Item 1. Business
Mission
Rewire the American banking
system to positively change the financial path for every hard-working American.
Company Overview
MoneyLion was founded on a
simple observation: the current financial system fails to meet the needs of 100 million middle-class Americans. We believe these
Americans deserve a better alternative in financial services, and MoneyLion can be a partner in improving their financial well-being.
We offer a personalized, all-in-one, digital financial platform that provides convenient, low-cost access to banking, borrowing and investing
solutions tailored for our customers, rooted in data, and delivered through our proprietary technology platform.
We use innovative, data-driven
approaches to address our customers’ individual life inflection points and financial circumstances. When our customers enjoy periods
of financial excess, we provide tools for them to easily manage their spending and saving goals through our digital banking and automated
investing solutions. When our customers experience moments of financial need, we provide them immediate access to innovative lending or
earned income advance products and credit improvement programs that can bridge these times of financial stress and improve their financial
health. We provide access to personalized proprietary products as well as financial and non-financial products offered by third-party
providers. Our subsidiary, Malka Media Group LLC (“MALKA”), provides digital
media and content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors.
Our technology platform has
been purpose-built to support our strategy of creating a relationship with the customer. How Americans consume financial information and
advice is evolving, with many Americans engaging with financial content online and on select social media channels. We endeavor for the
MoneyLion platform to become a daily destination for product discovery, education, advice and financial transactions, allowing our customers
to better understand their individual financial circumstances and take action to live a better financial life. Our comprehensive, modern
approach to providing money-related content, products and services to our customers is designed to allow MoneyLion to own the end-to-end
financial product buying cycle.
In addition, the technical
architecture of our platform, which centers around a data-driven, multifaceted understanding of our customers built upon our longstanding
experience in risk management, underwriting and origination, differentiates us from the transactional solutions provided by incumbents
in our industry. Consumer financial services remain oriented around siloed service providers with incomplete customer data and fee-first
product delivery models. We believe consumers benefit when their financial partner understands their entire financial life and can provide
both access and advice at the right time, the right place and, importantly, with the appropriate solution. Traditional providers generally
attempt to sell consumers specific financial products, only seeking to qualify them as a suitable buyer and generate a fee. With a deep,
data-driven understanding of our customers and a broad set of integrated, tailor-made products, we can guide our customers to use our
products when and if appropriate for their needs, creating a mutually beneficial partnership.
We address large, pervasive
problems in the $3.5 trillion financial services industry by focusing on the largest segment of consumers, the hardworking American
middle class. American consumers face enormous costs to obtain the basic elements of financial life — spend, save, invest
and borrow — that in aggregate generate over $250 billion in fees for the financial services industry on an annual
basis. With 100 million middle-class Americans as our core focus — defined as individuals with household incomes
up to $150,000 and FICO scores up to 750 — the breadth of our potential customers, and the costs they face in obtaining financial
services, are substantial.
We have only just begun to
address these problems, but our progress to date demonstrates the demand for MoneyLion to rewire the banking system. As of December 31,
2021, over 3.3 million customers have opened an account on our platform to use at least one of our current products. We added approximately
3.0 million of these customers since the beginning of 2019, and we believe that we have a substantial opportunity to grow our customer
base going forward. We focus on delivering the benefits of our personalized, all-in-one, digital financial platform to our customers.
We believe the value proposition of our platform approach will increase the network effects for sustained user growth. Our data-driven
perspective of our customers and our capability to create content to engage with our customers increases their time spent on our platform,
allowing us to introduce products and guidance that address their changing life circumstances.
Our Strategy
We address our customers’
needs by pursuing a differentiated strategy. Our personalized, all-in-one, digital financial platform is designed to foster a relationship
with consumers and provide them with the tools to discover and learn about their finances and our solutions, as well as to transact in
a variety of different financial and non-financial products based on their individual circumstances, all through one app. Our strategy
is supported by:
| 1) | Team: a leading management team and employees across
the globe with backgrounds in technology, product design and development, financial services, digital experiences, content creation and
media; |
|
2) |
Data: innovative products and services and personalized customer experiences delivered from our near-decade long, data-driven understanding of our customers and their needs; |
|
3) |
Technology: a purpose-built, scalable technical architecture built to connect the dynamic needs of the American consumer with our proprietary, as well as third-party, products; |
| 4) | Platform: proven track record and continued ability
to add the next set of key features to give our customers easy access to a comprehensive suite of products and services within the MoneyLion
ecosystem; |
| 5) | Guidance: financial recommendations that are highly
personalized, real-time and automated, spanning lifestyle, saving, spending, borrowing and investing; and |
| 6) | Content: curated content created in partnership
with thought leaders and influencers supporting the financial discovery and decision-making process in order to acquire, engage and retain
customers and improve financial literacy and know-how. |
Organize a Team to
Address the Problem: The complexity of the problems faced by our customers required a different type of team
to address them. The American middle class is under tremendous, ongoing financial stress with many individuals living paycheck to paycheck
without enough savings to navigate through a small financial setback, even before COVID-19. We believed building yet another provider
of standard financial products, whether delivered digitally or at a branch, was unlikely to impact their financial well-being for the
better.
What was required were individuals
who understood the current ecosystem of solutions in detail, including its legacy technology, exorbitant pricing models and myopic single
transaction-focused view of customers. But understanding the problem set was only the beginning. Experience in solving seemingly intractable
problems through the application of modern data and technology tools was necessary. Our team grew to include individuals who had built
advanced technologies to algorithmically identify and eliminate inefficiencies in some of the most demanding and competitive markets.
To this team, we added experts in product development and financial planning to translate these solutions into a data-driven platform
that maximized the benefit of these innovations for our customers.
Organizing a team that understands
the complex problems of both our customers and the financial system and has the experience to address such problems was our foundation.
However, to generate meaningful benefits for our customers, we had to go farther. Customers required a partner who could deliver products
that were transparent and made addressing their problems both easy to understand and enjoyable. We added team members experienced in delivering
best-in-class consumer digital experiences, bringing to market a beautiful, easy-to-use interface for our customers to access our platform,
consume our products and receive advice.
Lastly, as we established
an institution built for every hardworking American to use, we acquired capabilities in content creation, talent relationships and production.
We have a differentiated ability to introduce MoneyLion to our prospective consumers through culturally relevant, personalized content
and stories told through thought leaders and influencers in a cost-effective manner. We believe our innovations in customer acquisition,
engagement and retention have provided us with network effects that we expect to continue as we scale.
Understand the Problem
Through Data: We build innovative consumer financial products that address our customers’ individual
and complex problems by leveraging advancements in data science from both Silicon Valley and Wall Street and applying those advancements
for the benefit of America’s middle class. We believe this approach separates us both from incumbent providers and new market entrants.
MoneyLion begins and ends every
conversation with data. We have a near-decade long track record of underwriting, pricing risk and originating credit at scale across the
American credit spectrum. We now benefit from the compounding improvements made to our data models since 2013. This compounding data advantage
garnered through conducting scaled consumer diligence, underwriting and servicing allows us to offer differentiated, personalized experiences
across our platform. This advantage drives our approach to understanding the problems of our customers, how we can address these problems
with products and guidance and how we approach prospective customers in a timely, cost-effective manner.
We consume an enormous flow
of data about the American middle class to understand their problems. Since inception, we have engaged with millions of Americans through
our web and mobile applications, linked to over 17 million bank accounts, and integrated over 100 external data sources, coming to
understand the cycle of financial excess and deficit that permeates our prospective customer base. Each day we ingest billions of
transactional data points such that our understanding grows, and with it, our ability to address both legacy and emerging problems in
our customers’ lives. We are constantly analyzing this data reservoir through our 55 machine learning models to generate three billion
inferences, categorizations and predictions per day that we distill into over 14,000 insights for each of our customers.
These insights allow us to
understand our customers and drive the development of innovative products. On a standalone basis, our products reflect deep insights in
our customers’ needs:
|
● |
RoarMoney Banking product: modern mobile
banking offering premium features with no minimums, ability to get paid two days early with direct deposit, bill pay and
credit-card like rewards; |
| ● | MoneyLion
Investment product: the first
investment account for a significant portion of our customers, automatically manages their
investments on a discretionary basis in custom portfolios from leading providers like Global X
Management Company LLC (“Global X”) and Wilshire Advisors, LLC (“Wilshire”),
and offered without account minimums; |
|
● |
MoneyLion Crypto product: an easy-to-use account that allows users to buy and sell popular cryptocurrencies as well as automatically “round-up” their debit card purchases into Bitcoin, which we believe provides broader and more convenient access to investing in cryptocurrency for our customers, with no trading commissions or account minimums; |
|
● |
Instacash Earned Income Advance product: short-term 0% APR advances against expected salary or other recurring income deposits; available in moments of need, providing funds to help avoid overdraft fees or finance daily transactions; and |
|
● |
Credit Builder Plus membership program: a suite of services that help customers establish or repair credit, gain financial literacy and track financial health in a bundled membership subscription that includes banking and investing accounts, a loyalty rewards program and access to cost-effective credit. |
Our data-driven customer insights
drive the power of our platform, where our current products can work in conjunction to drive better outcomes for our customers. Selected
examples include:
| ● | Customers can track their account balances from the MoneyLion
mobile application so they can request a 0% APR Instacash advance to be delivered to their account to avoid costly overdraft fees; |
| ● | When a customer earns a cashback reward using their MoneyLion
debit card, it is automatically invested in a fully managed investment account where it can be withdrawn and spent or remain invested;
and |
| ● | Credit Builder Plus secured personal loans are collateralized
in part by assets in the customers’ investment account, allowing a customer to enjoy the benefits of a lower rate while leaving
their assets invested. |
Lastly, we use our data advantage
to drive our efficient customer acquisition strategy through peer-to-peer referrals, dynamic performance marketing strategies, affiliates,
brand marketing and search engine optimizations. Drawing upon the best practices of advertising technology, we use our deep understanding
of our prospective customers to cost effectively introduce the MoneyLion platform at the right time and place.
Build Technology to Scale
and Innovate: When we started MoneyLion, we recognized that both incumbent providers of financial services
and new market entrants generally chose to build technology to deliver a single product to market. While certainly an easier path than
building a platform, a monoline product model can never deliver a fully integrated platform experience or support rapid product innovation.
We chose to build differently.
We built a single core platform
from an array of microservices that allows us to deliver both our current products as well as all those we have in development. We believe
this technology development model is more in line with the best practices of leading global technology companies, rather than the legacy
models still largely employed in the financial services industry.
The primary beneficiary of
our technology strategy is our customers. Products we have introduced are integrated across our platform. Customers can move money from
their bank account to their investment or crypto account and invest that money into an ETF or a cryptocurrency. Customers can request
a salary advance and deposit that money into their bank account. These seamless product experiences can occur within a single app, without
friction, in real-time and reflects the benefit of our original design decision.
We have experienced additional
benefits from our decision to build a truly integrated technology platform, that we believe will only compound as we add additional products
and features to the platform:
| ● | Deliver new products to our customers, from prototype to onboarding,
in under six months; |
| ● | Reduce our cost to deliver our products and service on an ongoing
basis; |
| ● | Approve customer requests for new accounts, loans, advances,
etc. in under ten seconds; |
| ● | Transact across the platform on our own payment rails, allowing
for instantaneous, costless transfers; and |
| ● | Utilize decision engines that automate over 99% of our customer
interactions. |
We built this platform to deliver
a uniform customer experience alongside near complete flexibility in terms of the regulated and unregulated partners we utilize to support
our products. For example, MoneyLion is not a bank. However, our customers can open and utilize a Federal Deposit Insurance Corporation
(“FDIC”)-insured digital demand deposit account, provided by a partner bank, that is fully integrated into our platform. This
model allows MoneyLion to adopt best-of-breed partners to support an ever-increasing range of financial activities, shortening the time
to deliver new products to our customers, while maintaining a seamless customer experience.
We utilize Amazon Web Services
(“AWS”) to host and deliver our platform to customers. Delivery through AWS allows for reliable, secure, cost-effective and
high-performance scaling.
We have also invested in specific
technologies to attract prospective customers to MoneyLion and convert those individuals into customers. Our technological approach to
customer acquisition and retention is a core competitive advantage of MoneyLion and an area in which we will continue to invest resources
to maintain what we believe is a material advantage in our cost of marketing.
Solve with a Platform,
not a Product: Many new companies have entered the market since our inception that seek to provide an individual
or single-point financial product to American consumers, while fewer, if any, have attempted to deliver a complete platform of products
as we do. We continue to believe that a single product strategy is neither advantageous for consumers nor a tenable long-term strategy
for the providers of these products.
Our customers require a variety
of products and services to successfully manage their financial lives. By providing a complete platform for these customers, they can
address these financial needs both conveniently and seamlessly, and we are able to architect a unique user experience, personalized to
the individual customer. Most importantly, by addressing the complete financial life of our customers, we can provide much needed guidance
to our customers as to their saving, spending, borrowing and investing decisions, with substantially better insight into their life circumstances.
We believe a valuable financial partner needs to both see and provide guidance based on the whole problem, rather than only a portion,
and our platform approach is fundamental to achieving our mission to improve financial outcomes for the American middle class.
In addition to being a better
alternative for our customers, we believe that our platform approach is a substantially better long-term model as a business. The cost
to acquire customers in a competitive market such as consumer financial services is a material portion of the variable cost structure
for both incumbent providers as well as new market entrants. A platform approach allows us to generate multiple income streams from a
single customer and deliver our products at pricing levels that we believe will be comparatively lower over the long-term while maintaining
attractive operating margins. Lastly, as we continue to mature our customer relationships, we believe that we will continue to grow wallet
share with our customers in a manner only available to a full-service platform.
Similarly, our platform approach
has also proved advantageous in acquiring new customers. We believe our ability to selectively market multiple products at once allows
us to more cost effectively reach prospective customers initially seeking at least one of the products on our platform.
Guidance Brings it All
Together: Providing our customers with access to financial products is fundamental to our mission. However,
products alone, without discovery, education and personalized insights, will not adequately address the financial needs of our customers.
We believe that contextual and relevant financial education and guidance is an essential component of the required service model of a
personalized, all-in-one, digital financial platform.
When we refer to guiding our
customers, we are not referring to an asset allocation strategy or a specific investment opportunity. We use the term guidance to reflect
a holistic, customer-centric set of automated suggestions, recommendations, behavioral nudges, goal ingestion and adjustment, planning
tips and reporting across the entire spectrum of financial product discovery, saving, spending, borrowing and investing activities driven
by our knowledge of the customer, their peers and our customers’ own goals.
Our model is most similar
to goals-based planning, a methodology used by certain incumbent providers of financial planning services to address multiple customer
objectives across different time horizons. Historically, goals-based planning has been used by financial planning providers to assist
high-net-worth customers navigate their allocation of resources across current and future objectives. Through our acquisition of Wealth
Technologies Inc. (“WTI”), we acquired WTI’s market-leading wealth management decisioning and administration technology,
including fGPS (Financial Goals Positioning System), a version of goals-based planning that we adopted, customized and refined for our
middle-class American customers and which we believe to be more advanced than those employed by even the most sophisticated financial
planning organizations. Amongst our many advancements, we expect to deliver real-time goals-based planning services, customized to the
individual customer and their goals, on a fully automated basis, covering millions of concurrent customers and goals.
To date, we have focused our
guidance on addressing the immediate and near-term problems of our customers to assist them in making decisions to place them on a path
to a better financial future. Examples include:
| ● | Avoiding overdraft fees; |
| ● | Managing short-term gaps in cash flow; |
| ● | Improving their credit score; |
| ● | Building a rainy-day fund; |
| ● | Opening an investment account. |
As our customers make progress
on the basic elements of managing their financial lives, we will assist them in setting and maintaining progress towards longer-dated
goals and aspirations. Examples of longer-dated goals we will seek to assist our customers achieve include:
| ● | Planning for a vacation; |
Our platform utilizes affiliates,
third-party providers of products and services to whom we may introduce our customers from our network to assist customers in making purchases
in-line with their goals. We expect to grow our affiliate network over time to address the range of customer-defined goals. We earn revenue
from fees from our affiliate partners in exchange for meeting certain success metrics related to their campaigns such as customers’
clicks, impressions or completed transactions. This revenue is reflected in affiliates income.
Content to Drive Engagement
and Financial Literacy: Our customers not only want to successfully manage their financial lives, but
they want to do so in a way that is both informative and enjoyable. Consistent with our vision of establishing MoneyLion as a lifestyle
brand, we introduced MoneyLife, an online financial education content destination. MoneyLife is a video content-driven educational platform
available on the MoneyLion app and our website where customers can share and discover ideas, advice and insights regarding their financial
lives. With high usability and sleek design, MoneyLife includes highly personalized content driven by financial advice and education
influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Through MoneyLife, we provide
an additional daily destination site for current customers, drive additional prospective customers and increase customer engagement and
cross-sell opportunities for us and our affiliate partners. Our acquisition of MALKA, a creator network and content platform, accelerates
our ability to engage with consumers across all digital and emerging channels, allowing us to directly connect with communities natively
inside and outside of our platform. We will expand our vision of a daily destination, which started with our own MoneyLife content, with
personalized content that educates, informs and supports consumers’ financial decision making and other general interests. MALKA
operates as an independent wholly-owned subsidiary of MoneyLion and produces digital media and content for us as well as its own clients
across entertainment, sports, gaming, live streaming and other sectors. We earn revenue from fees that MALKA charges its clients in connection
with its digital media and content production, client services and licensing. This revenue is reflected in other income.
Our Product Platform
Once consumers download the
free MoneyLion app, they are ready to improve their financial health, with a full range of financial services across banking, borrowing
and investing, delivered through a personalized, all-in-one, easy-to-use digital financial platform.
Our intuitive and user-friendly
app provides a fast, seamless experience across all our products. We continually listen to our customers’ feedback and implement
improvements on an accelerated release cycle, always remaining committed to delivering a delightful customer experience. As of December 31,
2021, we had received over 130,000 five-star ratings across all app stores, with a 4.7 average on Apple, a 4.3 average on Google
and a 4.7 average on TrustPilot, and had an overall Net Promoter Score of 51 for December 2021.
MoneyLion’s current product
platform includes:
|
● |
RoarMoney: modern mobile banking offering premium features with no minimums, ability to get paid two days early with direct deposit, bill pay and credit-card like rewards; |
|
● |
MoneyLion Investing: the first investment account for a significant portion of our customers, automatically manages their investments on a discretionary basis in custom portfolios from leading providers like Global X and Wilshire, and offered without account minimums; |
|
● |
MoneyLion Crypto: an easy-to-use account that allows users to buy and sell popular cryptocurrencies as well as automatically “round-up” their debit card purchases into Bitcoin which we believe provides broader and more convenient access to investing in cryptocurrency for our customers, with no trading commissions or account minimums; |
|
● |
Instacash Earned Income Advances: short-term 0% APR advances against expected salary or other recurring income deposits, available in moments of need, providing funds to help avoid overdraft fees or finance daily transactions; |
|
● |
Credit Builder Plus: a suite of services that help customers establish or repair credit, gain financial literacy and track financial health in a bundled membership subscription that includes banking and investing accounts, a loyalty rewards program and access to cost-effective credit; |
|
● |
Financial Tracking: intelligent, automated platform that evaluates a customer’s financial situation across four key dimensions and delivers personalized guidance that helps them decide what actions to take and which products to use to improve their financial health, along with a personalized action plan meant to help customers reach their financial goals; and |
|
● |
MoneyLife: online financial education content destination where customers can share and discover ideas, advice and insights regarding their financial lives, delivered through a personalized financial feed tailored to each user based on intent and interests. |
Premium Mobile Banking: RoarMoney
RoarMoney is our FDIC-insured
digital demand deposit account with zero minimums, premium features and rewards. Our RoarMoney demand deposit accounts are currently issued
by MetaBank®, N.A. (“MetaBank”), a South Dakota-based, nationally chartered bank owned by Meta Financial Group,
Inc. (NASDAQ: CASH).
Customers can open a RoarMoney
account in minutes through the MoneyLion mobile application, add funds to their account and begin spending using a RoarMoney virtual debit
card. RoarMoney accounts also include a physical MoneyLion Debit Mastercard that can be used at any of the approximately 55,000 Allpoint
ATM network locations to make no-fee withdrawals.
Our RoarMoney account includes
some of the best features and rewards in banking, including:
| ● | Approximately 55,000 Allpoint ATM network locations to make
no-fee withdrawals; |
| ● | Paychecks delivered up to two days earlier than the scheduled
payment date with direct deposit into the RoarMoney account, a feature accessible with no additional mandatory fees; |
| ● | Price Protection, a Mastercard-sponsored insurance benefit,
worth up to $1,000 in individual coverage limits per year per MoneyLion Debit Mastercard cardholder; |
| ● | Access to mobile wallets such as Apple Pay and Google Pay; |
| ● | Shake ‘N’ Bank cashback rewards. Through Shake ‘N’
Bank rewards, customers can shake their phones after purchases of more than $10 for a reward, allowing them to earn up to five times the
amount of their purchases back, subject to a cap of $500. Shake ‘N’ Bank rewards are deposited automatically into a customer’s
MoneyLion investment account. Maintaining an investment account is a requirement in order to earn Shake ‘N’ Bank rewards;
and |
| ● | Other cashback rewards opportunities when customers make qualified
purchases with eligible merchants using their debit card. Rewards are automatically added to the RoarMoney account or to a MoneyLion
investment account, through which a customer can either withdraw the cash reward or keep it invested. RoarMoney customers may receive 1-5%
cashback on transactions at eligible merchants or merchant categories that are determined by MoneyLion. |
RoarMoney offers robust security
controls such as multi-factor authentication, contactless payment, instant card lock and robust protection against unauthorized purchases
if cards are lost or stolen.
Each RoarMoney account is charged
a $1 per month administrative fee, which is deducted from the customer’s RoarMoney account. The account administrative fee is retained
by MoneyLion and is not shared with any of its third-party partners/vendors. If a customer’s account has less than $1 on deposit,
the account will not be charged the administrative fee. We began charging this fee in 2020 and assessed the administrative fee on approximately
49% and 20%, respectively, of total RoarMoney accounts during the years ended December 31, 2021 and 2020.
Our RoarMoney demand deposit
accounts are currently issued by MetaBank. MetaBank is also the issuer of all RoarMoney debit cards and sponsors access to debit networks
for payment transactions, funding transactions and associated settlement of funds under a sponsorship agreement with MoneyLion. MetaBank
also provides sponsorship and support for ACH and associated funds settlement. Under the agreement between MoneyLion and MetaBank, MetaBank
receives all of the program revenue and transaction fees, and passes them on to MoneyLion, minus any obligations owed to MetaBank. MoneyLion
pays all payment network fees and other program-specific expenses associated with RoarMoney. These payment network fees are set directly
by the various payment networks and based on the transactions processed on their respective network. See “Our Business Model”
herein for additional information.
RoarMoney accounts can be
funded with a direct deposit, an external debit card, an external bank account, or mobile check capture. For an additional retail service
fee of up to $4.95 paid to the retailer, customers may also make cash deposits to their RoarMoney debit cards through a network of over
90,000 retailers across the country, a service provided by Green Dot Corporation (“Green Dot”). Under our network membership
agreement with Green Dot, all transactions made by customers through the Green Dot network are settled by MetaBank. MoneyLion does not
pay Green Dot any fees for this service, nor does MoneyLion receive any of the retail service fee revenue collected by retailer. Green
Dot may have revenue sharing arrangements with the retailer.
Shake ‘N’ Bank
and other cashback rewards are paid for by MoneyLion and included in our marketing expense on our consolidated statement of operations.
We pay a nominal fee to MetaBank for our customers to access their direct deposits up to two days earlier than the scheduled payment
date. As part of a fee arrangement between MoneyLion and Allpoint, MoneyLion pays Allpoint a fee to provide RoarMoney customers with access
to approximately 55,000 Allpoint ATM network locations at no additional cost to RoarMoney customers. Price Protection is an insurance
benefit sponsored by Mastercard and provided to MoneyLion Debit Mastercard cardholders by the Member Companies of AIG Insurance Company
and paid for by MoneyLion.
Personalized Investing: MoneyLion
Investing
MoneyLion Investing is an
online investment account that offers access to separately managed accounts invested based on model portfolios comprised of ETFs and managed
on a discretionary basis. Advisory services related to the MoneyLion investment account are provided by ML Wealth LLC (“ML Wealth”),
an SEC-registered investment adviser and an indirect wholly-owned subsidiary of MoneyLion Inc. Brokerage and custodial services are provided
by DriveWealth LLC (“DriveWealth”), a third-party provider. See “Our Business Model” herein for additional information
regarding our agreement with DriveWealth.
This fully-managed account
model allows customers to set their investment strategy and let ML Wealth manage investment decisions to implement that strategy on a
discretionary basis. An investment account holder simply identifies their investing comfort zone to receive a personalized portfolio,
a mix of stock and bond ETFs. The customer is then free to make the portfolio more or less aggressive, if their preferences or goals change.
Additionally, accounts are monitored on an ongoing basis and are managed to and rebalanced toward target allocations whenever there is
money movement within an account, when model allocations are updated, as well as on a periodic basis. Auto-investing allows customers
to automatically contribute into their investment account with recurring deposits directly into the account.
Investment strategies range
from Steady-Income (most conservative; consistent investment income with an all-bond ETF portfolio and minimal exposure to market fluctuation)
to Equity Only (most aggressive; taking on higher potential risk by investing in equity ETFs, in pursuit of the highest long-term potential
gains). Thematic investing allows customers to invest in their interests and passions, with thematic ETFs aligned to specific topics such
as technology innovation and social responsibility, by adding additional models to their investment account to be incorporated as part
of their target allocations alongside their core allocation model.
Each active investment account
is charged a $1 per month administrative fee, which is deducted from the customer’s investment account. The account administrative
fee is retained by MoneyLion and is not shared with any of its third-party partners/vendors. If a customer’s account has no balance,
the account will not be charged the administrative fee. We began charging this fee in the fourth quarter of 2019 and for the years ended
December 31, 2021 and 2020, approximately 60% and 87%, respectively, of our investment accounts have been charged the administrative
fee. There are no asset-based management fees charged or minimum balance required to maintain an investment account.
Portfolios are powered by two
of the leading global investment solution providers in the industry, Wilshire and Global X. Wilshire provides ML Wealth with
consulting services with respect to the development and maintenance of risk-based asset allocation and ETF selection for the core allocation
models that ML Wealth offers to customers. Global X and Wilshire each provide research and consulting regarding the construction
of the thematic portfolios that ML Wealth offers to customers. ML Wealth compensates Wilshire directly through a flat fee investment consulting
arrangement for these services, including asset allocation research and advice, as well as security due diligence and selection. ML Wealth
does not compensate Global X for these services.
As of December 31, 2021, ML
Wealth had assets under management of approximately $14.7 million. Certain cashback rewards offered by MoneyLion (or its affiliates)
may be added directly to the MoneyLion investment account. In those cases, the customer is required to maintain an investment account
to be eligible for the reward. These rewards are offered and funded by MoneyLion and not by ML Wealth. See “Premium Mobile Banking:
RoarMoney” herein.
Crypto
MoneyLion Crypto is an online
cryptocurrency account that enables customers to buy, sell and hold cryptocurrency. The account is provided by Zero Hash LLC and its affiliate,
Zero Hash Liquidity Services LLC (collectively, “Zero Hash”), both of which are registered as money services businesses and
have the required state-level licenses for engaging in digital assets activities where the Zero Hash services are offered.
RoarMoney accountholders can
open a MoneyLion Crypto account through the MoneyLion mobile application and fund it via their RoarMoney account. Customers are subject
to a minimum purchase per transaction of $1 and a daily maximum total purchase limit of $2,500. In addition, customers can also round
up purchases made either on their RoarMoney account or an external bank account to the nearest dollar. The accrued round ups can then
be transferred into the customer’s MoneyLion Crypto account and invested in Bitcoin.
As of December 31, 2021, the
only cryptocurrencies available through the MoneyLion Crypto account were Bitcoin and Ether. In January 2022, MoneyLion Crypto expanded
to include Bitcoin Cash and Litecoin. Transactions in additional digital assets may only be made available through the MoneyLion Crypto
account if mutually agreed between us and Zero Hash. MoneyLion’s evaluation of whether to provide any additional digital currency-related
products or services on our platform will depend on customer demand, estimated costs, potential risks and applicable regulatory requirements,
among other factors.
There are no mandatory fees
or minimum account balances associated with the MoneyLion Crypto account.
Access to Earned Money: Instacash
Instacash is our 0% APR advance
product that gives customers early access to their recurring income deposits. Customers can access Instacash advances at any time during
a regular deposit period up to their advance limit, providing customers with the flexibility to cover temporary cash needs and avoid costly
overdraft fees. When customers link their RoarMoney account or an external checking account, they can qualify for Instacash. No credit
check is required.
Eligibility for Instacash is
based on the verification of the customer’s checking account and the customer’s identity, and the advance limit is primarily
based on a percentage of income or other recurring deposit amounts detected through the linked checking account. This process is fully
automated unless there are any issues flagged via our customer identification processes. MoneyLion has the sole authority to make Instacash
advances.
There are no fees associated
with regular delivery of funds to either a RoarMoney account (typically delivered within 12-48 hours) or an external checking
account (typically delivered within two to five business days). However, customers have the option to pay an additional fee in order
to receive their funds on an expedited basis (typically within minutes or less), the amount of which is based on the amount of the disbursement
and whether the funds are delivered to a RoarMoney account or an external checking account. Customers may also choose to leave MoneyLion
an optional tip for use of the Instacash service. Instacash advances are included in receivables, net in our consolidated balance sheets.
Building Credit History and Giving
Access to Credit: Credit Builder Plus
Our Credit Builder Plus membership
program offers a proven path for our customers to access credit and establish or rebuild history, build savings, establish financial literacy
and track their financial health.
For a monthly cost of $19.99,
customers receive a suite of services including banking and investment accounts, credit tracking and financial literacy content, rewards
programs and access to loans of up to $1,000 at competitive rates offered by MoneyLion lending subsidiaries, allowing our customers to
establish up to twelve months of payment history with all three credit bureaus. Credit Builder Plus members do not pay additional
recurring fees for the services included in the membership program — the $1 per month administrative fees for the RoarMoney
account and MoneyLion investment account are waived. Credit Builder Plus members may incur certain fees or other charges for using specific
features of the membership services, such as interest charges on a loan they choose to borrow or non-recurring convenience fees associated
with their RoarMoney account.
We offer our Credit Builder
Plus members access to the Lion’s Share Loyalty Program, where members can earn rewards of up to $19.99 per month. The size of the
Lion’s Share reward depends on a customer’s number of logins into the MoneyLion app and purchases using their RoarMoney account
in that month. Expenses related to our Lion’s Share Loyalty Program are included in our marketing expense. For the year ended December 31,
2021, on average approximately 25% of our Credit Builder Plus customers who met the minimum eligibility criteria received this benefit.
As part of the Credit Builder
Plus membership program, members may apply for a Credit Builder Plus secured personal loan. While most other credit builder products in
the market do not give the consumer any of the loan funds upfront, MoneyLion provides a portion of the loan proceeds right away alongside
access to Instacash advances to help cover everyday expenses. The rest of the loan funds are saved for the customer in a credit reserve
account, an account in the customer’s name maintained by ML Wealth and held at DriveWealth (“Credit Reserve Account”).
Based on the customer’s credit profile, the MoneyLion lending subsidiary will disburse a portion of the loan principal to the customer’s
selected bank account, with the remainder deposited in a Credit Reserve Account. Funds in the Credit Reserve Account serve as collateral
that partially secures the loan, which may not be withdrawn while the loan is outstanding and may be liquidated if the customer defaults
on their loan obligations. Funds in the Credit Reserve Account are held in low-volatility money market funds or cash sweep vehicles and
become fully accessible to the customer once the full loan amount has been repaid. Monitoring of the collateral is done through monthly
reviews of the collateral value relative to the value of the outstanding loan-based finance receivables. With the membership, customers
receive their credit score as well as key credit factors, such as credit utilization, to track their progress.
For the year ended December 31,
2021, the average Credit Builder Plus loan was $705, with a weighted average APR of 21.29%. Credit Builder Plus loans range in size from
$500 to $1,000 with an interest rate range from 5.99% to 29.99%. All Credit Builder Plus loans have 12-month terms. Our underwriting is
driven by proprietary models that combine applicants’ prior credit history, based on credit bureau data, with bank account and income
data and their repayment history with MoneyLion. We do not have a minimum FICO score for approval of the Credit Builder Plus loans. MoneyLion
develops and executes all credit policies and risk management strategies directly. While MoneyLion does not provide a guarantee for the
performance of loans and other receivables that we originate, we sold these loans and other receivables at a discount of approximately
10% to IIA (as defined below). Beginning in the fourth quarter of 2021, we transitioned our primary source of funding for originated
receivables from IIA to special purpose vehicle financings from third-party institutional lenders. The receivables are included in
receivables, net on our consolidated balance sheet.
Prior to our launch of Credit
Builder Plus in 2019, we offered a ML Plus membership through which we originated unsecured personal loans, ML Plus loans. The ML Plus
membership transitioned into the Credit Builder Plus membership in the second quarter of 2020. ML Plus loans were fixed at $500, with
an interest rate of 5.99%. All ML Plus loans had 12-month terms. Our underwriting was driven by proprietary models that combine applicants’
prior credit history, based on credit bureau data, with bank account and income data and their performance history with MoneyLion. MoneyLion
develops and executes all credit policies and risk management strategies directly. While MoneyLion does not provide a guarantee for the
performance of loans and other receivables that we originate, we sold these loans and other receivables at a discount of approximately
10% to IIA. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations
of MoneyLion — Revenues — ML Plus loans” below for more information on ML Plus loans.
Advice and financial wellness: Financial
Tracking
In addition to offering a complementary
suite of financial products, MoneyLion has pioneered a new approach to personal financial management with Financial Heartbeat, an intelligent,
automated tool that guides customers on their financial journey. Financial Heartbeat evaluates customers’ financial situation across
four key dimensions: SAVE (savings and financial preparedness), SPEND (spending and personal budget), SHIELD (insurance
needs and coverage) and SCORE (credit tracking and health). Through our easy-to-use interface, customers can review the key issues
impacting their financial situation, decide what actions to take, evaluate which products to use and receive guidance on how to stay motivated
on their journey towards financial wellness. In addition, GamePlan provides our customers with a personalized action plan, including a
checklist with tasks, meant to help them reach their financial goals across different categories such as spending, saving and more.
Engaging content and improving
financial literacy: MoneyLife
Consistent with our vision
of establishing MoneyLion as a lifestyle brand, in 2021 we introduced MoneyLife, an online financial education content destination. MoneyLife
is a video content-driven educational platform available on the MoneyLion app and our website where customers can share and discover ideas,
advice and insights regarding their financial lives. With high usability and sleek design, MoneyLife includes content driven by financial
advice and education influencers, tools to achieve financial goals and additional ways of earning rewards to shop and save. Our acquisition
of MALKA accelerates our ability to engage with consumers across all digital and emerging channels, allowing us to expand our vision of
a daily destination, which started with our own MoneyLife content, with personalized content that educates, informs and supports consumers’
financial decision making and other general interests. We estimate that in the fourth quarter of 2021, MALKA’s content creators
provided over 69 million MoneyLion brand impressions. MoneyLife will drive additional prospective customers to MoneyLion and increase
customer engagement and cross-sell opportunities for both MoneyLion and its affiliate partners.
Our Business Model
We offer a range of financial
products and services through a single platform delivered via a mobile application. Our subsidiary, MALKA, provides digital media and
content production services to us and to its own clients in entertainment, sports, gaming, live streaming and other sectors.
Our revenue is primarily broken
out into the following categories:
|
● |
Fee income: In 2021, 68% of revenue, $116 million in revenue |
|
● |
MoneyLion Investing (administration fees), Crypto (revenue share) |
|
● |
RoarMoney (interchange fees, out-of-network ATM fees, administration fees) |
|
● |
Instacash (instant transfer convenience fees, tips) |
|
● |
Membership subscription revenue: In 2021, 19% of revenue, $32 million in revenue |
|
● |
Credit Builder Plus (monthly recurring membership fees) |
|
● |
Net interest income on finance receivables: In 2021, 4% of revenue, $7 million in revenue |
|
● |
Credit Builder Plus (loan interest income) |
|
● |
MoneyLion Plus (loan interest income) |
|
● |
Unsecured personal loans (loan interest income) |
|
● |
Affiliates income: In 2021, 6% of revenue, $11 million in revenue |
|
● |
Affiliates (fees earned from affiliate partners) |
|
● |
Other income: In 2021, 3% of revenue, $5 million in revenue |
|
● |
MALKA (media and content production, client services, licensing fees) |
Our Adjusted Revenue is primarily
broken out into the following categories:
|
● |
Fees: In 2021, 76% of Adjusted Revenue, $125 million in Adjusted Revenue |
|
● |
Instacash (instant transfer convenience fees, tips) |
|
● |
Credit Builder Plus (monthly recurring membership fees, loan instant transfer convenience fees) |
|
● |
Payments: In 2021, 8% of Adjusted Revenue, $14 million in Adjusted Revenue |
|
● |
RoarMoney (interchange fees, out-of-network ATM fees, administration fees) |
|
● |
Advice: In 2021, 10% of Adjusted Revenue, $17 million in Adjusted Revenue |
|
● |
MoneyLion Investing (administration fees), Crypto (revenue share) |
|
● |
Affiliates (fees earned from affiliate partners) |
|
● |
MALKA (media and content production, client services, licensing fees) |
|
● |
Interest: In 2021, 6% of Adjusted Revenue, $10 million in Adjusted Revenue |
|
● |
Credit Builder Plus (loan interest income) |
Adjusted Revenue is a non-GAAP
measure. See Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MoneyLion — Non-GAAP
Measures” for a reconciliation of Adjusted Revenue to total revenues, net.
We originate loans directly
under our lending licenses or pursuant to applicable exemptions across various states in the U.S., and we service all of the loans that
we originate. Our subsidiary, ML Plus LLC, makes Instacash advances that we service.
Receivables originated on our
platform, including Credit Builder Plus loans and Instacash advances, were primarily financed through Invest in America Credit Fund I
LLC (“IIA”) until the end of the fourth quarter of 2021. IIA was formed in 2016 and is an indirect wholly owned subsidiary
of MoneyLion Inc. IIA had been our primary source of funding for originated receivables since 2018. IIA is organized as a Delaware
limited liability company and is treated as a partnership for United States income tax purposes. IIA’s membership interests
were issued in separately designated series, with each series consisting of Class A Units and Class B Units. IIA investors
owned all non-voting Class B Units of the applicable series they invested in, which entitled them to a targeted, non-guaranteed,
preferred return of typically 12% per year. ML Capital III LLC (“ML Capital III”), an indirect wholly owned MoneyLion
subsidiary, is the managing member of IIA and owned the Class A Units of each series, which entitled ML Capital III to
returns that exceeded the targeted preferred return on the Class B Units (if any). IIA used proceeds from the sale of Class B
Units to investors to purchase borrower payment dependent promissory notes from Invest in America Notes SPV I LLC and Invest
in America Notes SPV IV LLC, each an indirect wholly-owned MoneyLion subsidiary. The collateral consisted of a portfolio of underlying
MoneyLion loans and advance receivables. Investors in Class B Units funded their investment into IIA at the time of subscription,
which proceeds were used to finance receivables originated on MoneyLion’s platform. At the end of the fourth quarter of 2021, IIA
was wound down and all assets were returned to investors. As of December 31, 2021, IIA had no assets.
Beginning in the fourth quarter
of 2021, MoneyLion transitioned its primary source of funding for originated receivables from IIA to special purpose vehicle financings
from third-party institutional lenders. In September 2021, ROAR 1 SPV Finance LLC, an indirect wholly owned subsidiary of MoneyLion (the
“ROAR 1 SPV Borrower”), entered into a $100 million credit agreement (the “ROAR 1 SPV Credit Facility”) with a
lender for the funding of receivables, which secure the ROAR 1 SPV Credit Facility. As of December 31, 2021, there was an outstanding
principal balance of $78 million under the ROAR 1 SPV Credit Facility. In December 2021, ROAR 2 SPV Finance LLC, an indirect wholly owned
subsidiary of MoneyLion (the “ROAR 2 SPV Borrower”), entered into a $125 million credit agreement (the “ROAR 2 SPV Credit
Facility”) with a lender for the funding of receivables, which secure the ROAR 2 SPV Credit Facility. As of December 31, 2021, there
was an outstanding principal balance of $68 million under the ROAR 2 SPV Credit Facility.
We depend on certain key third-party
partners to provide certain of our products and services. Our RoarMoney demand deposit accounts and associated debit cards are currently
issued by MetaBank. Our subsidiary, ML Plus LLC, is party to an Account Servicing Agreement (as amended from time to time, the “Account
Servicing Agreement”) with MetaBank, which had an initial three-year term ending January 2023 and was amended in December 2021
to extend the term until January 2026, with automatic renewal for successive two-year periods unless either party provides written notice
of non-renewal, which may be provided without cause to the other party at least 180 days prior to the end of any such term. In addition,
upon the occurrence of certain early termination events, either we or MetaBank may terminate the Account Servicing Agreement immediately
upon written notice to the other party. The Account Servicing Agreement does not prohibit MetaBank from working with our competitors or
from offering competing services, nor does it prevent us from working with other banks to provide similar services. Our partnership with
MetaBank allows us to provide deposit accounts and debit cards while complying with various federal, state and other laws. MetaBank also
sponsors access to debit networks and ACH for payment transactions, funding transactions and associated settlement of funds. Under the
terms of the Account Servicing Agreement, MetaBank has the right to supervise, oversee, monitor and review our performance, and we have
to comply with applicable laws and regulations, including data privacy, BSA/AML and Customer Identification Program requirements. MetaBank
receives all of the program revenue and transaction fees, and passes it on to MoneyLion, minus any obligations owed to MetaBank. In addition,
we are generally responsible for any expenses related to this arrangement, including payment network fees, marketing expenses, vendor
management expenses and taxes.
In connection with our arrangements
with MetaBank, we have also entered into a multi-year service agreement with Galileo, in which Galileo has agreed to process all of our
transactions for our RoarMoney accounts and debit cards, and to handle corresponding payments and adjustments. Galileo also maintains
cardholder information, implements certain fraud control processes and procedures and provides related services in connection with the
RoarMoney accounts and debit cards. We pay the greater of actual fees or the minimum monthly fee for these services. Following the initial
term, the service agreement renews for successive two-year periods unless either party provides written notice of non-renewal, which may
be provided without cause, to the other party at least 180 days prior to the end of any such term. The occurrence of certain events
would provide each party with an early termination right under the agreement.
Our MoneyLion Investing offering
is currently reliant upon DriveWealth, a third-party broker-dealer partner, which provides brokerage and related services for the investment
accounts facilitated through our platform. Under the terms of ML Wealth’s amended and restated Carrying Agreement with DriveWealth,
which was entered into in October 2020, DriveWealth provides brokerage and custodial services to ML Wealth’s advisory customers,
including by executing orders successfully submitted by ML Wealth via its master trading account. The Carrying Agreement has an initial
three-year term ending October 2023, which automatically renews for successive one-year periods unless either party provides written
notice of non-renewal, which may be provided without cause, to the other party at least 60 days prior to the end of any such term.
In addition, upon the occurrence of certain early termination events, either we or DriveWealth may terminate the agreement immediately
upon written notice to the other party. The Carrying Agreement does not prohibit DriveWealth from working with our competitors or from
offering competing services, and DriveWealth currently provides similar services to a variety of other financial institutions. Under our
arrangement, our customers must sign a Customer Account Agreement with DriveWealth, and DriveWealth maintains ultimate authority on whether
to reject the opening of an account, or to take any actions related to an account, including closing any account, liquidating the assets
under an account or limiting the activities of any account, if DriveWealth deems it necessary to comply with applicable laws or if there
is a reasonable risk-based justification for doing so.
Our MoneyLion Crypto account
offering is currently reliant upon Zero Hash, a third-party regulated digital asset settlement provider. Under the terms of the licensing
and cooperating agreement signed with Zero Hash LLC and its affiliate, Zero Hash Liquidity Services LLC, entered into on March 26, 2021,
Zero Hash pays us a share of the fees that they earn from our customers in exchange for MoneyLion enabling Zero Hash to effect digital
currency-related transactions for our customers with RoarMoney accounts that reside in states where Zero Hash is authorized to conduct
digital assets activities. Under the terms of the agreement, MoneyLion is not directly involved in any cryptocurrency transactions or
the exchange of fiat funds for cryptocurrency taking place at or through Zero Hash. Both parties agreed, at launch, to limit the cryptocurrency
offerings to Bitcoin and Ether, which was subsequently expanded to include Bitcoin Cash and Litecoin in January 2022. Both parties must
consent in writing before adding any additional digital assets to the program. Under our arrangement, each customer opening a MoneyLion
Crypto account is required to enter into a separate user agreement with Zero Hash.
Our Growth Strategy
We believe we are in the early
innings of realizing the full value of our existing platform. We seek to capitalize on the structural advantages inherent in being a digitally
native, customer-centric and built-to-scale platform as we continue capturing market share and economic gains. Our multi-pronged growth
strategy, designed to continue building upon the momentum we have generated to date to create even greater value for consumers, is to:
| ● | Continue penetrating our large addressable market; |
| ● | Increase top-of-funnel conversion; |
| ● | Accelerate cross-sell and attachment rates with our platform
approach; |
| ● | Deliver new products, features and content; |
| ● | Grow our affiliate network and expand our corporate partnerships;
and |
| ● | Evaluate additional strategic acquisitions. |
Continue penetrating our
large addressable market: Our target market is the 100 million middle-class Americans whose needs are
not well-addressed by the current financial system. We define this market as individuals with household incomes up to $150,000 and FICO
scores up to 750. While we have achieved significant growth and scale to date through developing a personalized, all-in-one, digital financial
platform to meet the needs of our customers, the addressable market is vast. We believe we have a long runway for future growth, and we
have the ability to substantially increase our marketing spend versus our historical expenditure levels. We believe we have developed
a highly efficient customer acquisition approach that will allow us to effectively deploy the expanded marketing spend and drive new customer
growth.
Increase top-of-funnel conversion: We
have a significant opportunity to increase the rate at which we convert consumers we reach through various marketing channels into customers.
While we have invested in a technology-based approach to customer acquisition that is highly efficient, we believe scale will allow us
to further enhance top-of-funnel conversion. Expanding our market presence and consumer awareness of our brand is expected to result in
higher rates of customer conversion. In addition, a growing customer base and associated financial and transactional data points will
enhance our consumer insights and allow us to better address the needs of our target market, the middle class. Those insights will allow
us to innovate and offer an even broader suite of financial products, attracting more customers onto the MoneyLion platform.
Accelerate cross-sell and
attachment rates with our platform approach: We take a platform approach to address our customers’ entire
financial lives. The combination of a deep, data-driven understanding of our customers’ pain points and a broad suite of products
allows us to help improve our customers’ financial well-being while producing strong revenue growth and profitability. We believe
the number of customers using two or more products will further expand as more customers see value in our holistic platform approach,
and as we continue to innovate and launch new products. Not only does multiple product engagement increase revenue per customer and drive
revenue growth, it also further enhances our profitability by driving a lower cost to acquire and service customers.
Deliver new products, features
and content: Our product and engineering teams are constantly innovating, leveraging both our data-driven understanding
of our customers and our existing technology infrastructure to build new, impactful products and features. Our products and services follow
established product development steps, including research and development, design, validation and testing. For each product launch, we
generally anticipate expenses related to technology, product design and implementation, including compensation and benefits, to amount
to approximately $1.5 to $2.0 million on average. We are developing several new products and services to continue our mission to
better serve our customers which will provide further financial flexibility for MoneyLion customers.
Another way we aim to better
serve our customers is through the creation of digital media and content that educates our customers about how to improve their financial
health by using MoneyLion’s and our affiliates’ products and services. MoneyLife, our online financial education content destination,
includes content driven by financial advice and education influencers, tools to achieve financial goals and additional ways of earning
rewards to shop and save. Through MoneyLife, we will drive additional prospective customers to MoneyLion and increase customer engagement
and cross-sell opportunities for both MoneyLion and our affiliate partners. Our acquisition of MALKA will accelerate our ability to engage
with consumers across all digital and emerging channels.
Grow our affiliate network
and expand our corporate partnerships: We have established an affiliate network to offer products and services
to our customers as guided by our platform. We will continue to dramatically expand our pool of affiliate partners to provide our customers
an ever-growing selection of products that can lower their cost of living and improve their quality of life.
MoneyLion partners with companies
to provide company-sponsored financial wellness programs that are designed to decrease financial stress and bolster productivity by offering
employees the financial products, education and tailored advice they require. We expect to continue to add corporate partners to deliver
our products in a cost-effective manner to our targeted customer segment.
Evaluate additional strategic
acquisitions: We acquired MALKA in November 2021. MALKA is a creator network and content platform that produces
digital media and content across entertainment, sports, games, live streaming and other sectors. MALKA’s content capabilities can
drive industry-leading customer acquisition and retention at scale to help accelerate MoneyLion’s customer growth. By combining
MALKA’s capabilities with MoneyLion’s financial products and extensive first-party data, we hope to turn the MoneyLion mobile
application into a daily destination for our customers with personalized content that educates, informs and supports customers’
financial decisions.
In addition, on December 15,
2021, we entered into an agreement to acquire Even Financial Inc. (“Even Financial”), an embedded finance marketplace that
digitally connects and matches consumers with real-time personalized financial product recommendations from a growing network of financial
institution, insurance and fintech partners, which closed on February 17, 2022. This acquisition strengthens MoneyLion’s platform
by improving customers’ abilities to find and access the right financial products to help them manage their financial lives. The
acquisition also extends our addressable market, extends the reach of our own products, diversifies our revenue mix and furthers our ambition
to be the premier financial super app for hardworking Americans.
We will continue to evaluate
opportunistic acquisitions that would allow us to either expand our product and service offerings to our existing customers or allow us
to enter new verticals.
Marketing
Our customer acquisition channels
combine a mix of online and offline, as well as paid and unpaid, channels. They include marketing affiliates, sponsorships, radio, direct
mail, organic web traffic, email marketing and online advertising, among others.
MoneyLion applies a full-funnel
marketing approach both in media and in content creation. By creating complete marketing programs, we believe we generate a sustainable
cost advantage across our various customer acquisition channels. We create multiple secondary content pieces from an original long-form
content asset, and then cycle these content assets and marketing narratives across earned media channels and our own platforms, including
our MoneyLion mobile application.
Customer Service
We are dedicated to addressing
the needs of our customers. We believe that our multi-pronged approach to providing cost-effective customer service helps to support customer
satisfaction. We offer a searchable, robust self-service Frequently Asked Questions database within our help center, where most questions
can be easily answered 24 hours a day, seven days a week. In addition, we offer both a chatbot and a live chat service
with an agent, either through the home screen of the MoneyLion app or on the MoneyLion web dashboard. Finally, should a customer wish
to speak with a live agent over the phone or email their inquiries to our customer support team, we offer those support services as well.
Competitive Landscape
Consumer financial services
is a large, fragmented and competitive market, and we compete in varying degrees with a range of existing providers of consumer-focused
banking, lending, investing and other financial products. Our competitors are generally large, well-capitalized financial services companies.
Some of our current and potential competitors have longer operating histories, particularly with respect to financial products similar
to what we offer, significantly greater financial, technical, marketing and other resources and a larger customer base. Our competitors
include:
Banking Competitors: Traditional
banks and credit unions (e.g., Chase and Wells Fargo), new entrants obtaining banking licenses (e.g., Varo Money) and other non-bank digital
providers that white label regulated products, offering banking-related services (e.g., Chime);
Lending and Earned Income
Advance Competitors: Traditional banks and credit unions, specialty finance and other non-bank providers, offering
consumer lending-related or advance products (e.g., Upstart and Dave);
Marketplace Competitors:
Online financial product and service marketplaces and aggregators that offer consumer financial products and services (e.g., Credit
Karma and WalletHub); and
Investing Competitors: Online
wealth management platforms, such as robo-advisors, offering consumer investment services (e.g., Betterment and Stash).
We believe other market participants
do not adequately meet the needs of the 100 million middle-class Americans who make up our target market. We feel our data-driven
approach, single-core technology stack, holistic product offering and financial guidance focus represent compelling competitive differentiators
that will allow us to continue to capture market share and drive growth.
Management Team
We are a founder-led business
with a diverse management team that brings together experienced viewpoints from both technology and financial services.
Employees and Culture
We believe we have built a
unique company culture. We attract smart and talented individuals, who possess a passion for innovation and flourish when provided the
opportunity to learn and grow. We provide our employees with support programs designed to allow employees to thrive and our teams to outperform.
Incentives are further aligned through a broad-based equity compensation program across the employee base.
In operating multiple offices
across the globe, bringing together some of the best talent from both the U.S. and around the world, we place significant emphasis
on having a seamless, one-firm culture and employee experience. This model has paid dividends for our global team members as reflected
in our employee engagement and retention.
As the focal point of our human
capital strategy, we attract and retain a diverse, talented and motivated employee base. Career growth at MoneyLion may include manager
skills and leadership training, peer-based recognition and rewards, transparent incentive and promotion processes and time and budget
allocated to learning and development initiatives.
We place special emphasis on
diversity, from our recruitment process to our career development programs. Our management team members come from diverse backgrounds
and seek to build a company with diversity clearly established as an organization priority. Here Women Roar is an employee resource group
that aims to champion the growth and advancement of women at MoneyLion by investing in their social, personal and professional development.
In 2021, we launched additional employee resource groups to further support our employees of diverse backgrounds.
As of December 31, 2021, we
had a total of 556 employees across all locations, which included 155 MALKA employees who joined the MoneyLion team in connection with
the MALKA acquisition. Of our employees, approximately 15%, 20%, 46%, 6% and 1% are located in our New York City, Jersey City, Kuala Lumpur,
Santa Monica and Sioux Falls offices, respectively, and the remaining approximately 13% work remotely. None of our employees are represented
by a labor union or covered by a collective bargaining agreement.
Privacy and Security
Our business involves the collection,
storage, processing, use, sharing and transmission of personally identifiable information (“PII”) and other sensitive data,
including customer and employee information, financial information and information about how customers interact with our platform. We
collect, store, process, use, share and transmit data while maintaining physical, electronic and procedural safeguards. We maintain physical
security measures designed to guard against unauthorized access to systems and use safeguards such as firewalls and data encryption. We
also enforce physical access controls to our facilities and we authorize access to PII on a least privilege access model only for those
employees or agents who require it to fulfill the responsibilities of their jobs.
To prevent against fraud, we
have built fraud detection capabilities to protect our customers and merchants. We first seek to establish the consumer’s identity
using basic information following our KYC protocols. The consumer is then evaluated by our fraud model, and we will then either move forward
in the approval processes or request additional data from the consumer. Our sophisticated fraud models use approximately 40-80 other
data points to make a near-instantaneous decision on whether to block a transaction. There are also secondary rules that, when triggered,
are designed to ensure a transaction is sent to fraud investigators.
The technology infrastructure
supporting our platform optimizes the storage and processing of large amounts of data and facilitates the deployment and operations of
large-scale products and services in our cloud computing environments. Our technology infrastructure is designed around industry practices
intended to reduce downtime in the event of outages or disaster recovery occurrences. We incorporate multiple layers of protection for
business continuity and system redundancy purposes to address cybersecurity risks and loss of data. We have a robust cybersecurity program
designed to protect our technology, including regularly testing our systems to identify and address potential vulnerabilities. We strive
to continually improve our technology infrastructure to enhance the customer experience and to increase efficiency, scalability and security.
As a result of our collection,
storage, processing, use, sharing and transmission of PII and other sensitive data, we are subject to certain privacy and information
security laws, including, for example, the Gramm-Leach-Bliley Act (“GLBA”), the California Consumer Privacy Act (“CCPA”),
the California Privacy Rights Act (“CPRA”) and other state privacy regulations, and other laws, rules and regulations designed
to regulate consumer information and data privacy, security and protection and mitigate identity theft. These laws impose obligations
with respect to the collection, processing, storage, disposal, use, transfer, retention and disclosure of PII, and some may require that
financial services providers have in place policies regarding information privacy and security. In addition, under certain of these laws,
we must provide notice to consumers of our policies and practices for sharing PII with third parties, provide notice of changes to our
policies and, with limited exceptions, give consumers the right to prevent use of their PII and disclosure of it to third parties. Further,
all 50 states and the District of Columbia have adopted data breach notification laws that impose, in varying degrees, an obligation to
notify affected individuals in the event of a data or security breach or compromise of our systems, including when their PII has or may
have been accessed by an unauthorized person. These laws may also require us to notify relevant law enforcement, regulators or consumer
reporting agencies in the event of a data breach. Some laws may also impose physical and electronic security requirements regarding the
safeguarding of PII. Privacy and information security laws evolve regularly, and complying with these various laws, rules, regulations
and standards, and with any new laws or regulations or changes to existing laws, could cause us to incur substantial costs that are likely
to increase over time, requiring us to adjust our compliance program on an ongoing basis, change our business practices in a manner adverse
to our business, divert resources from other initiatives and projects and restrict the way products and services involving data are offered.
See Part I, Item 1A “Risk Factors — Risks Relating to Cybersecurity — The collection, processing,
use, storage, sharing and transmission of PII and other sensitive data are subject to stringent and changing state, federal and international
laws, regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect
such data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we
articulate to our customers.”
Regulatory Environment
We operate in a rapidly evolving
regulatory environment and are subject to extensive and complex regulation under U.S. federal law and the laws of the states in which
we operate. These cover most aspects of our business and include laws, regulations, rules and guidance relating to consumer finance and
protection, privacy and data protection, banking, payments and investment advisory services, among other areas. For example, with respect
to our lending business, certain state laws may, if applicable, regulate interest rates and other charges and require certain disclosures
to our customers, and may also require licensing for certain activities. In addition, other federal and state laws, public policy and
general principles of equity, such as with respect to the protection of consumers, unfair and deceptive acts or practices and debt collection
practices, may apply to our activities involving the origination, servicing and collection of consumer loans, as well as to our activities
in banking, cash advances, payments, investment advisory services and other areas. We are impacted by these laws and regulations both
directly and indirectly, including by way of our partnership with MetaBank, which provides deposit accounts and debit cards to our customers.
Ensuring compliance with these laws and regulations imposes significant burdens on our business operations.
We could become subject to
additional legal or regulatory requirements if laws or regulations change in the jurisdictions in which we operate, or if we were to release
new products or services, under applicable laws or regulations to which we are not currently subject today. In addition, the regulatory
framework for our products and services is evolving and uncertain as federal and state governments and regulators consider the application
of existing laws and potential adoption of new laws. Although some of the products and services that we offer are relatively novel, we
are typically required to comply with the existing regulatory regimes for consumer financial products and services. New laws and regulations,
as well as continued uncertainty regarding the application of existing laws and regulations to our products and services, may negatively
affect our business. This could include the need to obtain new or different types of licenses or comply with additional laws and regulations
in order to conduct our business.
State licensing requirements and regulation
Our lending operations must
satisfy the laws and standards of each individual U.S. state in which we operate. This means that when individual states differ in
how they regulate consumer lending activity, we must operate in accordance with those jurisdictional-specific requirements.
We are subject to state licensing
and other requirements with respect to loans that we originate, and we have obtained necessary licenses or conduct operations pursuant
to relevant exemptions in order to originate loans in the jurisdictions in which we do so. Licensing statutes and regulations vary from
state to state and prescribe different requirements, including restrictions on loan origination and servicing practices (including limits
on the type, amount and manner of our fees), interest rate limits, disclosure requirements, periodic examination requirements, surety
bond and minimum specified net worth requirements, periodic financial reporting requirements, notification requirements for changes in
principal officers, stock ownership or corporate control, restrictions on advertising and requirements that loan forms be submitted for
review. We are also subject to supervision and examination by state regulatory authorities in the jurisdictions where we operate, which
have resulted and may continue to result in findings or recommendations that require us to modify our internal controls and/or business
practices. The application of state licensing requirements to our business model is not always clear, and while we believe we are in compliance
with applicable licensing requirements, state regulators may request or require that we obtain additional licenses or otherwise comply
with additional requirements in the future, which may result in changes to our business practices. If we are found to have engaged in
activities that require a state license without having the requisite license or in activities that are otherwise deemed to be in violation
of state lending laws, the licensing authority may impose fines, restrict our operations in the relevant state or seek other remedies
for activities conducted in the state.
U.S. federal consumer protection requirements
We must comply with various
federal consumer protection regimes, both pursuant to the financial products and services we provide directly and as a service provider
to our bank partner, including those set forth in Part I, Item 1A “Risk Factors — Risks Relating to Financial Regulation
— Our business is subject to extensive regulation, examination and oversight in a variety of areas, including registration
and licensing requirements under federal, state and local laws and regulations.”
We are subject to regulation
by the Consumer Financial Protection Bureau (“CFPB”), which oversees compliance with and enforces federal consumer financial
protection laws. The CFPB directly and significantly influences the regulation of consumer financial services, including the origination,
brokering, servicing, transfer and collection of consumer loans, including personal loans and other consumer financial services we may
provide. The CFPB has substantial power to regulate financial products and services received by consumers from both bank and non-bank
providers of consumer financial products or services and their respective service providers, including rulemaking authority in enumerated
areas of federal law applicable to consumer financial products or services such as truth in lending, fair credit reporting and fair debt
collection. Under Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), the
CFPB has the authority to pursue enforcement actions against companies that offer or provide consumer financial products or services that
engage in unfair, deceptive or abusive acts or practices, which can be referred to as “UDAAP.” The CFPB may also seek a range
of other remedies, including rescission of contracts, refund of money, return of real property, restitution, disgorgement of profits or
other compensation for unjust enrichment, damages, public notification of the violation, and “conduct” restrictions (i.e.,
future limits on the target’s activities or functions). Where a company has violated Title X of the Dodd-Frank Act or CFPB
regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to bring civil actions to enforce
such laws and regulations.
The CFPB also has enforcement
authority with respect to the conduct of third parties that provide services to financial institutions. The CFPB has made it clear that
it expects non-bank entities to maintain an effective process for managing risks associated with vendor relationships, including compliance-related
risks. In connection with this vendor risk management process, we are expected to perform due diligence reviews of potential vendors,
review their policies and procedures and internal training materials to confirm compliance-related focus, include enforceable consequences
in contracts with vendors regarding failure to comply with consumer protection requirements and take prompt action, including terminating
the relationship, in the event that vendors fail to meet our expectations.
Our business activities are
also subject to applicable requirements under other federal statutes and regulations, including, but not limited to:
| ● | Federal Trade Commission Act. The
Federal Trade Commission Act prohibits “unfair” and “deceptive” acts and practices in business or commerce and
gives the Federal Trade Commission (the “FTC”) enforcement authority to prevent and redress violations of this prohibition.
Whether a particular act or practice violates these laws or the UDAAP-prevention laws enforced by the CFPB frequently involves a highly
subjective and/or fact-specific judgment. |
| ● | Truth in Lending Act. The
Truth in Lending Act (“TILA”) and Regulation Z, which implements it, require lenders to provide consumers with uniform
and understandable information concerning certain terms and conditions of their loan and credit transactions prior to the consummation
of a credit transaction and, in the case of certain open-end loans, at the time of a loan solicitation, application, approval and origination
of a credit transaction. TILA also regulates the advertising of credit and gives borrowers, among other things, certain rights regarding
updated disclosures and periodic statements, security interests taken to secure the credit, the right to rescind certain loan transactions,
a right to an investigation and resolution of billing errors and the treatment of credit balances. |
| ● | Equal Credit Opportunity Act. The
federal Equal Credit Opportunity Act (“ECOA”) prohibits creditors from discriminating against credit applicants on the basis
of race, color, sex, age, religion, national origin, marital status, the fact that all or part of the applicant’s income derives
from any public assistance program or the fact that the applicant has in good faith exercised any right under the federal Consumer Credit
Protection Act or any applicable state law. Regulation B, which implements ECOA, restricts creditors from requesting certain types
of information from loan applicants and from using advertising or making statements that would discourage on a prohibited basis a reasonable
person from making or pursuing an application. ECOA also requires creditors to provide consumers and certain small businesses with timely
responses to applications for credit, including notices of adverse action taken on credit applications. |
| ● | Fair Credit Reporting Act. The
federal Fair Credit Reporting Act (“FCRA”), as amended by the Fair and Accurate Credit Transactions Act, promotes the accuracy,
fairness and privacy of information in the files of consumer reporting agencies. FCRA requires a permissible purpose to obtain a consumer
credit report and requires persons that furnish loan payment information to credit bureaus to report such information accurately. FCRA
also imposes disclosure requirements on creditors who take adverse action on credit applications based on information contained in a
consumer report or received from a third party and requires creditors who use consumer reports in establishing loan terms to provide
risk-based pricing or credit score notices to affected consumers. The FCRA also imposes rules and disclosure requirements on creditors’
use of consumer reports for marketing purposes, which impacts our ability to use consumer reports and prescreened lists to market consumer
loans through direct mail and other means. |
| ● | Military Lending Act. The
Military Lending Act (“MLA”) restricts, among other things, the interest rate and other terms that can be offered to active
military personnel and their dependents. The MLA caps the interest rate that may be offered to a covered borrower for most types of consumer
credit to a 36% military annual percentage rate, or “MAPR,” which includes certain fees such as application fees, participation
fees and fees for add-on products. The MLA also requires certain disclosures and prohibits certain terms, such as mandatory arbitration
if a dispute arises concerning the consumer credit product. |
| ● | Electronic Fund Transfer Act and NACHA Rules. The
federal Electronic Fund Transfer Act (“EFTA”) and Regulation E that implements it provide guidelines and restrictions
on the provision of electronic fund transfer services to consumers, and on making an electronic transfer of funds from consumers’
bank accounts. In addition, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and
guidelines administered by the National Automated Clearinghouse Association (“NACHA”). Most transfers of funds in connection
with the origination and repayment of loans are performed by electronic fund transfers, such as ACH transfers. EFTA requires that lenders
make available loan payment methods other than automatic preauthorized electronic fund transfers and prohibits lenders from conditioning
the approval of a loan transaction on the borrower’s agreement to repay the loan through automatic fund transfers. In 2018, the
NACHA Board of Directors approved a change in the NACHA Operating Rules that requires ACH originators to utilize commercially reasonable
fraudulent transaction detection systems. The rule change requires ACH originators, including lenders, to include account validation
as part of their commercially reasonable fraudulent transaction detection system, for the first use of new account information. The rule
change took effect on March 19, 2021, and will become enforceable for all ACH originators on March 19, 2022. Accordingly, we use NACHA-approved
vendors to perform commercially reasonable verification of external accounts for ACH transactions. |
| ● | GLBA. The GLBA includes
limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties,
in certain circumstances requires financial institutions to limit the use and further disclosure of nonpublic personal information by
nonaffiliated third parties to whom they disclose such information, and requires financial institutions to disclose certain privacy policies
and practices with respect to information sharing with affiliated and nonaffiliated entities, as well as to safeguard personal customer
information. |
The federal regulatory framework
applicable to consumer financial services providers, such as us, is evolving and uncertain. Additional or different requirements may apply
to our business in the future. While we have developed policies and procedures designed to assist in compliance with these laws and regulations,
no assurance is given that our compliance policies and procedures will be effective or will be adequate as laws change or are applied
in a new manner.
Investment adviser and broker-dealer regulation
We offer investment management
services through our wholly-owned subsidiary ML Wealth, an internet-based investment adviser that is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) and is subject to regulation by the SEC. ML
Wealth is subject to, among other things, the anti-fraud provisions of the Advisers Act and fiduciary duties derived from these provisions,
which apply to our relationships with our advisory clients. These provisions and duties impose restrictions and obligations on us with
respect to our dealings with our clients and the investments we manage, including, for example, disclosure of any conflicts of interest.
ML Wealth has in the past and will in the future be subject to periodic SEC examinations. A regular or routine SEC examination will typically
involve, at a minimum, a careful review of the adviser’s books and records and may include interviewing employees. The SEC examination
staff may also conduct more frequent examinations focusing on a limited number of specific issues or conduct an examination “for
cause.” ML Wealth is also subject to other requirements under the Advisers Act and related regulations primarily intended to protect
advisory clients. These additional requirements include maintaining effective and comprehensive compliance programs and written policies
and procedures, record-keeping, reporting and disclosure, advertising and solicitation rules, safeguards for protecting client funds and
securities, limitations on agency cross and principal transactions between an adviser and its advisory clients, restrictions on advisory
contract assignments, privacy protection regulations and anti-corruption rules relating to investors associated with U.S. state or
local governments.
The Advisers Act generally
grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities
in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable
requirements include the prohibition of individuals from associating with an investment adviser, the revocation of registrations, significant
monetary penalties, disgorgement of gains, cease-and-desist orders and other censures. The SEC may bring civil actions against investment
advisers, and seek damages or other relief, in a U.S. district court or before an administrative law judge. Even if an investigation
or proceeding did not result in a sanction or the sanction imposed against us or our personnel by the SEC were small in monetary amount,
the adverse publicity relating to the investigation, proceeding or imposition of these sanctions could harm our reputation and cause us
to lose existing clients or fail to gain new clients.
One of our subsidiaries, MoneyLion
Securities LLC, is a broker-dealer and is therefore registered with the SEC and a member of the Financial Industry Regulatory Authority,
Inc. (“FINRA”). Although we do not currently engage in any business activity through MoneyLion Securities LLC, as a broker-dealer,
it is subject to SEC and FINRA rules and regulations. The principal purpose of regulating broker-dealers is the protection of clients
and securities markets. The regulations cover all aspects of the broker-dealer business and operations, including, among other things,
sales and trading practices, client onboarding, communications with the public, publication or distribution of research, margin lending,
uses and safekeeping of clients’ funds and securities, capital adequacy, recordkeeping, reporting, fee arrangements, disclosures
to clients, suitability, acting in retail customers’ best interests when making recommendations to them, customer privacy, data
protection, information security and cybersecurity, the safeguarding of customer information, the sharing of customer information, best
execution of customer orders, public offerings, customer qualifications for margin and options transactions, registration of personnel,
business continuity planning, transactions with affiliates, conflicts and the conduct of directors, officers and employees.
MoneyLion Securities LLC is
subject to Rule 15c3-1 (the “Uniform Net Capital Rule”) under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and related self-regulatory organization requirements. The Uniform Net Capital Rule specifies minimum capital
requirements that measure the general financial soundness and liquidity of broker-dealers. SEC and FINRA rules require notification to
these regulators when net capital falls below certain defined criteria, or when withdrawals of capital exceed certain thresholds. These
rules also dictate the ratio of debt to equity in the regulatory capital composition of a broker-dealer. If MoneyLion Securities LLC fails
to maintain specified levels of net capital, we could be subject to sanctions, which may include immediate suspension or revocation of
registration, and suspension or expulsion. MoneyLion Securities LLC has been and currently is in compliance with the Uniform Net Capital
Rule and has net capital in excess of the minimum requirements.
The SEC, FINRA and applicable
state securities authorities also have the authority to conduct periodic examinations of MoneyLion Securities LLC and may also conduct
administrative proceedings that could result in sanctions being imposed. To the extent any applicable SEC, state or FINRA rules or regulations
change, MoneyLion Securities LLC will need to adapt to those changes.
Regulation of our bank partnership model
Pursuant to our partnership
with MetaBank, we offer to our customers FDIC-insured, non-interest-bearing deposit accounts and debit cards with which customers can
access their account balances, both of which are provided by MetaBank. We act as the service provider to, among other things, provide
customer support and technology features for customers utilizing their MetaBank account through our platform.
MetaBank is chartered as a
national bank and subject to regulation and supervision as such by the Office of the Comptroller of the Currency (the “OCC”)
and the FDIC. Many laws and regulations that apply directly to MetaBank are indirectly applicable to us as a service provider to
MetaBank. Our partnership with MetaBank is also subject to the supervision and enforcement authority of the OCC, MetaBank’s primary
banking regulator. Additionally, in order for each participating customer’s deposits to be covered by FDIC insurance up to the applicable
maximum deposit insurance amount, we and MetaBank must meet certain eligibility requirements established by the FDIC, such as adequately
evidencing participating customers’ ownership of each account.
Regulation of money services business /
money transmission involving virtual currencies
We offer certain digital currency-related
products and services to our customers through a partnership with Zero Hash. Both of the Zero Hash entities involved in this partnership
are registered as money services businesses with the Financial Crimes Enforcement Network and have the required state-level licenses for
engaging in digital assets activities where the Zero Hash services are offered. Under the terms of our agreement with Zero Hash, we do
not engage directly in any transactions involving the exchange of fiat currency for digital currencies taking place at or through Zero
Hash or the provision of money transmission services on behalf of our customers or of MoneyLion. Therefore, we do not currently expect
to be required to be registered as a money services business or be subject to money transmitter licensing requirements or other regulatory
requirements specific to transactions relating to virtual currencies. Other laws and regulations may apply to us as a service provider
to Zero Hash LLC and Zero Hash Liquidity Services LLC, including Bank Secrecy Act (“BSA”)/ U.S. anti-money laundering
(“AML”) requirements, but these would be similar to the legal and regulatory regimes to which we are already subject. However,
federal and state laws and regulations applicable to digital assets remain uncertain and will continue to evolve, and changes to the applicable
laws, regulations or guidance in this area may require us to meet additional licensing, registration or other requirements.
Other requirements
In addition to the requirements
described above, we are subject to and seek to comply with other state and federal laws and regulations applicable to consumer lending
and other consumer financial services, including additional requirements relating to loan disclosure, credit discrimination, credit reporting,
debt collection and UDAAP prevention. These laws and regulations may be enforced by state banking or consumer protection regulatory agencies,
state attorneys general, the CFPB and private litigants, among others. Given our novel business model and the subjective nature of some
of these laws and regulations, particularly UDAAP-prevention laws, we may become subject to regulatory scrutiny or legal challenge with
respect to our compliance with these requirements.
Given the nature of our business
and our arrangements with third parties, we are subject to compliance obligations related to AML laws and regulations. We have developed
and currently operate an AML program designed to prevent our products from being used to facilitate money laundering, terrorist financing
and other financial crimes. Our program is also designed to prevent our products from being used to facilitate business in certain countries
or territories, or with certain individuals or entities, including those on designated lists promulgated by the U.S. Department of
the Treasury’s Office of Foreign Assets Controls and other U.S. and non-U.S. sanctions authorities. Our AML and sanctions
compliance programs include policies, procedures, reporting protocols and internal controls, including the designation of a BSA/AML compliance
officer to oversee the programs. Our programs are designed to address these legal and regulatory requirements and to assist in managing
risk associated with money laundering and terrorist financing.
We collect, store, use, disclose,
transfer and otherwise process a wide variety of information, including PII, for various purposes in our business, including to help ensure
the integrity of our services and to provide features and functionality to our customers. This aspect of our business, including the collection,
storage, use, disclosure, transfer, processing and protection of the information, including PII, we acquire in connection with our consumers
use of our services, is subject to numerous privacy, data protection, cybersecurity and other laws and regulations in the United States,
including the GLBA as well as state laws such as the CCPA. Accordingly, we publish our privacy policies and terms of service, which
describe our practices concerning the collection, storage, use, disclosure, transmission, processing and protection of information. The
laws and regulations that apply to privacy and security issues are evolving and are subject to interpretation and change, and therefore,
additional laws and regulations may become relevant to us. For additional discussion, please see the risk factors related to regulation
of our business and regulation in the areas of privacy and data use under Part I, Item 1A “Risk Factors — Risks Relating
to Cybersecurity — The collection, processing, use, storage, sharing and transmission of PII and other sensitive data are subject
to stringent and changing state, federal and international laws, regulations and standards and policies and could give rise to liabilities
as a result of our failure or perceived failure to protect such data, comply with privacy and data protection laws and regulations or
adhere to the privacy and data protection practices that we articulate to our customers.”
In addition, there are federal
and state laws and regulations on marketing activities conducted over the internet, or by mail, email or telephone, including without
limitation the federal Telephone Consumer Protection Act (“TCPA”), the federal Controlling the Assault of Non-Solicited Pornography
and Marketing Act (“CAN-SPAM Act”), FTC regulations and guidelines that implement the FTC’s Do-Not-Call Registry
and impose other requirements in connection with telemarketing activities and state telemarketing laws. Our marketing activities may subject
us to some of these laws and regulations. MoneyLion’s policies address the requirements of the TCPA and other laws and regulations
limiting telephone outreach, and we do not engage in certain activities covered by the TCPA. Our email communications with all consumers
are formulated to comply with the CAN-SPAM Act and other applicable requirements.
The offerings of membership
interests in designated series of IIA described under “Our Business Model” herein were not offered publicly to retail investors
and were not registered under the Securities Act of 1933, as amended (the “Securities Act”). IIA membership interests were
offered in private placements only to “accredited investors” within the meaning of the Securities Act, pursuant to the exemption
provided in Regulation D thereunder, or to non-US persons in offshore transactions, pursuant to the exemption provided in Regulation S
thereunder.
Various federal and state regulatory
agencies in the United States continue to examine a wide variety of issues that are applicable to us and may impact our business.
These issues include account management guidelines, antidiscrimination, consumer protection, identity theft, privacy, disclosure rules,
electronic transfers, cybersecurity and marketing. As our business continues to develop and expand, we continue to monitor the additional
rules and regulations that may become relevant.
Intellectual Property
We rely on a combination of
trademark, trade secrets and copyright laws, as well as confidentiality procedures and contractual restrictions, to establish, maintain
and protect our proprietary rights. We own the domain name rights for, among other sites, moneylion.com and malkamedia.com, and, as of
December 31, 2021, we owned 22 registered trademarks, one copyright and four trademark applications in the United States. Despite
substantial investment in research and development activities, we have not focused on patents and patent applications historically. In
addition to the intellectual property that we own, we license certain third-party technologies and intellectual property, which are incorporated
into some of our products and services.
Although we take steps to protect
our intellectual property and proprietary rights, we cannot be certain that the efforts we have taken to protect our intellectual property
may not be sufficient or effective. It may be possible for other parties to copy or otherwise obtain and use the content of our solutions
or other technology without authorization. Moreover, others may independently develop technologies or services that are competitive with
ours or that infringe, misappropriate or otherwise violate our intellectual property and proprietary rights. In addition, third parties
may initiate litigation against us alleging infringement, misappropriation or other violation of their proprietary rights or declaring
their non-infringement of our intellectual property. Failure to protect our intellectual property or proprietary rights adequately could
significantly harm our competitive position, business, financial condition and results of operations. See Part I, Item 1A “Risk
Factors” for a more comprehensive description of risks related to our intellectual property and proprietary rights.
Available Information
Our website is www.moneylion.com.
Our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those forms
are available free of charge through our website (investors.moneylion.com) as soon as reasonably practicable after they are filed with
or furnished to the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC at www.sec.gov.
We use our website as a routine
channel for distribution of information that may be deemed material for investors, including news releases, presentations, financial information
and corporate governance information. We may use our website as a means of disclosing material information and for complying with
our disclosure obligations under Regulation Fair Disclosure promulgated by the SEC. These disclosures are included on our website in the
“Investor Relations” section. Accordingly, investors should monitor these portions of our website, in addition to following
MoneyLion’s news releases, SEC filings, public conference calls and webcasts.
None of the information contained
on, or that may be accessed through our websites or any other website identified herein, is part of, or incorporated into, this filing.
All website addresses in this Annual Report on Form 10-K/A are intended to be inactive textual references only, unless expressly noted.
Item 1A. Risk Factors
Risks Relating to Our Business and Operations
Our financial condition and results of operations
may be adversely impacted by the COVID-19 pandemic.
Occurrences of epidemics or
pandemics, depending on their scale, may cause different degrees of disruption to the regional, state and local economies in which we
offer our products and services. The current COVID-19 pandemic could have a material adverse effect on the value, operating results and
financial condition of our business.
The COVID-19 pandemic has caused
substantial changes in consumer behavior, restrictions on business and individual activities and high unemployment rates, which led to
reduced economic activity and may continue to cause economic volatility. Extraordinary actions taken by international, federal, state
and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the
world, including travel bans, quarantines, “stay-at-home” orders, suspension of interest accrual and similar mandates for
many individuals and businesses to substantially restrict daily activities have led to a decrease in consumer activity generally. Additionally,
the COVID-19 pandemic has had a negative impact on consumer finances and on employment levels, which could lead to lower demand for loans,
higher loan delinquencies, less likelihood of signing up for our membership programs, less likelihood of making investments through our
platform and less spending on the MoneyLion platform, all of which would have a negative impact on our financial condition, results of
operations and cash flows.
There continue to be significant
uncertainties associated with the COVID-19 pandemic, including with respect to the course, duration and severity of the virus
and additional variants, future actions that may be taken by governmental authorities and private businesses to contain the COVID-19 pandemic
or to mitigate its impact and the effectiveness of such actions, the timing and speed of economic recovery and the ultimate effectiveness
of vaccinations for COVID-19. We continue to monitor the situation and assess further possible implications to our business.
A continued significant economic slowdown could have a substantial adverse effect on our financial condition, liquidity and results of
operations. COVID-19 could have the following adverse effects on our business and results of operations, among others:
| ● | reduced borrower approval rates, including as a result of credit
eligibility and other adjustments; |
| ● | lower average balances of our loans as a result of changes in
consumer demand and adjustments to our credit decisioning process and credit criteria; |
| ● | reduced pool of customers eligible for our loan or advance products; |
| ● | impeded liquidity and negative fair value adjustments with respect
to our loans or advance products; and |
| ● | reduced funds available for our investment products. |
See Part II, Item 7 “Management’s
Discussion and Analysis of our Financial Condition and Results of Operations — Key Performance Metrics” and “— Results
of Operations for the Twelve Months Ended December 31, 2021 and 2020” for further discussion of the impact of the COVID-19
pandemic in recent periods on our business and operating results. We cannot at this time reasonably estimate the impact to our future
results of operations, cash flows and financial condition; however, if these conditions worsen, we may be materially and adversely impacted.
The COVID-19 pandemic, and its impact, may also have the effect of heightening many of the other risks described herein.
Our business may be adversely affected by
economic conditions and other factors that we cannot control.
Uncertainty and negative trends
in general economic conditions, including significant tightening of credit markets, historically have created a difficult operating environment
for our industry. Many factors, including factors that are beyond our control, may impact our results of operations or financial condition
and our overall success by affecting a customer’s willingness and capacity to use our products and services, including a customer’s
willingness to incur loan obligations or willingness or capacity to make payments on their loans or other services we offer. These factors
include interest rates, unemployment levels, conditions in the housing market, immigration policies, gas prices, energy costs, government
shutdowns, trade wars and delays in tax refunds, as well as events such as natural disasters, acts of war, terrorism, catastrophes and
pandemics.
Many new customers on our platform
have limited or no credit history and limited financial resources. Accordingly, such customers have historically been, and may in the
future become, disproportionately affected by adverse macroeconomic conditions, such as the disruption and uncertainty caused by the COVID-19
pandemic. In addition, major medical expenses, divorce, death or other issues that affect customers could affect a customer’s willingness
or ability to make payments on their loans or advances or engage in investing activities. If borrowers default on loans facilitated on
our platform, the cost to service these loans may also increase without a corresponding increase in revenue earned from lending operations
and the value of the loans could decline. Higher default rates by these borrowers may lead to lower demand by our funding sources and
institutional investors to fund loans and other receivables facilitated by our platform, which would adversely affect our business, financial
condition and results of operations.
During periods of economic
slowdown or recession, our current and potential investors in our special purpose financing structure may reduce the number of loans or
other receivables they are willing to finance or demand terms that are less favorable to us, to compensate for any increased risks. A
reduction in the volume of the loans and other receivables we are able to finance through this structure would negatively impact our ability
to maintain or increase the level of our lending and provision of other services to customers. Any sustained decline in demand for loans
or other services we offer, or any increase in delinquencies or defaults that result from economic downturns, may harm our ability to
maintain robust volumes for our lending operations and other services, which would adversely affect our business, financial condition
and results of operations. For the year ended December 31, 2021, for secured personal loans provided through our Credit Builder Plus
membership program, the average 30+ day delinquency rate was 3.9% and the average monthly default rate was 1.4%. For the year ended
December 31, 2021, the non-repayment rate for advances provided through our Instacash product was 5.4%. See Part I, Item 1 “Business — Our
Product Platform.”
For example, the COVID-19 pandemic
and other related adverse economic events led to a significant increase in unemployment, comparable, and at times surpassing, the unemployment
rates during the peak of the financial crisis in 2008. There can be no assurance that levels of unemployment or underemployment will improve
in the near term. The increase in the unemployment rate could increase the non-repayment rate on our loans and advance products, increase
the rate of customers declaring bankruptcy or decrease our customers’ use of our investment and other products and services, any
of which could adversely affect the attractiveness of our loans and other receivables to our financing sources. If we are unable to adjust
our platform to account for events like the COVID-19 pandemic and the resulting rise in unemployment, or if our platform is unable to
more successfully predict the creditworthiness of potential borrowers compared to other lenders, then our business, financial condition
and results of operations could be adversely affected.
Furthermore, the COVID-19 pandemic
has caused some borrowers on our platform to request a temporary extension or modification of the payment schedules of their loans under
our temporary relief or loan modification programs, or hardship programs. If a large number of borrowers seek to participate in such hardship
programs, the investment returns of our financing sources could decline. Further, if the rate of borrowers that participate in such hardship
programs is greater than those experienced by our competitors, then our financing sources may become less interested providing financing
for our loans and other consumer receivables, which could negatively impact our funding strategy or significantly increase the cost of
obtaining funding. Any of the foregoing could adversely affect our business, financial condition and results of operations.
If there is an economic downturn
that affects our current and prospective customers or our financing sources, or if we are unable to address and mitigate the risks associated
with any of the foregoing, our business, financial condition and results of operations could be adversely affected.
We operate in a cyclical industry. In an
economic downturn, we may not be able to grow our business or maintain expected levels of liquidity or revenue growth.
The timing, severity and duration
of an economic downturn can have a significant negative impact on our ability to generate adequate revenue and to absorb expected and
unexpected losses. For example, in making a decision whether to extend credit to a new or existing customer or determine appropriate pricing
for a loan or whether to provide a customer an advance, our decision strategies rely on robust data collection, including from third-party
sources, proprietary scoring models and market expertise. An economic downturn could place financial stress on our customers, potentially
impacting our ability to make accurate assessments or decisions about our customers’ ability to pay for loans and other services
we provide, as well as our customers’ willingness to use our products and services. Our ability to adapt in a manner that balances
future revenue production and loss management may be tested in a downturn. The longevity and severity of a downturn may also place pressure
on our funding sources. There can be no assurance that our financing arrangements will remain available to us through any particular business
cycle or be renewed on the same terms. The timing and extent of a downturn may also require us to change, postpone or cancel our strategic
initiatives or growth plans to pursue shorter-term sustainability. The longer and more severe an economic downturn, the greater the potential
adverse impact on us, which could be material.
We are a rapidly growing company with a
relatively limited operating history, which may result in increased risks, uncertainties, expenses and difficulties, and makes it difficult
to evaluate our future prospects.
We were founded in 2013 and
have experienced rapid growth in recent years. Our limited operating history may make it difficult to make accurate predictions about
our future performance. Assessing our business and future prospects may also be difficult because of the risks and difficulties we face.
These risks and difficulties include our ability to:
| ● | improve the effectiveness and predictiveness of our data-driven
platform; |
| ● | maintain and increase the volume of loans, advances and other
financial products we provide through our platform; |
| ● | enter into new and maintain existing relationships with third-party
partners and service providers; |
| ● | successfully maintain cost-effective sources of financing for
our operations; |
| ● | maintain competitive interest rates offered to borrowers on
our platform, while enabling our funding sources to achieve an adequate return over their cost of funds; |
| ● | successfully build our brand and protect our reputation from
negative publicity; |
| ● | increase the effectiveness of our marketing strategies, including
our direct consumer marketing initiatives; |
| ● | continue to expand the number of our potential customers; |
| ● | successfully adjust our proprietary models, products and services
in a timely manner in response to changing macroeconomic conditions and fluctuations in the credit market; |
| ● | comply with and successfully adapt to complex and evolving regulatory
environments; |
| ● | protect against increasingly sophisticated fraudulent uses of
financial products and online theft; |
| ● | successfully compete with companies that are currently in, or
may in the future enter, the business of providing consumer financial services; |
| ● | enter into new markets and introduce new products and services; |
| ● | sufficiently obtain, maintain, protect, or enforce our intellectual
property and other proprietary rights; |
| ● | effectively secure and maintain the confidentiality of the information
received, accessed, stored, provided and used across our systems; |
| ● | successfully obtain and maintain funding and liquidity to support
continued growth and general corporate purposes; |
| ● | attract, integrate and retain qualified employees; and |
| ● | effectively manage and expand the capabilities of our operations
teams, outsourcing relationships and other business operations. |
If we are not able to timely
and effectively address these risks and difficulties as well as those described elsewhere in this “Risk Factors” section,
our business and results of operations may be harmed.
Our results of operations and future prospects
depend on our ability to attract new and retain existing customers. We face intense and increasing competition and, if we do not compete
effectively, our competitive positioning and our operating results may be harmed.
We operate in a rapidly changing
and highly competitive industry, and our results of operations and future prospects depend on, among others:
| ● | the continued growth of our customer base; |
| ● | our ability to monetize our customer base, including through
additional products by our existing customers; |
| ● | our ability to acquire customers at a lower cost; and |
| ● | our ability to increase the overall value to us of each of
our customers while they remain on our platform. |
We believe that our ability
to compete depends upon many factors both within and beyond our control, including, among others, the following:
| ● | the size, diversity and activity levels of our customer base; |
| ● | the timing and market acceptance of products and services,
including developments and enhancements to those products and services, offered by us and our competitors; |
| ● | customer service and support efforts; |
| ● | selling and marketing efforts; |
| ● | the ease of use, performance, price and reliability of solutions
developed either by us or our competitors; |
| ● | changes in economic conditions, regulatory and policy developments; |
| ● | general credit markets conditions and their impact on our
liquidity and ability to access funding; |
| ● | the ongoing impact of the COVID-19 pandemic on the lending
and financial services markets we serve; |
| ● | our brand strength relative to our competitors; and |
| ● | competition over highly skilled personnel in the technology
industry. |
We expect our competition to
continue to increase, as there are generally no substantial barriers to entry to the markets we serve. In addition to established enterprises,
we may also face competition from early-stage companies attempting to capitalize on the same, or similar, opportunities as we are. Some
of our current and potential competitors have longer operating histories, particularly with respect to financial services products similar
to ours, significantly greater financial, technical, marketing and other resources and a larger customer base than we do. This allows
them, among other things, to potentially offer more competitive pricing or other terms or features, a broader range of financial products
or a more specialized set of specific products or services, as well as respond more quickly than we can to new or emerging technologies
and changes in customer preferences. Our existing or future competitors may develop products or services that are similar to our products
and services or that achieve greater market acceptance than our products and services. This could attract customers away from our services
and reduce our market share in the future. Additionally, when new competitors seek to enter our markets, or when existing market participants
seek to increase their market share, these competitors sometimes undercut, or otherwise exert pressure on, the pricing terms prevalent
in that market, which could adversely affect our market share and/or ability to capitalize on new market opportunities.
We currently compete at multiple
levels with a variety of competitors, including:
| ● | traditional banks and credit unions; |
| ● | new entrants obtaining banking licenses; |
| ● | other non-bank digital providers that white label regulated
products, offering banking-related services; |
| ● | specialty finance and other non-bank providers, offering consumer
lending-related products or advances; and |
| ● | online wealth management platforms, such as robo-advisors,
offering consumer investment services. |
We compete with traditional
banks for many of the services we offer. Because we do not currently control a bank or a bank holding company, we are subject to regulation
by a variety of state and federal regulators across our products and services and we rely on MetaBank to provide banking accounts and
debit cards to our customers. This regulation by federal, state and local authorities increases our compliance costs, particularly for
our lending business, as we navigate multiple regimes with different examination schedules and processes, varying disclosure requirements
and at times conflicting consumer protection laws. In addition, our ability to compete may be hampered in certain states where the amount
of interest we are permitted to charge customers is capped and we are consequently unable to make loans to all the customers that we believe
may be qualified but to whom we cannot offer the appropriate risk-adjusted margin.
Our current and future business
prospects demand that we act to meet these competitive challenges but, in doing so, our net revenue and results of operations could be
adversely affected if we, for example, increase marketing expenditures or make other expenditures. Competitive pressures could also result
in us reducing the amounts we charge for our various products and services, such as reducing the annual percentage rate on the loans we
originate, or incurring higher customer acquisition costs, and could make it more difficult for us to grow our financial services product
offerings in both number and volume for new as well as existing customers. All of the foregoing factors and events could adversely affect
our business, financial condition, results of operations, cash flows and future prospects.
In addition, our subsidiary,
MALKA, faces competition from others in the digital content creation industry and media companies. MALKA’s current and potential
competitors range from large and established companies to emerging start-ups. Established companies have longer operating histories and
more established relationships with customers and users, and they can use their experience and resources in ways that could affect MALKA’s
competitive position, including by making acquisitions, investing aggressively in research and development, aggressively initiating intellectual
property claims (whether or not meritorious) and competing aggressively for advertisers and websites. Emerging start-ups may be able to
innovate and provide products and services faster than we can. MALKA’s operating results may suffer if its digital content is not
appropriately timed with market opportunities, or if its digital content is not effectively brought to market. As technology continues
to develop, MALKA may be forced to compete in different ways and expend significant resources in order to remain competitive. If MALKA’s
competitors are more successful than MALKA is in developing compelling content or in attracting and retaining clients, MALKA’s revenues
and operating results could be adversely affected.
Demand for our products or services may
decline if we do not continue to innovate or respond to evolving technological or other changes.
We operate in a dynamic industry
characterized by rapidly evolving technology, frequent product introductions and competition based on pricing and other differentiators.
We rely on our proprietary technology to make the MoneyLion platform available to customers, to service customers and to introduce new
products. In addition, we may increasingly rely on technological innovation as we introduce new types of products, expand our current
products into new markets, and continue to streamline the MoneyLion platform. The process of developing new technologies and products
is complex, and if we are unable to successfully innovate and continue to deliver a superior customer experience, customers’ demand
for our products may decrease and our growth and operations may be harmed. Participants in our industry also compete on price, and our
ability to meet the demand of our customers in this respect could affect our ability to maintain demand for our products and services.
In addition, our subsidiary,
MALKA, provides digital media and content production services to clients in entertainment, sports, gaming, live streaming and other sectors.
To the extent that MALKA is unable to successfully innovate and provide superior services to its clients, these actions could reduce demand
for certain services provided by MALKA, which could have an adverse effect on our results of operations and financial position.
Any acquisitions, strategic investments,
entries into new businesses, joint ventures, divestitures and other transactions could fail to achieve strategic objectives, disrupt our
ongoing operations or result in operating difficulties, liabilities and expenses, harm our business and negatively impact our results
of operations.
We have and will continue to
evaluate and consider strategic transactions, combinations, acquisitions, dispositions or alliances, or other entries into new businesses.
These transactions, including the recently completed acquisitions of MALKA and Even Financial, could be material to our financial condition
and results of operations if consummated. If we are able to identify an appropriate business opportunity, we may not be successful in
negotiating favorable terms and/or consummating the transaction and, even if we do consummate such a transaction, we may be unable to
obtain the benefits or avoid the difficulties and risks of such transaction.
Any strategic transaction,
combination, acquisition, disposition or alliance we have entered into, including the recently completed acquisitions of MALKA and Even
Financial, or may enter into in the future will involve risks encountered in business relationships, including:
| ● | difficulties in assimilating and integrating the operations,
personnel, systems, data, technologies, products and services of the acquired business; |
| ● | inability of the acquired technologies, products or businesses
to achieve expected levels of revenue, profitability, productivity or other benefits; |
| ● | difficulties in retaining, training, motivating and integrating
key personnel; |
| ● | diversion of management’s time and resources from our
normal daily operations; |
| ● | difficulties in successfully incorporating licensed or acquired
technology and rights into our platform; |
| ● | difficulties in maintaining uniform standards, controls, procedures
and policies within the combined organizations; |
| ● | difficulties in retaining relationships with customers, employees
and suppliers of the acquired business; |
| ● | risks of entering markets in which we have no or limited direct
prior experience; |
| ● | regulatory risks, including remaining in good standing with
existing regulatory bodies or receiving any necessary pre-closing or post-closing approvals, as well as being subject to new regulators
with oversight over an acquired business; |
| ● | assumption of contractual obligations that contain terms that
are not beneficial to us, require us to license or waive intellectual property rights or increase our risk for liability; |
| ● | failure to successfully further develop the acquired technology; |
| ● | liability for activities of the acquired or disposed of business
before the acquisition or disposition, including patent and trademark infringement claims, violations of laws, regulatory actions, commercial
disputes, tax liabilities and other known and unknown liabilities; |
| ● | difficulty in separating assets and replacing shared services; |
| ● | assumption of exposure to performance of any acquired loan
portfolios; |
| ● | potential disruptions to our ongoing businesses; and |
| ● | unexpected costs and unknown risks and liabilities associated
with strategic transactions. |
We may not make any transactions,
combinations, acquisitions, dispositions or alliances, or any such transactions, combinations, acquisitions, dispositions or alliances
may not be successful, may not benefit our business strategy, may not generate sufficient revenue to offset the associated costs or may
not otherwise result in the intended benefits. It may take us longer than expected to fully realize the anticipated benefits and synergies
of these transactions, and those benefits and synergies may ultimately be smaller than anticipated or may not be realized at all, which
could adversely affect our business and operating results.
Our recent acquisitions of
MALKA and Even Financial include both cash consideration and issuance of equity. Any future transactions, combinations, acquisitions,
dispositions or alliances may also require us to issue additional equity securities, spend our cash, or incur debt (and increased interest
expense), liabilities and amortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our
results of operations and dilute the economic and voting rights of our stockholders and the interests of holders of our indebtedness.
We may not be successful in
identifying businesses or opportunities that meet our acquisition or expansion criteria. Even if a potential acquisition target or other
strategic investment is identified, we may not be successful in completing such acquisition or integrating such new business or other
investment. For example, we may not be successful in completing the integration of the MALKA business or the Even Financial business with
our business. We expect that completing the integration process for each acquisition will require significant additional time and resources,
and we may not be able to manage the process successfully. It is possible that we will experience disruption of our, MALKA’s or
Even Financial’s ongoing businesses.
In addition, we cannot assure
you that any future acquisition of new businesses or technology will lead to the successful development of new or enhanced products and
services or that any new or enhanced products and services, if developed, will achieve market acceptance or prove to be profitable. Further,
we may also choose to divest certain businesses or product lines that no longer fit with our strategic objectives. If we decide to sell
assets or a business, we may have difficulty obtaining terms acceptable to us in a timely manner, or at all. Additionally, the terms of
such potential transactions may expose us to ongoing obligations and liabilities.
Because we rely on third parties to provide
services, we could be adversely impacted if they fail to fulfill their obligations or if our arrangements with them are terminated and
suitable replacements cannot be found on commercially reasonable terms or at all.
We depend on certain key third-party
partners, service providers and vendors for certain products and services. The success of our business depends in part on our ability
to work with a bank partner, currently MetaBank, to provide our customers with deposit accounts and debit cards facilitated through our
platform. We are also dependent on our relationship with DriveWealth, a third-party broker-dealer partner, which provides brokerage and
related services for the investment accounts facilitated through our platform, as well as with Zero Hash, a third-party digital asset
settlement provider, which provides certain digital currency-related products and services to our customers. Any changes in these relationships
or loss of these partners could degrade the functionality of our products and services, impose additional costs or requirements or give
preferential treatment to competitors’ services, including their own services, and materially and adversely affect usage of our
products and services. In the event our agreements with these third parties are terminated, or if upon their expiration we are unable
to renew the contracts on terms favorable to us, or at all, it may be difficult for us to replace these services, which may adversely
affect our operations and profitability. Some of these organizations and third-party service providers provide similar services and technology
to our competitors, and we do not have long-term or exclusive contracts with them.
In addition, we rely on relationships
with third-party partners to obtain and maintain customers. Our ability to acquire new customers could be materially harmed if we are
unable to enter into or maintain these relationships on terms that are commercially reasonable to us, or at all.
Our systems and operations
or those of our third-party service providers could be exposed to damage or interruption from, among other things, financial insolvency,
bankruptcy, contractual default, or adverse regulatory changes. In addition, we may be unable to renew our existing contracts with our
most significant third-party relationships, MetaBank and DriveWealth, or they may stop providing or otherwise supporting the products
and services we obtain from them, and we may not be able to obtain these or similar products or services on the same or similar terms
as our existing arrangements, if at all. The failure of these third-party providers to perform their obligations and provide the products
and services we obtain from them in a timely manner for any reason could adversely affect our operations and profitability.
If we fail to comply with the applicable
requirements of our third-party partners, they could seek to suspend or terminate our accounts, which could adversely affect our business.
We rely on agreements with
MetaBank, DriveWealth, Zero Hash and other third-party providers to provide deposit accounts, debit card services, investment advisory
services and cryptocurrency-related services. These agreements and corresponding regulations governing banks and financial institutions
may give them substantial discretion in approving certain aspects of our business practices, including our application and qualification
procedures for customers and require us to comply with certain legal requirements. Our financial institution partners’ discretionary
actions under these agreements could impose material limitations to, or have a material adverse effect on, our business, financial condition
and results of operations. Without these relationships, we would not be able to service our deposit accounts, debit cards, investment
accounts and cryptocurrency accounts, which would have a material adverse effect on our business, financial condition and results of operations.
Furthermore, our financial results could be adversely affected if our costs associated with such relationships materially change or if
any penalty or claim for damages is imposed as a result of our breach of the agreement with them or their other requirements.
We rely on third-party service providers
for payment processing and other functions that are important to our operations. The loss of those service providers could materially
and adversely affect our business, results of operations and financial condition. Additionally, if a third-party service provider fails
to comply with legal or regulatory requirements or otherwise to perform these functions properly, our business may be adversely affected.
We rely on third-party service
providers to perform various functions relating to our business, including underwriting, fraud detection, marketing, operational functions,
cloud infrastructure services, information technology and telecommunications, and, because we are not a bank and cannot belong to or directly
access the ACH payment network, ACH processing and debit card payment processing. While we oversee these service providers to ensure they
provide services in accordance with our agreements and regulatory requirements, we do not have control over the operations of any of the
third-party service providers that we utilize. In the event that a third-party service provider for any reason fails to perform such functions,
including through negligence, willful misconduct or fraud, our ability to process payments and perform other operational functions for
which we currently rely on such third-party service providers will suffer and our business, cash flows and future prospects may be negatively
impacted.
Additionally, if one or more
key third-party service providers were to cease to exist, to become a debtor in a bankruptcy or an insolvency proceeding or to seek relief
under any debtor relief laws or to terminate its relationship with us, there could be delays in our ability to process payments and perform
other operational functions for which we are currently relying on such third-party service provider, and we may not be able to promptly
replace such third-party service provider with a different third-party service provider that has the ability to promptly provide the same
services in the same manner and on the same economic terms. As a result of any such delay or inability to replace such key third-party
service provider, our ability to process payments and perform other business functions could suffer and our business, cash flows and future
prospects may be negatively impacted.
A significant change in consumer confidence
in our products and services or adverse publicity concerning us, our business or our personnel could negatively impact our business.
We have developed a strong
and trusted brand that has contributed significantly to the success of our business. We believe that maintaining and promoting our brand
in a cost-effective manner is critical to achieving widespread acceptance of our products and services, retaining existing customers on
our platform and expanding our base of customers.
Maintaining and promoting our
brand will depend largely on our ability to continue to provide useful, reliable, secure and innovative products and services, the effectiveness
of our marketing efforts, the experience of existing customers and our ability to maintain trust and remain a leading financial services
platform. We may introduce, or make changes to, features, products, services, privacy practices or terms of service that customers do
not like, which may materially and adversely affect our brand. Our efforts to build our brand have involved significant expense, and we
expect to increase our marketing spend in the near term. Our brand promotion activities, including efforts and initiatives to create personalized
content using MALKA’s digital media and content production services, may not generate customer awareness or increase revenue, and
even if they do, any increase in revenue may not offset the expenses we incur in building our brand. Additionally, the successful protection
and maintenance of our brand will depend on our ability to obtain, maintain, protect and enforce trademark and other intellectual property
protection for our brand. If we fail to successfully promote, protect and maintain our brand or if we incur excessive expenses in this
effort, we may lose our existing merchants and customers to our competitors or be unable to attract new merchants and customers. Any such
loss of existing merchants or customers, or inability to attract new merchants or customers, would have an adverse effect on our business
and results of operations.
Harm to our brand can arise
from many sources, including failure by us or our partners and service providers to satisfy expectations of service and quality, inadequate
protection or misuse of PII, compliance failures and claims, litigation and other claims, misconduct by our partners or other counterparties
or any other negative publicity concerning our company or key personnel, including management and MALKA’s content creators. We have
been, from time to time and may in the future be, the target of incomplete, inaccurate and misleading or false statements about our company
and our business that could damage our brand and deter customers from adopting our services.
Any negative publicity relating
to the individuals or entities that we employ or contract with or that otherwise represent our company, including from reported or actual
incidents or allegations of illegal or improper conduct, such as harassment, discrimination or other misconduct, as well as any negative
publicity about our industry or our company, the quality and reliability of our products and services, our compliance and risk management
processes, changes to our products and services, our ability to effectively manage and resolve customer complaints, our privacy, data
protection and information security practices, litigation, regulatory licensing and infrastructure, and the experience of our customers
with our products or services, could result in significant media attention, even if not directly relating to or involving MoneyLion. This
could also have a negative impact on our reputation, potentially resulting in termination of contracts, our inability to attract new customer
or client relationships or the loss or termination of such employees’ services. If we do not successfully maintain a strong and
trusted brand, our business could be materially and adversely affected.
Companies periodically review and change
their advertising and marketing business models and relationships. If MALKA, our wholly-owned subsidiary, is unable to remain competitive
or retain key clients, its business and results of operations and financial position may be adversely affected.
From time to time, MALKA’s
clients put their advertising and marketing business up for competitive review. Key competitive considerations for retaining existing
business and winning new business include the quality and effectiveness of the advertising and marketing services that MALKA offers and
the content that it produces, actions taken by MALKA’s competitors to enhance their offerings, whether MALKA meets the expectations
of its customers, its ability to efficiently serve clients, particularly large international clients, on a broad geographic basis and
a number of other factors. To the extent that MALKA is not able to remain competitive or retain key clients, its revenue may be materially
adversely affected, which could have an adverse effect on our results of operations and financial position. In addition, many factors
can affect corporate spending, including economic conditions, changes in tax rates and tax laws and inflation, and any reduction
in client spending or a delay in client payments could significantly impact MALKA’s operating results. While corporate spending
may decline at any time for reasons beyond our or MALKA’s control, the risks associated with MALKA’s business become more
acute in periods of a slowing economy or recession, which may be accompanied by reductions in corporate sponsorship and advertising.
If the information provided to us by customers
is incorrect or fraudulent, we may misjudge a customer’s qualifications to receive our products and services and our results of
operations may be harmed and could subject us to regulatory scrutiny or penalties.
Our decisions to provide many
of our products and services to our customers are based partly on information customers provide to us or authorize us to receive. To the
extent that these customers provide information to us in a manner that we are unable to verify, our decisioning process may not accurately
reflect the associated risk. In addition, data provided by third-party sources, including consumer reporting agencies, is a component
of our credit decisions and this data may contain inaccuracies. Inaccurate analysis of credit data that could result from false loan application
information could harm our reputation, business and results of operations.
In addition, we use identity
and fraud prevention tools to analyze data provided by external databases to authenticate each applicant’s identity. From time to
time, these checks have failed and there is a risk that these checks could fail in the future, and fraud, which may be significant, may
occur. We may not be able to recoup funds underlying loans or associated with our other services made in connection with inaccurate statements,
omissions of fact or fraud, in which case our revenue, results of operations and profitability will be harmed. Fraudulent activity or
significant increases in fraudulent activity could also lead to regulatory intervention, which could negatively impact our results of
operations, brand and reputation, and require us to take steps to reduce fraud risk, which could increase our costs.
Many of our investment advisory customers
are first-time investors and our revenues could be reduced if these customers stop investing altogether or stop using our platform for
their investing activities.
Our business model focuses
on making the financial markets accessible to a broad demographic of retail investors. In each of the years ended December 31,
2020 and 2019, over half of our customers for the applicable period were first-time investors. Our success, and our ability to increase
revenues and operate profitably, depends in part on such customers continuing to utilize our platform, even as global social and economic
conditions shift. However, our customers do not have long-term contractual arrangements with us and can utilize our platform on a transaction-by-transaction
basis and may also cease to use our platform at any time or use a competitor’s platform. We may face particular challenges in retaining
these investors as customers, for example as a result of a return to pre-COVID-19 behaviors, increased volatility in the financial markets
or increasing availability of competing products that seek to target the same demographic. In particular, a broad decline or volatility
in the equity or other financial markets could result in some of these investors exiting the markets and leaving our platform. Any significant
loss of these customers or a significant reduction in their use of our platform could have a material impact on our investment volumes
and revenues, and materially adversely affect our business, financial condition and results of operations.
If loans and other receivables originated
through our platform do not perform, or significantly underperform, we may incur financial losses on the receivables we originate or lose
the confidence of our financing sources.
Any significant underperformance
of the loans and other receivables facilitated through our platform, especially if they underperform compared to those generated by our
competitors, may adversely impact our relationship with our funding sources and result in their loss of confidence in us, which could
lead to the termination of our existing funding arrangements. Any requirement that we increase the amount of receivables we hold on our
balance sheet due to a decrease or termination by our funding sources in their investments in our credit products and other consumer receivables
could have a material adverse effect on our business, results of operations, financial condition and future prospects.
Borrowers may prepay a loan at any time
without penalty, which could reduce our revenue and limit our ability to obtain financing for our lending operations.
A borrower may decide to prepay
all or a portion of the remaining principal amount on a loan at any time without penalty. If the entire or a significant portion of the
remaining unpaid principal amount of a loan is prepaid, we would receive significantly lower interest associated with such prepaid loan.
Prepayments may occur for a variety of reasons, including if interest rates decrease after a loan is made. If a significant volume of
prepayments occurs, the amount of our servicing fees would decline, which could harm our business and results of operations. Our data-driven
models are designed to predict prepayment rates. However, if a significant volume of prepayments occur that our models do not accurately
predict, returns targeted by our financing sources in our loan funding programs would be adversely affected and our ability to attract
new investors would be negatively affected.
We service all of the loans and advances
we originate. A failure by us to service loans or advances properly could result in lost revenue and negatively impact our business and
operations or subject us to regulatory scrutiny or penalties.
We service all of the loans
and advances we originate. Any failure on our part to perform functions related to our servicing activities to properly service our loans
or advances could result in a significant decrease in the amount of loans or advances we service and therefore adversely impact the amount
of revenue generated from interest income.
We rely on a variety of funding sources
to support our business model. If our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling
or unable to provide funding to us on terms acceptable to us, or at all, it could have a material adverse effect on our business, results
of operations, financial condition, cash flows and future prospects.
To support the origination
of loans and other receivables on our platform and the growth of our business, we must maintain a variety of funding arrangements. If
we are unable to maintain access to, or expand, our funding arrangements, our business, results of operations, financial condition and
future prospects could be materially and adversely affected.
We cannot guarantee that these
funding arrangements will continue to be available on favorable terms or at all, and our funding strategy may change over time and depends
on the availability of such funding arrangements. For example, disruptions in the credit markets or other factors, such as the impact
of the COVID-19 pandemic, could adversely affect the availability, diversity, cost and terms of our funding arrangements. The broad impact
of COVID-19 on the financial markets has created uncertainty and volatility in many funding markets and with many funding sources. In
addition, our funding sources may reassess their exposure to our industry and either curtail access to uncommitted financing capacity,
fail to renew or extend facilities, or impose higher costs to access our funding.
In addition, there can be no
assurances that we would be able to extend or replace our existing funding arrangements at maturity, on reasonable terms or at all. If
our existing funding arrangements are not renewed or replaced or our existing funding sources are unwilling or unable to provide funding
on terms acceptable to us, or at all, we would need to secure additional sources of funding or reduce our operations significantly. Further,
as the volume of loans and other receivables facilitated through our platform increases, we may require the expansion of our funding capacity
under our existing funding arrangements or the addition of new sources of capital. The availability and diversity of our funding arrangements
depends on various factors and are subject to numerous risks, many of which are outside of our control.
The agreements governing our
funding arrangements require us to comply with certain covenants. A breach of such covenants or other events of default under our funding
agreements could result in the reduction or termination of our access to such funding, could increase our cost of such funding or, in
some cases, could give our lenders the right to require repayment of the loans prior to their scheduled maturity. Certain of these covenants
and restrictions limit our and our subsidiaries’ ability to, among other things: incur additional debt; create liens on certain
assets; pay dividends on or make distributions in respect of their capital stock or make other restricted payments; consolidate, merge,
sell, or otherwise dispose of all or substantially all of their assets; and enter into certain transactions with their affiliates. Our
senior credit facility also contains certain financial maintenance covenants that require us and our subsidiaries to maintain a certain
income level each quarter, and to maintain a minimum level of unrestricted cash while any borrowings under the senior credit facility
are outstanding.
In the event of a sudden or
unexpected shortage of funds in the financial system, we may not be able to maintain necessary levels of funding without incurring high
funding costs, a reduction in the term or size of funding instruments, and/or the liquidation of certain assets. In such a case, if we
are unable to arrange new or alternative methods of financing on favorable terms, we would have to reduce our transaction volume, which
could have a material adverse effect on our business, results of operations, financial condition, cash flows and future prospects.
We may be unsuccessful in managing the effects
of changes in the cost of capital on our business.
In the future, we may seek
to access the capital markets to obtain capital to develop new technologies, expand our business, respond to competitive pressures and
make acquisitions. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements.
However, our future access to the capital markets and ability to obtain debt or equity funding could be restricted due to a variety of
factors, including a deterioration of our earnings, cash flows, balance sheet quality, our credit rating, investor interest or overall
business or industry prospects, our share price, interest rates, adverse regulatory changes, a disruption to or volatility or deterioration
in the state of the capital markets, or a negative bias toward our industry by market participants. Due to the negative bias toward our
industry, certain financial institutions have restricted access to available financing by participants in our industry, and we may have
more limited access to institutional capital than other businesses. Future prevailing capital market conditions and potential disruptions
in the capital markets may adversely affect our efforts to arrange additional financing on terms that are satisfactory to us, if at all.
In addition, our share price has been and may continue to be volatile and any limitation on market liquidity or reduction in the price
of MoneyLion Class A Common Stock, including as a result of a delisting of our securities from a national exchange, could have a material
adverse effect on our ability to raise capital on terms acceptable to us, or at all. If adequate funds are not available, or are not available
on acceptable terms, we may not have sufficient liquidity to fund our operations, make future investments, take advantage of acquisitions
or other opportunities, or respond to competitive challenges and this, in turn, could adversely affect our ability to advance our strategic
plans. In addition, if the capital and credit markets experience volatility, and the availability of funds is limited, third parties with
whom we do business may incur increased costs or business disruption and this could adversely affect our business relationships with such
third parties, which in turn could have a material adverse effect on our business, results of operations, financial condition, cash flows
and future prospects.
If we succeed in raising additional
funds through the issuance of equity or equity-linked securities, then existing stockholders could experience substantial dilution. If
we raise additional funds through the issuance of debt securities or preferred stock, these new securities would have rights, preferences
and privileges senior to those of the holders of our common stock. In addition, any such issuance could subject us to restrictive covenants
relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities, including potential acquisitions. Further, to the extent we incur additional
indebtedness or such other obligations, the risks associated with our existing debt, including our possible inability to service our existing
debt, would increase.
We depend on our key personnel and other
highly skilled personnel, and if we fail to attract, retain and motivate our personnel, our business, financial condition and results
of operations could be adversely affected.
Our success significantly depends
on the continued service of our senior management team, including Diwakar (Dee) Choubey, our Co-Founder and Chief Executive Officer, and
Rick Correia, our Chief Financial Officer, and other highly skilled personnel. Our success also depends on our ability to identify, hire,
develop, motivate and retain highly qualified personnel for all areas of our organization.
Competition for highly skilled
personnel, including engineering and data analytics personnel, is extremely intense, particularly in New York where our headquarters
is located. We have experienced, and expect to continue to face, difficulty identifying and hiring qualified personnel in many areas and
may also encounter difficulties in retaining key employees of acquired companies, especially as we pursue our growth strategy. Further,
as a result of the COVID-19 pandemic, a large and increasing number of companies have adopted permanent work-from-home policies, which
further increases the challenges associated with hiring and retaining qualified personnel. We may not be able to hire or retain such personnel
at compensation or flexibility levels consistent with our existing compensation and salary structure and policies. Many of the companies
with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of
employment. In particular, candidates making employment decisions, specifically in high-technology industries, often consider the value
of any equity they may receive in connection with their employment. Any significant volatility in the price of our stock may adversely
affect our ability to attract or retain highly skilled technical, financial and marketing personnel.
In addition, we invest significant
time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain
our employees, we could incur significant expenses in hiring and training their replacements. While we are in the process of training
their replacements, the quality of our services and our ability to serve our customers could decline, resulting in an adverse effect on
our business.
Increases in the costs of content may have
an adverse effect on MALKA’s business, financial condition and results of operations.
The success of the business
of our subsidiary, MALKA, is dependent in part on its ability to produce popular content. The production of such content depends on MALKA’s
ability to retain its content creators. As MALKA’s business develops, MALKA may incur increasing revenue-sharing costs to compensate
its content creators for producing original content. MALKA relies on its team to generate creative ideas for original content and to supervise
the original content origination and production process, and MALKA intends to continue to invest resources in content production. If MALKA
is not able to compete effectively for talent or attract and retain top influencers at reasonable costs, MALKA’s original content
production capabilities would be negatively impacted.
Our engineering and technical development
teams are based primarily in Malaysia, which could be adversely affected by changes in political or economic stability or by government
policies.
Our engineering and technical
development teams operate a foreign office in Malaysia, which is subject to relatively higher degrees of political and social instability
than the United States and may lack the infrastructure to withstand political unrest or natural disasters. The political or regulatory
climate in the United States, or elsewhere, also could change so that it would not be lawful or practical for us to use international
operations in the manner in which we currently use them. If we had to curtail or cease operations in Malaysia and transfer some or all
of these operations to another geographic area, we would incur significant transition costs as well as higher future overhead costs that
could materially and adversely affect our results of operations. In many foreign countries, particularly in those with developing economies,
it may be common to engage in business practices that are prohibited by laws and regulations applicable to us, such as the Foreign Corrupt
Practices Act of 1977, as amended (“FCPA”). Any violations of the FCPA or local anti-corruption laws by us, our
subsidiaries or our local agents could have an adverse effect on our business and reputation and result in substantial financial penalties
or other sanctions.
Our ability to collect payments on our financial
products and services and maintain accurate accounts may be adversely affected by computer malware, social engineering, phishing, physical
or electronic break-ins, undetected technical errors, bugs and similar disruptions.
The automated nature of our
platform may make it an attractive target for hacking and potentially vulnerable to computer viruses, physical or electronic break-ins
and similar disruptions. It is possible that we may not be able to anticipate or to implement effective preventive measures against all
security breaches of these types, in which case there would be an increased risk of fraud or identity theft, and we may experience losses
on, or delays in the collection of amounts owed on, a fraudulently induced loan or payments relating to our other products and services.
Security breaches could occur from outside our company, and also from the actions of persons inside our company who may have authorized
or unauthorized access to our technology systems. Furthermore, any failure of our computer systems could cause an interruption in operations
and result in disruptions in, or reductions in the amount of, collections on fees and other amounts from our customers.
Additionally, if hackers were
able to access our secure files, they might be able to gain access to the personal information of our customers. If we are unable to prevent
such activity, we may be subject to significant liability, negative publicity and a material loss of customers, all of which may negatively
affect our business.
Our platform and internal systems, and those
of third parties upon whom we rely, rely on software that is highly technical, and if it contains undetected technical errors, our business
could be adversely affected.
Our platform and internal systems
rely on software that is highly technical and complex. In addition, our platform and internal systems depend on the ability of such software
to store, retrieve, process and manage high volumes of data. The software upon which we rely may from time to time contain undetected
technical errors or bugs. Some technical errors or bugs may only be discovered after the code has been released for external or internal
use. Technical errors or other design defects within the software upon which we rely may result in failure to accurately predict a loan
applicant’s creditworthiness or the suitability of other applicants for our other products and services, failure to comply with
applicable laws and regulations, approval of sub-optimally priced loans, incorrectly displayed interest rates or other fees to borrowers
and other customers, or incorrectly charged interest or fees to borrowers and other customers, third-party partners or institutional investors,
failure to detect fraudulent activity on our platform, our inability to accurately evaluate potential customers, a negative experience
for customers or third-party partners, delayed introductions of new features or enhancements or failure to protect customer data, our
intellectual property or other sensitive data or proprietary information. Any technical errors, bugs or defects discovered in the software
upon which we rely could result in harm to our reputation, loss of customers or bank partners, increased regulatory scrutiny, fines or
penalties, loss of revenue or liability for damages, any of which could adversely affect our business, financial condition and results
of operations.
Some aspects of our business processes include
open-source software, which poses risks that could have a material and adverse effect on our business, financial condition and results
of operations. In addition, any failure to comply with the terms of one or more of these open-source licenses could negatively affect
our business.
We incorporate open-source
software into processes supporting our business and anticipate using open-source software in the future. Such open-source software may
include software covered by licenses like the GNU General Public License and the Apache License. The terms of various open-source licenses
to which we are subject have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a
manner that imposes unanticipated conditions or restrictions on our ability to operate our systems, limits our use of the software, inhibits
certain aspects of our systems and negatively affects our business operations.
Some open-source licenses contain
requirements that we make source code modifications or derivative works we create publicly available or make available on unfavorable
terms or at no cost, based upon the type of open-source software we use.
While we monitor our use of
open-source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or
that would otherwise breach the terms of an open-source license, such use could inadvertently occur, or could be claimed to have occurred,
in part because open-source license terms are often ambiguous. We may face claims from third parties claiming ownership of, or demanding
the release or license of, modifications or derivative works that we have developed using such open-source software (which could include
our proprietary source code or artificial intelligence (“AI”) models), or otherwise seeking to enforce the terms of the applicable
open-source license. These claims could result in litigation and if portions of our proprietary AI models or software are determined to
be subject to an open-source license, or if the license terms for the open-source software that we incorporate change, we could be required
to publicly release all or affected portions of our source code, purchase a costly license, cease offering the implicated products or
services unless and until we can re-engineer such source code in a manner that avoids infringement, discontinue or delay the provision
of our offerings if re-engineering could not be accomplished on a timely basis or change our business activities, any of which could negatively
affect our business operations and potentially our intellectual property rights. In addition, the re-engineering process could require
us to expend significant additional research and development resources, and we may not be able to complete the re-engineering process
successfully. If we were required to publicly disclose any portion of our proprietary models, it is possible we could lose the benefit
of trade secret protection for our models.
In addition to risks related
to license requirements, the use of certain open-source software can lead to greater risks than the use of third-party commercial software,
as open-source licensors generally do not provide support, warranties, indemnification, controls or other contractual protections regarding
infringement claims or the quality of the origin of the software. There is little legal precedent in this area, and any actual or claimed
requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third
parties, including our competitors, develop products and services that are similar to or better than ours. Use of open-source software
may also present additional security risks because the public availability of such software may make it easier for hackers and other third
parties to determine how to breach our website and systems that rely on open-source software. Any of these risks associated with the use
of open-source software could be difficult to eliminate or manage, and if not addressed, could materially and adversely affect our business,
financial condition and results of operations.
Systems defects, failures or disruptions,
including events beyond our control, and resulting interruptions in the availability of our websites, applications, products, or services
could harm our business, harm our reputation, result in significant costs to us, decrease our potential profitability and expose us to
substantial liability.
We use vendors, such as our
cloud computing web services provider, account transaction and card processing companies, and third-party software providers, in the operation
of our platform. The satisfactory performance, reliability and availability of our technology and our underlying network and infrastructure
are critical to our operations and reputation and the ability of our platform to attract new and retain existing customers. We rely on
these vendors to protect their systems and facilities against damage or service interruptions from natural disasters, power or telecommunications
failures, air quality issues, environmental conditions, computer viruses or attempts to harm these systems, criminal acts, unauthorized
access, sabotage, acts of vandalism, military actions, negligence, human errors, fraud, spikes in platform use and denial of service issues,
hardware failures, improper operation, cyberattacks, data loss, wars and similar events. If our arrangement with a vendor is terminated
or if there is a lapse of service or damage to its systems or facilities, we could experience interruptions in our ability to operate
our platform. We also may experience increased costs and difficulties in replacing that vendor and replacement services may not be available
on commercially reasonable terms, on a timely basis, or at all.
In addition, our platform is
accessed by many customers, often at the same time. As we continue to expand the number of our customers, and products and services available
through our platform, we may not be able to scale our technology to accommodate the increased capacity requirements. The failure of data
centers, internet service providers or other third-party service providers to meet our capacity requirements could result in interruptions
or delays in access to our platform or impede our ability to grow our business and scale our operations. Any interruptions or delays in
our platform availability, whether as a result of a failure to perform on the part of a vendor, any damage to one of our vendor’s
systems or facilities, the termination of any of our third-party vendor agreements, software failures, our or our vendor’s error,
natural disasters, terrorism, other man-made problems, security breaches, whether accidental or willful, or other factors, could harm
our relationships with our customers, prevent our customers from accessing their accounts, damage our reputation with current and potential
customers, expose us to liability, cause us to lose customers, cause the loss of critical data, prevent us from supporting our platform,
products or services or cause us to incur additional expense in arranging for new facilities and support or otherwise harm our business
and also harm our reputation.
In addition, we source certain
information from third parties. For example, our risk-scoring model is based on algorithms that evaluate a number of factors and currently
depend on sourcing certain information from third parties, including consumer reporting agencies. In the event that any third party from
which we source information experiences a service disruption, whether as a result of maintenance, natural disasters, terrorism, or security
breaches, whether accidental or willful, or other factors, the ability to score and decision loan applications and applications for our
other products and services through our platform may be adversely impacted. Additionally, there may be errors contained in the information
provided by third parties. This may result in the inability to approve otherwise qualified applicants through our platform, which may
adversely impact our business by negatively impacting our reputation and reducing our transaction volume.
To the extent we use or are
dependent on any particular third-party data, technology, or software, we may also be harmed if such data, technology, or software becomes
non-compliant with existing regulations or industry standards, becomes subject to third-party claims of intellectual property infringement,
misappropriation, or other violation, or malfunctions or functions in a way we did not anticipate. Any loss of the right to use any of
this data, technology, or software could result in delays in the provisioning of our products and services until equivalent or replacement
data, technology, or software is either developed by us, or, if available, is identified, obtained, and integrated, and there is no guarantee
that we would be successful in developing, identifying, obtaining, or integrating equivalent or similar data, technology, or software,
which could result in the loss or limiting of our products, services, or features available in our products or services.
In addition, in the event of
damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery
plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in
the event of an outage. Furthermore, prolonged interruption in the availability, or reduction in the speed or other functionality, of
our platform, products or services could materially harm our reputation and business. Any of the foregoing could prevent us from processing
transactions or posting payments on our platform, damage our brand and reputation, divert the attention of our employees, reduce our revenue,
subject us to liability and cause customers to abandon our platform, any of which could have a material and adverse effect on our business,
results of operations, financial condition and future prospects.
Real or perceived inaccuracies in our key
operating metrics may harm our reputation and negatively affect our business.
We track certain key operating
metrics such as total payment volume, Total Originations and Total Customers (each as defined herein) with internal systems and tools
that are not independently verified by any third party. While the metrics presented in this Annual Report on Form 10-K/A are based on
what we believe to be reasonable assumptions and estimates, our internal systems and tools have a number of limitations, and our methodologies
for tracking these metrics may change over time. In addition, limitations or errors with respect to how we measure data or with respect
to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies.
If the internal systems and tools we use to track these metrics understate or overstate performance or contain algorithmic or other technical
errors, the key operating metrics we report may not be accurate. If investors do not perceive our operating metrics to be accurate, or
if we discover material inaccuracies with respect to these figures, our reputation may be significantly harmed, and our results of operations
and financial condition could be adversely affected.
We have a history of losses and may not
achieve profitability in the future. (As Restated)
Our net losses were $169.5 million
and $41.6 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had a total
accumulated deficit of $465.3 million. We may continue to incur net losses in the future, and such losses may fluctuate significantly
from quarter to quarter. We will need to generate and sustain significant revenues for our business generally, and achieve greater scale
and generate greater operating cash flows in future periods in order to achieve, maintain or increase our level of profitability. We intend
to continue to invest in sales and marketing, technology and new products and services in order to enhance our brand recognition and our
value proposition to our customers, and these additional costs will create further challenges to generating near-term profitability. We
also expect general and administrative expenses to increase to meet the increased compliance and other requirements associated with operating
as a public company and evolving regulatory requirements.
Our efforts to grow our business
may be more costly than we expect, and we may not be able to increase our revenue sufficiently to offset our higher operating expenses.
We may continue to incur losses and not achieve future profitability or, if achieved, be unable to maintain such profitability, due to
a number of reasons, including the risks described in “Risk Factors” herein, unforeseen expenses, difficulties, complications
and delays and other unknown events.
Risks Relating to Financial Regulation
Our business is subject to extensive regulation,
examination and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws
and regulations.
We are subject to extensive
regulation, supervision and examination under United States federal and state laws and regulations. Regulators have broad discretion
with respect to the interpretation, implementation and enforcement of these laws and regulations, including through enforcement actions
that could subject us to civil money penalties, customer remediations, increased compliance costs and limits or prohibitions on our ability
to offer certain products or services or to engage in certain activities. Any failure or perceived failure to comply with any of these
laws or regulations could subject us to lawsuits or governmental actions and/or damage our reputation, which could materially and adversely
affect our business. In addition, to the extent that we undertake actions requiring regulatory approval or non-objection, regulators may
make their approval or non-objection subject to conditions or restrictions that could have a material adverse effect on our business.
Moreover, any competitors subject to different, or in some cases less restrictive, legislative or regulatory regimes may have or obtain
a competitive advantage over us.
We are subject to the regulatory
and enforcement authority of the CFPB, which oversees compliance with federal consumer financial protection laws. In addition, if the
CFPB were to expand its supervisory authority by promulgating new regulations, it is possible that the CFPB could be permitted to conduct
periodic examination of our business, which may increase our risk of regulatory or enforcement actions. Further, we are regulated by many
state regulatory agencies through licensing and other supervisory or enforcement authority, which includes regular examination by state
governmental authorities.
In addition, our wholly-owned
subsidiary, ML Wealth, is registered as an investment adviser under the Advisers Act and is subject to regulation by the SEC. The
Advisers Act, together with related regulations and interpretations of the SEC, impose numerous obligations and restrictions on investment
advisers, including requirements relating to the safekeeping of client funds and securities, limitations on advertising, disclosure and
reporting obligations, prohibitions on fraudulent activities, restrictions on agency cross and principal transactions between an adviser
and its advisory clients and other detailed operating requirements, as well as general fiduciary obligations. We also have a wholly-owned
subsidiary, MoneyLion Securities LLC, which is a broker-dealer and is therefore registered with the SEC and a member of FINRA. Although
we do not currently engage in any business activity through MoneyLion Securities LLC, as a broker-dealer, it is subject to SEC and FINRA
rules and regulations.
We are also subject to potential
enforcement and other actions that may be brought by state attorneys general or other state enforcement authorities and other governmental
agencies. Any such actions could result in civil money penalties and fines, customer remediations, increased compliance costs, damage
to our reputation and brand and limits or prohibitions of our ability to offer certain products and services or engage in certain business
practices. Further, in some cases, regardless of fault, it may be less time-consuming or costly to settle these matters, which may require
us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to
a given party or regulatory body.
The legal and regulatory regimes governing
certain of our products and services are uncertain and evolving. Changing laws, regulations, interpretations or regulatory enforcement
priorities may negatively impact the management of our business, results of operations, ability to offer certain products or the terms
and conditions upon which they are offered and ability to compete.
We are required to comply with
constantly changing federal, state and local laws and regulations that regulate, among other things, the terms of the loans and other
consumer receivables that we originate and the associated fees that may be charged. Federal and state regulators of consumer financial
products and services are also enforcing existing laws, regulations and rules more aggressively and enhancing their supervisory expectations
regarding the management of legal and regulatory compliance risks. Changes in the laws, regulations and enforcement priorities applicable
to our business could have a material impact on our business model, operations and financial position.
Such laws and regulations are
complex and require us to incur significant expenses and devote significant management attention to ensure compliance. In addition, our
failure to comply (or to ensure that our agents and third-party service providers comply) with these laws or regulations may result in
litigation or enforcement actions, the penalties for which could include: revocation of licenses and registrations; fines and other monetary
penalties; civil and criminal liability; substantially reduced payments by our customers; modification of the original terms of loans
and other products, permanent forgiveness of debt, or inability to, directly or indirectly, collect all or a part of the principal of
or interest on loans or other amounts owed by our customers; and indemnification claims. Such consequences could, among other things,
require changes to our business practices and scope of operations or harm our reputation, which in turn, could have a material adverse
effect on our results of operations, financial condition or business.
State attorneys general have
indicated that they will take a more active role in enforcing consumer protection laws, including through use of Dodd-Frank Act provisions
that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and obtain civil money penalties
and other relief available to the CFPB.
Further, we may not be able
to respond quickly or effectively to regulatory, legislative and other developments, and these changes may in turn impair our ability
to offer our existing or planned features, products and services and/or increase our cost of doing business. In addition, if our practices
are not consistent or viewed as not consistent with legal and regulatory requirements, we may become subject to audits, inquiries, whistleblower
complaints, adverse media coverage, investigations or criminal or civil sanctions, all of which may have an adverse effect on our reputation,
business, results of operations and financial condition.
These regulatory changes and
uncertainties make our business planning more difficult and could result in changes to our business model and potentially adversely impact
the results of our operations. New laws or regulations also require us to incur significant expenses to ensure compliance. As compared
to our competitors, we could be subject to more stringent state or local regulations or could incur marginally greater compliance costs
as a result of regulatory changes.
Proposals to change the statutes
affecting financial services companies are frequently introduced in Congress and state legislatures that, if enacted, may affect our operating
environment in substantial and unpredictable ways. In addition, numerous federal and state regulators have the authority to promulgate
or change regulations that could have a similar effect on our operating environment. We cannot determine with any degree of certainty
whether any such legislative or regulatory proposals will be enacted and, if enacted, the ultimate impact that any such potential legislation
or implemented regulations, or any such potential regulatory actions by federal or state regulators, would have upon our business.
In addition, we expect to continue
to launch new products and services in the coming years, which may subject us to additional legal and regulatory requirements under
federal, state and local laws and regulations, but which we expect to be similar to the legal and regulatory regimes to which we are already
subject.
New laws, regulations, policies
or changes in enforcement of existing laws or regulations applicable to our business, or reexamination of current practices, could adversely
impact our profitability, limit our ability to continue existing or pursue new business activities, require us to change certain of our
business practices or alter its relationships with customers, affect retention of key personnel or expose us to additional costs (including
increased compliance costs and/or customer remediation). These changes also may require us to invest significant resources or devote significant
management attention in order to make any necessary changes and could adversely affect our business.
The regulatory regime governing blockchain
technologies and digital assets is uncertain, and new regulations or policies may alter our business practices with respect to digital
assets.
We currently offer certain
cryptocurrency-related products and services available to our customers through Zero Hash. The Zero Hash entities are registered as money
services businesses and have the necessary state-level licenses for engaging in digital assets activities where the Zero Hash services
are offered. Although many regulators have provided some guidance, regulation of digital assets based on or incorporating blockchain,
such as digital assets and digital asset exchanges, remains uncertain and will continue to evolve. Further, regulation varies significantly
among international, federal, state and local jurisdictions. As blockchain networks and blockchain assets have grown in popularity and
in market size, federal and state agencies are increasingly taking interest in, and in certain cases regulating, their use and operation.
Treatment of virtual currencies continues to evolve under federal and state law. Many U.S. regulators, including the SEC, the Financial
Crimes Enforcement Network, the Commodity Futures Trading Commission, (the “CFTC”), the Internal Revenue Service (the “IRS”)
and state regulators including the New York State Department of Financial Services (the “NYSDFS”), have made official
pronouncements or issued guidance or rules regarding the treatment of Bitcoin and other digital currencies. The IRS released guidance
treating virtual currency as property that is not currency for U.S. federal income tax purposes, although there is no indication
yet whether other courts or federal or state regulators will follow this classification. Both federal and state agencies have instituted
enforcement actions against those violating their interpretation of existing laws. Other U.S. and many state agencies have offered
little official guidance and issued no definitive rules regarding the treatment of digital assets. The CFTC has publicly taken the position
that certain virtual currencies, which term includes digital assets, are commodities. To the extent that virtual currencies are deemed
to fall within the definition of a “commodity interest” under the Commodity Exchange Act (the “CEA”),
we may be subject to additional regulation under the CEA and CFTC regulations.
As blockchain technologies
and digital assets business activities grow in popularity and market size, and as new digital assets businesses and technologies emerge
and proliferate, foreign, federal, state and local regulators revisit and update their laws and policies, and can be expected to continue
to do so in the future. Changes in this regulatory environment, including changing interpretations and the implementation of new or varying
regulatory requirements by the government, may significantly affect or change the manner in which we currently conduct some aspects of
our business.
States may require that we obtain licenses
that apply to blockchain technologies and digital assets.
Under the terms of our agreement
with Zero Hash, we are not directly involved in any cryptocurrency transactions or the exchange of fiat funds for cryptocurrency at or
through Zero Hash, and therefore, we do not currently expect to be subject to money services business, money transmitter licensing, or
other licensing or regulatory requirements specific to transactions relating to virtual currencies. However, state and federal regulatory
frameworks around virtual currencies continue to evolve and are subject to interpretation and change, which may subject us to additional
licensing and other requirements.
In the case of virtual currencies,
state regulators such as the NYSDFS have created regulatory frameworks. For example, in July 2014, the NYSDFS proposed the first
U.S. regulatory framework for licensing participants in virtual currency business activity. The regulations, known as the “BitLicense”,
are intended to focus on consumer protection. The NYSDFS issued its final BitLicense regulatory framework in June 2015. The BitLicense
regulates the conduct of businesses that are involved in virtual currencies in New York or with New York customers and prohibits
any person or entity involved in such activity from conducting such activities without a license. The Zero Hash entities do not currently
hold BitLicenses but they are in the process of obtaining it; therefore we do not currently offer cryptocurrency-related products to our
New York customers but we expect to do so in the future.
Other states may adopt similar
statutes and regulations which will require us or our partners to obtain a license to conduct digital asset activities. Effective August
1, 2020, Louisiana adopted the Virtual Currency Business Act, which requires an operator of a virtual currency business to obtain a virtual
currency license to conduct business in Louisiana, and the Louisiana Office of Financial Institutions issued related guidance in December
2021. Other states, such as Texas, have published guidance on how their existing regulatory regimes governing money transmitters apply
to virtual currencies. Some states, such as Alabama, North Carolina and Washington, have amended their state’s statutes to include
virtual currencies in existing licensing regimes, while others have interpreted their existing statutes as requiring a money transmitter
license to conduct certain virtual currency business activities. The Zero Hash entities are money transmitters or the equivalent in a
majority of states and the District of Columbia.
It is likely that, as blockchain
technologies and the use of virtual currencies continues to grow, additional states will take steps to monitor the developing industry
and may require us or our regulated partners to obtain additional licenses in connection with our virtual currency activity.
If loans made by our lending subsidiaries
are found to violate applicable state interest rate limits or other provisions of applicable state lending and other laws, it could adversely
affect our business, results of operations, financial condition and future prospects.
We have 37 subsidiaries through
which we conduct our consumer lending business. These entities originate loans pursuant to state licenses or applicable exemptions under
state law. The loans we originate are subject to state licensing or exemption requirements and interest rate restrictions, as well as
numerous state requirements regarding consumer protection, interest rate, disclosure, prohibitions on certain activities and loan term
lengths. If the loans we originate were deemed subject to and in violation of certain state consumer finance or other laws, we could be
subject to fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas) and
other penalties or consequences, and the loans could be rendered void or unenforceable in whole or in part, any of which could have an
adverse effect on our business, results of operations, financial condition and future prospects.
If we operate without having obtained necessary
state or local licenses, it could adversely affect our business, results of operations, financial condition and future prospects.
Certain states have adopted
laws regulating and requiring licensing, registration, notice filing or other approval by parties that engage in certain activity regarding
consumer finance transactions, including facilitating and assisting such transactions in certain circumstances. Furthermore, certain states
and localities have also adopted laws requiring licensing, registration, notice filing or other approval for consumer debt collection
or servicing and/or purchasing or selling consumer loans. We have also received inquiries from state regulatory agencies regarding requirements
to obtain licenses from or register with those states, including in states where we have determined that we are not required to obtain
such a license or be registered with the state, and we expect to continue to receive such inquiries. The application of some consumer
financial licensing laws to our platform and the related activities it performs is unclear. In addition, state licensing requirements
may evolve over time, including, in particular, recent trends toward increased licensing requirements and regulation of parties engaged
in loan solicitation activities. If we were found to be in violation of applicable state licensing requirements by a court or a state,
federal or local enforcement agency, or agree to resolve such concerns by voluntary agreement, we could be subject to or agree to pay
fines, damages, injunctive relief (including required modification or discontinuation of our business in certain areas), criminal penalties
and other penalties or consequences, and the loans facilitated through our platform could be rendered void or unenforceable in whole or
in part, any of which could have an adverse effect on the enforceability or collectability of the loans facilitated through our platform.
The highly regulated environment in which
our third-party financial institution partners operate may subject us to regulation and could have an adverse effect on our business,
results of operations, financial condition and future prospects.
Our third-party partners are
subject to federal and state supervision and regulation. Federal regulation of the banking and investment industries, along with tax and
accounting laws, regulations, rules and standards, may limit their operations significantly and control the methods by which they conduct
business. In addition, compliance with laws and regulations can be difficult and costly, and changes to laws and regulations can impose
additional compliance requirements. Regulatory requirements affect our third-party partners’ banking, investment and virtual currency
practices, among other aspects of their business, and restrict transactions between us and our third-party partners. These requirements
may constrain the operations of our third-party partners, and the adoption of new laws and changes to, or repeal of, existing laws may
have a further impact on our business and the businesses of our third-party partners.
In choosing whether and how
to conduct business with us, current and prospective third-party partners can be expected to take into account the legal, regulatory and
supervisory regime that applies to them, including potential changes in the application or interpretation of regulatory standards, licensing
requirements or supervisory expectations. Regulators may elect to alter standards or the interpretation of the standards used to measure
regulatory compliance or to determine the adequacy of liquidity, certain risk management or other operational practices for financial
services companies in a manner that impacts our current and prospective third-party partners.
Furthermore, the regulatory
agencies have extremely broad discretion in their interpretation of the regulations and laws and their interpretation of the quality of
our third-party partners’ assets. If any regulatory agency’s assessment of the quality of our third-party partners’
assets, operations, lending practices, investment practices or other aspects of their business changes, it may reduce our third-party
partners’ earnings, capital ratios and share price in such a way that affects our business.
Bank holding companies and
financial institutions are extensively regulated and currently face an uncertain regulatory environment. Applicable state and federal
laws, regulations and interpretations, including enforcement policies and accounting principles, have been subject to significant changes
in recent years, and may be subject to significant future changes. We cannot predict with any degree of certainty the substance or
effect of pending or future legislation or regulation or the application of laws and regulations to our current and prospective third-party
partners. Future changes may have an adverse effect on our current and prospective third-party partners and, therefore, on us.
Risks Relating to Cybersecurity
The collection, processing, use, storage,
sharing and transmission of PII and other sensitive data are subject to stringent and changing state, federal and international laws,
regulations and standards and policies and could give rise to liabilities as a result of our failure or perceived failure to protect such
data, comply with privacy and data protection laws and regulations or adhere to the privacy and data protection practices that we articulate
to our customers.
In the course of our operations
and the processing of transactions, we collect, process, store, disclose, use, share and/or transmit a large volume of PII and other sensitive
data from current, past and prospective customers as well as our employees in and across multiple jurisdictions. The regulatory framework
for privacy issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. There are federal, state
and foreign laws and regulations regarding privacy, data security and the collection, processing, use, storage, protection, sharing and/or
transmission of PII and sensitive data. For example, the GLBA (along with its implementing regulations) restricts certain collection,
processing, storage, use and disclosure of personal information, requires notice to individuals of privacy practices and provides individuals
with certain rights to prevent the use and disclosure of certain nonpublic or otherwise legally protected information. Additionally, many
states continue to enact legislation on matters of privacy, information security, cybersecurity, data breach and data breach notification
requirements. For example, as of January 1, 2020, the CCPA grants additional consumer rights with respect to data privacy in California.
The CCPA, among other things, entitles California residents to know how their PII is being collected and shared, to access or request
the deletion of their PII and to opt out of certain sharing of their PII. The CCPA is subject to further amendments pending certain
proposed regulations that are being reviewed and revised by the California Attorney General. The CCPA provides for civil penalties for
violations, as well as a private right of action for certain data breaches that result in the loss of PII. This private right of
action may increase the likelihood of, and risks associated with, data breach litigation. We cannot predict the impact of the CCPA on
our business, operations or financial condition, but it could result in liabilities and/or require us to modify certain processes or procedures,
which could result in additional costs.
Additionally, the CPRA was
passed in November 2020. Effective in most material respects starting on January 1, 2023, the CPRA imposes additional obligations
on companies covered by the legislation and will significantly modify the CCPA, including by expanding customers’ rights with respect
to certain sensitive PII. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the
CCPA and the CPRA. The effects of the CCPA and the CPRA are potentially significant and may require us to modify our data collection
or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure
to regulatory enforcement and/or litigation.
We expect more states to enact
legislation similar to the CCPA and the CPRA, which provide customers with new privacy rights and increase the privacy and security obligations
of entities handling certain PII of such customers. The CCPA has prompted a number of proposals for new federal and state-level privacy
legislation, such as in Virginia, which signed such legislation, the Virginia Consumer Data Protection Act (“VCDPA”), into
law on March 2, 2021 with an effective date of January 1, 2023. In addition, on July 7, 2021, Colorado enacted the Colorado
Privacy Act (the “CoPA”), becoming the third comprehensive consumer privacy law to be passed in the United States (after
the CCPA and VCDPA). The CoPA is set to take effect on July 1, 2023. The VCDPA, CoPA and such other proposed legislation, if enacted,
may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources
in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs
and/or changes in business practices and policies.
Additionally, our investment
adviser, ML Wealth, and broker-dealer, MoneyLion Securities LLC, are subject to SEC Regulation S-P, which requires that businesses
maintain policies and procedures addressing the protection of customer information and records. This includes protecting against any anticipated
threats or hazards to the security or integrity of customer records and information and against unauthorized access to or use of customer
records or information. Regulation S-P also requires businesses to provide initial and annual privacy notices to customers describing
information sharing policies and informing customers of their rights.
Because the interpretation
and application of many privacy and data protection laws are uncertain, it is possible that these laws may be interpreted and applied
in a manner that is inconsistent with our existing data management practices or the features of our services and platform capabilities.
If so, in addition to the possibility of fines, lawsuits and other claims, we could be required to fundamentally change our business activities
and practices or modify our platform, which could have an adverse effect on our business. Any violations or perceived violations of these
laws, rules and regulations by us, or any third parties with which we do business, may require us to change our business practices or
operational structure, including limiting our activities in certain states and/or jurisdictions, addressing legal claims by governmental
entities or private actors, sustaining monetary penalties, sustaining reputational damage, expending substantial costs, time and other
resources and/or sustaining other harms to our business. Furthermore, our online, external-facing privacy policy and website make certain
statements regarding our privacy, information security and data security practices with regard to information collected from our customers
or visitors to our website. Failure or perceived failure to adhere to such practices may result in regulatory scrutiny and investigation,
complaints by affected customers or visitors to our website, reputational damage and/or other harm to our business. If either we, or the
third-party service providers with which we share customer data, are unable to address privacy concerns, even if unfounded, or to comply
with applicable privacy or data protection laws, regulations and policies, it could result in additional costs and liability to us, damage
our reputation, inhibit sales and harm our business, financial condition and results of operations.
Cyberattacks and other security breaches
or disruptions suffered by us or third parties upon which we rely could have a materially adverse effect on our business, harm our reputation
and expose us to public scrutiny or liability.
In the normal course of business,
we collect, process, use and retain sensitive and confidential information regarding our customers and prospective customers, including
data provided by and related to customers and their transactions, as well as other data of the counterparties to their payments. We also
have arrangements in place with certain third-party service providers that require us to share consumer information. Although we devote
resources and management focus to ensuring the integrity of our systems through information security and business continuity programs,
our facilities and systems, and those of third-party service providers, are vulnerable to actual or threatened external or internal security
breaches, acts of vandalism, theft, fraud or misconduct on the part of employees, other internal sources or third parties, computer viruses,
phishing attacks, internet interruptions, disruptions or losses, misplaced or lost data, ransomware, unauthorized encryption, denial-of-service
attacks, social engineering, unauthorized access, spam or other attacks, natural disasters, fires, terrorism, war, telecommunications
or electrical interruptions or failures, programming or human errors or malfeasance and other similar malicious or inadvertent disruptions
or events. We and our third-party service providers from time to time have experienced and may in the future continue to experience such
instances. For example, during the third quarter of 2021, we experienced a customer account takeover incident where an unknown third party(ies)
utilized password and other customer credentials found outside of MoneyLion to successfully gain access to MoneyLion customer accounts.
In some cases, the bad actors facilitated unauthorized financial transactions. Our investigation to date shows no signs that our systems
were actually breached by the bad actors, and we have compensated and made whole the customers whose accounts were accessed and financially
impacted. We also worked with our banking partners and advisors to provide notices to affected customers and relevant regulators, and
expect to incur total costs and expenses associated with the incident that are immaterial to our financial statements and operations.
We also face security threats from malicious third parties that could obtain unauthorized access to our systems and networks, which threats
we anticipate will continue to grow in scope and complexity over time. These events could interrupt our business or operations, result
in legal claims or proceedings, result in significant legal and financial exposure, supervisory liability under U.S. federal or state,
or non-U.S. laws regarding the privacy and protection of information, including PII, damage to our reputation and a loss of confidence
in the security of our systems, products and services. Although the impact to date from these events has not had a material adverse effect
on us, no assurance is given that this will be the case in the future.
Information security risks
in the financial services industry have increased recently, in part because of new technologies, the use of the internet and telecommunications
technologies (including mobile devices) to conduct financial and other business transactions and the increased sophistication and activities
of organized criminals, perpetrators of fraud, hackers, terrorists and other malicious third parties. In addition to cyberattacks and
other security breaches involving the theft of sensitive and confidential information, hackers, terrorists, sophisticated nation-state
and nation-state supported actors and other malicious third parties recently have engaged in attacks that are designed to disrupt key
business services, such as consumer-facing websites. We and our third-party service providers may not be able to anticipate or implement
effective preventive measures against all security breaches of these types, especially because the techniques used to sabotage or to obtain
unauthorized access to our or our third-party service providers’ technology, systems, networks and/or physical facilities in which
data is stored or through which data is transmitted change frequently and because attacks can originate from a wide variety of sources.
We employ detection and response mechanisms designed to contain and mitigate security incidents. Nonetheless, early detection efforts
may be thwarted by sophisticated attacks and malware designed to avoid detection. We also may fail to detect the existence of a security
breach related to the information of our customers and to prevent or detect service interruption, system failure or data loss. Further,
as the current COVID-19 pandemic continues to result in a significant number of people working from home, these cybersecurity risks may
be heightened by an increased attack surface across our business and those of our customers and third-party service providers. We cannot
guarantee that our efforts, or the efforts of those upon whom we rely and partner with, will be successful in preventing any such information
security incidents.
The access by unauthorized
persons to, or the improper disclosure by us of, confidential information regarding our customers or our proprietary information, software,
methodologies and business secrets could interrupt our business or operations, result in significant legal and financial exposure, supervisory
liability, damage to our reputation or a loss of confidence in the security of our systems, products and services, all of which could
have a material adverse impact on our business. In addition, there recently have been a number of well-publicized attacks or breaches
affecting companies in the financial services industry that have heightened concern by customers, which could also intensify regulatory
focus, cause customers to lose trust in the security of the industry in general and result in reduced use of our services and increased
costs, all of which could also have a material adverse effect on our business.
Most jurisdictions (including
all 50 states) have enacted laws requiring companies to notify individuals, regulatory authorities and/or others of security breaches
involving certain types of data. In addition, our agreements with certain partners and service providers may require us to notify them
in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our customers, partners
and service providers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and
other resources to respond to and/or alleviate problems caused by the actual or perceived security breach. A security breach of any of
our vendors that processes PII of our customers may pose similar risks.
A security breach may also
cause us to breach customer contracts. Our agreements with certain partners and service providers may require us to use industry-standard
or reasonable measures to safeguard PII. We also may be subject to laws that require us to use industry-standard or reasonable security
measures to safeguard PII. A security breach could lead to claims by our customers or other relevant stakeholders that we have failed
to comply with such legal or contractual obligations. As a result, we could be subject to legal action or our customers could end their
relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or
would otherwise protect us from liabilities or damages, and in some cases our customer agreements may not limit our remediation costs
or liability with respect to data breaches.
Litigation resulting from security
breaches may adversely affect our business. Unauthorized access to our technology, systems, networks or physical facilities, or those
of our third-party service providers, could result in litigation with our customers or other relevant stakeholders. These proceedings
could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business
or adversely affect our reputation. We could be required to fundamentally change our business activities and practices or modify our products
and/or technology capabilities in response to such litigation, which could have an adverse effect on our business. If a security breach
were to occur, and the confidentiality, integrity or availability of PII was disrupted, we could incur significant liability, or our technology,
systems or networks may be perceived as less desirable, which could negatively affect our business and damage our reputation.
While we maintain cybersecurity
insurance, we may not have adequate insurance coverage with respect to liabilities that result from any cyberattacks or other security
breaches or disruptions suffered by us or third parties upon which we rely. The successful assertion of one or more large claims against
us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the
imposition of large deductible or co-insurance requirements), could have an adverse effect on our business. In addition, we cannot be
sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that
our insurers will not deny coverage as to any future claim.
While we take precautions to prevent consumer
identity fraud, it is possible that identity fraud may still occur or has occurred, which may adversely affect the performance of our
products and services or subject us to scrutiny or penalties.
There is risk of fraudulent
activity associated with our platform, customers, service providers and third parties handling consumer information. Our resources, technologies
and fraud prevention tools may be insufficient to accurately detect and prevent fraud. The level of fraud-related charge-offs on the loans
and other products and services facilitated through our platform could be adversely affected if fraudulent activity were to significantly
increase. Significant amounts of fraudulent cancellations or chargebacks could adversely affect our business or financial condition. High
profile fraudulent activity or significant increases in fraudulent activity could also lead to regulatory intervention, negative publicity
and the erosion of trust from our customers, and could materially and adversely affect our business, results of operations, financial
condition, future prospects and cash flows.
Risks Relating to Intellectual Property
We may be unable to sufficiently obtain,
maintain, protect or enforce our intellectual property and other proprietary rights, which could reduce the value of our platform, products,
services and brand, impair our competitive position and cause reputational harm.
Intellectual property and other
proprietary rights are important to the success of our business. Our ability to compete effectively is dependent in part upon our ability
to obtain, maintain, protect and enforce our intellectual property and other proprietary rights, including with respect to our proprietary
technology, and to obtain licenses to use the intellectual property and proprietary rights of others. We rely on a combination of trademarks,
service marks, copyrights, trade secrets, domain names and contractual rights to protect our intellectual property and other proprietary
rights. We own the domain name rights for moneylion.com, and, as of December 31, 2021, we owned 22 registered trademarks and four trademark
applications in the United States. Nonetheless, the steps we take to obtain, maintain, protect and enforce our intellectual property
and other proprietary rights may be inadequate and, despite our efforts to protect these rights, unauthorized third parties, including
our competitors, may duplicate, mimic, reverse engineer, access, obtain, or use the proprietary aspects of our technology, processes,
products, or services without our permission, thereby impeding our ability to promote our platform and possibly leading to customer confusion.
Our competitors and other third parties may also design around or independently develop similar technology or otherwise duplicate or mimic
our services or products such that we would not be able to successfully assert our intellectual property or other proprietary rights against
them. We have filed, and may continue in the future to file, applications to protect certain of our innovations and intellectual property.
We cannot assure that any future patent, trademark, or service mark registrations will be issued for our pending or future applications
or that any of our current or future patents, copyrights, trademarks, or service marks (whether registered or unregistered) will be valid,
enforceable, sufficiently broad in scope, provide adequate protection of our intellectual property or other proprietary rights, or provide
us with any competitive advantage.
Our trademarks, trade names
and service marks have significant value, and our brand is an important factor in the marketing of our services. We rely on, and intend
to rely on, both registrations and common law protections for our trademarks. However, we may be unable to prevent competitors or other
third parties from acquiring or using trademarks, service marks, or other intellectual property or other proprietary rights that are similar
to, infringe upon, misappropriate, dilute, or otherwise violate or diminish the value of our trademarks and service marks and our other
intellectual property and proprietary rights. The value of our intellectual property and other proprietary rights could diminish if others
assert rights in or ownership of our intellectual property or other proprietary rights, or in trademarks or service marks that are similar
to our trademarks or service marks. Additionally, if third parties succeed in registering or developing common law rights in such trademarks
or similar trademarks, and if we are not successful in challenging such third-party rights, we may not be able to use these trademarks
to develop brand recognition of our platform, products or services. If we are unable to establish name recognition based on our trademarks
and trade names, we may not be able to compete effectively, which could adversely impact our business, financial condition and results
of operations.
In addition to registered intellectual
property rights such as trademark registrations, we rely on non-registered proprietary information and technology, such as trade secrets,
confidential information, know-how and technical information. In order to protect our proprietary information and technology, we rely
in part on confidentiality and intellectual property assignment agreements with our employees and contractors involved in the development
of material intellectual property for us, which require such individuals to assign such intellectual property to us and place restrictions
on the employees’ and contractors’ use and disclosure of our confidential information. However, these agreements may not be
self-executing, and we cannot guarantee that we have entered into such agreements containing obligations of confidentiality with each
party that has or may have had access to proprietary information, know-how, or trade secrets owned or held by us. Individuals that were
involved in the development of intellectual property for us or who had access to our intellectual property may make adverse ownership
claims to our current and future intellectual property. Likewise, to the extent that our employees, independent contractors or other third
parties with whom we do business use intellectual property owned by others in their work for us, disputes may arise as to the rights in
related or resulting works of authorship, know-how and inventions. Moreover, our contractual arrangements may be insufficient, breached
or may otherwise not effectively prevent disclosure of, or control access to, our confidential or otherwise proprietary information or
provide an adequate remedy in the event of an unauthorized disclosure, which could cause us to lose any competitive advantage resulting
from this intellectual property. The measures we have put in place may not prevent misappropriation, infringement, or other violation
of our intellectual property, proprietary rights or information and any resulting loss of competitive advantage, and we may be required
to litigate to protect our intellectual property or other proprietary rights or information from misappropriation, infringement or other
violation by others, which is time-consuming and expensive, could cause a diversion of resources and may not be successful, even when
our rights have been infringed, misappropriated or otherwise violated. Our efforts to enforce our intellectual property and other proprietary
rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property
and other proprietary rights, and if such defenses, counterclaims or countersuits are successful, it could diminish or we could otherwise
lose valuable intellectual property and other proprietary rights. Furthermore, changes to U.S. or foreign intellectual property laws
and regulations may jeopardize the enforceability and validity of our intellectual property portfolio and harm our ability to obtain patent
protection, including for some of our unique business methods. Additionally, the laws of some foreign countries may not be as protective
of intellectual property and other proprietary rights as those in the U.S., and the mechanisms for enforcement of intellectual property
and other proprietary rights may be inadequate.
Furthermore, third parties
may challenge, invalidate, or circumvent our intellectual property and proprietary rights, including through administrative processes
or litigation. The legal standards relating to the validity, enforceability and scope of protection of intellectual property and other
proprietary rights are uncertain and still evolving. Our intellectual property and other proprietary rights may not be sufficient to provide
us with a competitive advantage and the value of our intellectual property and other proprietary rights could also diminish if others
assert rights therein or ownership thereof, and we may be unable to successfully resolve any such conflicts in our favor or to our satisfaction.
We may be sued by third parties for alleged
infringement, misappropriation or other violation of their intellectual property or other proprietary rights which may be costly and may
subject us to significant liability and increased costs of doing business.
Our success depends, in part,
on our ability to develop and commercialize our products and services without infringing, misappropriating or otherwise violating the
intellectual property or other proprietary rights of third parties.
We may become involved in disputes
from time to time concerning intellectual property or other proprietary rights of third parties, which may relate to our own proprietary
technology, or to technology that we acquire or license from third parties, and we may not prevail in these disputes. Relatedly, competitors
or other third parties may raise claims alleging that we, service providers or other third parties retained or indemnified by us, infringe
on, misappropriate or otherwise violate such competitors’ or other third parties’ intellectual property or other proprietary
rights. These claims of infringement, misappropriation or other violation may be extremely broad, and it may not be possible for us to
conduct our operations in such a way as to avoid all such alleged violations of such intellectual property or other proprietary rights.
We also may be unaware of third-party intellectual property or other proprietary rights that cover or otherwise relate to some or all
of our products and services. For example, there may be issued patents of which we are not aware, held by third parties that, if found
to be valid and enforceable, could be alleged to be infringed by our current or future technologies or products. There also may be pending
patent applications of which we are not aware that may result in issued patents, which could be alleged to be infringed by our current
or future technologies or products. Because patent applications can take years to issue and are often afforded confidentiality for
some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover
our current or future technologies or products.
Given the complex, rapidly
changing and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual
property-related litigation, a claim of infringement, misappropriation or other violation against us may require us to spend significant
amounts of time and other resources to defend against the claim (even if we ultimately prevail), pay significant money damages, make significant
payments for legal fees, settlement payments or other costs, lose significant revenues, be prohibited from using the relevant systems,
processes, technologies or other intellectual property (temporarily or permanently), cease offering certain products or services, obtain
a license, which may not be available on commercially reasonable terms or at all, to sell or use the relevant technology or redesign our
allegedly infringing products or services, or functionality therein, to avoid infringement, misappropriation or other violations, which
could be costly, time-consuming or impossible, rebrand our products and services and/or be prevented from selling some of our products
or services if third parties successfully oppose or challenge our trademarks or successfully claim that we infringe, misappropriate or
otherwise violate their trademarks or other intellectual property rights and/or limit the manner in which we use our brands. In addition,
if a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we
cannot license or develop alternative technology for any infringing aspect of our business, we may be forced to limit or stop sales of
our relevant products and technology capabilities or cease business activities related to such intellectual property. We cannot predict
the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial
condition or results of operations.
Some of the aforementioned
risks of infringement, misappropriation or other violation, in particular with respect to patents, are potentially increased due to the
nature of our business, industry and intellectual property portfolio. For instance, it has become common in recent years for certain
third parties to purchase patents or other intellectual property assets for the sole purpose of making claims of infringement, misappropriation
or other violation in an attempt to extract settlements from companies such as ours. In addition, many companies have the capability to
dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against
them than we can. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent
claims, that the patent is invalid or both. The strength of our defenses may depend on the patents asserted, the interpretation of these
patents or our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity
arguments in our defense. In the U.S., issued patents enjoy a presumption of validity, and the party challenging the validity of a patent
claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only
prove infringement by a preponderance of the evidence, which is a lower burden of proof. We do not currently have a patent portfolio,
which could prevent us from deterring patent infringement claims from competitors or other third parties and our competitors and others
may now and in the future have significantly larger and more mature patent portfolios than we may have. Any litigation may also involve
patent holding companies or other adverse patent owners that have no relevant product revenue, and therefore, any future patents we may
have may provide little or no deterrence as we would not be able to assert them against such entities or individuals.
In addition to the previously
mentioned impacts of intellectual property-related litigation, while in some cases a third party may have agreed to indemnify us for costs
associated with intellectual property-related litigation, such indemnifying third party may refuse or be unable to uphold its contractual
obligations. In other cases, our insurance may not cover potential claims of this type adequately or at all, and we may be required to
pay monetary damages, which may be significant.
Even if the claims do not result
in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources
of our management and harm our business and operating results. Moreover, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it
could have a substantial adverse effect on the price of the MoneyLion Class A Common Stock. The occurrence of infringement and misappropriation
claims may grow as the market for our platform and products grows. Accordingly, our exposure to damages resulting from infringement claims
could increase and this could further exhaust our financial and management resources. Any of the foregoing could adversely impact our
business, financial condition and results of operations.
Our business and platform depend in part
on intellectual property and proprietary rights and technology licensed from or otherwise made available to us by third parties. If we
fail to comply with our obligations under license or technology agreements with third parties, we may be required to pay damages and we
could lose license rights that are critical to our business.
Our business and our platform
rely on technologies developed or licensed by third parties. These third-party software components may become obsolete, defective or incompatible
with future versions of our services, relationships with the third-party licensors or technology providers may deteriorate or our agreements
with the third-party licensors or technology providers may expire or be terminated. Additionally, some of these licenses or other grants
of rights may not be available to us in the future on terms that are acceptable, or at all, or that allow our platform, products and services
to remain competitive. Our inability to obtain licenses or rights on favorable terms could have a material and adverse effect on our business
and results of operations. Furthermore, incorporating intellectual property or proprietary rights licensed from or otherwise made available
to us by third parties on a non-exclusive basis in our products or services could limit our ability to protect the intellectual property
and proprietary rights in our services and our ability to restrict third parties from developing, selling or otherwise providing similar
or competitive technology using the same third-party intellectual property or proprietary rights.
We believe we have all the
necessary licenses and other grants of rights from third parties to use technology and software that we do not own. A third party could,
however, allege that we are infringing its rights, which may deter our ability to obtain licenses or other grants of rights on commercially
reasonable terms from the third party, if at all, or cause the third party to commence litigation against us. Our failure to obtain necessary
licenses or other rights, or litigation or claims arising out of intellectual property matters, may harm or restrict our business. In
addition, we could be found liable for significant monetary damages, including treble damages and attorneys’ fees, if we are found
to have willfully infringed a patent or other intellectual property right. Any such litigation or the failure to obtain any necessary
licenses or other rights could adversely impact our business, financial position and results of operations.
Risks Relating to Legal and Regulatory Matters
Failure to comply with anti-money laundering,
economic and trade sanctions regulations and similar laws could subject us to penalties and other adverse consequences.
We maintain an enterprise-wide
program designed to enable us to comply with all applicable anti-money laundering and anti-terrorism financing laws and regulations, including
the BSA and the USA PATRIOT Act of 2001. This program includes policies, procedures, processes and other internal controls designed to
identify, monitor, manage and mitigate the risk of money laundering and terrorist financing. These controls include procedures and processes
to detect and report potentially suspicious transactions, perform consumer due diligence, respond to requests from law enforcement and
meet all recordkeeping and reporting requirements related to particular transactions involving currency or monetary instruments. We are
required to maintain this program under our agreements with our third-party partners, and certain state regulatory agencies have intimated
they expect the program to be in place and followed. We cannot provide any assurance that our programs and controls will be effective
to ensure compliance with all applicable anti-money laundering and anti-terrorism financing laws and regulations we are required to comply
with, and our failure to comply with these laws and regulations could result in a breach and termination of our agreements with our third-party
partners or criticism by state governmental agencies, which would have a material adverse effect on our business, results of operations,
financial condition and future prospects.
We have in the past, and continue to be,
subject to inquiries, subpoenas, exams, pending investigations and enforcement matters by state and federal regulators, the outcomes of
which are uncertain and could cause reputational and financial harm to our business and results of operations.
The financial services industry
is subject to extensive regulation under federal, state and applicable international laws. From time to time, we have been, and continue
to be, subject to inquiries, subpoenas, pending investigations and enforcement matters by state and federal regulators and have been threatened
with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities, consumer financial services and
other matters. We are also subject to periodic regulatory examinations and inspections. Compliance and trading problems that are reported
to regulators, such as the SEC, FINRA, the CFPB or state regulators, by dissatisfied customers or others are investigated by such regulators,
and may, if pursued, result in formal claims being filed against us by customers or disciplinary action being taken against us or our
employees by regulators or enforcement agencies. To resolve issues raised in examinations or other governmental actions, we may be required
to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be
financially or competitively detrimental to us. We expect to continue to incur costs to comply with governmental regulations. Any such
claims or disciplinary actions that are decided against us could have a material impact on our financial results. For a discussion of
specific legal and regulatory proceedings, inquiries and investigations, to which we are currently subject, please refer to Part I, Item
3 “Legal Proceedings.”
Unfavorable outcomes in legal proceedings
may harm our business and results of operations.
We are, and may in the future
become, subject to litigation, claims, examinations, investigations, legal and administrative cases and proceedings, whether civil or
criminal, or lawsuits by governmental agencies or private parties, which may affect our results of operations. These claims, lawsuits
and proceedings could involve labor and employment, discrimination and harassment, commercial disputes, intellectual property rights (including
patent, trademark, copyright, trade secret and other proprietary rights), class actions, general contract, tort, defamation, data
privacy rights, antitrust, common law fraud, government regulation, compliance, alleged federal and state securities and “blue sky”
law violations or other investor claims and other matters. Due to the consumer-oriented nature of our business and the application of
certain laws and regulations, participants in our industry are regularly named as defendants in litigation alleging violations of federal
and state laws and regulations and consumer law torts, including fraud. Many of these legal proceedings involve alleged violations of
consumer protection laws. In addition, we have in the past and may in the future be subject to litigation, claims, examinations, investigations,
legal and administrative cases and proceedings related to our loan products and other financial services we provide. For instance, our
membership model and some of the products and services we offer are relatively novel and have been subject to limited regulatory scrutiny,
but there has been, and may continue to be, increasing regulatory interest in and/or litigation challenging our membership model, our
products or our services.
Any unfavorable results of
pending or future legal proceedings may result in contractual damages, usury-related claims, fines, penalties, injunctions, the unenforceability,
rescission or other impairment of loans originated on our platform or other censure that could have a material adverse effect on our business,
results of operations and financial condition. Even if we adequately address the issues raised by an investigation or proceeding or successfully
defend a third-party lawsuit or counterclaim, we may have to devote significant financial and management resources to address these issues,
which could harm our business, financial condition and results of operations.
Although we currently maintain
insurance, there can be no assurance that we will be able to maintain such insurance on acceptable terms in the future, if at all, or
that any such insurance will provide adequate protection against potential liabilities. Additionally, we do not carry insurance for all
categories of risk that our business may encounter. Any significant liability that is uninsured or not fully insured may require us to
pay substantial amounts. There can be no assurance that any current or future claims will not materially and adversely affect our business,
financial position, results of operations and cash flows.
Changes in tax law and differences in interpretation
of tax laws and regulations may adversely impact our financial statements.
We operate in multiple jurisdictions
and are subject to tax laws and regulations of the U.S. federal, state and local and non-U.S. governments. U.S. federal,
state and local and non-U.S. tax laws and regulations are complex and subject to varying interpretations. U.S. federal, state
and local and non-U.S. tax authorities may interpret tax laws and regulations differently than we do and challenge tax positions
that we have taken. This may result in differences in the treatment of revenues, deductions, credits and/or differences in the timing
of these items. The differences in treatment may result in payment of additional taxes, interest or penalties that could have an adverse
effect on our financial condition and results of operations. Further, future changes to U.S. federal, state and local and non-U.S. tax
laws and regulations could increase our tax obligations in jurisdictions where we do business or require us to change the manner in which
we conduct some aspects of our business.
As the regulatory framework for artificial
intelligence and machine learning technology evolves, our business, financial condition and results of operations may be adversely affected.
The regulatory framework for
artificial intelligence and machine learning technology is evolving and remains uncertain. It is possible that new laws and regulations
will be adopted in the U.S., or existing laws and regulations may be interpreted in new ways, that would affect the operation of our platform
and the way in which we use artificial intelligence and machine learning technology, including with respect to fair lending laws. Further,
the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely
affect our business, financial condition and results of operations.
If we fail to maintain an effective system
of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements
or comply with applicable regulations could be impaired.
As a public company, we are
now subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”), and the rules and regulations of the applicable listing standards of the NYSE. We expect that the requirements of these
rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult,
time-consuming and costly and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are
continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to
be disclosed by us in the reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified
in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated
to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. In
order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting,
we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs, and significant
management oversight. Our current controls and any new controls that we develop may become inadequate because of changes in conditions
in our business.
The nature of our business
is such that our financial statements involve a number of complex accounting policies, many of which involve significant elements of judgment,
including determinations regarding the consolidation of variable interest entities, determinations regarding the fair value of derivative
warrant liabilities and the appropriate classification of various items within our financial statements. The inherent complexity of these
accounting matters and the nature and variety of transactions in which we are involved require that we have sufficient qualified accounting
personnel with an appropriate level of experience and controls in our financial reporting process commensurate with the complexity of
our business. While we believe we have sufficient internal accounting personnel and external resources and appropriate controls to address
the demands of our business, we expect that the growth and development of our business will place significant additional demands on our
accounting resources. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or
improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement
of our financial statements. Any failure to implement and maintain effective internal control over financial reporting could also adversely
affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding
the effectiveness of our internal control over financial reporting that we will be required to include in our periodic reports that will
be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause
investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading
price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on
the NYSE. As a public company, we are now subject to the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and
will be required to provide an annual management report on the effectiveness of our internal control over financial reporting. There can
be no assurance that we will maintain internal control over financial reporting sufficient to enable us to identify or avoid material
weaknesses in the future.
Our independent registered
public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until
we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the
“JOBS Act”). At such time, our independent registered public accounting firm may issue a report that is adverse in the event
it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure
to maintain effective disclosure controls and internal control over financial reporting could materially and adversely affect our business,
results of operations and financial condition and could cause a decline in the trading price of our common stock.
MoneyLion has identified a material weakness
in its internal control over financial reporting which remains un-remediated as of December 31, 2021 and March 31, 2022. If MoneyLion
is unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report
our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our
business and operating results. (As Restated)
A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material
misstatement of an entity’s annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with U.S. GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal
controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls.
Subsequent to the issuance of MoneyLion’s
consolidated financial statements for the years ended December 31, 2020 and December 31, 2019, MoneyLion had to restate such financial
statements with respect to the treatment of the noncontrolling interests attributable to the Class B investors of IIA. For additional
information with respect to the restatement, see Note 2 to MoneyLion’s audited financial statements for the years ended December
31, 2020 and December 31, 2019 included in our prospectus (File No. 333-255936), filed with the SEC on September 3, 2021 pursuant to
Rule 424(b) under the Securities Act. As a result of the foregoing, MoneyLion identified a material weakness in its internal control
over financial reporting as of December 31, 2020 and December 31, 2019. MoneyLion did not maintain an effective control environment as
there were certain areas in which the accounting function did not operate as expected, resulting in the foregoing restatement of previously
issued financial statements. Despite efforts to improve the deficiencies in our internal control over financial reporting, as described
below under Part II, Item 9A “Controls and Procedures,” the Company’s management has concluded that the material weakness
in our internal control over financial reporting as of December 31, 2020 and December 31, 2019 remained un-remediated as of December
31, 2021.
In addition, subsequent to the issuance of MoneyLion’s condensed
consolidated financial statements as of and for the three and nine months ended September 30, 2021, MoneyLion had to restate such previously
issued financial statements with respect to the accounting for the conversion of subordinated convertible notes and exercise of stock
warrants into equity and the calculation of diluted earnings per share for the three months ended September 30, 2021. For additional information
with respect to the restatement, see Part II, Item 9A “Controls and Procedures.” MoneyLion determined that such restatement
resulted from the previously identified material weakness in its internal control over financial reporting as of September 30, 2021, which
remained un-remediated as of December 31, 2021. MoneyLion did not maintain an effective control environment, resulting in the foregoing
restatement of previously issued financial statements, as there were certain areas in which the accounting function did not operate as
expected, due to a lack of sufficient internal accounting resources and inadequate level of precision embedded in control activities,
as well as lack of sufficient formalization over processes and control evidence, resulting in multiple audit adjustments and restatements
in our previously issued financial statements.
Furthermore, subsequent to
the issuance of MoneyLion’s audited consolidated financial statements as of and for the year ended December 31, 2021 and the issuance
of MoneyLion’s unaudited consolidated financial statements as of and for the three months ended March 31, 2022, MoneyLion determined
to restate such previously issued financial statements to correct an error arising from the manner in which the Company classified and
accounted for the Make-Whole Provision related to the Closing Consideration Shares issued in connection with the closing of the MALKA
Acquisition. For additional information with respect to the error, see the Explanatory Note to this Amendment and Note 2 to the audited
consolidated financial statements included in Part II, Item 8 of this Amendment. MoneyLion determined that such restatements resulted
from the previously identified material weakness in its internal control over financial reporting as of December 31, 2021 and March 31,
2022. MoneyLion did not maintain an effective control environment, resulting in the previously undetected error and the need to restate
such previously issued financial statements, 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 resulting 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, resulting in audit adjustments and
restatements in our previously issued financial statements.
Effective internal controls
are necessary to provide reliable financial reports and prevent fraud. MoneyLion continues to evaluate steps to remediate the identified
material weakness and is in the process of remediating the control deficiencies that relate to the material weakness, as described further
in Part II, Item 9A “Controls and Procedures.” We intend to complete the remediation by March 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.
If MoneyLion identifies any
new material weaknesses in the future, any such newly identified material weakness could limit its ability to prevent or detect a misstatement
of its accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case,
we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable
stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result.
We cannot assure you that the measures MoneyLion has taken to date, or any measures it may take in the future, will be sufficient to avoid
potential future material weaknesses.
The material weakness in our internal control
over financial reporting and the restatements of certain of our previously issued financial statements subjected us to additional risks
and uncertainties, including increased professional costs and the increased possibility of legal proceedings. (As Restated)
As a result of the material
weakness in our internal control over financial reporting and the restatements of certain of our previously issued financial statements
as described further in the foregoing risk factor, we have become subject to additional risks and uncertainties, including, among others,
increased professional fees and expenses and time commitment that may be required to address matters related to the remediation of the
material weakness and the restatements and increased scrutiny of the SEC and other regulatory bodies, which could cause investors to lose
confidence in our reported financial information and could subject us to penalties. In addition, we face increased potential for litigation
or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other
claims arising from, among other things, the restatements, the material weakness in our internal control over financial reporting and
the preparation of our financial statements. Any such litigation or dispute, whether successful or not, could have a material adverse
effect on our business, financial condition and results of operations and could cause our stock price to decline.
Our risk management processes and procedures
may not be effective.
Our risk management processes
and procedures seek to appropriately balance risk and return and mitigate risks. We have established processes and procedures intended
to identify, measure, monitor and control the types of risk to which we are subject, including credit risk, deposit risk, market risk,
liquidity risk, strategic risk, operational risk, cybersecurity risk and reputational risk. Credit risk is the risk of loss that arises
when a loan obligor fails to meet the terms of a loan repayment obligation, the loan enters default, and if uncured results in financial
loss of remaining principal and interest to the investor. Our exposure to credit risk mainly arises from our lending activities. Deposit
risk refers to accelerated availability of depositor funds, prior to settlement, risk of ACH returns or merchant settlements and transactional
limits that may be applied to deposit accounts. Market risk is the risk of loss due to changes in external market factors, such as interest
rates, asset prices and foreign exchange rates. Liquidity risk is the risk that financial condition or overall safety and soundness are
adversely affected by an inability, or perceived inability, to meet obligations (e.g., current and future cash flow needs) and support
business growth. We actively monitor our liquidity position. Strategic risk is the risk from changes in the business environment, ineffective
business strategies, improper implementation of decisions or inadequate responsiveness to changes in the business and competitive environment.
Our management is responsible
for defining the priorities, initiatives and resources necessary to execute our strategic plan, the success of which is regularly evaluated
by the board of directors. Operational risk is the risk of loss arising from inadequate or failed internal processes, controls, people
(e.g., human error or misconduct) or systems (e.g. technology problems), business continuity or external events (e.g., natural disasters),
compliance, reputational, regulatory or legal matters and includes those risks as they relate directly to us, fraud losses attributed
to applications, transaction processing or employees, as well as to third parties with whom we contract or otherwise do business. Operational
risk is one of the most prevalent forms of risk in our risk profile. We strive to manage operational risk by establishing policies and
procedures to accomplish timely and efficient processing, obtaining periodic internal control attestations from management, conducting
internal process risk control self-assessments and audit reviews to evaluate the effectiveness of internal controls.
In order to be effective, among
other things, our enterprise risk management capabilities must adapt and align to support any new product or loan features, capability,
strategic development, or external change. Cybersecurity risk is the risk of a malicious technological attack intended to impact the confidentiality,
availability or integrity of our systems and data, including, but not limited to, sensitive client data. Our technology and information
security teams rely on a layered system of preventive and detective technologies, practices and policies to detect, mitigate and neutralize
cybersecurity threats. In addition, our information security team and third-party consultants regularly assess our cybersecurity risks
and mitigation efforts. Cyberattacks can also result in financial and reputational risk.
Reputational risk is the risk
arising from possible negative perceptions of us, whether true or not, among our current and prospective customers, counterparties, employees
and regulators. The potential for either enhancing or damaging our reputation is inherent in almost all aspects of business activity.
We manage this risk through our commitment to a set of core values that emphasize and reward high standards of ethical behavior, maintaining
a culture of compliance and by being responsive to customer and regulatory requirements.
Risk is inherent in our business,
and therefore, despite our efforts to manage risk, there can be no assurance that we will not sustain unexpected losses. We could incur
substantial losses and our business operations could be disrupted to the extent our business model, operational processes, control functions,
technological capabilities, risk analyses and business/product knowledge do not adequately identify and manage potential risks associated
with our strategic initiatives. There also may be risks that exist, or that develop in the future, that we have not appropriately anticipated,
identified or mitigated, including when processes are changed or new products and services are introduced. If our risk management framework
does not effectively identify and control our risks, we could suffer unexpected losses or be adversely affected, which could have a material
adverse effect on our business.
Our ability to use our deferred tax assets
to offset future taxable income may be subject to certain limitations that could subject our business to higher tax liabilities.
We may be limited in the portion
of net operating loss carryforwards (“NOLs”) that we can use in the future to offset taxable income for U.S. federal
and state income tax purposes. The Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017, makes broad and
complex changes to the U.S. tax code. While future interpretative guidance of the Tax Act and how many U.S. states will incorporate
these federal law changes may have an impact on our business, the Tax Act’s reduction of the federal corporate income tax rate from
35% to 21%, effective January 1, 2018, has reduced our deferred tax asset associated with NOLs. A lack of future taxable income would
adversely affect our ability to utilize our NOLs.
In addition, under Section 382
of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs
to offset future taxable income. Future changes in our stock ownership as well as other changes that may be outside of our control, could
result in additional ownership changes under Section 382 of the Code. Our NOLs may also be impaired under similar provisions of state
law.
We assess the available positive
and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. On
the basis of this evaluation, a full valuation allowance has historically been recorded to recognize only deferred tax assets that are
more likely than not to be realized.
Finally, further changes to
the federal or state tax laws or technical guidance relating to the Tax Act that would further reduce the corporate tax rate could operate
to effectively reduce or eliminate the value of any deferred tax asset. Our tax attributes as of December 31, 2021 may expire unutilized
or underutilized, which could prevent us from offsetting future taxable income.
Risks Relating to Ownership of MoneyLion Class
A Common Stock
Our warrants are exercisable for MoneyLion
Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution
to our stockholders.
As of December 31, 2021, there
were 17,499,900 outstanding Public Warrants to purchase 17,499,900 shares of MoneyLion Class A Common Stock at an exercise price
of $11.50 per share, which warrants became exercisable commencing 30 days following the Business Combination. In addition, as of
December 31, 2021, there were 8,100,000 private placement warrants outstanding exercisable for 8,100,000 shares of MoneyLion Class A
Common Stock at an exercise price of $11.50 per share. To the extent such warrants are exercised, additional shares of MoneyLion Class A
Common Stock will be issued, which will result in dilution to the holders of MoneyLion Class A Common Stock and increase the number
of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect
the market price of MoneyLion Class A Common Stock, the impact of which is increased as the value of our stock price increases.
We may redeem your unexpired warrants prior
to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem
outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant,
provided that the closing price of MoneyLion Class A Common Stock equals or exceeds $18.00 per share for any 20 trading days
within a 30 trading-day period ending on the third trading day prior to the date we give notice of redemption. If and when the
warrants become redeemable by MoneyLion, we may exercise the redemption right even if it is unable to register or qualify the underlying
securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force holders to (i) exercise
the warrants and pay the exercise price therefor at a time when it may be disadvantageous to do so, (ii) sell the warrants at the
then-current market price when the holder might otherwise wish to hold onto such warrants or (iii) accept the nominal redemption
price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value
of the warrants. None of the private placement warrants will be redeemable by us so long as they are held by their initial purchasers
or their permitted transferees.
In addition, we may redeem
your warrants after they become exercisable for a number of shares of MoneyLion Class A Common Stock determined based on the redemption
date and the fair market value of MoneyLion Class A Common Stock. Any such redemption may have similar consequences to a cash redemption
described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case
you would lose any potential embedded value from a subsequent increase in the value of the MoneyLion Class A Common Stock had your warrants
remained outstanding.
Delaware law and provisions in MoneyLion’s
Certificate of Incorporation and Bylaws could make a takeover proposal more difficult.
Our organizational documents
are governed by Delaware law. Certain provisions of Delaware law and of MoneyLion’s Fourth Amended and Restated Certificate of Incorporation
(as amended and restated from time to time, the “Certificate of Incorporation”) and Amended and Restated Bylaws (as amended
and restated from time to time, the “Bylaws”) could discourage, delay, defer or prevent a merger, tender offer, proxy contest
or other change of control transaction that a stockholder might consider in its best interest, including those attempts that might result
in a premium over the market price for the shares of MoneyLion Class A Common Stock held by MoneyLion’s stockholders. These
provisions include the ability of the board of directors to designate the terms of and issue new series of preference shares, which may
make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing
market prices for our securities.
These anti-takeover provisions
as well as certain provisions of Delaware law could make it more difficult for a third party to acquire MoneyLion, even if the third party’s
offer may be considered beneficial by many of MoneyLion’s stockholders. As a result, MoneyLion’s stockholders may be limited
in their ability to obtain a premium for their shares. If prospective takeovers are not consummated for any reason, MoneyLion may experience
negative reactions from the financial markets, including negative impacts on the price of MoneyLion Class A Common Stock. These provisions
could also discourage proxy contests and make it more difficult for MoneyLion’s stockholders to elect directors of their choosing
and to cause MoneyLion to take other corporate actions that MoneyLion’s stockholders desire.
The market price of our securities may be
volatile.
Fluctuations in the price
of MoneyLion’s securities could contribute to the loss of all or part of your investment. The trading price of MoneyLion securities
may be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors
listed below could have a material adverse effect on your investment in our securities and MoneyLion securities may trade at prices significantly
below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further
decline.
Factors affecting the trading
price of MoneyLion’s securities may include:
| ● | actual or anticipated fluctuations in our quarterly financial
results or the quarterly financial results of companies perceived to be similar to us; |
| ● | changes in the market’s expectations about MoneyLion’s
operating results; |
| ● | operating results failing to meet the expectations of securities
analysts or investors in a particular period; |
| ● | changes in financial estimates and recommendations by securities
analysts concerning MoneyLion or the industry in which MoneyLion operates in general; |
| ● | operating and stock price performance of other companies that
investors deem comparable to MoneyLion; |
| ● | ability to market new and enhanced products and services on
a timely basis; |
| ● | changes in laws and regulations affecting our business; |
| ● | commencement of, or involvement in, litigation involving MoneyLion; |
| ● | changes in MoneyLion’s capital structure, such as future
issuances of securities or the incurrence of additional debt; |
| ● | the volume of shares of MoneyLion Class A Common Stock
available for public sale; |
| ● | any major change in MoneyLion’s board or management; |
| ● | sales of substantial amounts of MoneyLion Class A Common
Stock by MoneyLion’s directors, executive officers or significant stockholders or the perception that such sales could occur; and |
| ● | general economic and political conditions such as recessions,
interest rates, fuel prices, international currency fluctuations and acts of war or terrorism. |
Broad market and industry factors
may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and the
NYSE specifically, have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.
As a result of this volatility, you may not be able to sell your securities at or above the price at which it was acquired. A loss of
investor confidence in the market for the stocks of other companies which investors perceive to be similar to MoneyLion could depress
our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of
our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in
the future.
MoneyLion’s failure to meet the continued
listing requirements of the NYSE could result in a delisting of its securities.
If MoneyLion fails to satisfy
the continued listing requirements of the NYSE such as the corporate governance requirements or the minimum closing bid price requirement,
the NYSE may take steps to delist its securities. Such a delisting would likely have a negative effect on the price of the securities
and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, MoneyLion can provide
no assurance that any action taken by it to restore compliance with listing requirements would allow its securities to become listed again,
stabilize the market price or improve the liquidity of its securities, prevent its securities from dropping below the NYSE minimum bid
price requirement or prevent future non-compliance with the NYSE’s listing requirements. Additionally, if MoneyLion’s
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 MoneyLion’s
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.
MoneyLion qualifies as an emerging
growth company within the meaning of Section 2(a) of the Securities Act, as modified by the JOBS Act. Because MoneyLion
intends to take advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make MoneyLion’s
securities less attractive to investors and may make it more difficult to compare MoneyLion’s 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. MoneyLion intends to take advantage of this extended transition period under the JOBS Act for adopting
new or revised financial accounting standards.
For as long as MoneyLion continues
to be an emerging growth company, it 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, its stockholders may not have access to certain information that
they may deem important. MoneyLion could be an emerging growth company for up to five years, although circumstances could cause it
to lose that status earlier, including if its total annual gross revenue exceeds $1.07 billion, if it issues more than $1.0 billion
in non-convertible debt securities during any three-year period, or if before that time it is a “large accelerated filer”
under U.S. securities laws.
MoneyLion cannot predict if
investors will find MoneyLion Class A Common Stock less attractive because it may rely on these exemptions. If some investors find
MoneyLion Class A Common Stock less attractive as a result, there may be a less active trading market for MoneyLion Class A
Common Stock and MoneyLion’s share price may be more volatile. If an active, liquid public trading market for MoneyLion 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 MoneyLion
Class A Common Stock and our ability to acquire other companies or assets by using shares of MoneyLion Class A Common Stock or other MoneyLion
securities as consideration. Further, there is no guarantee that the exemptions available to MoneyLion under the JOBS Act will
result in significant savings. To the extent that MoneyLion chooses not to use exemptions from various reporting requirements under the JOBS
Act, it will incur additional compliance costs, which may impact MoneyLion’s financial condition.
Our Certificate of Incorporation designates
the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be
initiated by MoneyLion’s stockholders, which could limit MoneyLion’s stockholders’ ability to obtain what such stockholders
believe to be a favorable judicial forum for disputes with MoneyLion or MoneyLion’s directors, officers or other employees.
Our Certificate of Incorporation
provides that, unless MoneyLion consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware
(the “Court of Chancery”) shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring
(i) any derivative action or proceeding brought on behalf of MoneyLion, (ii) any action asserting a claim of breach of a fiduciary
duty owed by any director, officer or other employee of MoneyLion to MoneyLion or MoneyLion’s stockholders, (iii) any action
asserting a claim against MoneyLion, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation
Law or MoneyLion’s Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against MoneyLion, its directors,
officers or employees governed by the internal affairs doctrine and, if brought outside of Delaware, the stockholder bringing the suit
will be deemed to have consented to service of process on such stockholder’s counsel, except for, as to each of (i) through
(iv) above, any claim (A) as to which the Court of Chancery determines that there is an indispensable party not subject to the
jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery
within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than
the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) arising under the
Securities Act as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction.
Notwithstanding the foregoing, these provisions will not apply to suits brought to enforce a duty or liability created by the Exchange Act
or any other claim for which the federal courts have exclusive jurisdiction.
Any person or entity purchasing
or otherwise acquiring any interest in any security of MoneyLion shall be deemed to have notice of and consented to these provisions.
These choice-of-forum provisions
may limit a stockholder’s ability to bring a claim in a judicial forum that he, she or it believes to be favorable for disputes
with MoneyLion or MoneyLion’s directors, officers or other employees, which may discourage such lawsuits. We note that there is
uncertainty as to whether a court would enforce these provisions and that investors cannot waive compliance with the federal securities
laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal
courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.
Alternatively, if a court were
to find these provisions of our Certificate of Incorporation inapplicable or unenforceable with respect to one or more of the specified
types of actions or proceedings, MoneyLion may incur additional costs associated with resolving such matters in other jurisdictions, which
could materially adversely affect MoneyLion’s business, financial condition and results of operations and result in a diversion
of the time and resources of MoneyLion’s management and board of directors.
We incur significant costs and have become
subject to additional regulations and requirements as a result of becoming a public company, and our management is required to devote
substantial time to new compliance matters, which could lower profits and make it more difficult to run our business.
We completed the Business Combination
with Legacy MoneyLion on September 22, 2021. As a publicly traded company, MoneyLion incurs significant legal, accounting and other expenses
that Legacy MoneyLion was not required to incur in the past as a privately held company, including costs associated with public company
reporting requirements and costs of recruiting and retaining non-employee directors. We also have incurred, and will continue to incur,
costs associated with compliance with the rules and regulations of the SEC, the listing requirements of NYSE and various other costs of
a public company. These expenses will increase once MoneyLion is no longer an “emerging growth company” as defined under the
JOBS Act. These laws and regulations also could make it more difficult and costly for us to obtain certain types of insurance, including
director and officer liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher
costs to obtain the same or similar coverage. These laws and regulations could also make it more difficult to attract and retain qualified
persons to serve on our board of directors and board committees and to serve as executive officers.
In addition, new and changing
laws, regulations and standards relating to corporate governance and public disclosure for public companies, including the Dodd-Frank
Act, the Sarbanes-Oxley Act, regulations related thereto and the rules and regulations of the SEC and NYSE, have increased the costs and
the time that must be devoted to compliance matters. We expect these rules and regulations will increase our legal and financial costs
and lead to a diversion of management time and attention from revenue-generating activities.