confirms and agrees that the Credit Agreement and each other Loan Document to which it is a party is, and shall continue to be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Amendment Effective Date, all references in any such Loan Document to “the Credit Agreement”, the “Agreement”, “thereto”, “thereof”, “thereunder” or words of like import referring to the Credit Agreement shall mean the Credit Agreement as amended by this Amendment, and (c) confirms and agrees that, to the extent that any such Loan Document purports to assign or pledge to the Agent, for the benefit of the Agent and the Lenders, or to grant to the Agent, for the benefit of the Agent and the Lenders, a security interest in or Lien on any Collateral as security for the Obligations of the Loan Parties from time to time existing in respect of the Credit Agreement (as amended hereby) and the other Loan Documents, such pledge, assignment and/or grant of the security interest or Lien is hereby ratified and confirmed in all respects. This Amendment does not and shall not affect any of the obligations of the Loan Parties, other than as expressly provided herein, including, without limitation, the Loan Parties’ obligations to repay the Loans in accordance with the terms of Credit Agreement or the obligations of the Loan Parties under any Loan Document to which they are a party, all of which obligations shall remain in full force and effect. Except as expressly provided herein, the execution, delivery and effectiveness of this Amendment shall not
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operate as a waiver of any right, power or remedy of the Agent or any Lender under the Credit Agreement or any other Loan Document nor constitute a waiver of any provision of the Credit Agreement or any other Loan Document.
6. No Novation. Nothing herein contained shall be construed as a substitution or novation of the Obligations outstanding under the Credit Agreement or instruments securing the same, which shall remain in full force and effect, except as modified hereby.
7. No Representations by Agent or Lenders. The Borrower for itself and each other Loan Party hereby acknowledges that it has not relied on any representation, written or oral, express or implied, by the Agent or any Lender, other than those expressly contained herein, in entering into this Amendment.
8. Release. The Borrower for itself and each other Loan Party hereby acknowledges and agrees that: (a) neither it nor any of its Subsidiaries has any claim or cause of action against the Agent or any Lender (or any of the directors, officers, employees, agents, attorneys or consultants of any of the foregoing), and (b) the Agent and the Lenders have heretofore properly performed and satisfied in a timely manner all of their obligations to the Loan Parties, and all of their Subsidiaries and Affiliates. Notwithstanding the foregoing, the Agent and the Lenders wish (and the Borrower for itself and each other Loan Party agrees) to eliminate any possibility that any past conditions, acts, omissions, events or circumstances would impair or otherwise adversely affect any of their rights, interests, security and/or remedies. Accordingly, for and in consideration of the agreements contained in this Amendment and other good and valuable consideration, the Borrower (for itself and its Subsidiaries and Affiliates and the successors, assigns, heirs and representatives of each of the foregoing) (collectively, the “Releasors”) does hereby fully, finally, unconditionally and irrevocably release, waive and forever discharge the Agent and the Lenders, together with their respective Affiliates and Related Funds, and each of the directors, officers, employees, agents, attorneys and consultants of each of the foregoing (collectively, the “Released Parties”), from any and all debts, claims, allegations, obligations, damages, costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and causes of action, in each case, whether known or unknown, contingent or fixed, direct or indirect, and of whatever nature or description, and whether in law or in equity, under contract, tort, statute or otherwise, which any Releasor has heretofore had or now or hereafter can, shall or may have against any Released Party by reason of any act, omission or thing whatsoever done or omitted to be done, in each case, on or prior to the Amendment Effective Date directly arising out of, connected with or related to this Amendment, the Credit Agreement or any other Loan Document, or any act, event or transaction related or attendant thereto, or the agreements of the Agent or any Lender contained therein, or the possession, use, operation or control of any of the assets of any Loan Party, or the making of any Loans or other advances, or the management of such Loans or other advances or the Collateral. The Borrower for itself and each other Loan Party represents and warrants that it has no knowledge of any claim by any Releasor against any Released Party or of any facts or acts or omissions of any Released Party which on the date hereof would be the basis of a claim by any Releasor against any Released Party which would not be released hereby.
9. Further Assurances. The Borrower shall, and shall cause each other Loan Party to, execute any and all further documents, agreements and instruments, and take all further actions, as may be required under Applicable Law or as the Agent may reasonably request, in order to effect the purposes of this Amendment.
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10. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment by facsimile or electronic mail shall be equally effective as delivery of an original executed counterpart of this Amendment.
(b) Section and paragraph headings herein are included for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.
(c) This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.
(d) The Borrower for itself and each other Loan Party hereby acknowledges and agrees that this Amendment constitutes a “Loan Document” under the Credit Agreement.
(e) Any provision of this Amendment that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered as of the date set forth on the first page hereof.
MONEYLION TECHNOLOGIES INC. |
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By: |
/s/ Richard Correia |
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Name: Richard Correia |
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Title: President, Chief Financial Officer and Treasurer |
[Signature Page to Amendment]
Monroe Capital Management Advisors, LLC, |
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By: |
/s/ Joseph P. Valickus |
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Name: Joseph P. Valickus |
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Title: Managing Director |
[Signature Page to Amendment]
LENDERS: |
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MONROE CAPITAL INCOME PLUS CORPORATION, in its capacity as a Lender |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
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MONROE CAPITAL CORPORATION, in its capacity as a Lender |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MC INCOME PLUS FINANCING SPV LLC, in its capacity as a Lender |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL PRIVATE CREDIT MASTER FUND IV SCSP, in its capacity as a Lender
By: MONROE CAPITAL MANAGEMENT ADVISORS, LLC, as Investment Manager |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
[Signature Page to Amendment]
MONROE CAPITAL PRIVATE CREDIT MASTER FUND IV (UNLEVERAGED) SCSP, in its capacity as a Lender
By: MONROE CAPITAL MANAGEMENT ADVISORS, LLC, as Investment Manager |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL PRIVATE CREDIT FUND 559 LP, in its capacity as a Lender
By: MONROE CAPITAL PRIVATE CREDIT FUND 559 GP LLC, its general partner |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL PRIVATE CREDIT FUND 559 FINANCING SPV LLC, in its capacity as a Lender
By: MONROE CAPITAL PRIVATE CREDIT FUND 559 LP, as its Designated Manager
By: MONROE CAPITAL PRIVATE CREDIT FUND 559 GP, LLC, its general partner |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
[Signature Page to Amendment]
MONROE CAPITAL OPPORTUNISTIC PRIVATE CREDIT FUND FINANCING SPV SCSP, in its capacity as a Lender
By: MONROE CAPITAL MANAGEMENT ADVISORS, LLC, as Investment Manager |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL OPPORTUNISTIC PRIVATE CREDIT MASTER FUND SCSP, in its capacity as a Lender
By: MONROE CAPITAL MANAGEMENT ADVISORS, LLC, as Investment Manager |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL FUND MARSUPIAL (LUX) FINANCING SPV LP
By: MONROE CAPITAL FUND MARSUPIAL (LUX) FINANCING GP LLC, its General Partner
By: MONROE CAPITAL MANAGEMENT ADVISORS, LLC, as Designated Manager |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
[Signature Page to Amendment]
MONROE CAPITAL FUND MARSUPTIAL (LUX) FINANCING HOLDCO LP
By: MONROE CAPITAL MANAGEMENT ADVISORS, LLC, as Investment Manager |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL PRIVATE CREDIT FUND IV FINANCING SPV I SCSP,
By: MONROE CAPITAL PRIVATE CREDIT FUND IV GP S.A R.L, its managing general partner
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
MONROE CAPITAL PRIVATE CREDIT FUND IV FINANCING SPV II SCSP,
By: MONROE CAPITAL PRIVATE CREDIT FUND IV SPV II GP S.A.R.L, its managing general partner |
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By: |
/s/ Joseph P. Valickus |
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Name: |
Joseph P. Valickus |
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Title: |
Managing Director |
[Signature Page to Amendment]
ANNEX A
Amended Financing Agreement
(see attached)
[Signature Page to Amendment]
Credit Agreement
dated as of March 24, 2022
among
MONEYLION TECHNOLOGIES INC.,
as Borrower,
the various financial institutions party hereto,
as Lenders,
Monroe Capital Management Advisors, LLC,
as Administrative Agent and Lead Arranger
[Signature Page to Amendment]
Table of Contents
Page
Section 1 |
DEFINITIONS. |
1 |
1.1 |
Definitions |
1 |
1.2 |
Certain Interpretive Provisions. |
33 |
1.3 |
Accounting and Other Terms. |
34 |
1.4 |
Treatment of LLC Division |
35 |
1.5 |
Reclassifiable Items |
35 |
Section 2 |
COMMITMENTS OF THE LENDERS; BORROWING and CONVERSION PROCEDURES. |
36 |
2.1 |
Commitments |
36 |
2.1.1 |
Term Loan Commitments. |
36 |
2.1.2 |
Incremental Facilities. |
36 |
2.2 |
Loan Procedures. |
38 |
2.2.1 |
Various Types of Loans |
39 |
2.2.2 |
Borrowing Procedures. |
39 |
2.2.3 |
Conversion Procedures. |
39 |
2.3 |
Commitments Several |
40 |
2.4 |
Certain Conditions |
40 |
Section 3 |
EVIDENCING OF LOANS. |
40 |
3.1 |
Notes |
40 |
3.2 |
Recordkeeping |
40 |
Section 4 |
INTEREST. |
41 |
4.1 |
Interest Rates |
41 |
4.1.1 |
Term Loans. |
41 |
4.1.2 |
Default Rate |
41 |
4.1.3 |
Interest Payment Dates |
41 |
4.2 |
Setting and Notice of Adjusted Term SOFR Rates |
42 |
4.3 |
Computation of Interest |
42 |
4.4 |
Term SOFR Conforming Changes |
42 |
Section 5 |
FEES. |
42 |
5.1 |
Administrative Agent’s Fees |
42 |
5.2 |
Applicable Premium |
42 |
Section 6 |
PREPAYMENTS; Repayments. |
43 |
6.1 |
Prepayments. |
43 |
6.1.1 |
Voluntary Prepayments |
43 |
6.1.2 |
Mandatory Prepayments |
43 |
6.2 |
Manner of Prepayments. |
45 |
6.2.1 |
All Prepayments |
45 |
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Table of Contents
(continued)
Page
6.3 |
Repayments |
45 |
6.4 |
Option to Decline |
45 |
Section 7 |
MAKING AND PRORATION OF PAYMENTS; SETOFF; TAXES. |
45 |
7.1 |
Making of Payments. |
45 |
7.2 |
Application of Certain Payments |
46 |
7.3 |
Due Date Extension |
47 |
7.4 |
Setoff |
47 |
7.5 |
Proration of Payments |
47 |
7.6 |
Taxes. |
47 |
Section 8 |
INCREASED COSTS; SPECIAL PROVISIONS FOR SOFR LOANS. |
50 |
8.1 |
Increased Costs. |
50 |
8.2 |
Basis for Determining Interest Rate Inadequate or Unfair. |
51 |
8.3 |
Changes in Law Rendering SOFR Loans Unlawful |
51 |
8.4 |
Right of Lenders to Fund through Other Offices |
52 |
8.5 |
Mitigation of Circumstances; Replacement of Lenders. |
52 |
8.6 |
Conclusiveness of Statements; Survival of Provisions |
52 |
8.7 |
Benchmark Replacement Setting. |
52 |
Section 9 |
REPRESENTATIONS AND WARRANTIES. |
54 |
9.1 |
Organization |
54 |
9.2 |
Authorization; No Conflict. |
54 |
9.3 |
Validity and Binding Nature |
54 |
9.4 |
Financial Condition |
54 |
9.5 |
No Material Adverse Change |
54 |
9.6 |
Litigation and Contingent Liabilities |
55 |
9.7 |
Ownership of Properties; Liens |
55 |
9.8 |
Equity Ownership |
55 |
9.9 |
Pension Plans. |
55 |
9.10 |
Investment Company Act |
55 |
9.11 |
Compliance with Laws Consents; Certain Actions |
56 |
9.12 |
Regulation T, U, X |
56 |
9.13 |
Taxes |
56 |
9.14 |
Solvency, etc |
56 |
9.15 |
Environmental Matters |
57 |
9.16 |
Insurance |
57 |
9.17 |
Real Property |
57 |
9.18 |
Information |
57 |
9.19 |
Location of Bank Accounts |
58 |
9.20 |
[Reserved] |
58 |
ii
Table of Contents
(continued)
Page
9.21 |
Intellectual Property |
58 |
9.22 |
[Reserved]. |
58 |
9.23 |
Employee and Labor Matters |
58 |
9.24 |
[Reserved] |
58 |
9.25 |
Name; Jurisdiction of Organization; Organizational ID Number; Chief Place of Business; Chief Executive Office; FEIN |
58 |
9.26 |
Locations of Collateral |
59 |
9.27 |
Security Interests |
59 |
9.28 |
No Default |
59 |
9.29 |
Hedging Agreements |
59 |
9.30 |
OFAC |
59 |
9.31 |
Patriot Act |
59 |
Section 10 |
AFFIRMATIVE COVENANTS. |
60 |
10.1 |
Reports, Certificates and Other Information |
60 |
10.1.1 |
Annual Reports |
60 |
10.1.2 |
Quarterly Reports |
60 |
10.1.3 |
Monthly Reports |
60 |
10.1.4 |
Compliance Certificates |
61 |
10.1.5 |
Reports to the SEC and to Shareholders |
61 |
10.1.6 |
Notice of Default, Litigation, and ERISA Matters |
61 |
10.1.7 |
Real Estate |
62 |
10.1.8 |
Management Reports |
62 |
10.1.9 |
Projections |
62 |
10.1.10 |
Other Information |
63 |
10.2 |
Books, Records, and Inspections |
63 |
10.3 |
Maintenance of Property; Insurance. |
63 |
10.4 |
Compliance with Laws; Payment of Taxes and Liabilities. |
64 |
10.5 |
Maintenance of Existence, etc |
65 |
10.6 |
Use of Proceeds |
65 |
10.7 |
Employee Benefit Plans. |
65 |
10.8 |
Environmental Matters |
65 |
10.9 |
Lender Meetings |
65 |
10.10 |
Further Assurances |
66 |
10.11 |
Deposit Accounts |
66 |
10.12 |
Collateral Access Agreements |
66 |
10.13 |
Guarantor Joinders |
66 |
Section 11 |
NEGATIVE COVENANTS |
67 |
11.1 |
Debt |
67 |
11.2 |
Liens |
69 |
iii
Table of Contents
(continued)
Page
11.3 |
Restricted Payments |
71 |
11.4 |
Mergers, Consolidations, Sales |
73 |
11.5 |
Modification of Certain Documents; Organizational Form. |
74 |
11.6 |
Transactions with Affiliates |
75 |
11.7 |
Inconsistent Agreements |
76 |
11.8 |
Business Activities |
77 |
11.9 |
Investments |
77 |
11.10 |
[Reserved] |
78 |
11.11 |
Fiscal Year |
79 |
11.12 |
Financial Covenants |
79 |
11.12.1 |
Minimum Revenue |
79 |
11.12.2 |
Minimum EBITDA |
79 |
11.12.3 |
Minimum Liquidity |
80 |
11.13 |
Compliance with Laws |
80 |
11.14 |
Permitted Activities of Parent |
80 |
Section 12 |
EFFECTIVENESS; CONDITIONS OF LENDING, ETC. |
81 |
12.1 |
Conditions to Effectiveness |
81 |
12.1.1 |
Agreement, Notes, and other Loan Documents |
81 |
12.1.2 |
Authorization Documents |
81 |
12.1.3 |
Consents, etc |
82 |
12.1.4 |
Letter of Direction |
82 |
12.1.5 |
Collateral and Diligence Questionnaire |
82 |
12.1.6 |
[Reserved] |
82 |
12.1.7 |
[Reserved] |
82 |
12.1.8 |
[Reserved] |
82 |
12.1.9 |
Opinions of Counsel |
82 |
12.1.10 |
Insurance |
82 |
12.1.11 |
Payment of Fees |
82 |
12.1.12 |
Debt to be Repaid |
82 |
12.1.13 |
Solvency Certificate |
83 |
12.1.14 |
Search Results; Lien Terminations |
83 |
12.1.15 |
Filings, Registrations, and Recordings |
83 |
12.1.16 |
Closing Certificate |
83 |
12.1.17 |
Financial Statements |
83 |
12.1.18 |
No Material Adverse Effect |
83 |
12.1.19 |
Capital Structure |
83 |
12.1.20 |
Financial Condition |
83 |
12.1.21 |
Know-Your-Customer and Anti-Money Laundering |
84 |
12.2 |
Conditions Precedent to all Loans |
84 |
iv
Table of Contents
(continued)
Page
12.2.1 |
Compliance with Warranties, No Default, etc |
84 |
12.2.2 |
Confirmatory Certificate |
84 |
Section 13 |
EVENTS OF DEFAULT AND THEIR EFFECT. |
84 |
13.1 |
Events of Default |
84 |
13.1.1 |
Non-Payment of the Loans, etc |
85 |
13.1.2 |
Non-Payment of Other Debt |
85 |
13.1.3 |
[Reserved] |
85 |
13.1.4 |
Bankruptcy, Insolvency, etc |
85 |
13.1.5 |
Non-Compliance with Loan Documents. |
85 |
13.1.6 |
Representations; Warranties |
86 |
13.1.7 |
Pension Plans |
86 |
13.1.8 |
Judgments |
86 |
13.1.9 |
Invalidity of Loan Documents, etc |
86 |
13.1.10 |
Charges or Proceedings |
86 |
13.1.11 |
Change of Control |
87 |
13.2 |
Effect of Event of Default |
87 |
13.3 |
Credit Bidding |
87 |
13.4 |
Curative Equity. |
88 |
Section 14 |
AGENCY. |
88 |
14.1 |
Appointment and Authorization |
88 |
14.2 |
[Reserved] |
89 |
14.3 |
Delegation of Duties |
89 |
14.4 |
Exculpation |
89 |
14.5 |
Reliance |
89 |
14.6 |
Notice of Default |
90 |
14.7 |
Credit Decision |
90 |
14.8 |
Indemnification |
90 |
14.9 |
Administrative Agent in Individual Capacities |
91 |
14.10 |
Successor Administrative Agent |
91 |
14.11 |
Collateral Matters |
91 |
14.12 |
Restriction on Actions by Lenders |
92 |
14.13 |
Administrative Agent May File Proofs of Claim. |
92 |
14.14 |
Other Agents; Arrangers and Managers |
93 |
14.15 |
Protective Advances |
93 |
Section 15 |
GENERAL. |
93 |
15.1 |
Waiver; Amendments. |
93 |
15.2 |
Confirmations |
94 |
15.3 |
Notices. |
95 |
v
Table of Contents
(continued)
Page
15.3.1 |
Generally |
95 |
15.3.2 |
Electronic Communications |
95 |
15.4 |
Computations |
95 |
15.5 |
Costs and Expenses |
96 |
15.6 |
Assignments; Participations. |
96 |
15.6.1 |
Assignments. |
96 |
15.6.2 |
Participations |
97 |
15.7 |
Register |
98 |
15.8 |
Governing Law |
98 |
15.9 |
Confidentiality |
98 |
15.10 |
Severability |
99 |
15.11 |
Nature of Remedies |
99 |
15.12 |
Entire Agreement |
99 |
15.13 |
Counterparts |
99 |
15.14 |
Successors and Assigns |
100 |
15.15 |
Captions |
100 |
15.16 |
Customer Identification—USA Patriot Act Notice |
100 |
15.17 |
Indemnification by Loan Parties |
100 |
15.18 |
Non-Liability of Lenders. |
100 |
15.19 |
Forum Selection and Consent to Jurisdiction |
101 |
15.20 |
Waiver of Jury Trial |
101 |
15.21 |
Acknowledgement and Consent to Bail-In of EEA Financial Institutions |
101 |
vi
ANNEXES
Annex A |
Lenders and Pro Rata Shares |
Annex B |
Addresses for Notices |
|
|
SCHEDULES
SCHEDULE 1.1 |
Enterprise Value |
Schedule 9.6 |
Litigation and Contingent Liabilities |
Schedule 9.8 |
Equity Ownership |
SCHEDULE 9.11(d) |
Compliance with Laws; Consents; Certain Actions |
Schedule 9.16 |
Insurance |
Schedule 9.17 |
Real Property |
Schedule 9.19 |
Deposit and Securities Accounts |
Schedule 9.21 |
Intellectual Property |
Schedule 9.25 |
Loan Party Information |
Schedule 9.26 |
Locations of Collateral |
Schedule 11.1 |
Existing Debt |
Schedule 11.2 |
Existing Liens |
Schedule 11.6 |
Transactions with Affiliates |
Schedule 11.7 |
Inconsistent Agreements |
Schedule 11.9 |
Investments |
Schedule 12.1 |
Debt to be Repaid |
|
|
EXHIBITS
Exhibit A |
Form of Note (Section 3.1) |
Exhibit B |
Form of Compliance Certificate (Section 10.1.4) |
Exhibit C |
Form of Assignment Agreement (Section 15.6.1) |
Exhibit D |
Form of Notice of Borrowing (Section 2.2.2) |
Exhibit E |
Form of Notice of Conversion (Section 2.2.3) |
Exhibit F-1 |
Form of U.S. Tax Compliance Certificate) |
Exhibit F-2 |
Form of U.S. Tax Compliance Certificate) |
Exhibit F-3 |
Form of U.S. Tax Compliance Certificate) |
EXHIBIT F-4 |
Form of U.S. Tax Compliance Certificate) |
EXHIBIT G |
Form of Intercompany Subordination Agreement |
vii
CREDIT AGREEMENT
This Credit Agreement dated as of March 24, 2022 (this “Agreement”) is entered into among MONEYLION TECHNOLOGIES INC., a Delaware corporation (the “Company” or “Borrower”); the financial institutions that are or may from time to time become parties hereto (together with their respective successors and permitted assigns, the “Lenders”); and Monroe Capital Management Advisors, LLC, a Delaware limited liability company (“Monroe Capital”), as administrative agent for the Lenders.
The Company has requested that the Lenders make Loans (a) to provide the funds required to repay the Debt to be Repaid, (b) to provide for the ongoing general corporate purposes and working capital needs of Borrower and its Subsidiaries, (c) to consummate any other transaction not prohibited by this Agreement (including repayment of Term A-2 Loans with Term B Loans or Incremental Loans) and (d) to fund fees and expenses associated with the foregoing, as further provided in this Agreement, in an aggregate principal amount of $110,000,000 in the form of (a) Term A-1 Loans to Borrower on the Closing Date in an aggregate principal amount of $70,000,000, (b) Term A-2 Loans to Borrower on the Closing Date in an aggregate principal amount equal to $20,000,000 and (b) Term B Loans to Borrower during the Term B Loan Availability Period in an aggregate principal amount of $20,000,000, and the Lenders are willing to do so on the terms and conditions set forth in this Agreement.
To secure the Loans and other Obligations, Borrower and the other Loan Parties are granting to Administrative Agent, for the benefit of Administrative Agent and Lenders, a security interest in and lien upon substantially all of Borrower’s and the other Loan Parties’ real and personal property (subject to the limitations and exclusions set forth in the Loan Documents).
In consideration of the mutual agreements contained in this Agreement, the parties hereby agree as follows:
“Account Debtor” is used as defined in the Guaranty and Collateral Agreement.
“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of all or substantially all of any business or division of a Person, (b) the acquisition of all or a majority of the Equity Interests of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other than a Person that is already a Subsidiary).
“Adjusted Revenue” means, with respect to the Company and its Subsidiaries for any period, the “Total Revenues, net” of the Company and its Subsidiaries for that period determined in accordance with GAAP, as adjusted by amortization of loan origination costs, provisions for loss on receivables related to membership and fee receivables, and revenue derived from products that have been phased out and non-operating income, in each case, determined in a manner consistent with the Company’s financial reporting practices in effect as of the Closing Date.
“Adjusted Term SOFR” means, for purposes of any calculation, the rate per annum equal to the sum of (a) Term SOFR for such calculation plus (b) the Term SOFR Adjustment; provided that if Adjusted
8
Term SOFR as so determined shall ever be less than the Floor, then Adjusted Term SOFR shall be deemed to be the Floor.
“Administrative Agent” means Monroe Capital in its capacity as administrative agent for the Lenders under this Agreement and any successor thereto in that capacity appointed in accordance with Section 14.10.
“Affected Loan” is defined in Section 8.3.
“Affiliate” of any Person means (a) any other Person which, directly or indirectly, controls or is controlled by or is under common control with that Person, (b) solely for purposes of Sections 9.16, 9.30, 11.3, and 11.6 of this Agreement, any officer or director of that Person and (c) with respect to any Lender, any entity administered or managed by that Lender or an Affiliate or investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in commercial loans. A Person will be deemed to be “controlled by” any other Person if that other Person possesses, directly or indirectly, power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managers or power to direct or cause the direction of the management and policies of that Person whether by contract or otherwise. Unless expressly stated otherwise in this Agreement, none of the following Persons will be deemed an Affiliate of any Loan Party: (i) Administrative Agent; or (ii) any Lender.
“Agent Fee Letter” means the fee letter dated as of the date of this Agreement between Borrower and Administrative Agent.
“Agreement” is defined in the introductory clause of this Agreement.
“Applicable Margin” means, as of any date of determination, the applicable rate per annum set forth in the following table that corresponds to the “Applicable MetricEnterprise Value” calculation as set forth in (or otherwise furnished or delivered contemporaneously with) the most recent Compliance Certificate delivered to Administrative Agent pursuant to Section 10.1.310.1.4. At any time prior to the EBITDA Trigger Date, the rate per annum in the row styled “Level IV” shall not apply.
Level |
Applicable MetricEnterprise Value |
Base Rate Loans |
SOFR Loans |
I |
Enterprise Value less than or equal to $300,000,000 |
8.25% |
9.25% |
II |
Enterprise Value greater than $300,000,000 and less than or equal to $800,000,000 |
7.50% |
8.50% |
III |
Enterprise Value greater than $800,000,000 |
6.75% |
7.75% |
IV |
Enterprise Value greater than $800,000,000 and, from and after the EBITDA Trigger Date, Total Debt to EBITDA Ratio less than or equal to 4.00:1.00 |
6.00% |
7.00% |
Except as otherwise set forth in this definition, the The Enterprise Value shall be calculated as of the end of each Fiscal Quarter of the Company and its Subsidiaries (the “EV Calculation”), and such EV Calculation shall be set forth in or otherwise furnished to the Administrative Agent contemporaneously with the furnishing of the Compliance Certificate pursuant to Section 10.1.4. The Applicable Margin will
9
be based upon the most recent Compliance Certificate. Except as otherwiseEV Calculation furnished as set forth in this definition, the Applicable Margin will be re-determined quarterlyabove and will take effect on the first day of the month following the date of delivery to Administrative Agent of the applicable Compliance Certificate pursuant to Section 10.1.3. If Borrower fails to furnish anysuch EV Calculation is furnished and will be re-determined quarterly. If Company fails to furnish an EV Calculation when due as set forth above (or fails to furnish a Compliance Certificate when that Compliance Certificate is due), then the Applicable Margin will be the rate per annum in the row styled “Level I” as of the first day of the month following the date on which thatthe EV Calculation (or Compliance Certificate) was required to be delivered until the date on which that EV Calculation or Compliance Certificate is delivered, on which date (but not retroactively), without constituting a waiver of any Default or Event of Default occasioned by the failure to timely deliver that EV Calculation or Compliance Certificate, the Applicable Margin will be set at the rate per annum based upon the calculations disclosed by that EV Calculation or Compliance Certificate. If any information contained in any EV Calculation or Compliance Certificate delivered pursuant to the foregoing or Section 10.1.310.1.4 is shown to be inaccurate, and that inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period than the Applicable Margin actually applied for that period, then (i) Borrower shall promptly upon a responsible officer becoming aware thereof deliver or cause to be delivered to Administrative Agent and each Lender a correct EV Calculation and/or Compliance Certificate for that period; (ii) the Applicable Margin will be determined as if the correct Applicable Margin (as set forth in the table above) were applicable for that period (irrespective of whether a correct EV Calculation and/or Compliance Certificate is delivered); and (iii) Borrower shall promptly (but in any event within five Business Days after delivery of that corrected EV Calculation and/or Compliance Certificate or after demand by Administrative Agent if such corrected EV Calculation and/or Compliance Certificate is not timely delivered) deliver to Administrative Agent full payment in respect of the accrued additional interest as a result of the increased Applicable Margin for that period, which payment Administrative Agent shall promptly apply to the affected Obligations.
“Applicable Premium” is defined in Section 5.2.
“Applicable Premium Trigger Event” means:
(a) any prepayment by any Loan Party of all, or any part, of the principal balance of any Term Loan for any reason (including, but not limited to, any optional prepayment or mandatory prepayment, and distribution in respect thereof, and any refinancing thereof (but for the avoidance of doubt, not including any amortization payment)), whether in whole or in part, and whether before or after (i) the occurrence of an Event of Default, or (ii) the commencement of any Insolvency Proceeding, and notwithstanding any acceleration (for any reason) of the Obligations; provided that any payments required to be made pursuant to Section 6.1.2(a)(ii) and Section 6.1.2(a)(v) of this Agreement shall not constitute an Applicable Premium Trigger Event;
(b) the acceleration of the Obligations for any reason, including, but not limited to, acceleration in accordance with Section 13.2 of the Credit Agreement, including as a result of the commencement of an Insolvency Proceeding;
(c) the satisfaction, release, payment, restructuring, reorganization, replacement, reinstatement, defeasance or compromise of any of the Obligations in any Insolvency Proceeding or any foreclosure (whether by power of judicial proceeding or otherwise) or deed in lieu of foreclosure or the making of a distribution of any kind in any Insolvency Proceeding to Administrative Agent, for the account of the Lenders in full or partial satisfaction of the Obligations; or
(d) the termination of the Credit Agreement for any reason.
10
Solely for purposes of calculating the term Applicable Premium, if an Applicable Premium Trigger Event occurs under clause (b), (c) or (d), the entire then outstanding principal amount of the Term Loan shall be deemed to have been prepaid on the date on which such Applicable Premium Trigger Event occurs.
“Approved Fund” means (a) any Person (other than a natural person) engaged in making, purchasing, holding, or investing in commercial loans and similar extensions of credit and that is advised, administered, or managed by a Lender, an Affiliate of a Lender (or an entity or an Affiliate of an entity that administers, advises or manages a Lender); (b) with respect to any Lender that is an investment fund, any other investment fund that invests in loans and that is advised, administered or managed by the same investment advisor as that Lender or by an Affiliate of that investment advisor; and (c) any third party that provides “warehouse financing” to a Person described in clause (a) or (b) (and any Person described in clause (a) or (b) will also be deemed an Approved Fund with respect to any such third party providing warehouse financing); provided that in no event shall a Person that constitutes a Disqualified Institution constitute an Approved Fund.
“Asset Disposition” means the sale, lease, assignment, disposition, conveyance or other transfer for value by any Loan Party to any Person of any asset of that Loan Party (including, the loss, destruction or damage of any thereof or any actual or threatened (in writing to any Loan Party) condemnation, confiscation, requisition, seizure or taking thereof). For the avoidance of doubt, none of (x) the sale of any Permitted Convertible Debt by Parent, (y) the sale of any Permitted Warrant Transaction by Parent and (z) the performance by Parent of its obligations under any Permitted Convertible Debt or any Permitted Warrant Transaction shall constitute an Asset Disposition.
“Assignee” is defined in Section 15.6.1.
“Assignment Agreement” is defined in Section 15.6.1.
“Attorney Costs” means, with respect to any Person, all reasonable and documented out-of-pocket invoiced fees and charges of any counsel (excluding in –house counsel) to that Person and all court costs and similar legal expenses.
“Available Tenor” means, as of any date of determination and with respect to the then-current Benchmark, as applicable, (x) if such Benchmark is a term rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this Agreement or (y) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of “Interest Period” pursuant to Section 8.7.4.
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.
“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.
“Bankruptcy Code” means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. § 101 et seq.) and the regulations issued from time to time thereunder.
11
“Base Rate” means at any time a fluctuating rate per annum equal to the greatest of (a) the Federal Funds Rate plus 0.50%, (b) the Prime Rate, (c) 2.00%, and (d) the Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00 %.
“Base Rate Loan” means any Loan which bears interest at or by reference to the Base Rate.
“Base Rate Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Benchmark” means, initially, the Term SOFR Reference Rate; provided that if a Benchmark Transition Event has occurred with respect to the Term SOFR Reference Rate or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 8.7.1.
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has been selected by Administrative Agent and Borrower giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (b) the related Benchmark Replacement Adjustment; provided, that if the Benchmark Replacement as determined pursuant to clause (a) or (b) above would be less than the Floor, the Benchmark Replacement will be deemed to be a rate per annum equal to the Floor for the purposes of this Agreement and the other Loan Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted Benchmark Replacement, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by Administrative Agent and Borrower Representative giving due consideration to (a) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (b) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of such Benchmark with the applicable Unadjusted Benchmark Replacement for Dollar-denominated syndicated credit facilities at such time.
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark:
(a) in the case of clause (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or
(b) in the case of clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component thereof) to be non-representative; provided that such non-representativeness, non-compliance or non-alignment will be determined by reference to the most recent statement or publication referenced in such clause (c) and even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on such date.
12
For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
(a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof), permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof);
(b) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal Reserve Board, the Federal Reserve Bank of New York, an insolvency official with jurisdiction over the administrator for such Benchmark (or such component), a resolution authority with jurisdiction over the administrator for such Benchmark (or such component) or a court or an entity with similar insolvency or resolution authority over the administrator for such Benchmark (or such component), which states that the administrator of such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof) permanently or indefinitely; provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide any Available Tenor of such Benchmark (or such component thereof); or
(c) a public statement or publication of information by the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all Available Tenors of such Benchmark (or such component thereof) are not, or as of a specified future date will not be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means, the period (if any) (a) beginning at the time that a Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 8.7 and (b) ending at the time that a Benchmark Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Loan Document in accordance with Section 8.7.
“Borrower” is defined in the introductory clause of this Agreement.
13
“Borrowing” means a borrowing consisting of simultaneous Loans of the same Type and, in the case of a SOFR Borrowing, having the same Interest Period made by the Lenders.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the laws of, or are in fact closed in, New York
“Capital Expenditures” means all expenditures that, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of the Company and its Subsidiaries, including expenditures in respect of Capital Leases, but excluding any such expenditures made in connection with the replacement, substitution, or restoration of assets to the extent financed (i) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets being replaced or restored, (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, (iii) with assets traded or exchanged for that replacement, substitution, or restoration of assets, or (iv) with Net Cash Proceeds from a sale, lease, assignment, disposition, or other transfer for value of the type specifically described in clause (a) of the definition of “Permitted Asset Disposition.”
“Capital Lease” means, with respect to any Person, any lease of (or other agreement conveying the right to use) any real or personal property by that Person that, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person.
“Cash Collateralize” means, with respect to any inchoate, contingent, or other Obligations, the delivery of cash to Administrative Agent, as security for the payment of those Obligations, in an amount equal to Administrative Agent’s good faith estimate of the amount due or to become due, including all fees and other amounts relating to those Obligations. “Cash Collateralization” has a correlative meaning.
“Cash Equivalent Investment” means, at any time, (a) any evidence of Debt, maturing not more than one year after that time, issued or guaranteed by the United States Government or any agency thereof; (b) commercial paper, maturing not more than one year from the date of issue, or corporate demand notes, in each case (unless issued by a Lender or its holding company) rated at least A-l by Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or P-l by Moody’s Investors Service, Inc.; (c) any certificate of deposit, time deposit, or banker’s acceptance, maturing not more than one year after that time, or any overnight Federal Funds transaction that is issued or sold by any Lender or its holding company (or by a commercial banking institution that is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000); (d) any repurchase agreement entered into with any Lender (or commercial banking institution of the nature referred to in clause (c)) which (i) is secured by a fully perfected security interest in any obligation of the type described in any of clauses (a) through (c) above and (ii) has a market value at the time that repurchase agreement is entered into of not less than 100% of the repurchase obligation of that Lender (or other commercial banking institution) thereunder; (e) money market accounts or mutual funds which invest exclusively in assets satisfying the foregoing requirements; and (f) other short-term liquid investments approved in writing by Administrative Agent (such approval not to be unreasonably withheld, delayed or conditioned).
“Cash-in-Transit” means, as of any date of determination, the aggregate amount of receivables of the Company and its Subsidiaries from payment processors (for debit card collections and other sources).
“Change in Law” means the adoption or phase-in of, or any change in, in each case after the date of this Agreement, any applicable law, rule, or regulation, or any change in the interpretation or administration of any applicable law, rule, or regulation by any governmental authority, central bank, or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank,
14
or comparable agency. For purposes of this Agreement, the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, or directives thereunder or issued in connection therewith, and all requests, rules, guidelines, or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, will, in each case, be deemed to have been adopted and gone into effect after the date of this Agreement.
“Change of Control” means the occurrence of any of the following events: (a) the acquisition, directly or indirectly, by any person or group (within the meaning of Section 13(d)(3) of the Exchange Act) of beneficial ownership of more than 30% of the aggregate outstanding voting or economic power of the Equity Interests of Parent; or (b) except to the extent otherwise expressly permitted by the terms of this Agreement (including without limitation, pursuant to Section 11.4), Parent ceases to, directly or indirectly, own and control 100% of the outstanding Equity Interests of Borrower.
“Closing Date” is defined in Section 12.1.
“Code” means the Internal Revenue Code of 1986.
“Collateral” means “Collateral” (as defined in the Guaranty and Collateral Agreement) and any and all other property now or hereafter securing Obligations.
“Collateral Access Agreement” means an agreement in form and substance reasonably satisfactory to Administrative Agent pursuant to which a lessor of real property on which collateral or books or records are stored or otherwise located, or a warehouseman, processor, or other bailee of inventory or other property owned by any Loan Party, acknowledges the Liens of Administrative Agent, waives or subordinates any Liens held by that Person on Collateral held at that property, and, in the case of any such agreement with a lessor, permits Administrative Agent reasonable access to and use of the applicable real property following the occurrence and during the continuance of an Event of Default to assemble, complete and remove any Collateral stored or otherwise located on that real property.
“Collateral and Diligence Questionnaire” means a collateral and diligence questionnaire executed and delivered to Administrative Agent by a Loan Party.
“Collateral Documents” means, collectively, the Guaranty and Collateral Agreement, each Mortgage, each Mortgage-Related Document, each Collateral Access Agreement, each Control Agreement, each Intellectual Property Security Agreement, and any other agreement or instrument pursuant to which Borrower, any Subsidiary or any other Person grants or purports to grant Collateral to Administrative Agent for the benefit of Administrative Agent and the Lenders or otherwise relates to any such Collateral.
“Commitment” means, as to any Lender, that Lender’s commitment to make Loans under this Agreement. The initial amount of each Lender’s Commitment is set forth on Annex A.
“Competitor” means any company or business that operates a personal finance platform including mobile applications designed to help users simplify personal financial management.
“Compliance Certificate” means a Compliance Certificate in substantially the form of Exhibit B.
“Computation Period” means each period of four consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter.
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“Conforming Changes” means, with respect to either the use or administration of Term SOFR or the use, administration, adoption or implementation of any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Base Rate,” the definition of “Business Day,” the definition of “U.S. Government Securities Business Day,” the definition of “Interest Period” or any similar or analogous definition (or the addition of a concept of “interest period”), timing and frequency of determining rates and making payments of interest, timing of borrowing requests or prepayment, conversion or continuation notices, the applicability and length of lookback periods and other technical, administrative or operational matters) that Administrative Agent decides may be appropriate to reflect the adoption and implementation of any such rate or to permit the use and administration thereof by Administrative Agent in a manner substantially consistent with market practice (or, if Administrative Agent decides that adoption of any portion of such market practice is not administratively feasible or if Administrative Agent determines that no market practice for the administration of any such rate exists, in such other manner of administration as Administrative Agent decides is reasonably necessary in connection with the administration of this Agreement and the other Loan Documents).
“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
“Consolidated Net Income” means, with respect to the Company and its Subsidiaries for any period, in each case as determined in accordance with GAAP, the consolidated net income (or loss) of the Company and its Subsidiaries for that period, excluding (a) any gains from Asset Dispositions; (b) any extraordinary gains; (c) the income (or loss) of any Subsidiary during that period in which any other Person (other than the Company or a Subsidiary) has a joint interest and contractual provisions actually restrict the amount of dividends or other distributions payable in cash to the Company or any of its Subsidiaries during such period, except to the extent of the amount of cash dividends or other distributions actually paid or payable in cash to the Company or any Subsidiary during that period; (d) the income (or loss) of any Person during that period and accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with a Loan Party or that Person’s assets are acquired by a Loan Party, except to the extent permitted with respect to, and only with respect to, pro forma calculations permitted or required by the terms of this Agreement; (e) the income of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by that Subsidiary to the Company or any of its Subsidiaries of that income is not at the time permitted by operation of the terms of its organizational documents, its governing documents, or any agreement, instrument, judgment, decree, order, statute, rule; or governmental regulation applicable to that Subsidiary, except to the extent of the amount of cash dividends or other distributions actually paid in cash to the Company or any Subsidiary during such period; and (f) any gains (or losses) from discontinued operations.
“Contingent Liability” means, with respect to any Person, each obligation and liability of that Person and all such obligations and liabilities of that Person incurred pursuant to any agreement, undertaking or arrangement by which that Person: (a) guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor against loss) the indebtedness, dividend, obligation or other liability of any other Person in any manner (other than by endorsement of instruments in the course of collection), including any indebtedness, dividend or other obligation which may be issued or incurred at some future time; (b) guarantees the payment of dividends or other distributions upon the Equity Interests of any other Person; (c) undertakes or agrees (whether contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire any indebtedness, obligation or liability of any other Person or any property or assets constituting security therefor, (ii) to advance or provide funds for the payment or discharge of any indebtedness, obligation or liability of any other Person (whether in the form of loans, advances, stock purchases, capital contributions, or otherwise), or to maintain solvency, assets, level of income, working capital, or other financial condition of any other Person, or (iii)
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to make payment to any other Person other than for value received; (d) agrees to lease property or to purchase securities, property, or services from any other Person with the purpose or intent of assuring the owner of that indebtedness or obligation of the ability of that other Person to make payment of the indebtedness or obligation; (e) to induce the issuance of, or in connection with the issuance of, any letter of credit for the benefit of any other Person; or (f) undertakes or agrees otherwise to assure a creditor against loss. The amount of any Contingent Liability will (subject to any limitation set forth in this Agreement) be as reasonably determined by such Person in good faith in accordance with GAAP.
“Control Agreement” means each deposit account control agreement or securities account control agreement, as applicable, entered into by a Loan Party, each depository institution or securities intermediary party thereto and Administrative Agent in form and substance reasonably satisfactory to Administrative Agent.
“Controlled Group” means all members of a controlled group of corporations, all members of a controlled group of trades or businesses (whether or not incorporated) under common control and all members of an affiliated service group which, together with Borrower or any Subsidiary of Borrower, are treated as a single employer under Section 414 of the Code or Section 4001(b) of ERISA.
“Credit Facilities” means the credit facilities provided under this Agreement and the other Loan Documents.
“Curative Equity” means the making of capital contributions to the Company or the issuance of Equity Interests by the Company (other than Disqualified Equity Interests), for the purposes of, and in accordance with, Section 13.4.
“Debt” of any Person at a particular time means, without duplication, (a) all indebtedness of that Person for borrowed money; (b) all indebtedness evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of that Person as lessee under Capital Leases which have been or should be recorded as liabilities on a balance sheet (excluding the footnotes thereto) of that Person in accordance with GAAP; (d) all obligations of that Person to pay the deferred purchase price of property or services (excluding (x) trade accounts payable in the ordinary course of business and (y) any earn out obligation, purchase price adjustment or other similar obligation until such obligation (A) becomes a liability on the balance sheet of such Person (excluding the footnotes thereto) in accordance with GAAP and (B) has not been paid within 60 days after becoming due and payable following expiration of any dispute resolution mechanics set forth in the applicable agreement governing the applicable transaction (it being understood and agreed that, in addition to the foregoing limitations, earn-out obligations shall only constitute Debt to the extent payable in cash)); (e) all indebtedness secured by a Lien on the property of that Person, whether or not that indebtedness has been assumed by that Person, but if that Person has not assumed or otherwise become liable for that indebtedness, then the amount of that indebtedness will be deemed to be the lesser of (i) the amount of such indebtedness and (ii) at the fair market value of the property securing that indebtedness at the time of determination; (f) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn), bankers’ acceptances, and similar obligations issued for the account of that Person; (g) all Hedging Obligations of that Person; (h) all Contingent Liabilities of that Person; (i) all Debt of any partnership of which that Person is a general partner unless such Debt is expressly made non-recourse to such Person; (j) (x) all monetary obligations under any receivables factoring, receivables sales, or similar transactions (including any warehouse financing) and (y) all monetary obligations (to the extent such obligations become payable in accordance with GAAP) under any synthetic lease, tax ownership/operating lease, off-balance sheet financing, or similar financing; and (k) any Disqualified Equity Interests of that Person and any other equity interest or instrument of that Person, whether or not mandatorily redeemable, that under GAAP is characterized as debt, whether
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pursuant to financial accounting standards board issuance No. 150 or otherwise. For the avoidance of doubt, the obligations of Parent under any Permitted Warrant Transaction shall not constitute Debt.
“Debt to be Repaid” means the Debt listed on Schedule 12.1.
“Default” means any event that, if it continues uncured, will, with lapse of applicable cure or grace periods or notice or both, constitute an Event of Default.
“Defaulting Lender” means any Lender that (a) has failed to fund any portion of the Loans or participations in Letters of Credit required to be funded by it under this Agreement within two (2) Business Days of the date required to be funded by it under this Agreement; (b) has otherwise failed to pay over to Administrative Agent or any other Lender any other amount required to be paid by it under this Agreement within two (2) Business Days of the date when due, unless the subject of a good faith dispute; (c) has or has a direct or indirect parent company that has (i) been deemed insolvent or become the subject of an Insolvency Proceeding or (ii) become the subject of a Bail-In Action; (d) has notified any Borrower, Administrative Agent or any Lender that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement or under other agreements in which it commits to extend credit or (e) has failed to confirm within three (3) Business Days of a request by Administrative Agent (including any request by Borrower that such request be made) that it will comply with the terms of this Agreement relating to its obligations to fund Loans and participations in Letters of Credit.
“Disqualified Equity Interest” means any Equity Interest that, by its terms (or by the terms of any security or other Equity Interest into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition, in each case before the date that is one hundred eighty (180) days after the Termination Date, (a) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking-fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event are subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments); (b) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part; (c) provides for the scheduled payments of dividends in cash before the date that is one hundred eighty (180) days after the Termination Date; or (d) is or becomes convertible into or exchangeable for Debt or any other Equity Interests that would constitute Disqualified Equity Interests.
“Disqualified Institution” means (i)(x) Persons that are Competitors of any of the Loan Parties and (y) those banks, financial institutions and other Persons to the extent identified by the Company to Administrative Agent and each Initial Lender by name in writing prior to the Closing Date, which written list of Disqualified Institutions under clause (y) may be updated from time to time after the Closing Date with the consent of Administrative Agent and each Lender (such consents not to be unreasonably withheld, conditioned or delayed) or (ii) any reasonably identifiable controlled Affiliate of such Persons (provided that neither Administrative Agent nor any Lender shall have any obligation to carry out due diligence in order to identify such controlled Affiliates but shall act in good faith), it being understood that any supplement thereof shall not apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans and/or Commitments as permitted herein. Disqualified Institutions exclude any Person that the Company has designated in writing as no longer being a Disqualified Institution by written notice delivered to Administrative Agent and each Lender from time to time.
“Dollar” and the sign “$” mean lawful money of the United States of America.
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“EBITDA” means, for any period, the result of the following, in each case as determined in accordance with GAAP:
(a) Consolidated Net Income for that period;
plus
(b) to the extent deducted in determining that Consolidated Net Income (other than in respect of (b)(xiv)(i)), without duplication, the sum of the following during that period:
(i) Interest Expense;
(ii) any federal, state, local and foreign income tax expense for that period and, without duplication, Tax Distributions made in (or payable with respect to) that period;
(iii) depreciation and amortization for that period;
(iv) non-cash compensation expense, or other non-cash expenses or charges, for that period arising from the granting of stock options, stock appreciation rights or similar equity arrangements;
(v) non-cash extraordinary or non-cash non-recurring expenses or losses (including non-cash adjustments due to changes in accounting) and other non-cash charges (including changes in fair value of warrants issued by Parent) (in each case as determined in accordance with GAAP) incurred during that period;
(vi) reasonable and documented out-of-pocket fees, costs, and expenses paid during that period in connection with the negotiation, execution, and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated by this Agreement and the other Loan Documents, so long as (A) those fees, costs, and expenses were paid not later than 180 days after the Closing Date, and (B) the aggregate amount of all such fees, costs, and expenses, whenever incurred or paid, does not exceed $1,800,000.
(vii) (A) (x) Malka Transaction Expenses, (y) Even Transaction Expenses and (z) at the election of Borrower, other transaction fees, costs and expenses incurred in connection with Permitted Acquisitions and Investments, Permitted Asset Dispositions and other transactions not prohibited by this Agreement or any other Loan Documents or Agent Fee Letter (whether or not any such transaction has been consummated) but only to the extent the aggregate amount thereof added back pursuant to this clause (z) does not exceed $5,000,000 for any Computation Period or $10,000,000 in the aggregate during the term of this Agreement and (B) other reasonable and customary transaction fees, costs and expenses incurred in connection with issuance of Permitted Convertible Debt and Equity Issuances, in each case, negotiated with non-Affiliates on arm’s length customary market terms (as determined by Borrower in good faith);
(viii) (A) extraordinary charges, losses and expenses (determined in accordance with GAAP) and (B) unusual, one-time or non-recurring charges, losses and expenses, but only to the extent the aggregate amount thereof added back pursuant to this clause (viii) does not exceed $3,500,000 for any Computation Period;
(ix) provision for loss on receivables related to finance receivables for that period[reserved];
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(x) reasonable and documented out-of-pocket fees, costs, and expenses of the Loan Parties incurred after the Closing Date and paid during that period in connection with the Loan Documents (including any amendment, modification or waiver of terms thereof) but only to the extent the aggregate amount thereof added back pursuant to this clause (x) does not exceed $500,000 for any Computation Period;
(xi) restructuring and similar charges, including any charge attributable to the undertaking and/or implementation of cost savings initiatives, cost rationalization programs, operating expense reductions and/or synergies (excluding “revenue” synergies, but including, without limitation, in connection with any integration, and/or restructuring or transition), any business optimization or business organization charge, any restructuring charge (including any charge relating to any tax restructuring), and/or any charge relating to the closure or consolidation of any facility and/or discontinued operations (including but not limited to severance, rent termination costs, moving costs and legal costs), any systems implementation charge, any consulting charge, any severance charge and/or any other transaction costs or other costs associated with operational changes or improvements, but only to the extent the aggregate amount thereof pursuant to this clause (xi) does not exceed $2,500,000 for any Computation Period;
(xii) non-cash charges relating to grants of stock appreciation rights, stock options, restricted stock units or restricted stock, non-cash impairment of goodwill and other long term intangible assets, unrealized non-cash losses (or minus unrealized non-cash gains) under Hedging Agreements or other derivative contracts, unrealized non-cash losses (or minus unrealized non-cash gains) in such period due solely to fluctuations in currency values, but excluding any non-cash loss or expense relating to a write-down, write-off or reserve with respect to accounts receivable or inventory in any Fiscal Year;
(xiii) reasonable and customary fees, costs, and expenses of board of directors (or similar governing body) (including compensation expenses) of the Company for that period incurred in the ordinary course of business;
(xiv) (i) business interruption insurance proceeds and (ii) other amounts paid during such period which have been indemnified or reimbursed in cash by third parties that are not a Loan Party or a Subsidiary of a Loan Party (or an Affiliate of a Loan Party with respect to expenses related to operating expenses of such Loan Party or Subsidiary);
(xv) the amount of any earn-out payments paid in such period to the extent the earn-out payment is permitted by the terms of this Agreement and made pursuant to and in accordance with documentation that has been delivered to Administrative Agent;
(xvi) one-time costs associated with Public Company Compliance in an aggregate amount not to exceed $1,000,000 during the term of this Agreement;
plus
(c) proceeds of any Curative Equity made in accordance with Section 13.4 and subject to the limitations therein;
minus
(d) to the extent included in determining Consolidated Net Income, without duplication: non-cash gains or profits during that period;
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provided that (x) there shall be included in determining EBITDA for any period, without duplication and to the extent reasonably satisfactory to the Required Lenders, the EBITDA of any Person acquired by the Company or any of its Subsidiaries pursuant to a Permitted Acquisition during such period (but not the EBITDA of any related Person, property, business or assets to the extent not so acquired), to the extent not subsequently sold, transferred or otherwise disposed of by the Company or such Subsidiary during such period and (y) there shall be excluded in determining EBITDA for any period, without duplication and to the extent reasonably satisfactory to the Required Lenders, the EBITDA of any Person sold, transferred or otherwise disposed of by the Company or any of its Subsidiary pursuant to Section 11.4 during such period, in each case, as if such acquisition or disposition occurred on the first day of the relevant measurement period.
Notwithstanding anything to the contrary contained herein, for purposes of calculating EBITDA, for the monthly periods set forth below, EBITDA for such month shall be deemed the respective EBITDA amount set forth below (the “Deemed EBITDA”):
Period |
EBITDA |
February 2021 |
($1,958,987) |
March 2021 |
$689,217 |
April 2021 |
($2,227,366) |
May 2021 |
($2,152,412) |
June 2021 |
($6,969,332) |
July 2021 |
($1,003,636) |
August 2021 |
($10,914,497) |
September 2021 |
($5,476,686) |
October 2021 |
($6,289,667) |
November 2021 |
($8,079,961) |
December 2021 |
($14,789,862) |
January 2022 |
($4,788,940) |
For the avoidance of doubt, with respect to any addback or adjustment subject to a cap or other limitation, (x) such cap or limitation shall not apply with respect to any addbacks or adjustments included in the Deemed EBITDA and (y) addbacks or adjustments included in Deemed EBITDA shall not be counted as usage of such cap or limitation.
“EBITDA Trigger Date” the first date by which EBITDA for the most recently ended two consecutive Fiscal Quarters is greater than $0 (whether or not sustained).
“ECF Percentage” means, with respect to the Excess Cash Flow for any Fiscal Year following the EBITDA Trigger Date, the following percentages, as applicable: (a) if the Total Debt to EBITDA Ratio as of the last day of the last Fiscal Quarter of that Fiscal Year is equal to or less than 1.50 to 1.00, 0%; (b) if the Total Debt to EBITDA Ratio as of the last day of the last Fiscal Quarter of that Fiscal Year is greater than 1.50 to 1.00 but equal to or less than 3.00 to 1.00, 25.0%; and (c) otherwise, 50.0%.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority; (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition; or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent;
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“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Assignee” means any commercial bank, any finance company, any investment fund or other fund that invests in loans, or any Affiliate of any of the foregoing.
“Environmental Claims” means all claims, however asserted, by any governmental, regulatory or judicial authority or other Person alleging potential liability or responsibility for violation of any Environmental Law, or for release of Hazardous Substances or injury to the environment.
“Environmental Laws” means all present or future federal, state or local laws, statutes, common law duties, rules, regulations, ordinances and codes, together with all administrative or judicial orders, consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements with, any governmental authority, in each case relating to any matter arising out of or relating to public health and safety, or pollution or protection of the environment or workplace, including any of the foregoing relating to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge, emission, release, threatened release, control or cleanup of any Hazardous Substance.
“Enterprise Value” means, as of any date of determination (or, with respect to restricted stock units and options, Funded Debt and cash and Cash Equivalent Investments, as of the last day of the Fiscal Quarter most recently ended prior to such date of determination) (a) Equity Value plus (b) all outstanding Funded Debt of Parent and its Subsidiaries minus (c) cash and Cash Equivalent Investments of Parent and its Subsidiaries (other than restricted cash kept on the balance sheet of Excluded Subsidiaries consistent with past practice). For illustrative purposes, set forth on Schedule 1.1 are reasonably detailed calculations demonstrating the Enterprise Value as of March 23, 2022, and its components set forth in clauses (a), (b) and (c) above.
“Equity Value” means, as of any date of determination (or, with respect to restricted stock units and options, as of the last day of the Fiscal Quarter most recently ended prior to such date of determination), the product of (a) the number of issued and outstanding Equity Interests of Parent (which for the purpose of this definition shall include all common shares, preferred shares, options and restricted stock units) on a fully diluted basis using the treasury stock method multiplied by (b) the price of a share of Parent’s common stock, par value $0.0001 per share as of the close of business of such date.
“Equity Interests” means, with respect to any Person, all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) of that Person’s equity capital, whether now outstanding or issued or acquired after the Closing Date, including common shares, preferred shares, membership interests in a limited liability company, limited or general partnership interests in a partnership, interests in a trust, interests in other unincorporated organizations, or any other equivalent of any such ownership interest, but excluding, for the avoidance of doubt, any Debt that is convertible into or exchangeable for any of the foregoing.
“Equity Issuance” means either (a) the sale or issuance by any Loan Party or any of its Subsidiaries of any shares of its Equity Interests or (b) the receipt by Borrower of any cash capital contributions.
“ERISA” means the Employee Retirement Income Security Act of 1974.
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“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.
“EV Calculation” has the meaning specified in the definition of “Applicable Margin”.
“Even Earn-Out” means the earn-out payment payable in either shares of common stock, par value $0.0001 per share, of Parent or Series A Convertible Preferred Stock, par value $0.0001 per share, of Parent pursuant to the terms of the Even Acquisition Agreement.
“Even Financial Acquisition” means the acquisition of Even Financial Inc. by MoneyLion Inc., pursuant to that certain Agreement and Plan of Merger dated December 15, 2021, by and among MoneyLion Inc., Epsilon Merger Sub Inc., Even Financial Inc., and Fortis Advisors LLC, solely in its capacity as representative of the equityholders of Even Financial Inc. (the “Even Acquisition Agreement”).
“Even Financial Dividend” means dividends paid in cash by MoneyLion Inc. to (i) holders of the Series A Convertible Preferred Stock, par value $0.0001, of MoneyLion Inc. pursuant to the Certificate of Designation filed immediately prior to, and issued upon, the consummation of the transactions contemplated by the Even Financial Acquisition, as such Certificate of Designation is in effect on the Closing Date and (ii) participants in the MoneyLion Inc. Preferred Share Dividend Replacement Program adopted concurrently with the consummation of the Even Financial Acquisition.
“Even Transaction Expenses” means all fees, costs and expenses incurred in connection with the Even Financial Acquisition.
“Event of Default” means any of the events described in Section 13.1.
“Excess Cash Flow” means, for any period, the result of:
(a) EBITDA for that period,
minus
(b) the sum, without duplication, of
(i) (A) scheduled payments of principal of the Term Loans and other Funded Debt (other than (x) payments of revolving Debt that do not include a dollar-for-dollar commitment reduction with respect to such Debt and (y) for the avoidance of doubt, any Excess Cash Flow payments made during such period pursuant to Section 6.1.2(a)(v)) permitted under this Agreement and made during that period and (B) the amount of Net Cash Proceeds from (x) any Asset Disposition pursuant to Section 11.4(ix) or (y) Extraordinary Receipts, in each case, to the extent such Net Cash Proceeds are required to be used to prepay the Term Loans or are reinvested (or anticipated to be reinvested) in the business pursuant to Section 6.1.2(a)(i) or (iv), respectively, in each case, solely to the extent the receipt of such Net Cash Proceeds resulted in an increase to Consolidated Net Income or EBITDA (and not in excess of the amount of such increase), plus
(ii) cash payments permitted under this Agreement and made during that period with respect to any Capital Expenditures, Permitted Acquisitions and any Investments made pursuant to Section 11.9(p) and/or (r), in each case, to the extent funded with Internally Generated Cash, plus
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(iii) all income taxes (or taxes from capital gains or profits) paid (or payable) in cash by the Loan Parties during (or with respect to) that period net of refunds actually received in cash during that period, plus
(iv) Tax Distributions paid (or payable) in cash during (or with respect to) such period, plus
(v) cash Interest Expense of the Loan Parties during that period, plus
(vi) the positive difference, if any, of working capital as of the end of that period over working capital as of the beginning of that period (provided that cash and Cash Equivalent Investments shall be excluded in determining any such change in working capital for purposes of this clause (vi)), plus
(vii) the cash portion paid (or payable) by the Company and its Subsidiaries during (or with respect to) such period of all cash items added back to EBITDA during such period pursuant to clauses (b)(vi), (b)(vii), (b)(viii), (b)(x), (b)(xi), (b)(xiii), (b)(xv), and (b)(xvi) of the definition of EBITDA, in each case, to the extent funded with Internally Generated Cash, plus
(viii) other overhead and administrative fees, costs, and expenses of the Company incurred in the ordinary course of business and paid in cash during such period to the extent permitted under Section 11.3 to the extent added back to EBITDA for such period, plus
(ix) payments in respect of earn-out obligations permitted hereunder by the Loan Parties in connection with Permitted Acquisitions, plus
(x) net cash payments made in connection with Hedging Agreements during such period; plus
(xi) an amount equal to (A) all cash charges excluded in calculating Consolidated Net Income and (B) any non-cash item of gain or income included in calculating Consolidated Net Income or EBITDA; plus
(xii) the positive difference, if any, of the aggregate outstanding principal amount of originated loans funded with cash into haircut capital of Loan Parties (i.e., excluding amounts funded with proceeds of warehouse lines or other financing) as of the end of that period over the aggregate outstanding principal amount of originated loans funded with cash into haircut capital of Loan Parties (i.e., excluding amounts funded with proceeds of warehouse lines or other financing) as of the beginning of that period, assuming a consistent advance rate from such warehouse lines of 90% or higher (i.e., discount rate of 10% or lower);
plus
(c) the sum, without duplication, of:
(ci) the positive difference, if any, of working capital as of the beginning of that period over working capital as of the end of that period (provided that cash and Cash Equivalent Investments shall be excluded in determining any such change in working capital for purposes of this clause (c)).; plus
(ii) the positive difference, if any, of the aggregate outstanding principal amount of originated loans funded with cash into haircut capital of Loan Parties (i.e., excluding amounts
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funded with proceeds of warehouse lines or other financing) as of the beginning of that period over the aggregate outstanding principal amount of originated loans funded with cash into haircut capital of Loan Parties (i.e., excluding amounts funded with proceeds of warehouse lines or other financing) as of the end of that period, assuming a consistent advance rate from such warehouse lines of 90% or higher (i.e., discount rate of 10% or lower).
“Excluded Deposit Accounts” means (i) deposit accounts the balance of which consists exclusively of (A) withheld income taxes and federal, state or local employment taxes required to be paid to the Internal Revenue Service or state or local government agencies with respect to employees of any of the Loan Parties and their Subsidiaries and (B) amounts required to be paid over to an employee benefit plan pursuant to DOL Reg. Sec. 2510.3 102 on behalf of or for the benefit of employees of any of the Loan Parties and their Subsidiaries; (ii) all segregated deposit accounts constituting (and the balance of which consists solely of funds set aside in connection with) payroll accounts, trust accounts, fiduciary accounts and accounts dedicated to the payment of accrued employee benefits, medical, dental and employee benefits claims to employees of any of the Loan Parties and their Subsidiaries; (iii) other deposit accounts, excluding collection or primary operating accounts, where the average daily balance thereof, calculated on a monthly basis, does not exceed $250,000, up to an aggregate amount for all such deposit accounts not to exceed $750,000; (iv) any deposit account established as an escrow account (but only so long as such account remains an escrow account); (v) any deposit account constituting a zero balance account and (vi) any deposit account with respect to which, in the reasonable judgment of Administrative Agent, the burden or cost of providing a Guaranty shall be excessive in view of the benefits to be obtained by the Lenders therefrom.
“Excluded Subsidiary” means any Subsidiary that is (a) not a wholly owned Subsidiary of a Loan Party, (b) prohibited or restricted by applicable Law or by contractual obligations existing on the Closing Date (or, in the case of any Subsidiary acquired after the Closing Date, in existence at the time of acquisition but not entered into in contemplation thereof) from guaranteeing the Obligations or if guaranteeing the Obligations (i) would require governmental (including regulatory) consent, approval, license or authorization in order to provide such guarantee or (ii) where the delivery of such guaranty or pledge, as applicable, would reasonably be expected to result in an adverse Tax consequence (including, without limitation, as a result of the operation of Sections 245A and 956 of the Internal Revenue Code, taking into account any proposed or final regulations issued thereunder, or any similar Law or regulation in any applicable jurisdiction (other than any de minimis consequences)) as reasonably determined by Administrative Agent in consultation with Borrower, (c) a Subsidiary with respect to which, in the reasonable judgment of Administrative Agent, the burden or cost of providing a Guaranty shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (d) any SPV Financing Entity, (e) any Subsidiary that is a licensed broker-dealer, registered investment adviser or licensed insurance broker and (f) MoneyLion of Malaysia SDN DHB.
“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case imposed (i) in a jurisdiction in which the relevant recipient is organized, (ii) in a jurisdiction which the relevant recipient’s principal office is located, (iii) in a jurisdiction in which the relevant recipient’s lending office (or branch) in respect of which payments under this Agreement are made is located or (iv) that are Other Connection Taxes; (b) any withholding Taxes imposed under FATCA; (c) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 7.6, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its lending office, and (d) Taxes attributable to such Recipient’s failure to comply with Section 7.6.4.
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“Extraordinary Receipts” means any cash in excess of $750,000 (in the case of clauses (b) (other than in respect of business interruption insurance) and (d) below) and $3,000,000 (in the case of clauses (a), (b) (to the extent relating to business interruption insurance), (c), (e) and (f) below), in each case, in any Fiscal Year received by or paid to or for the account of any Loan Party not in the ordinary course of business consisting of (a) pension plan reversions, (b) proceeds of insurance, (c) judgments, proceeds of settlements or other consideration of any kind in connection with any cause of action (other than with respect to reimbursement of third party claims), (d) condemnation awards (and payments in lieu thereof), (e) indemnity payments (other than with respect to reimbursement of third party claims), (f) any purchase price adjustment received in connection with any purchase, and (g) foreign, United States, state or local tax refunds to the extent not included in the calculation of EBITDA.
“FATCA” means Sections 1471 through 1474 of the Code, as of the date of the Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement treaty or convention among Governmental Authorities and implementing such Sections of the Code.
“Federal Funds Rate” means, for any day, a fluctuating interest rate equal for each day during the applicable period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for that day (or, if that day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if that rate is not so published for any day which is a Business Day, the average of the quotations for that day on those transactions received by Administrative Agent from three Federal funds brokers of recognized standing selected by Administrative Agent. Administrative Agent’s determination of the Federal Funds Rate will be binding and conclusive absent manifest error.
“Financial Statements” means that certain audited consolidated balance sheet, statement of operations, stockholders equity and cash flows for the fiscal year ended December 31, 2020.
“Fiscal Quarter” means a fiscal quarter of a Fiscal Year, which period is the 3‑month period ending on the last day of each of March, June, September, and December of each year.
“Fiscal Year” means the fiscal year of the Company and its Subsidiaries, which period will be the 12‑month period ending on the last day of December of each year.
“Floor” means a rate of interest equal to 1.00%.
“FRB” means the Board of Governors of the Federal Reserve System or any successor thereto.
“Funded Debt” means, as to any Person, all Debt of the type set forth in clauses (a), (b), (c), (d), (e), (f) (the amount of such Debt will be limited to the extent of unreimbursed amounts thereunder), (i), (j) (excluding Debt of SPV Financing Entities of the type set forth in clause (j)(x)) (in each case, only to the extent such Debt is characterized as debt or considered a liability under GAAP) and (k) of such definition, and Contingent Liabilities with respect to each of the foregoing types of Debt. For the avoidance of doubt, in no event shall Debt of an SPV Financing Entity of the type set forth in clause (j)(x) of “Debt” (even if such Debt would also constitute Debt under another clause of the definition thereof) constitute Funded Debt.
“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public
26
Accountants and statements and pronouncements of the Financial Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the U.S. accounting profession) and the Securities and Exchange Commission, which are applicable to the circumstances as of the date of determination.
“Guarantor” means each Person that guarantees the Obligations of Borrower.
“Guaranty” means each guaranty executed and delivered by any Guarantor, together with any joinders thereto and any other guaranty agreement executed by a Guarantor, in each case in form and substance reasonably satisfactory to Administrative Agent. The Guaranty and Collateral Agreement is a Guaranty.
“Guaranty and Collateral Agreement” means the Guaranty and Collateral Agreement dated as of the date of this Agreement executed and delivered by each Loan Party, together with any joinders thereto and any other guaranty and collateral agreement executed by a Loan Party, in each case in form and substance reasonably satisfactory to Administrative Agent.
“Hazardous Substances” means hazardous waste, hazardous substance, pollutant, contaminant, toxic substance, oil, hazardous material, chemical, or other substance regulated by any Environmental Law.
“Hedging Agreement” means any interest rate, currency or commodity swap agreement, cap agreement, collar agreement, spot foreign exchange, forward foreign exchange, foreign exchange option (or series of options) and any other agreement or arrangement designed to protect a Person against fluctuations in interest rates, currency exchange rates or commodity prices.
“Hedging Obligation” means, with respect to any Person, any liability of that Person under any Hedging Agreement determined (a) for any date on or after the date that Hedging Agreement has been closed out and termination value determined in accordance therewith, using that termination value; and (b) for any date prior to the date referenced in clause (a), using the amount determined as the mark-to-market value for that Hedging Agreement, as determined based upon one or more mid-market or other readily available quotations provided by any recognized dealer in that Hedging Agreement (which may include a Lender or any Affiliate of a Lender).
“Incremental Effective Date” is defined in Section 2.1.2(a).
“Incremental Equivalent Debt” is defined in Section 2.1.2(f).
“Incremental Facility Amendment” is defined in Section 2.1.2(e).
“Incremental Facility Request” is defined in Section 2.1.2(a).
“Incremental Facility” is defined in Section 2.1.2(a).
“Incremental Loan” is defined in Section 2.1.2(a).
“Incremental Term Loan” is defined in Section 2.1.2(a).
“Incremental Term Loan Commitment” is defined in Section 2.1.2(a).
“Indemnified Liabilities” is defined in Section 15.17.
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“Indemnified Taxes” means (a) Taxes other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
“Insolvency Proceeding” means any case or proceeding commenced by or against a Person under any state, federal or foreign law for, or any agreement of a Person to, (a) the entry of an order for relief under the Bankruptcy Code, or any other insolvency, debtor relief, or debt adjustment law; (b) the appointment of a receiver, trustee, liquidator, administrator, conservator or other custodian for that Person or any part of its Property; or (c) an assignment or trust mortgage for the benefit of creditors.
“Intellectual Property” is defined in Section 9.21.
“Intellectual Property Security Agreement” is used as defined in the Guaranty and Collateral Agreement.
“Intercompany Subordination Agreement” means an Intercompany Subordination Agreement substantially in the form of Exhibit G.
“Interest Expense” means, for any period, as determined in accordance with GAAP, the consolidated interest expense of the Company and its Subsidiaries for that period (including all imputed interest on Capital Leases) in each case calculated net of interest income.
“Interest Payment Date” means as to any Loan, the last Business Day of each month and the Termination Date.
“Interest Period” means, as to any Borrowing, the period commencing on the date of such Loan or Borrowing and ending on the numerically corresponding day in the calendar month that is one or three months thereafter (in each case, subject to the availability thereof), as specified in the applicable Notice of Borrowing or Notice of Conversion; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) no Interest Period shall extend beyond the Termination Date and (iv) no tenor that has been removed from this definition pursuant to Section 8.7.4 shall be available for specification in such Notice of Borrowing or Notice of Conversion. For purposes hereof, the date of a Loan or Borrowing initially shall be the date on which such Loan or Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Loan or Borrowing.
“Internally Generated Cash” means cash generated from the operations of the business of Borrower and its Subsidiaries; provided that, notwithstanding the foregoing, “Internally Generated Cash” shall not include (i) the proceeds of any Debt (ii) the proceeds of any Equity Issuance, (iii) the proceeds of any insurance, indemnification or other payments or (iv) the proceeds of any Extraordinary Receipts (including, without limitation, any non-ordinary course tax refunds or returns).
“Investment” means, with respect to any Person, any investment in another Person, whether by acquisition of any debt or Equity Interest, by making any loan or advance, by becoming obligated with respect to a Contingent Liability in respect of obligations of that other Person (other than travel and similar advances to employees in the ordinary course of business) or by making an Acquisition. The amount of any Investment shall be the original cost of such Investment, plus the cost of any addition thereto that otherwise
28
constitutes an Investment, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect thereto, but giving effect to any repayments of principal in the case of any Investment in the form of a loan and any return of capital or return on Investment in the case of any equity Investment (whether as a distribution, dividend, redemption or sale).
“IRS” means the United States Internal Revenue Service.
“Lender” is defined in the introductory clause of this Agreement.
“Lender Party” is defined in Section 15.17.
“Lien” means, with respect to any Person, any interest granted by that Person in any real or personal property, asset, or other right owned or being purchased or acquired by that Person (including an interest in respect of a Capital Lease) that secures payment or performance of any obligation and includes any mortgage, lien, encumbrance, title retention lien, charge, or other security interest of any kind, whether arising by contract, as a matter of law, by judicial process, or otherwise, provided that in no event shall an operating lease in and of itself be deemed to constitute a Lien.
“Liquidity” means, as of any date of determination, (I) the sum of (x) Unrestricted Cash plus (y) Cash-in-Transit, minus (II) the unpaid amount of any final non-appealable judgments or settlements (whether in respect of an action by a Governmental Authority, class action or substantially similar claim or otherwise; and whether from a court or arbitration) or final non-appealable penalties or fines imposed by a Governmental Authority (in each case, except to the extent covered by insurance (including D&O insurance) pursuant to which the insurer has been notified within seven calendar days of such judgment, settlement, penalty or fine (and which Borrower believes in good faith is covered by such insurance at the time of such notification) and has not denied coverage so long as that insurance is paid to the applicable Loan Party within sixty (60) days of the rendering of those judgments, entering into of those settlements or imposition of those penalties or fines).
“Loan” or “Loans” means, as the context may require, any of the Term Loans.
“Loan Documents” means this Agreement, the Notes, the Agent Fee Letter, each Collateral and Diligence Questionnaire, the Collateral Documents, and all documents, instruments, and agreements delivered in connection with the foregoing, as any of the foregoing are amended or modified in accordance with their respective terms.
“Loan Party” means Borrower and each Guarantor.
“Malka Acquisition” means that certain Membership Interest Purchase Agreement dated as of November 15, 2021, by and among, among others, MoneyLion Technologies Inc. and Malka Media Group LLC.
“Malka Earn-Out” means the earn-out payment payable in cash or shares of common stock, par value $0.0001 per share, of Parent, in the sole discretion of Borrower, pursuant to the terms of the Malka Acquisition Agreement.
“Malka Make-Whole” means those certain make-whole payments payable pursuant to Section 2.06(e) of the Malka Acquisition Agreement.
“Malka Transaction Expenses” means all fees, costs and expenses incurred in connection with the Malka Acquisition Agreement.
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“Margin Stock” means any “margin stock” as defined in Regulation U.
“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the financial condition, operations, assets, business or properties of the Loan Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any of the Obligations under any Loan Document, (c) a material adverse effect upon any substantial portion of the Collateral under the Collateral Documents or upon the legality, validity, binding effect or enforceability against any Loan Party of any Loan Document, or (d) a material impairment of the ability of Administrative Agent to enforce or collect any Obligations or to realize upon any material portion of the Collateral.
“Monroe Capital” is defined in the introductory clause of this Agreement.
“Mortgage” means a mortgage, deed of trust, leasehold mortgage or similar instrument granting Administrative Agent a Lien on real property of any Loan Party.
“Mortgage-Related Documents” means with respect to any real property subject to a Mortgage, the following, in form and substance reasonably satisfactory to Administrative Agent: (a) a mortgagee title policy (or binder therefor) covering Administrative Agent’s interest under the Mortgage, in a form and amount and by an insurer reasonably acceptable to Administrative Agent, which must be fully paid on that effective date; (b) all assignments of leases, estoppel letters, attornment agreements, consents, waivers, and releases as Administrative Agent reasonably requires with respect to other Persons having an interest in such real estate; (c) a current, as-built survey of the real property, containing a metes-and-bounds property description and certified by a licensed surveyor reasonably acceptable to Administrative Agent; (d) a life-of-loan flood hazard determination and, if such real property is located in a flood plain, an acknowledged notice to the applicable Loan Party and flood insurance in an amount, with endorsements and by an insurer reasonably acceptable to Administrative Agent; (e) a current appraisal of such real property, prepared by an appraiser reasonably acceptable to Administrative Agent, and in form and substance reasonably satisfactory to Required Lenders; (f) copies of any existing Phase I or Phase II environmental site assessments in the possession of any Loan Party with respect to such real property.
“Multiemployer Pension Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which Borrower or any other member of the Controlled Group contributes or has any liability, whether direct or indirect or absolute or contingent.
“Net Cash Proceeds” means:
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“Non-Consenting Lender” is defined in Section 15.1(k).
“Non-U.S. Lender” is defined in Section 7.6.4.
“Note” means a promissory note substantially in the form of Exhibit A.
“Notice of Borrowing” is defined in Section 2.2.2(a).
“Notice of Conversion” is defined in Section 2.2.3(b).
“Obligations” means all obligations (monetary (including post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement and any other Loan Document, including Attorney Costs, all in each case howsoever created, arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due.
“OFAC” is defined in Section 9.30.
“Operating Lease” means any lease of (or other agreement conveying the right to use) any real or personal property by any Loan Party, as lessee, other than any Capital Lease.
“Other Connection Taxes” means, with respect to any to Recipient pursuant to the terms of this Agreement, Taxes imposed as a result of a present or former connection between such Administrative Agent, Lender or other Person, as the case may be, and the jurisdiction imposing such Tax (other than connections arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies, arising from any payment made under this Agreement or from the execution, delivery or enforcement of, or otherwise with respect to any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.
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“Parent” means MoneyLion Inc., which directly owns 100% of the outstanding Equity Interests of Borrower.
“Participant” is defined in Section 15.6.2.
“Patriot Act” is defined in Section 15.16.
“Payment in Full” means (a) the payment in full in cash of all Loans and other Obligations, other than contingent indemnification obligations for which no claims have been asserted; (b) the termination of all Commitments; and (c) the release of any claims of the Loan Parties against Administrative Agent and Lenders arising on or before the payment date.
“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA.
“Pension Plan” means a “pension plan,” as that term is defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA or the minimum funding standards of Section 302 of ERISA (other than a Multiemployer Pension Plan), and as to which Borrower, any Subsidiary of Borrower or any member of Borrower’s Controlled Group, has any liability, whether direct or indirect or absolute or contingent, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
“Periodic Term SOFR Determination Day” has the meaning specified in the definition of “Term SOFR”.
“Permitted Acquisition” means (x) the Even Financial Acquisition and (y) any other Acquisition by Borrower or any of its Subsidiaries that, in the case of this clause (y) satisfies the following terms:
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“Permitted Asset Disposition” means an Asset Disposition involving (a) the sale or lease of inventory in the ordinary course of business; (b) any sale, lease, assignment, disposition, or other transfer for value between or among Loan Parties or (c) liquidation of Cash Equivalent Investments into cash in the ordinary course of business.
“Permitted Bond Hedge Transaction” means any call or capped call option (or substantively equivalent derivative transaction) relating to Parent’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of Parent) purchased by
33
Parent in connection with the issuance of any Permitted Convertible Debt and settled in common stock of Parent (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of Parent’s common stock or such other securities or property) and cash in lieu of fractional shares.
“Permitted Convertible Debt” means senior, unsecured Debt of Parent that is convertible into shares of common stock of Parent (or other securities or property following a merger event, reclassification or other change of the common stock of Parent), cash or a combination thereof (such amount of cash determined by reference to the price of Parent’s common stock or such other securities or property) and cash in lieu of any fractional shares, provided that such Permitted Convertible Debt has customary market terms for capital markets convertible indebtedness.
“Permitted Lien” means a Lien expressly permitted under this Agreement pursuant to Section 11.2.
“Permitted Parent Debt” means unsecured Debt of Parent (A) that is not subject to any guarantee by any Subsidiary of Parent, (B) that will not mature until after the latest maturity date in effect with respect to the Loans on the date of issuance or incurrence thereof, (C) that is not subject to mandatory redemption, mandatory amortization, repurchase, prepayment or sinking fund obligation (other than customary offers to repurchase and prepayment events upon a change of control, asset sale or event of loss and a customary acceleration right after an event of default) prior to ninety-one (91) days after such latest maturity date (it being understood that such Debt may have mandatory prepayment, repurchase or redemption provisions satisfying the requirements of clause (D) below prior to such date), (D) that does not require any payments in cash of interest or other amounts in respect of the principal thereof prior to a date that is ninety-one (91) days after the latest maturity date in effect with respect to the Loans on the date of such issuance or incurrence, (E) that has covenant, default and remedy provisions no more restrictive (taken as a whole) than those set forth in this Agreement (taken as a whole) (except in a manner customary for holding company debt securities, including senior discount notes) (in each case as determined by Borrower in good faith) and (F) Permitted Convertible Debt.
“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) relating to Parent’s common stock (or other securities or property following a merger event, reclassification or other change of the common stock of Parent) sold by Parent substantially concurrently with any purchase by Parent of a Permitted Bond Hedge Transaction and settled in common stock of Parent (or such other securities or property), cash or a combination thereof (such amount of cash determined by reference to the price of Parent’s common stock or such other securities or property) and cash in lieu of fractional shares.
“Person” means any natural person, corporation, partnership, trust, limited liability company, association, governmental authority or unit, or any other entity, whether acting in an individual, fiduciary or other capacity.
“Prepayment Percentage” is defined in Section 5.2.
“Prime Rate” means, for any day, the rate of interest in effect for that day equal to the prime rate in the United States as reported from time to time by Bloomberg L.P. (or other authoritative source selected by Administrative Agent in its reasonable discretion), or as Prime Rate is otherwise determined by Administrative Agent in its sole and absolute discretion. Administrative Agent’s determination of the Prime Rate will be conclusive, absent manifest error. Any change in the Prime Rate will take effect at the opening of business on the day of that change. In the event Bloomberg L.P. (or any other authoritative source) publishes a range of “prime rates,” the Prime Rate will be the highest of the “prime rates.”
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“Proceeding” means any investigation, inquiry, litigation, review, hearing, suit, claim, audit, arbitration, proceeding or action (in each case, whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted or heard by or before, or otherwise involving, any governmental authority or arbitrator.
“Pro Rata Share”
(a) with respect to a Lender’s obligation to make a Term A-1 Loan and receive payments of interest, fees, and principal with respect thereto, (i) prior to the Term A-1 Loan Commitment being terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term A-1 Loan Commitment plus the unpaid principal amount of that Lender’s Term A-1 Loans, by (B) the aggregate Term A-1 Loan Commitment of all Lenders plus the unpaid principal amount of all Term A-1 Loans of all Lenders; and (ii) from and after the time the Term A-1 Loan Commitment has been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term A-1 Loans by (B) the aggregate unpaid principal amount of all Term A-1 Loans;
(b) with respect to a Lender’s obligation to make a Term A-2 Loan and receive payments of interest, fees, and principal with respect thereto, (i) prior to the Term A-2 Loan Commitment being terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term A-2 Loan Commitment plus the unpaid principal amount of that Lender’s Term A-2 Loans, by (B) the aggregate Term A-2 Loan Commitment of all Lenders plus the unpaid principal amount of all Term A-2 Loans of all Lenders; and (ii) from and after the time the Term A-2 Loan Commitment has been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term A-2 Loans by (B) the aggregate unpaid principal amount of all Term A-2 Loans;
(c) with respect to a Lender’s obligation to make Term B Loans and receive payments of interest, fees, and principal with respect thereto, (i) prior to the Term B Loan Commitment being terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term B Loan Commitment plus the unpaid principal amount of that Lender’s Term B Loans, by (B) the aggregate Term B Loan Commitment of all Lenders plus the unpaid principal amount of all Term B Loans of all Lenders; and (ii) from and after the time the Term B Loan Commitment has been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term B Loans by (B) the aggregate unpaid principal amount of all Term B Loans; and
(d) with respect to all other matters as to a particular Lender, (i) prior to the time that the Commitments have been terminated or reduced to zero, the percentage obtained by dividing (A) that Lender’s Term A-1 Loan Commitment plus the aggregate unpaid principal amount of that Lender’s A-1 Loans plus that Lender’s Term A-2 Loan Commitment plus the aggregate unpaid principal amount of that Lender’s A-2 Loans plus that Lender’s Term B Loan Commitment plus the aggregate unpaid principal amount of that Lender’s Term B Loans, by (B) the Term A-1 Loan Commitment of all Lenders plus the aggregate unpaid principal amount all Term A-1 Loans of all Lenders plus the Term A-2 Loan Commitment of all Lenders plus the aggregate unpaid principal amount all Term A-2 Loans of all Lenders plus the aggregate Term B Loan Commitment of all Lenders plus the aggregate unpaid principal amount all Term B Loans of all Lenders; and (ii) if the Commitments have been terminated or reduced to zero, the percentage obtained by dividing (A) the aggregate unpaid principal amount of that Lender’s Term A-1 Loans plus the aggregate unpaid principal amount of that Lender’s Term A-2 Loans plus the aggregate unpaid principal amount of that Lender’s Term B Loans by (B) the aggregate unpaid principal amount of all Term A-1 Loans of all Lenders plus the aggregate unpaid principal amount of all Term A-2 Loans of all Lenders plus the aggregate unpaid principal amount of all Term B Loans of all Lenders.
“Protective Advances” is defined in Section 14.15.
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“Recipient” means (a) the Administrative Agent and (b) any Lender, as applicable.
“Regulation D” means Regulation D of the FRB.
“Regulation U” means Regulation U of the FRB.
“Relevant Governmental Body” means the Federal Reserve Board or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board or the Federal Reserve Bank of New York, or any successor thereto.
“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued thereunder as to which the PBGC has not waived the notification requirement of Section 4043(a), or the failure of a Pension Plan to meet the minimum funding standards of Section 412 of the Code or under Section 302 of ERISA.
“Required Lenders” means, at any time, Lenders whose Pro Rata Shares exceed 50% as determined pursuant to clause (d) of the definition of “Pro Rata Share”; provided that the Pro Rata Shares held or deemed held by, any Defaulting Lender will be excluded for purposes of making a determination of Required Lenders.
“SEC” means the Securities and Exchange Commission or any other governmental authority succeeding to any of the principal functions thereof.
“Second Lien Loan” means the “Term Loans” under and as defined in the Second Lien Loan and Security Agreement.
“Second Lien Loan and Security Agreement” means that certain Loan and Security Agreement, dated as of April 17, 2020, entered into between MoneyLion Technologies Inc. (f/k/a MoneyLion Inc.), ML Plus LLC, as co-borrower, each lender thereto, and Monroe Capital, as collateral agent and as administrative agent.
“Senior Officer” means, with respect to any Loan Party, any of the president, chief executive officer or the chief financial officer of that Loan Party.
“SOFR” means a rate equal to the secured overnight financing rate as administered by the SOFR Administrator.
“SOFR Administrator” means the Federal Reserve Bank of New York (or a successor administrator of the secured overnight financing rate).
“SOFR Borrowing” means, as to any Borrowing, the SOFR Loans comprising such Borrowing.
“SOFR Loan” means a Loan that bears interest at a rate based on Adjusted Term SOFR, other than pursuant to clause (c) of the definition of “Base Rate”.
“SPV Financing Entity” means a Subsidiary of Borrower which (a) is a “special purpose vehicle” or similar entity which is or was formed or acquired for purposes of (i) acquiring consumer loans, cash advance receivables and/or membership fees or similar periodic membership receivables, and/or (ii) obtaining related financing or equity investments from lenders or equity investors, as applicable; (b) issues promissory notes or similar evidences of indebtedness to lenders or investors in connection with consumer loans, cash advance receivables and/or membership receivables acquired by such Subsidiary or an Affiliate
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of such Subsidiary; and/or (c) acquires consumer loans, cash advance receivables and/or membership receivables and transfers all or a portion of such consumer loans, cash advance receivables and/or membership receivables to another Subsidiary that is special purpose vehicle and a trust.
“Subordination Agreement” means any subordination, intercreditor, or other similar agreement in form and substance satisfactory to Administrative Agent.
“Subordinated Debt” means Debt subject to a Subordination Agreement.
“Subsidiary” means, with respect to any Person, a corporation, partnership, limited liability company, or other entity of which that Person owns, directly or indirectly, outstanding Equity Interests having more than 50% of the ordinary voting power for the election of directors or other managers of that corporation, partnership, limited liability company, or other entity. Unless the context otherwise requires, each reference to Subsidiaries in this Agreement refers to Subsidiaries of Parent.
“Tax Distributions” means for any taxable period in which Borrower is a member of a consolidated, combined, unitary or similar income tax group of which a direct or indirect parent of Borrower is Parent (“Tax Group”), distributions by Borrower or any Subsidiary of Borrower in amounts necessary to enable Parent to pay federal, foreign, state, territorial and local income Taxes and franchise Taxes imposed in lieu of income Taxes of such Tax Group that are attributable to the taxable income of each Borrower and/or any Subsidiary, as applicable, in respect of consolidated, combined, unitary or similar returns for the relevant jurisdiction of Parent that include such Borrower and/or any Subsidiaries attributable to Borrower and/or any Subsidiary, as applicable; provided that, with respect to such payments on account of income Taxes, such payments shall not exceed the income tax liability of Borrower and/or its applicable Subsidiaries, if such Borrower and/or such Subsidiaries had been a stand-alone corporate taxpayer or a consolidated, combined, unitary or affiliated group that consists solely of Borrower and such Subsidiaries for all relevant taxable periods.
“Taxes” means any and all present and future taxes, duties, levies, imposts, deductions, assessments, charges, similar fees or withholdings (including backup withholdings) imposed under applicable law and/or by any governmental authority that are in the nature of a tax, and any and all liabilities (including interest and penalties and other additions to taxes) with respect to any of the foregoing.
“Term A-1 Loan Commitment” means, as to any Lender, that Lender’s commitment to make Term A-1 Loans under this Agreement. The amount of each Lender’s Term A-1 Loan Commitment is set forth on Annex A. The initial aggregate amount of the Term A-1 Loan Commitments of all Lenders is $70,000,000.
“Term A-1 Loan” is defined in Section 2.1.2(a).
“Term A-2 Interest Rate” means, for any given day, the greater of (a) 12%, and (b) a fluctuating rate of interest per annum equal to the Prime Rate plus 5.75%, but shall not exceed 15%. Any change in the Term Loan Interest Rate due to a change in the Prime Rate shall be effective from and including the effective day of such change in the Prime Rate.
“Term A-2 Lender” means any Lender with a Term A-2 Loan Commitment or a Term A-2 Loan.
“Term A-2 Loan Commitment” means, as to any Lender, that Lender’s commitment to make Term A-2 Loans under this Agreement. The amount of each Lender’s Term A-2 Loan Commitment is set forth on Annex A. The initial aggregate amount of the Term A-2 Loan Commitments of all Lenders is $20,000,000.
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“Term A-2 Loan” is defined in Section 2.1.2(a).
“Term A-2 Termination Date” means May 1, 2023.
“Term B Loan Availability Period” means the period (i) beginning on and including the day after the Closing Date and (ii) ending on and including the date that is eighteenth (18) months after the Closing Date.
“Term B Loan Commitment” means, as to any Lender, that Lender’s commitment to make Term B Loans under this Agreement. The amount of each Lender’s Term B Loan Commitment is set forth on Annex A. The initial aggregate amount of the Term B Loan Commitments of all Lenders is $20,000,000.
“Term B Loan” is defined in Section 2.1.2(b).
“Term Loan” means, as the context may require, any Term A-1 Loans, Term A-2 Loans and/or any Term B Loan and, if applicable, any Incremental Term Loan.
“Term SOFR” means,
(a) for any calculation with respect to a SOFR Loan, the Term SOFR Reference Rate for a tenor comparable to the applicable Interest Period on the day (such day, the “Periodic Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to the first day of such Interest Period, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 4:00 p.m. (Chicago time) on any Periodic Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Periodic Term SOFR Determination Day, and
(b) for any calculation with respect to an Base Rate Loan on any day, the Term SOFR Reference Rate for a tenor of one month on the day (such day, the “Base Rate Term SOFR Determination Day”) that is two (2) U.S. Government Securities Business Days prior to such day, as such rate is published by the Term SOFR Administrator; provided, however, that if as of 4:00 p.m. (Chicago time) on any Base Rate Term SOFR Determination Day the Term SOFR Reference Rate for the applicable tenor has not been published by the Term SOFR Administrator and a Benchmark Replacement Date with respect to the Term SOFR Reference Rate has not occurred, then Term SOFR will be the Term SOFR Reference Rate for such tenor as published by the Term SOFR Administrator on the first preceding U.S. Government Securities Business Day for which such Term SOFR Reference Rate for such tenor was published by the Term SOFR Administrator so long as such first preceding U.S. Government Securities Business Day is not more than three (3) U.S. Government Securities Business Days prior to such Base Rate SOFR Determination Day.
“Term SOFR Adjustment” means, for any calculation with respect to a Base Rate Loan or a SOFR Loan, a percentage per annum equal to the percentage set forth below for the applicable Type of such Loan and (if applicable) Interest Period therefor:
Base Rate Loans: 0.11448%
SOFR Loans:
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Interest Period |
Percentage |
One month |
0.11448 % |
Three months |
0.26161% |
“Term SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of the Term SOFR Reference Rate selected by Administrative Agent in its reasonable discretion).
“Term SOFR Reference Rate” means the forward-looking term rate based on SOFR.
“Termination Date” means the earliest to occur of (a) March 24, 2026 or (b) any other date on which the Loans are required to be paid in full pursuant to Section 6 or Section 13.
“Termination Event” means, with respect to a Pension Plan that is subject to Title IV of ERISA, the following: (a) a Reportable Event; (b) the withdrawal of Borrower or any other member of the Controlled Group from that Pension Plan during a plan year in which that Borrower or other member of the Controlled Group was a “substantial employer” as defined in Section 4001(a)(2) of ERISA; (c) the termination of that Pension Plan, the filing of a notice of intent to terminate the Pension Plan or the treatment of an amendment of that Pension Plan as a termination under Section 4041 of ERISA; (d) the institution by the PBGC of proceedings to terminate that Pension Plan; or (e) any event or condition that could reasonably constitute grounds under Section 4042 of ERISA for the termination of, or appointment of a trustee to administer, that Pension Plan.
“Threshold Amount” means $30,000,000.
“Threshold Percentage” means 10.0%.
“Total Debt” means, as of any date of determination, all Funded Debt of the Company and its Subsidiaries as of such date, determined on a consolidated basis in accordance with GAAP.
“Total Debt to EBITDA Ratio” means, as of the last day of any Fiscal Quarter, the ratio of (a) Total Debt as of that day minus the lesser of (i) Unrestricted Cash and (ii) $5,000,000 to (b) EBITDA for the Computation Period ending on that day.
“Total Plan Liability” means, at any time, the present value of all vested and unvested accrued benefits under all Pension Plans, determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single-employer plan terminations.
“Treasury Rate” means, as of any prepayment date, the yield to maturity as of such prepayment date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the prepayment date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the prepayment date to the date that is 12 months after the Closing Date; provided, however, that if the period from the prepayment date to the date that is 12 months after the Closing Date is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be the
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weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.
“Type” is defined in Section 2.2.1.
“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York.
“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement Adjustment.
“Unfunded Liability” means the amount (if any) by which the present value of all vested and unvested accrued benefits under all Pension Plans exceeds the fair market value of all assets allocable to those benefits, all determined as of the then most recent valuation date for each Pension Plan, using PBGC actuarial assumptions for single employer plan terminations.
“Unrestricted Cash” means, as of any date of determination, the aggregate amount of unrestricted cash on-hand and Cash Equivalent Investments of the Company and its Subsidiaries, maintained in deposit accounts in the United States in the name of a Loan Party, which deposit accounts are subject to Control Agreements.
“U.S. Government Securities Business Day” means any day except for (a) a Saturday, (b) a Sunday or (c) a day on which the Securities Industry and Financial Markets Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States government securities
“Weighted Average Life to Maturity” means, when applied to any Debt at any date, the number of years obtained by dividing: (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required scheduled payments of principal, including payment at final maturity, in respect thereof by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Debt; provided that the effect of (x) any prepayment made in respect of such Debt shall be disregarded in making such calculation and (y) any “AHYDO catch-up” payment that may be required to be made in respect of such Debt shall be disregarded in making such calculation.
“Wholly-Owned Subsidiary” means, as to any Person, a Subsidiary all of the Equity Interests of which (except directors’ qualifying Equity Interests) are at the time directly or indirectly owned by that Person and/or another Wholly-Owned Subsidiary of that Person. Unless the context otherwise requires, each reference to Wholly-Owned Subsidiaries refers to Wholly‑Owned Subsidiaries of the Company.
“Withholding Certificate” is defined in Section 7.6.4.
“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.
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Notwithstanding the foregoing or any other provision of this Agreement, each Term A-2 Lender shall not make its Term A-2 Loan in cash on the Closing Date but shall be deemed to have made its Term A-2 Loan under this Agreement by exchanging (i.e. rolling over) (the “Second Lien Rollover”) its Second Lien Loans for the same aggregate principal amount as such Term A-2 Lender’s Term A-2 Loan Commitment and Term A-2 Loan. The parties hereto acknowledge and agree that, as of the Closing Date, after giving effect to the Second Lien Rollover, the Obligations in respect of the Second Lien Loans shall be deemed satisfied and paid in full.
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(I) in the case of any Term Loan (other than Term A-2 Loans),
(A) if the repayment of the applicable Term Loan occurs within 12 months after the Closing Date, the sum of (i) the principal amount of such repayment multiplied by 2.00% and (ii) the present value of all interest that would have otherwise been payable on the amount of such principal prepayment from the date of such prepayment to and including the date that is twelve months after the Closing Date, computed using a discount rate equal to the Treasury Rate plus 50 basis points, and
(B) thereafter, an amount determined by multiplying the principal amount of the Term Loans repaid by the following applicable percentage amount: (i) 2.00% if that repayment occurs more than 12 months after the Closing Date but within 24 months after the Closing Date; (iii) 1.00% if that repayment occurs more than 24 months after the Closing Date but within 36 months after the Closing Date; and (iv) 0% if that repayment occurs more than 36 months after the Closing Date.
(II) in the case of any Term A-2 Loans, a payment equal to the principal amount of the Term A-2 Loans being prepaid multiplied by the applicable Prepayment Percentage.
For purposes of this Section 5.2(II), “Prepayment Percentage” means (A) three percent (3%) with respect to Term A-2 Loans prepaid after February 27, 2022 and prior to April 17, 2022 and one percent (1%) with respect to Term A-2 Loans prepaid after April 17, 2022 but prior to the Term A-2 Termination Date.
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If Administrative Agent reasonably determines (in consultation with Borrower) after the Closing Date that adequate and reasonable means do not exist for ascertaining the Adjusted Term SOFR, then (i) a comparable or successor floating rate that is, at such time, broadly accepted by the market for loans denominated in Dollars in lieu of the London interbank offered rate as determined by Administrative Agent (in consultation with Borrower) or (ii) if no such broadly accepted comparable successor rate exists at such time, Administrative Agent and Borrower shall endeavor to establish an alternate rate of interest to the Adjusted Term SOFR that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable. Such selection of a successor rate by Administrative Agent (and Borrower, as applicable) shall be conclusive and binding unless the Required Lenders shall have objected in writing to such successor rate within five Business Days of notice thereof. Notwithstanding anything to the contrary in this Agreement, such amendment shall become effective without any further action or consent of any other party to this Agreement.
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To induce Administrative Agent and the Lenders to enter into this Agreement and to induce the Lenders to make Loans under this Agreement, Borrower represents and warrants to Administrative Agent and the Lenders on the Closing Date, on the date of any borrowing hereunder and on each other date on which such representations and warranties are expressly deemed made or expressly required to be made under the terms of the Loan Documents, that:
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Until Payment in Full, Borrower shall, unless at any time the Required Lenders otherwise expressly consent in writing, do the following:
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Notwithstanding the foregoing, the obligations in Sections 10.1.1 and 10.1.2 may be satisfied with respect to financial information of the Company and its Subsidiaries by furnishing the Form 10-K or 10-Q of Parent filed with the SEC; provided that, (i) if (1) such financial statements relate to such other Person, such financial statements or the Form 10-K or Form 10-Q, as applicable, shall be accompanied by consolidating information (which need not be audited) that summarizes in reasonable detail the differences between the information relating to such Person, on the one hand, and the information relating to Borrower and its consolidated subsidiaries on a standalone basis, on the other hand, which consolidating information shall be certified by a Senior Officer of Borrower as having been fairly presented in all material respects and (ii) to the extent such statements are in lieu of statements required to be provided under Section 10.1.1, such statements shall be accompanied by an audit report that would satisfy the applicable requirements set forth in Section 10.1.1 as if the references to “Borrower” therein were references to such Person; provided further, the Company shall notify Administrative Agent upon any such filing.
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unless the actions or events described in clauses (a), (b), and/or (c) individually or in the aggregate could not reasonably be expected to have a Material Adverse Effect.
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Until Payment in Full, Borrower (and, for purposes of Section 11.4, Parent) shall, unless at any time the Required Lenders otherwise expressly consent in writing, do the following:
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To the extent Debt which is permitted to be incurred hereunder is incurred directly by a Loan Party or other Person and guaranteed by another Loan Party or any other Person the guarantee of such Debt shall be permitted under this Section 11.1 and this Agreement, without duplication.
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Computation |
Revenue |
March 31, 2022 |
$180,000,000 |
June 30, 2022 |
$225,000,000 |
September 30, 2022 |
$275,000,000 |
December 31, 2022 |
$300,000,000 |
March 31, 2023 |
$310,000,000 |
June 30, 2023 |
$320,000,000 |
September 30, 2023 |
$330,000,000 |
December 31, 2023 |
$340,900,000 |
March 31, 2024 |
$373,800,000 |
June 30, 2024 |
$411,400,000 |
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Fiscal Quarter |
EBITDA |
March 31, 2022 |
$(30,000,000) |
June 30, 2022 |
$(30,000,000) |
September 30, 2022 |
$(30,000,000) |
December 31, 2022 |
$(30,000,000) |
March 31, 2023 |
$(25,000,000) |
June 30, 2023 |
$(15,000,000) |
September 30, 2023 |
$(15,000,000) |
December 31, 2023 |
$(10,000,000) |
March 31, 2024 |
$0 |
June 30, 2024 |
$5,000,000 |
September 30, 2024 |
$10,000,000 |
December 31, 2024 |
$15,000,000 |
March 31, 2025 |
$20,000,000 |
June 30, 2025 |
$25,000,000 |
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Fiscal Quarter |
EBITDA |
September 30, 2025 |
$30,000,000 |
December 31, 2025 and each Computation Period ending thereafter |
$35,000,000 |
The effectiveness of this Agreement and the obligation of each Lender to make its Loans are subject to the following conditions precedent:
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For purposes of determining compliance with the conditions specified in this Section 12.1, Administrative Agent and each Lender that has signed this Agreement shall be deemed to have received, consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be received, consented to or approved by or acceptable or satisfactory to Administrative Agent or a Lender.
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[Signature pages follow]
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Diwakar Choubey, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of MoneyLion Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2023 |
By: |
/s/ Diwakar Choubey |
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Diwakar Choubey |
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Chief Executive Officer |
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(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Correia, certify that:
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1. |
I have reviewed this Quarterly Report on Form 10-Q of MoneyLion Inc.; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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a. |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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b. |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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c. |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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d. |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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a. |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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b. |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 9, 2023 |
By: |
/s/ Richard Correia |
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Richard Correia |
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President, Chief Financial Officer and Treasurer |
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(Principal Financial Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant To Rule 18 U.S.C. Section 1350
In connection with the Quarterly Report on Form 10-Q of MoneyLion Inc. (the “Company”) for the quarterly period ended March 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Diwakar Choubey, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 9, 2023 |
/s/ Diwakar Choubey |
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Diwakar Choubey |
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Chief Executive Officer |
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant To Rule 18 U.S.C. Section 1350
In connection with the Quarterly Report on Form 10-Q of MoneyLion Inc. (the “Company”) for the quarterly period ended March 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “Report”), I, Richard Correia, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
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2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 9, 2023 |
/s/ Richard Correia |
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Richard Correia |
|
President, Chief Financial Officer and Treasurer |