424B3

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-262478

 

PROSPECTUS

 

LOGO

Dave Inc.

Up to 319,960,376 Shares of Class A Common Stock

Up to 11,444,364 Shares of Class A Common Stock Issuable Upon Exercise of Warrants

Up to 5,100,214 Warrants

 

 

This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling Securityholders”) of up to (A) 331,404,740 shares of our Class A common stock, par value $0.0001 per share (the “Dave Class A Common Stock”), which consists of up to (i) 21,000,000 shares of Dave Class A Common Stock issued in a private placement pursuant to subscription agreements entered into on June 7, 2021, (ii) 48,450,639 shares of Dave Class A Common Stock that are issuable by us upon conversion of our Class V common stock, par value $0.0001 per share (the “Dave Class V Common Stock”) held by our Chief Executive Officer; (iii) 5,392,528 shares of Dave Class A Common Stock (the “Founder Shares”) originally issued in a private placement to VPC Impact Acquisition Holdings Sponsor III, LLC (the “Sponsor”) in connection with the initial public offering (the “IPO”) of our predecessor, VPC Impact Acquisition Holdings III, Inc. (“VPCC”), 51,000 of which were subsequently distributed to certain equityholders of VPCC; (iv) 5,100,214 shares of Dave Class A Common Stock that are issuable by us upon the exercise of 5,100,214 warrants (the “Private Warrants”) originally issued in a private placement to the Sponsor in connection with the IPO at an exercise price of $11.50 per share of Dave Class A Common Stock; (v) 6,344,150 shares of Dave Class A Common Stock that are issuable by us upon the exercise of 6,344,150 warrants originally issued in connection with the IPO at an exercise price of $11.50 per share of Class A Stock that were previously registered (the “Public Warrants” and, together with the Private Warrants, the “Dave Warrants”); (vi) 244,949,074 shares of Dave Class A Common Stock issued upon consummation of our business combination pursuant to the Merger Agreement (as defined below) and held by certain of our directors and officers and other holders of registration rights and (vii) 168,135 shares of Dave Class A Common Stock underlying Legacy Dave Options held by certain former employees of Legacy Dave (“Option Shares”); and (B) up to 5,100,214 Private Warrants.

On January 5, 2022 (the “Closing Date”), we consummated the previously announced mergers contemplated by the Merger Agreement, dated as of June 7, 2021 (the “Merger Agreement”), by and among VPCC, Dave Inc., a Delaware corporation (“Legacy Dave”), Bear Merger Company I Inc., a Delaware corporation and a direct, wholly owned subsidiary of VPCC (“First Merger Sub”), and Bear Merger Company II LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of VPCC (“Second Merger Sub” and together with the First Merger Sub, the “Merger Subs”). Pursuant to the Merger Agreement, First Merger Sub merged with and into Legacy Dave (the “First Merger”), with Legacy Dave being the surviving corporation of the First Merger (the “Surviving Corporation”), and immediately following the First Merger, the Surviving Corporation merged with and into Second Merger Sub (the “Second Merger,” together with the First Merger, the “Mergers” and the Mergers together with the other transactions contemplated by the Merger Agreement, the “Business Combination”), with Second Merger Sub being the surviving company of the Second Merger as a wholly owned subsidiary of VPCC. In connection with the closing of the Business Combination, we changed our name from “VPC Impact Acquisition Holdings III, Inc.” to “Dave Inc.,” and the Surviving Entity operates under the name “Dave Operating LLC”.

Our Dave Class A Common Stock and Public Warrants are listed on The Nasdaq Global Market under the symbols “DAVE” and “DAVEW,” respectively. On February 10, 2022, the last reported sales price of the Dave Class A Common Stock was $10.21 per share and the last reported sales price of our Public Warrants was $1.04 per warrant.

We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read this entire prospectus and any amendments or supplements carefully before you make your investment decision.

We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and, as such, have elected to comply with certain reduced disclosure and regulatory requirements.

 

 

Investing in our securities involves risks. See the section entitled “Risk Factors” beginning on page 14 of this prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

The date of this prospectus is February 11, 2022.


TABLE OF CONTENTS

Prospectus

 

     Page  

ABOUT THIS PROSPECTUS

     1  

CERTAIN DEFINED TERMS

     2  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     6  

PROSPECTUS SUMMARY

     8  

RISK FACTORS

     14  

USE OF PROCEEDS

     42  

DETERMINATION OF OFFERING PRICE

     43  

MARKET INFORMATION FOR CLASS A STOCK AND DIVIDEND POLICY

     44  

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF LEGACY DAVE

     45  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     47  

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

     52  

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

     54  

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     56  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     62  

BUSINESS

     85  

MANAGEMENT

     101  

EXECUTIVE COMPENSATION

     107  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     126  

PRINCIPAL SECURITYHOLDERS

     131  

SELLING SECURITYHOLDERS

     133  

DESCRIPTION OF SECURITIES

     137  

SECURITIES ACT RESTRICTIONS ON RESALE OF COMMON STOCK

     143  

PLAN OF DISTRIBUTION

     144  

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

     147  

LEGAL MATTERS

     154  

EXPERTS

     154  

WHERE YOU CAN FIND MORE INFORMATION

     154  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

     F-1  

You should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus and any applicable prospectus supplement. Neither we nor the Selling Securityholders have authorized anyone to provide you with different information. Neither we nor the Selling Securityholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus, any applicable prospectus supplement or any documents incorporated by reference is accurate as of any date other than the date of the applicable document. Since the date of this prospectus and the documents incorporated by reference into this prospectus, our business, financial condition, results of operations and prospects may have changed.

 

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ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Dave Class A Common Stock issuable upon the exercise of any Dave Warrants. We will receive proceeds from any exercise of the Dave Warrants for cash.

Neither we nor the Selling Securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”

We are registering the securities described above for resale pursuant to, among other things, the Selling Securityholders’ registration rights under certain agreements between us and the Selling Securityholders. Our registration of the securities covered by this prospectus does not mean that either we or the Selling Securityholders will issue, offer or sell, as applicable, any of the securities. The Selling Securityholders may offer, sell or distribute all or a portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of Dave Class A Common Stock or Dave Warrants, except with respect to amounts received by us upon the exercise of the Dave Warrants. We will bear all costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The Selling Securityholders will bear all commissions and discounts, if any, attributable to their sale of shares of Dave Class A Common Stock or Dave Warrants. See “Plan of Distribution” beginning on page 144 of this prospectus.

Unless the context indicates otherwise, references in this prospectus to the “Company,” “Dave,” “we,” “us,” “our” and similar terms refer to Dave Inc. (f/k/a VPC Impact Acquisition Holdings III, Inc.) and its consolidated subsidiaries. References to “VPCC” refer to our predecessor company prior to the consummation of the Business Combination.

 

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CERTAIN DEFINED TERMS

Unless the context otherwise requires, references in this prospectus to:

 

   

“Business Combination” are to the Merger Agreement and the transactions contemplated by the Merger Agreement, which include the Mergers and the other transactions contemplated thereby;

 

   

“Business Combination Shares” are to the shares of Dave Class A Common Stock issued upon consummation of the Business Combination pursuant to the Merger Agreement and held by certain of Dave’s officers, directors and greater than 5% stockholders and their affiliated entities;

 

   

“Closing” are to January 5, 2022, the date of the consummation of the Business Combination;

 

   

“Closing Date” are to the date the Closing takes place;

 

   

“Code” are to the U.S. Internal Revenue Code of 1986, as amended;

 

   

“Conversion” are to the conversion of each share of Legacy Dave Class A Common Stock held by Jason Wilk into the same number of shares of Legacy Dave Class V Common Stock immediately prior to the Effective Time at the then-effective conversion rate;

 

   

“Common Stock” are to the Dave Class A Common Stock and Dave Class V Common Stock;

 

   

“Dave” are to Dave Inc., a Delaware corporation, which prior to the Business Combination was known as VPC Impact Acquisition Holdings III, Inc., a Delaware corporation;

 

   

“Board” are to the board of directors of Dave;

 

   

“Dave Bylaws” are to the Amended and Restated Bylaws of Dave dated January 5, 2022, as the same may be amended, supplemented or modified from time to time;

 

   

“Dave Charter” are to the Second Amended and Restated Certificate of Incorporation of Dave dated January 5, 2022, as the same may be amended, supplemented or modified from time to time;

 

   

“Dave Class A Common Stock” are to the shares of Class A common stock, par value $0.0001 per share, of Dave;

 

   

“Dave Class V Common Stock” are to the shares of Class V common stock, par value $0.0001 per share, of Dave;

 

   

“Dave Warrants” are to Public Warrants and Private Warrants;

 

   

“DGCL” are to the Delaware General Corporation Law;

 

   

“Legacy Dave Stockholders” are the holders of Legacy Dave Capital Stock as of immediately prior to the Closing;

 

   

“Effective Time” are to the date and time at which the First Merger became effective;

 

   

“First Merger” are to the merger of First Merger Sub with and into Legacy Dave, with Legacy Dave surviving the merger as a wholly owned subsidiary of VPCC;

 

   

“First Merger Sub” are to Bear Merger Company I Inc., a Delaware corporation and direct, wholly owned subsidiary of VPCC;

 

   

“Founder Holder Agreement” are to that certain Founder Holder Agreement, dated as of June 7, 2021, by and among VPCC, the Founder Holders, the other directors and officers of VPCC and Legacy Dave;

 

   

“Founder Holders” are to the Sponsor and the Prior Independent Directors, in each case solely in their capacity as holders of VPCC Class B Common Stock as of immediately prior to the Closing and the Founder Holder Class B Conversion;

 

   

“Founder Shares” are, if prior to the Effective Time, to the 6,344,150 shares of VPCC Class B Common Stock initially purchased by the Sponsor in a private placement prior to the IPO, and if after the Effective Time, to the shares of VPCC Class A Common Stock after giving effect to the Founder Holder Class B Conversion, originally issued in a private placement to the Sponsor in connection with the IPO;

 

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“Founder Holder Class B Conversion” are to the conversion in connection with the Closing of the outstanding shares of VPCC Class B Common Stock on a one-for-one basis into shares of VPCC Class A Common Stock;

 

   

“Initial Public Offering” or “IPO” are to VPCC’s initial public offering of Units, the base offering of which closed on March 4, 2021;

 

   

“initial shareholders” are to the holders of the Founder Shares, which includes the Sponsor and the Independent Directors;

 

   

“Investor Rights Agreement” are to that certain Investor Rights Agreement dated January 5, 2022, by and among Dave, the Founder Holders and certain holders of Legacy Dave Capital Stock in respect of the shares of Common Stock held by such holders following the Closing;

 

   

“IRS” are to the Internal Revenue Service;

 

   

“Legacy Dave” are to Dave Inc., a Delaware corporation, prior to the Mergers;

 

   

“Legacy Dave Capital Stock” are to shares of Legacy Dave Common Stock and Legacy Dave Restricted Stock;

 

   

“Legacy Dave Class A Common Stock” are to the shares of Legacy Dave’s Class A common stock, par value $0.00001 per share;

 

   

“Legacy Dave Class V Common Stock” are to the shares of Legacy Dave’s Class V common stock, par value $0.00001 per share;

 

   

“Legacy Dave Common Stock” are to shares of Legacy Dave Class A Common Stock and Legacy Dave Class V Common Stock;

 

   

“Legacy Dave Preferred Stock” are to the Legacy Dave Series A Preferred Stock, Legacy Dave Series B-1 Preferred Stock and Legacy Dave Series B-2 Preferred Stock;

 

   

“Legacy Dave Series A Preferred Stock” are to the shares of Legacy Dave Series A convertible preferred stock, par value per share $0.000001;

 

   

“Legacy Dave Series B-1 Preferred Stock” are to the shares of Legacy Dave Series B-1 convertible preferred stock, par value per share $0.000001;

 

   

“Legacy Dave Series B-2 Preferred Stock” are to the shares of Legacy Dave Series B-2 convertible preferred stock, par value per share $0.000001;

 

   

“Legacy Dave Restricted Stock” are to the restricted shares of Legacy Dave granted pursuant to the Legacy Dave Stock Plan;

 

   

“Legacy Dave Stock Plan” are to the 2017 Stock Plan of Legacy Dave;

 

   

“Legacy Dave Warrants” are to the warrants to purchase Legacy Dave Capital Stock outstanding immediately prior to the Effective Time;

 

   

“management” or our “management team” are to our officers and directors;

 

   

“Merger Agreement” are to that certain Agreement and Plan of Merger, dated June 7, 2021, by and among Legacy Dave, VPCC, First Merger Sub and Second Merger Sub;

 

   

“Mergers” are to the First Merger and Second Merger;

 

   

“Nasdaq” are to The Nasdaq Stock Market LLC;

 

   

“Organizational Documents” are to the Dave Charter and Dave Bylaws;

 

   

“PIPE Investment” are to the transactions contemplated by the Subscription Agreements, entered into in connection with the execution of the Merger Agreement;

 

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“PIPE Investors” are to the qualified institutional buyers and accredited investors that purchased shares of Dave Class A Common Stock in the PIPE Investment;

 

   

“Prior Independent Directors” are to Janet Kloppenburg, Peter Offenhauser and Kurt Summers;

 

   

“Private Warrants” are to warrants to purchase one share of VPCC Class A Common Stock originally issued to the Sponsor in a private placement simultaneously with the closing of the IPO;

 

   

“Proxy Statement/Prospectus” means the final prospectus and definitive proxy statement, dated December 9, 2021 and filed with the SEC on December 13, 2021, together with the supplements subsequently filed with the SEC;

 

   

“Public Shares” are to shares of VPCC Class A Common Stock sold as part of the Units in the IPO (whether purchased in the IPO or thereafter in the open market);

 

   

“Public Warrants” are to the warrants originally sold as part of the Units in the IPO (whether purchased in the IPO or thereafter in the open market);

 

   

“SEC” are to the U.S. Securities and Exchange Commission;

 

   

“Second Merger” are to the merger of Legacy Dave (as the surviving entity of the First Merger) with and into Second Merger Sub, with Second Merger Sub surviving the merger as a wholly owned subsidiary of VPCC;

 

   

“Second Merger Sub” are to Bear Merger Company II LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of VPCC, which changed its name to Dave Operating LLC subsequent to the Second Merger;

 

   

“Securities Act” are to the Securities Act of 1933, as amended;

 

   

“Selling Securityholders” are to the selling securityholders named in this prospectus;

“Sponsor” are to VPC Impact Acquisition Holdings Sponsor III, LLC, a Delaware limited liability company, which was the sponsor of VPCC and an affiliate of certain of VPCC’s officers and directors prior to the Business Combination;

 

   

“Subscription Agreements” are to those certain Subscription Agreements, dated as of June 7, 2021, by and among VPCC and the PIPE Investors, pursuant to which the PIPE investors agreed to purchase an aggregate of 21,000,000 shares of Dave Class A Common Stock in a private placement for an aggregate purchase price of $210,000,000;

 

   

“VPCC” are to VPC Impact Acquisition Holdings III, Inc., a Delaware corporation;

 

   

“VPCC Class A Common Stock” are to VPCC’s Class A common stock, par value $0.0001 per share, which following the Closing, is Dave Class A Common Stock;

 

   

“VPCC Class B Common Stock” are to VPCC’s Class B common stock, par value $0.0001 per share;

 

   

“Transactions” are to the Mergers together with the other transactions contemplated by the Merger Agreement;

 

   

“Trust Account” are to the trust account established at the consummation of VPCC’s initial public offering that held the proceeds of the initial public offering and was maintained by Continental Stock Transfer & Trust Company, acting as trustee;

 

   

“Units” are to VPCC’s units sold in the IPO, each of which consisted of one Public Share and one-fourth of one Public Warrant;

 

   

“U.S. GAAP” are to the generally accepted accounting principles in the United States;

 

   

“Legacy Dave Options” are to options to purchase shares of Legacy Dave Capital Stock pursuant to the Legacy Dave Stock Plan;

 

   

“Warrant Agreement” are to the Warrant Agreement, dated March 4, 2021, between VPCC and Continental Stock Transfer & Trust Company, as warrant agent;

 

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“Written Consent Party” are to the Legacy Dave Stockholders (including Jason Wilk, the Chief Executive Officer and Co-Founder of Dave) who collectively held holding sufficient number, type and classes of Dave equity interests to obtain the Requisite Legacy Dave Stockholder Approval; and

 

   

“Requisite Legacy Dave Stockholder Approval” are to the Legacy Dave Stockholders collectively holding sufficient number, type and classes of Legacy Dave Capital Stock, adopting and approving the Merger Agreement and the transactions contemplated thereby and constituting the requisite approval under the DGCL and Dave’s governance documents with respect to the Merger Agreement and the transactions contemplated thereby.

 

5


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus and any accompanying prospectus supplement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are forward-looking and as such are not historical facts. These forward-looking statements include, without limitation, statements regarding the benefits of the Business Combination, future financial performance, business strategies, expansion plans, future operations, future operating results, estimated revenues, losses, projected costs, prospects, plans and objectives of management. These forward-looking statements are based on our management’s current expectations, estimates, projections and beliefs, as well as a number of assumptions concerning future events, and are not guarantees of performance. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this prospectus and any accompanying prospectus supplement, words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “would,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “projects” or the negative version of these words or other comparable words or phrases, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The following factors among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

 

   

the ability to maintain the listing of Dave Class A Common Stock on Nasdaq;

 

   

the risk that the Business Combination disrupts current plans and operations of Legacy Dave;

 

   

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition and the ability of Dave to manage its growth following the Business Combination;

 

   

the ability of Dave to protect intellectual property and trade secrets;

 

   

changes in applicable laws or regulations and extensive and evolving government regulations that impact operations and business;

 

   

the ability to attract or maintain a qualified workforce;

 

   

level of product service failures that could lead Dave members (“Members”) to use competitors’ services;

 

   

investigations, claims, disputes, enforcement actions, litigation and/or other regulatory or legal proceedings;

 

   

the effects of the COVID-19 pandemic on Dave’s business;

 

   

the possibility that Dave may be adversely affected by other economic, business, and/or competitive factors; and

 

   

other risks and uncertainties described under the section titled “Risk Factors” of this prospectus.

The forward-looking statements contained in this prospectus are based on our current expectations and beliefs concerning future developments and their potential effects on our business. There can be no assurance that future developments affecting our business will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in the section entitled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the effect of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any

 

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forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of the assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

The forward-looking statements made by us in this prospectus and any accompanying prospectus supplement speak only as of the date of this prospectus and the accompanying prospectus supplement. Except to the extent required under the federal securities laws and rules and regulations of the SEC, we disclaim any obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In light of these risks and uncertainties, there is no assurance that the events or results suggested by the forward-looking statements will in fact occur, and you should not place undue reliance on these forward-looking statements.

 

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PROSPECTUS SUMMARY

The following summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our consolidated financial statements and the related notes included in this prospectus and the information set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

The Company

In the story of David vs. Goliath, the small underdog is able to outsmart and defeat his larger adversary. This is the spirit behind the name “Dave.” We have built an integrated financial services online platform that provides millions of Americans with seamless access to a variety of intuitive financial products at a fraction of the cost and with much higher speed to value than that of the legacy financial services incumbents, such as traditional banks and other financial institutions. Our mission is to create financial opportunity that advances America’s collective potential.

Based on the Company’s observation and analysis of data gathered from its Members, legacy financial institutions charge high fees for financial banking products, which disproportionately burdens tens of millions of Americans who need it most. We see this dynamic playing out with our Members who we believe are on average paying between $300-$400 in overdraft, maintenance and other fees to their existing bank for basic checking services.

According to a report by the Center for Financial Services Innovation (“CFSI”), legacy financial institutions charge approximately $30 billion in fees annually. The Consumer Financial Protection Bureau (“CFPB”) reports that more than 50 million Americans overdraft multiple times per year. According to the Financial Health Network, by 2023 approximately 45 million Americans will be “financially vulnerable,” 65 million Americans will be unbanked or underbanked and 185 million Americans will fall into the low or volatile income and credit-challenged category. Given these dynamics, our potential Member opportunity is significant. We estimate that our total addressable market consists of between 150 million to 180 million Americans who are in need of financial stability and are either not served or underserved by legacy financial institutions.

Dave offers a suite of innovative financial products aimed at helping our Members improve their financial health. Our budgeting tool helps Members manage their upcoming bills to avoid overspending. To help Members avoid punitive overdraft fees, Dave offers cash advances through its flagship 0% interest ExtraCash product. We also help Members generate extra income for spending or emergencies through our Side Hustle product, where we present Members with supplemental work opportunities. Through Dave Banking, we provide a modern checking account experience with valuable tools for building long-term financial health.

Market research conducted by Dave found that legacy financial institutions commonly require a more extensive banking relationship and days or even weeks of wait times to access their features and services, which can potentially be more onerous in order to obtain premium features (e.g., access to increased interest rates requires direct deposit or higher minimum daily balances). Even new challenger banks often take multiple days or even weeks before allowing members to access certain premium features, according to the same research. In contrast, Members are able to utilize all of Dave’s products individually and instantly, whether or not their banking relationship is with us. As an example, our ExtraCash product allows new Members to access up to $250 to cover an overdraft at their existing bank. We are able to do this by leveraging our proprietary machine learning engine that analyzes a Member’s prior transaction history at their existing bank. This flexible approach to Member choice and speed to value has been a key driver of our growth and best-in-Class brand favorability. According to market research conducted by Dave in June 2021 through a third-party using a quantitative online

 

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survey of 2,021 respondents across the United States 73% of respondents rated Dave in the two highest favorable categories (42% very favorable and 30% somewhat favorable) compared to other bank innovators.

We have only begun to address the many inequities in financial services, but our progress to date demonstrates the demand for Dave to rewire the financial system for the everyday person. Since inception and through the date of this prospectus, approximately 10 million Members have registered on the Dave app and over five million of them have used at least one of our current products. We have added more than one million new banking relationships over the last 12 months, and we believe that we have a substantial opportunity to grow our Member base going forward. We believe the value proposition of our platform approach will continue to accelerate as a result of our data-driven perspective of our Members, allowing us to introduce products and services that address their changing life circumstances.

Corporate Information

We were incorporated on January 14, 2021 as a Delaware corporation under the name VPC Impact Acquisition Holdings III, Inc. (“VPCC”) for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. On March 4, 2021, VPCC completed its initial public offering. On January 5, 2022, VPCC consummated the Business Combination with Dave pursuant to the Merger Agreement and changed its name to Dave Inc.

Our principal executive offices are located at 1265 South Cochran Avenue, Los Angeles, California 90019. Our telephone number is (844) 857-3283. Our website address is www.dave.com. Information contained on our website or connected thereto does not constitute part of, and is not incorporated by reference into, this prospectus or the registration statement of which it forms a part.

Dave, the Dave logo and our other registered or common law trademarks, service marks or trade names appearing in this prospectus are the property of Dave. Other trademarks, service marks and trade names used in this prospectus are the property of their respective owners.

 

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The Offering

 

Issuer

Dave Inc. (f/k/a VPC Impact Acquisition Holdings III, Inc).

Issuance of Dave Class A Common Stock

 

Shares of Dave Class A Common Stock offered by us

59,895,003 shares of Dave Class A Common Stock, consisting of

 

   

48,450,639 shares of Dave Class A Common Stock that are issuable upon conversion of 48,450,639 outstanding shares of Dave Class V Common Stock;

 

   

5,100,214 shares of Dave Class A Common Stock that are issuable upon the exercise of 5,100,214 Private Warrants; and

 

   

6,344,150 shares of Dave Class A Common Stock that are issuable upon the exercise of 6,344,150 Public Warrants.

 

Shares of Dave Class A Common Stock outstanding prior to exercise of all Dave Warrants and conversion of all Dave Class V Common Stock

323,549,861 shares of Dave Class A Common Stock (as of January 5, 2022).

 

Shares of Dave Class A Common Stock outstanding assuming exercise of all Dave Warrants and conversion of all Dave Class V Common Stock

383,444,864 shares of Dave Class A Common Stock (as of January 5, 2022).

 

Exercise Price of Private Warrants and Public Warrants

$11.50 per share, subject to adjustments as described herein.

 

Use of proceeds

We will receive up to an aggregate of approximately $131.61 million from the exercise of the Dave Warrants, assuming the exercise in full of all of the Dave Warrants for cash. We will receive up to an aggregate of approximately $0.21 million from the exercise of Option Shares, assuming the exercise in full of all of the Option Shares for cash. We expect to use the net proceeds from the exercise of the Dave Warrants and Option Shares, if any, for general corporate purposes. See “Use of Proceeds.”

Resale of Dave Class A Common Stock and Dave Warrants

 

Securities offered by the Selling Securityholders

331,404,740 shares of Dave Class A Common Stock, consisting of:

 

   

21,000,000 shares of Dave Class A Common Stock issued in the PIPE Financing;

 

   

5,392,528 Founder Shares;

 

   

244,949,074 shares of Dave Class A Common Stock issued upon consummation of our business combination pursuant to the Merger Agreement and held by certain of our directors and officers and other holders of registration rights;

 

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48,450,639 shares of Dave Class A Common Stock that are issuable upon conversion of 48,450,639 outstanding shares of Dave Class V Common Stock held by Jason Wilk, our Chief Executive Officer;

 

   

6,344,150 shares of Dave Class A Common Stock that are issuable upon the exercise of 6,344,150 Public Warrants;

 

   

168,135 shares of Dave Class A Common Stock underlying Legacy Dave Options held by certain former employees of Legacy Dave; and

 

   

5,100,214 shares of Dave Class A Common Stock that are issuable upon the exercise of 5,100,214 Private Warrants.

 

Dave Warrants offered by the Selling Securityholders

5,100,214 Private Warrants.

 

Terms of the offering

The Selling Securityholders will determine when and how they will dispose of the shares of Dave Class A Common Stock and Private Warrants registered under this prospectus for resale.

 

Use of proceeds

We will not receive any proceeds from the sale of shares of Dave Class A Common Stock or Private Warrants (assuming the cashless exercise provision is used) by the Selling Securityholders.

 

Lock-Up Restrictions

Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See “Certain Relationships and Related TransactionsLock-Up Arrangements” for further discussion.

 

Risk Factors

See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.

 

Nasdaq Stock Market Symbols

Our Dave Class A Common Stock and Public Warrants are listed on the Nasdaq Global Market under the symbols “DAVE” and “DAVEW,” respectively.

 

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Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances, may adversely affect our ability realize the anticipated benefits of the Business Combination, and may have an adverse effect on our business, financial condition, results of operations, and prospects. Such risks include, but are not limited to:

 

   

The industries in which we compete are highly competitive, which could adversely affect our results of operations.

 

   

If we are unable to keep pace with the rapid technological developments in our industry and the larger financial services industry necessary to continue providing our Members with new and innovative products and services, the use of our platform and other products and services could decline. In addition, if the prices we charge for our products and services are unacceptable to our Members, our operating results will be harmed.

 

   

Our non-recourse cash advances expose us to credit risk of our Members and if our underwriting criteria for making advances is not sufficient to mitigate against this risk, our financial condition and operating results could be adversely affected if a substantial number of our Members fail to repay the cash advance they receive.

 

   

We may not be able to scale our business quickly enough to meet our Members’ growing needs, and if we are not able to grow efficiently, our operating results could be harmed.

 

   

If we are unable to acquire new Members and retain our current members or sell additional functionality and services to them, our revenue growth will be adversely affected.

 

   

We have historically incurred losses in the operation of our business. We may never achieve or sustain profitability.

 

   

We operate in an uncertain regulatory environment and may from time to time be subject to governmental investigations or other inquiries by state, federal and local governmental authorities.

 

   

The financial services industry continues to be targeted by new laws or regulations in many jurisdictions, including the U.S. states in which we operate, that could restrict the products and services we offer, impose additional compliance costs on us, render our current operations unprofitable or even prohibit our current operations.

 

   

Our business is subject to extensive regulation and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws and regulations.

 

   

Stringent and changing laws and regulations relating to privacy and data protection could result in claims, harm our results of operations, financial condition, and future prospects, or otherwise harm our business.

 

   

Legacy Dave identified material weaknesses in its internal control over financial reporting, which for the years ended December 31, 2020 and 2019 resulted in a restatement of its financial statements, and if Dave is unable to remediate these material weaknesses, or if it identifies additional material weaknesses in the future or otherwise fails to maintain effective internal control over financial reporting, it may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect Dave’s business and share price.

 

   

Dave’s forecasted operating results and projections rely in large part upon assumptions, analyses and internal estimates developed by Dave’s management. If these assumptions, analyses or estimates prove

 

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to be incorrect or inaccurate, Dave’s actual operating results may differ materially and adversely from those forecasted or projected.

 

   

Fraudulent and other illegal activity involving our products and services could lead to reputational damage to us, reduce the use of our platform and services and may adversely affect our financial position and results of operations.

 

   

In the normal course of business, we collect, process, use and retain sensitive and confidential information regarding our Members and prospective Members, including data provided by and related to Members and their transactions, as well as other data of the counterparties to their payments. A data security breach could expose us to liability and protracted and costly litigation, and could adversely affect our reputation and operating revenues.

 

   

Dave’s management has limited experience in operating a public company.

 

   

We transfer funds to our Members daily, which in the aggregate comprise substantial sums, and are subject to the risk of errors, which could result in financial losses, damage to our reputation, or loss of trust in our brand, which would harm our business and financial results.

 

   

Dave, Inc. has guaranteed up to $50,000,000 of one of its subsidiary’s obligations under a credit facility, and currently that limited guaranty is secured by a first-priority lien against substantially all of Dave, Inc.’s assets. The credit facility contains financial covenants and other restrictions on our actions, which could limit our operational flexibility and otherwise adversely affect our financial condition.

 

   

If our present or any future key banking relationships are terminated and we are not able to secure or successfully migrate client portfolios to a new bank partner or partners, our business would be adversely affected.

 

   

We depend upon several third-party service providers for processing our transactions and provide other important services for our business. If any of our agreements with our processing providers are terminated or if we experience any interruption or delay in the services provided by our third-party service providers, delivery of our products and services could be impaired or suspended and our business could suffer.

 

   

Our recent rapid growth, including growth in our volume of payments, may not be indicative of future growth, and if we continue to grow rapidly, we may not be able to manage our growth effectively. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

 

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RISK FACTORS

Investing in our securities involves risks. You should consider carefully the risks and uncertainties described below, together with all of the other information in this prospectus, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, before deciding whether to purchase any of our securities. Our business, results of operations, financial condition, and prospects could also be harmed by risks and uncertainties that are not presently known to us or that we currently believe are not material. If any of these risks actually occur, our business, results of operations, financial condition, and prospects could be materially and adversely affected. Unless otherwise indicated, references in these risk factors to our business being harmed will include harm to our business, reputation, brand, financial condition, results of operations, and prospects. In such event, the market price of our securities could decline, and you could lose all or part of your investment.

Risks Related to Dave’s Business

The industries in which we compete are highly competitive, which could adversely affect our results of operations.

The industries in which we compete are highly competitive and subject to rapid and significant changes. We compete against companies and financial institutions across the retail banking, financial services, consumer technology and financial technology services industries, as well as other nonbank lenders serving credit-challenged consumers, including online marketplace lenders, check cashers, point-of-sale lenders and payday lenders. We may compete with others in the market who may in the future provide offerings similar to ours, particularly companies who may provide money management, lending and other services though a platform similar to our platform. These and other competitors in the banking and financial technology industries are introducing innovative products and services that may compete with ours. We expect that this competition will continue as banking and financial technology industries continue to evolve, particularly if non-traditional non-recourse advance providers and other parties gain greater market share in these industries. If we are unable to differentiate our products and platform from and successfully compete with those of our competitors, our business, results of operations and financial condition will be materially and adversely affected.

Many existing and potential competitors are entities substantially larger in size, have more resources, are more highly diversified in revenue and substantially more established with significantly more brand awareness than ours. As such, many of our competitors can leverage their size, robust networks, financial wherewithal, brand awareness, pricing power and technological assets to compete with us. To the extent new entrants gain market share, the purchase and use of our products and services would decline. If price competition materially intensifies, we may have to decrease the prices of our products and services, which would likely adversely affect the results of operations.

Our long-term success depends on our ability to compete effectively against existing and potential competitors that seek to provide banking and financial technology products and services. If we fail to compete effectively against these competitors, our revenues, results of operations, prospects for future growth and overall business will be materially and adversely affected.

If we are unable to keep pace with the rapid technological developments in our industry and the larger financial services industry necessary to continue providing our Members with new and innovative products and services, the use of our platform and other products and services could decline.

The financial services industry is subject to rapid and significant technological changes. We cannot predict the effect of technological changes on our business. We expect that new services and technologies applicable to our industry will continue to emerge, and these new services and technologies may be superior to, or render obsolete, the technologies we currently utilize in our products and services. Our future success will depend, in part, on our

 

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ability to develop new technologies and adapt to technological changes and evolving industry standards. These initiatives are inherently risky, and they may not be successful or may have an adverse effect on our business, financial condition and results of operations. Additionally, we may make future investments in, or enter into strategic partnerships to develop new technologies and services or to implement infrastructure to further our strategic objectives, strengthen our existing businesses and remain competitive. However, our ability to transition to new services and technologies that we develop may be inhibited by a lack of industry-wide standards, changes to the regulatory landscape, resistance by consumers to these changes, or by the intellectual property rights of third parties.

If the prices we charge for our products and services are unacceptable to our Members, our operating results will be harmed.

We generate revenue by charging Members a fixed monthly rate for membership to our platform as well as additional fees related to optional expedited delivery of advances. Members who obtain a non-recourse advance through our platform also have the option to tip us. We also generate revenue from our Dave banking product through interchange and out-of-network ATM fees, as well as from our job portal service through referral fees from partner companies. As the market for our platform matures, or as new or existing competitors introduce new products or services that compete with ours, we may experience pricing pressure and be unable to retain current Members and attract new Members at prices that are consistent with our pricing model and operating budget. Our pricing strategy for new products and services we introduce may prove to be unappealing to our Members, and our competitors could choose to bundle certain products and services competitive with ours. If this were to occur, it is possible that we would have to change our pricing strategies or reduce our prices, which could harm our revenue, gross profits, and operating results.

Our non-recourse cash advances expose us to credit risk of our Members and if our underwriting criteria for making advances is not sufficient to mitigate against this risk, our financial condition and operating results could be adversely affected if a substantial number of our Members fail to repay the cash advance they receive.

Our non-recourse advance product exposes us to financial losses if Members do not repay the advance we provide to them. The timing and volume of advance repayments have a significant impact on our financial results and cash flows. If a large number of Members do not repay advances, our financial condition and operating results would be adversely affected.

Our underwriting standards may not offer adequate protection against the risk of non-payment, especially in periods of economic uncertainty such as has existed with the onset of the COVID-19 pandemic. As our cash advances are non-recourse, we have no remedy if a Member fails to repay an advance.

Our ability to accurately forecast performance and determine an appropriate provision and allowance for credit losses, is critical to our business and financial results. The allowance for credit losses is established through a provision for credit losses based on management’s evaluation of the risk inherent in the cash advance portfolio, the composition of the portfolio, specific impaired advances, and current economic conditions. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in this prospectus.

There can be no assurance that our performance forecasts will be accurate. In periods with changing economic conditions, accurately forecasting repayment of advances is more difficult. Our allowance for losses is an estimate, and if actual repayment defaults are materially greater than our allowance for losses, or more generally, if our forecasts are not accurate, our financial position, liquidity and results of operations could be materially adversely affected. For example, uncertainty surrounding the continuing economic impact of COVID-19 on our Members has made historical information on credit losses slightly less reliable in the current environment, and there can be no assurances that we have accurately estimated repayment rates.

 

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We may not be able to scale our business quickly enough to meet our Members’ growing needs, and if we are not able to grow efficiently, our operating results could be harmed.

As usage of our platform grows and we sign additional strategic partners, we will need to devote additional resources to improving and maintaining our infrastructure and computer network and integrating with third-party applications to maintain the performance of our platform. In addition, we will need to appropriately scale our internal business systems and our services organization, including customer support, risk and compliance operations, and professional services, to serve our growing Members base.

Any failure of or delay in these efforts could result in service interruptions, impaired system performance, and reduced Member satisfaction, which could hurt our revenue growth. If sustained or repeated, performance issues could reduce the attractiveness of our platform to Members and could result in lost Member opportunities, which could hurt our revenue growth, Member loyalty, and our reputation. Even if we are successful in these efforts to scale our business, they will be expensive and complex, and require the dedication of significant management time and attention. We could also face inefficiencies or service disruptions as a result of our efforts to scale our internal infrastructure. We cannot be sure that the expansion and improvements to our internal infrastructure will be effectively implemented on a timely basis, if at all, and such failures could adversely affect our business, operating results, and financial condition.

If we are unable to acquire new Members and retain our current members or sell additional functionality and services to them, our revenue growth will be adversely affected.

To increase our revenue, in addition to acquiring new Members, we must continue to retain existing members and convince them to expand their use of our platform by increasing the number of members and incentivizing them to pay for additional functionality. Our ability to retain our Members and increase their usage could be impaired for a variety of reasons, including member reaction to changes in the pricing of our products or the other risks described in this prospectus. As a result, we may be unable to retain existing Members or increase the usage of our platform by them, which would have an adverse effect on our business, revenue, gross margins, and other operating results, and accordingly, on the trading price of our common stock.

Our ability to sell additional functionality to our existing Members may require more sophisticated and costly sales efforts. Similarly, the rate at which our Members purchase additional products from us depends on several factors, including general economic conditions and the pricing of additional product functionality. If our efforts to sell additional functionality to our Members are not successful, our business and growth prospects would suffer.

Our member subscriptions are open-ended arrangements that can be terminated by the Member without penalty at any time. For us to maintain or improve our operating results, it is important that our members continue to maintain their subscriptions on the same or more favorable terms. We cannot accurately predict renewal or expansion rates given the diversity of our member base in terms of size, industry, and geography. Our renewal and expansion rates may decline or fluctuate as a result of several factors, including member spending levels, member satisfaction with our platform, decreases in the number of members, pricing changes, competitive conditions, the acquisition of our members by other companies, and general economic conditions. If our members do not renew their subscriptions, or if they reduce their usage of our platform, our revenue and other operating results will decline and our business will be adversely affected. If our renewal or expansion rates fall significantly below the expectations of the public market, securities analysts, or investors, the trading price of our common stock would likely decline.

We have limited operating history and face significant challenges as a new entrant in our industry.

We were incorporated in October 2015 and we have a relatively short operating history in the financial services industry, which is continuously evolving. We have limited experience to date in building consumer financial

 

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services technology. We cannot assure you that we will be able to develop products and services on our platform that will enable us to meet quality, price and engineering standards, as well as comply with any regulatory standards we may be subject to. You should consider our business and prospects in light of the risks and significant challenges we face as a new entrant in our industry, including, among other things, with respect to our ability to:

 

   

build a well-recognized, trusted and respected brand;

 

   

establish and expand our Member base;

 

   

successfully market our products and services;

 

   

properly price our services and successfully anticipate the usage of such services by our Members;

 

   

improve and maintain our operational efficiency;

 

   

maintain a reliable, secure, high-performance and scalable technology infrastructure;

 

   

predict our future revenues and appropriately budget our expenses;

 

   

attract, retain and motivate talented employees;

 

   

anticipate trends that may emerge and affect our business;

 

   

anticipate and adapt to changing market conditions, including technological developments and changes in competitive landscape; and

 

   

navigate an evolving and complex regulatory environment.

If we fail to address any or all of these risks and challenges, our business may be materially and adversely affected.

Changes in debit interchange rates could adversely affect our business, financial position and results of operations.

We expect interchange revenues from fees charged to merchants by card networks for processing a debit or credit payment to represent a significant percentage of our total operating revenues as adoption of our Dave banking product increases. The amount of interchange revenues that we earn is highly dependent on the interchange rates that the payment networks set and adjust from time to time.

The enactment of the Dodd-Frank Act required the Federal Reserve Board to implement regulations that have substantially limited interchange fees for many debit card issuers. While the interchange rates that may be earned by us are exempt from the limitations imposed by the Dodd-Frank Act, there can be no assurance that future regulation or changes by the payment networks will not impact our interchange revenues substantially. If interchange rates decline, whether due to actions by the payment networks or future regulation, we would likely need to change our fee structure to offset the loss of interchange revenues. To the extent we change the pricing of our Dave banking product, we might find it more difficult to acquire new Members, to maintain or grow Dave banking debit card usage and to retain existing Members. As a result, our total operating revenues, operating results, prospects for future growth and overall business could be materially and adversely affected.

If we lose key personnel, if their reputations are damaged, or if we are unable to attract and retain executives and employees we need to support our operations and growth, our business may be harmed.

Our success and future growth depend upon the continued services of our management team and other key employees who are critical to our overall management, as well as the continued development of our products, strategic partnerships, our culture and our strategic direction. Our business may also be adversely affected by the departure of members of our senior management team who have, over the years, developed long standing and

 

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favorable relationships with our bank sponsor and key payment processing and technology service providers. We currently do not have “key person” insurance on any of our employees. The loss of one or more of our senior management team members or other key employees could disrupt or harm our business, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees or that we would be able to timely replace members of our senior management or other key employees should any of them depart.

If we fail to offer high-quality customer support, or if our support is more expensive than anticipated, our business and reputation could suffer.

Our Members rely on our customer support services to resolve issues and realize the full benefits provided by our platform. High-quality support is also important for the renewal and expansion of our subscriptions with existing Members. We primarily provide customer support over chat and email. If we do not help our Members quickly resolve issues and provide effective ongoing support, or if our support personnel or methods of providing support are insufficient to meet the needs of our Members, our ability to retain Members, increase adoption by our existing Members and acquire new Members could suffer, and our reputation with existing or potential Members could be harmed. If we are not able to meet the customer support needs of our Members by chat and email during the hours that we currently provide support, we may need to increase our support coverage and provide additional phone-based support, which may reduce our profitability.

We offer a number of free products and services to drive awareness, usage and adoption of all our products and services. If these marketing strategies are unsuccessful, our ability to grow our revenue will be adversely affected.

To encourage awareness, usage, familiarity and adoption of our platform, products and services, we offer a number of free products and services. These strategies may not be successful in leading users to become paid Members, use our revenue generating products or services, or contribute voluntary tips. To the extent that we are unable to generate revenue from new memberships or the use of our products and services, we will not realize the intended benefits of these marketing strategies and our ability to grow our revenue will be adversely affected.

If our present or any future key banking relationships are terminated and we are not able to secure or successfully migrate client portfolios to a new bank partner or partners, our business would be adversely affected.

We rely on agreements with Evolve Bank & Trust (“Evolve Bank”) to provide deposit accounts, debit card services and other transaction services to us and our Members. These agreements and corresponding regulations governing banks and financial institutions may give Evolve Bank substantial discretion in approving certain aspects of our business practices, including our application and qualification procedures for Members and require us to comply with certain legal requirements. Evolve Bank’s 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. If our relationship with Evolve Bank is terminated, we would need to find another financial institution to provide those services, which could be difficult and expensive. If we are unable to find a replacement financial institution to provide the services we receive from Evolve Bank, we would not be able to service our deposit accounts, debit cards and other services, 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 using Evolve Bank materially change or if any penalty or claim for damages is imposed as a result of our breach of our agreements with them or their other requirements.

 

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Our recent rapid growth, including growth in our volume of payments, may not be indicative of our future growth, and if we continue to grow rapidly, we may not be able to manage our growth effectively. Our rapid growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

Our operating revenues increased from $76.2 million in 2019 to $121.8 million in 2020. Although we have recently experienced significant growth in our revenue and transaction volume, even if our revenue continues to increase, we expect our growth rate will decline in the future as a result of a variety of factors, including the increasing scale of our business. Overall growth of our revenue depends on a number of factors, including our ability to:

 

   

price our products and services effectively to attract new Members;

 

   

Create new products and expand the functionality and scope of the products we offer on our platform;

 

   

maintain the rates at which Members subscribe to and continue to use our platform;

 

   

provide our members with high-quality support that meets their needs;

 

   

introduce our products to new markets;

 

   

successfully identify and acquire or invest in businesses, products or technologies that we believe could complement or expand our platform;

 

   

increase awareness of our brand and successfully compete with other companies; and

 

   

manage the risks related to the effects of the COVID-19 pandemic on our business and operations.

We may not successfully accomplish any of these objectives, which makes it difficult for us to forecast our future operating results. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain consistent revenue or revenue growth, it may be difficult to achieve and maintain profitability. You should not rely on our revenue from any prior quarterly or annual periods as any indication of our future revenue or revenue or payment growth.

In addition, we expect to continue to expand substantial financial and other resources on:

 

   

product development, including investments in our product development team and the development of new products and new functionality for our platform;

 

   

sales, marketing and customer success;

 

   

technology infrastructure, including systems architecture, scalability, availability, performance and security;

 

   

acquisitions and/or strategic investments;

 

   

regulatory compliance and risk management; and

 

   

general administration, including increased legal and accounting expenses associated with being a public company.

These investments may not result in increased revenue growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, or if we encounter difficulties in managing a growing volume of payments, our business, financial position and operating results will be adversely affected, and we may not be able to achieve or maintain profitability over the long term.

We have historically incurred losses in the operation of our business. We may never achieve or sustain profitability.

Since incorporation in October 2015, we have been engaged in growth activities related to building our business, which requires substantial capital and other expenditures. We incurred net loss in fiscal year 2020, and we may

 

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incur losses again in the future. We expect our cash needs to increase significantly for the next several years as we:

 

   

market our products and services;

 

   

hire additional marketing, client support, engineering, product development and administrative personnel; and

 

   

expand our client support and service operations; and

 

   

implement new and upgraded operational and financial systems, procedures and controls.

As a result of these continuing costs and expenses, we need to generate significant revenues to attain and maintain profitability and positive cash flow. To date, our operations have been supported by equity and debt financings. If we do not continue to increase our revenues, our business, results of operations and financial condition could be materially and adversely affected.

We may require additional capital to support the growth of our business, and this capital may not be available on acceptable terms, if at all.

We have funded our operations since inception primarily through equity financings, sales of memberships to our platform, optional expedited processing fees and Member tips. We cannot be certain when or if our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which may require us to engage in equity or debt financings to secure additional funds.

We expect to have sufficient capital to fund our planned operations for the next 18 months. We may need to raise additional funds through the issuance of equity, equity related or debt securities, or through obtaining credit from government, financial institutions or other lenders. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially adversely affected.

Our operating results may fluctuate in the future.

Our quarterly and annual results of operations may fluctuate in the future, which may adversely affect our stock price. Fluctuations in our quarterly or annual results of operations might result from a number of factors, many of which are outside of our control, including, but not limited to:

 

   

the election by our Members of expedited processing of our non-recourse cash advance product;

 

   

the timing and volume of tips our Members send to us;

 

   

the timing and volume of advance repayments;

 

   

the timing and volume of subscriptions and use of our products and services;

 

   

the timing and success of new product or service introductions by us or our competitors;

 

   

fluctuations in Member retention rates;

 

   

changes in the mix of products and services that we provide to our Members;

 

   

the timing of commencement of new product development and initiatives, the timing of costs of existing product roll-outs and the length of time we must invest in those new products before they generate material operating revenues;

 

   

our ability to effectively sell our products through direct-to-consumer initiatives;

 

   

changes in our or our competitors’ pricing policies or sales terms;

 

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costs associated with significant changes in our risk policies and controls;

 

   

the amount and timing of costs related to fraud losses;

 

   

the amount and timing of commencement and termination of major advertising campaigns, including partnerships and sponsorships;

 

   

disruptions in the performance of our products and services, and the associated financial impact thereof;

 

   

the amount and timing of costs of any major litigation to which we are a party;

 

   

the amount and timing of costs related to the acquisition of complementary businesses;

 

   

the amount and timing of capital expenditures and operating costs related to the maintenance and expansion of our business;

 

   

changes in our executive leadership team;

 

   

our ability to control costs, including third-party service provider costs and sales and marketing expenses in an increasingly competitive market; and

 

   

changes in the political or regulatory environment affecting the banking or financial technology service industries.

Fraudulent and other illegal activity involving our products and services could lead to reputational damage to us, reduce the use of our platform and services and may adversely affect our financial position and results of operations.

Criminals are using increasingly sophisticated methods to engage in illegal activities using deposit account products or Member information. Illegal activities involving products and services like ours often include malicious social engineering schemes. Illegal activities may also include fraudulent payment or refund schemes and identity theft. We rely upon third parties for transaction processing services, which subjects us and our Members to risks related to the vulnerabilities of those third parties. A single significant incident of fraud, or increases in the overall level of fraud, involving our products and services, have in the past and could in the future, result in reputational damage to us. Such damage could reduce the use and acceptance of our products and services, cause our banking and strategic partners to cease doing business with us, or lead to greater regulation that would increase our compliance costs. Fraudulent activity could also result in the imposition of regulatory sanctions, including significant monetary fines, which could adversely affect our business, results of operations and financial condition.

For example, in February 2021, we observed anomalous “chargeback” transaction volume in connection with the funding of Dave Banking accounts via debit card networks. After investigating, we discovered that these were fraudulent transactions exposing us to losses under the debit card network rules. Following this incident, we instituted new controls in an effort to prevent similar incidents in the future. To address the challenges we face with respect to fraudulent activity of the nature outlined above and other activity as well, we have implemented risk control mechanisms that have made it more difficult for all Members, including legitimate Members, to obtain and use our Dave banking product. We believe it is likely that our risk control mechanisms may continue to adversely affect the growth of our Dave banking product for the foreseeable future and as a result, negatively impact our operating revenues.

We are exposed to losses from Dave banking Member accounts.

Fraudulent activity involving our Dave banking account may lead to Member disputed transactions, for which we may be liable under banking regulations and payment network rules. Our fraud detection and risk control mechanisms may not prevent all fraudulent or illegal activity. To the extent we incur losses from disputed

 

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transactions, our business, results of operations and financial condition could be materially and adversely affected. Additionally, our Members can incur charges in excess of the funds available in their accounts, and we may become liable for these overdrafts. While we decline authorization attempts for amounts that exceed the available balance in a Member’s account, the application of payment network rules and the timing of the settlement of transactions, among other things, can result in overdrawn accounts.

Our remaining overdraft exposure arises primarily from late-posting. A late-post occurs when a merchant posts a transaction within a payment network-permitted timeframe, but subsequent to our release of the authorization for that transaction, as permitted by payment network rules. Under payment network rules, we may be liable for the transaction amount even if the Member has made additional purchases in the intervening period and funds are no longer available in the Member’s account at the time the transaction is posted.

We transfer funds to our Members daily, which in the aggregate comprise substantial sums, and are subject to the risk of errors, which could result in financial losses, damage to our reputation, or loss of trust in our brand, which would harm our business and financial results.

We have grown rapidly and seek to continue to grow, and although we maintain a robust and multi-faceted risk management process, our business is always subject to the risk of financial losses as a result of operational errors, software defects, service disruption, employee misconduct, security breaches, or other similar actions or errors on our platform. Software errors in our platform and operational errors by our employees may also expose us to losses.

Moreover, our trustworthiness and reputation are fundamental to our business. The occurrence of any operational errors, software defects, service disruption, employee misconduct, security breaches, or other similar actions or errors on our platform could result in financial losses to our business and our Members, loss of trust, damage to our reputation, or termination of our agreements with strategic partners and accountants, each of which could result in:

 

   

loss of Members;

 

   

lost or delayed market acceptance and sales of our products and services;

 

   

legal claims against us;

 

   

regulatory enforcement action; or

 

   

diversion of our resources, including through increased service expenses or financial concessions, and increased insurance costs.

Although we maintain insurance to cover losses resulting from our errors and omissions, there can be no assurance that our insurance will cover all losses or our coverage will be sufficient to cover our losses. If we suffer significant losses or reputational harm as a result, our business, operating results, and financial condition could be adversely affected.

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 and liability.

In the normal course of business, we collect, process, use and retain sensitive and confidential information regarding our Members and prospective Members, including data provided by and related to Members 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. Information security risks in the financial services industry continue to increase generally, 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,

 

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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.

These cybersecurity challenges, including threats to our own IT infrastructure or those of our Members or third-party providers, may take a variety of forms ranging from stolen bank accounts, business email compromise, user fraud, account takeover, check fraud or cybersecurity attacks, such as ransomware, unauthorized encryption, denial-of-service attacks, social engineering, unauthorized access, spam or other attacks, to “mega breaches” targeted against cloud-based services and other hosted software, which could be initiated by individual or groups of hackers or sophisticated cyber criminals. A cybersecurity incident or breach could result in disclosure of confidential information and intellectual property, or cause service interruptions and compromised data. We may be unable to anticipate or prevent techniques used in the future to obtain unauthorized access or to sabotage systems because they change frequently and often are not detected until after an incident has occurred. We have administrative, technical, and physical security measures in place, and we have policies and procedures in place to contractually require service providers to whom we disclose data to implement and maintain reasonable privacy and security measures. Despite our security measures, and those of our third-party vendors, our information technology and infrastructure has experienced breaches and may be subject or vulnerable in the future to breaches or attacks. If our own confidential business information were improperly disclosed, our business could be materially and adversely affected. A core aspect of our business is the reliability and security of our platform. Any perceived or actual breach of security, regardless of how it occurs or the extent of the breach, could have a significant impact on our reputation as a trusted brand, cause us to lose existing partners or members, prevent us from obtaining new partners and members, require us to expend significant funds to remedy problems caused by breaches and implement measures to prevent further breaches, and expose us to legal risk and potential liability including from governmental or regulatory investigations, class action litigation and other lawsuits. If sensitive information is lost or improperly disclosed through a data breach or otherwise or threatened to be disclosed, we could experience a loss of confidence by our partners and members in the security of our systems, products and services and prevent us from obtaining new partners and members, and we could incur significant costs to remedy problems caused by breaches and implement measures to prevent further breaches, and expose us to legal risk and potential liability and penalties, including from governmental or regulatory investigations, class action litigation and other lawsuits, all of which could adversely affect our reputation and our operating results. Any actual or perceived security breach at a company providing services to us or our Members could have similar effects.

Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data. In addition, our agreements with certain partners and service providers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, may cause our Members 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 personally identifiable information of our Members may pose similar risks.

In May 2020, an unauthorized third party attempted to gain access to Dave Member accounts and was able to access Member profiles and Members’ partial or incomplete bank account information. We did not uncover any evidence that the attacker was able to take any actions with respect to the data, other than gaining read access to it, nor do we believe any unauthorized transactions were made or advances requested on the Dave system. We provided notice to relevant parties as required under applicable law and agreements and took steps to set up alerts to detect abnormal request volumes and introduced rate limiting at the IP address level. In addition, in June 2020, we were notified of an unauthorized third party breach of our Dave database. The third party was able to access to Dave’s system by breaching the system of one of Dave’s third party service providers. The attacker was able to download a large data set, including encrypted social security numbers for some Members; however, there was no evidence that unauthorized transactions were made or advances requested on the Dave system, nor do we

 

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believe that the third party gained access to decryption keys or was otherwise able to decrypt encrypted information. We took remedial measures, including the engagement of an outside security consultant to monitor for ongoing dark web activity and to conduct a security audit and incident investigation, and notified relevant parties as required under applicable law and agreements. As a result of these breaches, Dave did not experience any material adverse impact to its business or operation and any costs and expenses relating to such security breaches were not material to Dave. As we have increased our Member base and our brand has become more widely known and recognized, third parties may continue to seek to compromise our security controls or gain unauthorized access to our sensitive corporate information or our Members’ data.

If our banking partner or other strategic partners were to conclude that our systems and procedures are insufficiently rigorous, they could terminate their relationships with us, and our financial results and business could be adversely affected. Under our terms of service and our contracts with strategic partners, if there is a breach of nonpublic personal information of our Members that we store, we could be liable to the partner for their losses and related expenses.

While we maintain cybersecurity insurance, our insurance may be insufficient or may not cover all liabilities incurred by such attacks. We also cannot be certain that our insurance coverage will be adequate for data handling or data security liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

We guarantee certain obligations of one of our wholly-owned subsidiaries, which guaranty is secured by a first-priority lien against substantially all of our assets, and contains financial covenants and other restrictions on our actions, which could limit our operational flexibility and otherwise adversely affect our financial condition.

One of our wholly-owned subsidiaries, Dave OD Funding I, LLC (“Dave OD Funding”), has a senior secured credit facility with Victory Park Capital Advisors, LLC and the VPCC Funds (the “Credit Facility”). We have guaranteed up to $25,000,000 of Dave OD Funding’s obligations under the Credit Facility, and currently that limited guaranty is secured by a first-priority lien against substantially all of our assets. The Credit Facility contains financial covenants and other restrictions on our actions, which could limit our operational flexibility and otherwise adversely affect our financial condition.

We depend upon several third-party service providers for processing our transactions and provide other important services for our business. If any of our agreements with our processing providers are terminated or if we experience any interruption or delay in the services provided by our third-party service providers, delivery of our products and services could be impaired or suspended and our business could suffer.

Our business involves processing of large numbers of transactions and management of the data necessary to do so. Our success depends upon the efficient and error-free handling of the money that is collected, remitted or deposited in connection with the provision of our products and services. We rely on the ability of our vendors and third-parties to process and facilitate these transactions, including ACH processing (as we are not a bank), and debit card payment processing, in an efficient, uninterrupted and error-free manner. We also rely on third-party service providers to perform various functions relating to our business, including software development, marketing, operational functions, fraud detection, cloud infrastructure services, information technology, data analysis, and, because we are not a bank and cannot belong 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

 

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that we utilize. In the event that a third-party service provider for any reason fails to perform such functions, including negligence, willful misconduct or fraud, fire, natural disaster, power loss, telecommunication failures, software and hardware defects, terrorist attacks and similar events, 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.

We use both internally developed and third-party systems, including cloud computing and storage systems, for our services and certain aspects of transaction processing. Any damage to, or failure of, third party computer network systems or data centers generally, or those of our vendors (including as a result of disruptions at our third-party data center hosting facilities and cloud providers), or an improper action by our employees, agents or third-party vendors, could result in interruptions in our services, causing Members and other partners to become dissatisfied with our products and services or obligate us to issue refunds or pay fines or other penalties to them. Sustained or repeated system failures could reduce the attractiveness of our products and services, and result in Member attrition, thereby reducing operating revenue and harming our results of operations. Further, negative publicity arising from these types of disruptions could be damaging to our reputation and may adversely impact use of our products and services, including our platform, and adversely affect our ability to attract new Members and business partners.

If we fail to adequately protect our proprietary rights, our competitive position could be impaired and we may lose valuable assets, generate less revenue and incur costly litigation to protect our rights.

Our success is dependent, in part, upon protecting our proprietary technology and rights. We rely on a combination of copyrights, trademarks, trade secret laws, and contractual provisions to establish and protect our proprietary rights. However, the steps we take to protect our intellectual property may be inadequate. Any of our trademarks or other intellectual property rights may be challenged or circumvented by others or invalidated through administrative process or litigation. Furthermore, legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights are uncertain. Despite our precautions, it may be possible for unauthorized third parties to copy our products and use information that we regard as proprietary to create products and services that compete with ours.

No assurance can be given that the contractual agreements we enter into to establish and protect our proprietary rights will be effective in controlling access to and distribution of our products and proprietary information. Further, these agreements do not prevent our competitors or partners from independently developing technologies that are substantially equivalent or superior to our platform.

Real or perceived software errors, failures, bugs, defects, or outages could adversely affect our business, results of operations, financial condition, and future prospects.

Our platform and our internal systems rely on software that is highly technical and complex. In addition, our platform and our internal systems depend on the ability of such software to store, retrieve, process, and manage immense amounts of data. As a result, undetected errors, failures, bugs, or defects may be present in such software or occur in the future in such software, including open source software and other software we license in from third parties, especially when updates or new products or services are released.

Any real or perceived errors, failures, bugs, or defects in the software may not be found until our consumers use our platform and could result in outages or degraded quality of service on our platform that could adversely impact our business, as well as negative publicity, loss of or delay in market acceptance of our products and services, and harm to our brand or weakening of our competitive position. In such an event, we may be required, or may choose, to expend significant additional resources in order to correct the problem. Any real or perceived errors, failures, bugs, or defects in the software we rely on could also subject us to liability claims, impair our ability to attract new consumers, retain existing consumers, or expand their use of our products and services, which would adversely affect our business, results of operations, financial condition, and future prospects.

 

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Dave’s management has limited experience in operating a public company.

Many of Dave’s senior management team have limited experience in the management of a publicly-traded company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of the company’s operations. Dave may not have adequate personnel with the appropriate level of knowledge, experience and training in accounting policies, compliance practices or internal controls required of public companies. The development and implementation of the standards and controls and the hiring of experienced personnel necessary to achieve the level of accounting standards required of a public company may require expenditures greater than expected, and a delay could impact Dave’s ability or prevent it from accurately and timely reporting its operating results, timely filing required reports with the SEC and complying with Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). It is possible that Dave will be required to expand its employee base and hire additional employees to support its operations as a public company, which will increase its operating costs in future periods.

Legacy Dave identified material weaknesses in its internal control over financial reporting, which for the years ended December 31, 2020 and 2019 resulted in a restatement of its financial statements. If Dave is unable to remediate these material weaknesses, or if it identifies additional material weaknesses in the future or otherwise fails to maintain effective internal control over financial reporting, it may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect Dave’s business and share price.

In connection with the preparation and audits of Dave’s consolidated financial statements for the years ended December 31, 2020 and 2019, material weaknesses were identified in Dave’s internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of its annual or interim consolidated financial statements will not be prevented or detected on a timely basis. These material weaknesses are as follows:

 

   

Dave did not design and maintain certain formal accounting policies, procedures, and internal controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including internal controls over the period-end financial reporting process addressing financial statement and footnote presentation and disclosures, account reconciliations, and journal entries. Additionally, the lack of a sufficient number of accounting and finance professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of Dave’s financial reporting objectives, as demonstrated by, amongst other things, insufficient segregation of duties within the finance and accounting functions.

 

   

Dave did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements, specifically, with respect to: (i) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate company personnel: and (iii) computer operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored.

Additionally, in connection with the preparation of the Company’s June 30, 2021 unaudited condensed consolidated financial statements, management became aware of errors related to Member advances and the allowance for unrecoverable advances and concluded that (i) an error originated in the design of the journal entries related to the recoveries of Member advances and (ii) an error arose from the improper reconciliation of timing differences between the Member advances accounting records and the subledger, which resulted in the

 

26


overstatement of Member advances, net of allowance for unrecoverable advances, and the understatement of the provision for unrecoverable advances. Management determined the effect of these corrections was material to the consolidated financial statements as of and for the years ended December 31, 2020 and 2019. Accordingly, the Company has restated the consolidated financial statements as of and for the year ended December 31, 2020 and 2019 in accordance with ASC 250, Accounting Changes and Error Corrections. In addition to the adjustments to correct the overstatement of Member advances, net of allowance for unrecoverable advances, and the understatement of the provision for unrecoverable advances in the consolidated financial statements as of and for the years ended December 31, 2020 and 2019, the Company also made the related adjustments to Prepaid income taxes, Income taxes payable, Other non-current liabilities and Provision for incomes taxes. These adjustments did not affect operating revenues, total cash flows from operating activities, financing activities or investing activities for any period presented.

Dave has begun implementation of a plan to remediate the material weaknesses described above. Those remediation measures are ongoing and include (i) hiring additional accounting and IT personnel to bolster its technical reporting, transactional accounting and IT capabilities; (ii) designing and implementing controls to formalize roles and review responsibilities and designing and implementing formal controls over segregation of duties; (iii) designing and implementing formal processes, accounting policies, procedures, and controls supporting Dave’s financial close process, including creating standard balance sheet reconciliation templates and journal entry controls; (iv) designing and implementing IT general controls, including controls over change management, the review and update of user access rights and privileges and computer operations controls; and (v) redesigning its internal controls around the allowance for unrecoverable advances to detect and prevent future errors.

While Dave believes these efforts will remediate the material weaknesses, Dave may not be able to complete its evaluation, testing or any required remediation in a timely fashion, or at all. Dave cannot assure you that the measures it has taken to date and may take in the future, will be sufficient to remediate the control deficiencies that led to its material weaknesses in internal control over financial reporting or that they will prevent or avoid potential future material weaknesses. The effectiveness of Dave’s internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the possibility of human error and the risk of fraud. If Dave is unable to remediate the material weaknesses or identifies additional material weakness in the future, Dave’s ability to record, process and report financial information accurately, and to prepare financial statements within the time periods specified by the forms of the SEC, could be adversely affected which, in turn, to may adversely affect Dave’s reputation and business and the market price of the combined company. In addition, any such failures could result in litigation or regulatory actions by the SEC or other regulatory authorities, loss of investor confidence, delisting of Dave’s securities and harm to Dave’s reputation and financial condition, or diversion of financial and management resources from the operation of Dave’s business.

We strive to deliver simple, transparent, and fair financial products, which may conflict with the short term interests of our stockholders.

Our core principle, and the foundation on which we have built our company, is to deliver simple, transparent, and fair financial products. Therefore, we have made in the past, and may make in the future, decisions that we believe will benefit our Members and therefore provide long-term benefits for our business, even if our decision negatively impacts our short-term results of operations. For example, the advances facilitated through our platform are non-recourse and currently have no mandatory fees. Our decisions may negatively impact our short-term financial results or not provide the long-term benefits that we expect, in which case the success of our business and results of operations could be harmed.

 

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Negative publicity about us or our industry could adversely affect our business, results of operations, financial condition, and future prospects.

Negative publicity about us or our industry, including the transparency, fairness, Member experience, quality, and reliability of our platform or consumer fintech platforms in general, effectiveness of our risk models, our ability to effectively manage and resolve complaints, our privacy and security practices, litigation, regulatory activity, misconduct by our employees, funding sources, bank partners, service providers, or others in our industry, the experience of consumers with our platform or services, even if inaccurate, could adversely affect our reputation and the confidence in, and the use of, our platform, which could harm our reputation and cause disruptions to our platform. Any such reputational harm could further affect the behavior of consumers, including their willingness to obtain advances, deposit accounts, and other products and services facilitated through our platform. As a result, our business, results of operations, financial condition, and future prospects would be materially and adversely affected.

Our business, financial condition and results of operations have and may continue to be adversely affected by the COVID-19 pandemic or other similar epidemics or adverse public health developments, including government responses to such events.

There are many uncertainties regarding the current global pandemic involving a novel strain of coronavirus (“COVID-19”), and the Company continues to closely monitor the impact of the pandemic on all aspects of its business, including how it has and may in the future impact its Members, employees, suppliers, vendors, and business partners. The duration and magnitude of the continuing effects of COVID-19 on the Company’s Members remain uncertain and dependent on various factors, including the continued severity and transmission rate of the virus, new variants of the virus, the nature of and duration for which preventative measures remain in place, the extent and effectiveness of containment and mitigation efforts, including vaccination programs, and the type of stimulus measures and other policy responses that the U.S. government may further adopt.

Beginning in March 2020, the Company’s business and operations were disrupted by the conditions caused by COVID-19, which adversely affected Members’ spending levels and disposable income. Governmental actions such as the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) helped mitigate the effects of COVID-19 on the Company’s Members. In particular, stimulus funds and incremental unemployment benefits provided under the CARES Act created additional financial support for the Company’s Members; however, the overall economic conditions potentially increases Members’ credit risk. Economic conditions that affect personal finances of members could also impact repayment of non-recourse advances that we make to our members. The Company is concurrently evaluating its policies around the level and extent of Members’ cash advances and corresponding credit risk. The Company expects to continue to assess the evolving impact of the COVID-19 pandemic and intends to make adjustments to its responses accordingly.

Additionally, concerns over the economic impact of the COVID-19 pandemic have caused volatility in financial and other capital markets, which may adversely affect our stock price and our ability to access capital markets in the future.

If we cannot maintain our company culture as we grow, our success and our business may be harmed.

We believe our culture has been a key contributor to our success to date and that the nature of the platform that we provide promotes a sense of greater purpose and fulfilment in our employees. Any failure to preserve our culture could negatively affect our ability to retain and recruit personnel, which is critical to our growth, and to effectively focus on and pursue our corporate objectives. As we grow and develop the infrastructure of a public company, we may find it difficult to maintain these important aspects of our culture. If we fail to maintain our company culture, our business and competitive position may be adversely affected.

 

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We use open source software in our products, which could subject us to litigation or other actions.

We use open source software in our products. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate it into their products. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results and financial condition, or require us to devote additional research and development resources to change our products. In addition, if we were to combine our proprietary software products with open source software in a certain manner under certain open source licenses, we could be required to release the source code of our proprietary software products. If we inappropriately use or incorporate open source software subject to certain types of open source licenses that challenge the proprietary nature of our products, we may be required to re-engineer such products, discontinue the sale of such products, or take other remedial actions.

Natural catastrophic events, pandemics and man-made problems such as power-disruptions, computer viruses, data security breaches, and terrorism may disrupt our business.

Natural disasters, pandemics such as COVID-19, or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could harm our business. We have a large employee presence in Los Angeles, California, and our data centers are located in Iowa. The west coast of the United States contains active earthquake zones and the greater Los Angeles area has experienced major fire danger in the past five years and may experience major fires in the future. In the event of a major earthquake, hurricane or catastrophic event such as fire, power loss, telecommunications failure, vandalism, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our application development, lengthy interruptions in the availability of our products and services, breaches of data security, and loss of critical data, all of which could harm our business, operating results, and financial condition.

Additionally, as computer malware, viruses, and computer hacking, fraudulent use attempts, and phishing attacks have become more prevalent, we, and third parties upon which we rely, face increased risk in maintaining the performance, reliability, security, and availability of our solutions and related services and technical infrastructure to the satisfaction of our Members. Any computer malware, viruses, computer hacking, fraudulent use attempts, phishing attacks, or other data security breaches related to our network infrastructure or information technology systems or to computer hardware we lease from third parties, could, among other things, harm our reputation and our ability to retain existing Members and attract new Members.

In addition, the insurance we maintain may be insufficient to cover our losses resulting from disasters, cyber-attacks, or other business interruptions, and any incidents may result in loss of, or increased costs of, such insurance.

Risks Related to Regulatory and Legal Matters

We operate in an uncertain regulatory environment and may from time to time be subject to governmental investigations or other inquiries by state, federal and local governmental authorities.

Determinations of compliance with applicable legal and regulatory requirements can be highly technical and subject to varying interpretations. From time to time we become aware of instances where our products and services have not fully complied with requirements under applicable laws and regulations. When we become aware of such an instance, whether as a result of our compliance reviews, regulatory inquiry, Member complaint or otherwise, we generally conduct a review of the activity in question and determine how to address it, such as modifying the product, making Member refunds or taking other remedial actions

Failure to comply with applicable laws, regulations, rules and guidance, or any finding that our past forms, practices, processes, procedures, controls or infrastructure were insufficient or not in compliance, could subject

 

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us to regulatory enforcement actions, result in the assessment against us of civil, monetary, criminal or other penalties (some of which could be significant in the case of knowing or reckless violations), result in the issuance of cease and desist orders (which can include orders for restitution, as well as other kinds of affirmative relief), require us to refund payments, interest or fees, result in a determination that certain financial products are not collectible, result in a suspension or revocation of licenses or authorization to transact business, result in a finding that we have engaged in unfair and deceptive acts or practices, limit our access to services provided by third-party financial institutions or cause damage to our reputation, brands and valued Member relationships. We may also incur additional, substantial expenses to bring those products and services into compliance with the laws of various jurisdictions or as a result choose to stop offering certain products and services in certain jurisdictions.

Our failure to comply with any regulations, rules, or guidance applicable to our business could have a material adverse effect on our business. In addition, changes to, or the discontinuation of, certain products and services necessary to maintain compliance with regulatory and legal requirements or to adequately manage compliance-related risks may result in corresponding changes to or limitations on the fees we can charge and other sources of revenue we currently rely upon. Such failures or changes to our products, services or business may have substantial adverse effects on our prospects, results of operations, financial condition and cash flows and could prohibit or directly or indirectly impair our ability to continue current operations.

The financial services industry continues to be targeted by new laws or regulations in many jurisdictions, including the U.S. states in which we operate, that could restrict the products and services we offer, impose additional compliance costs on us, render our current operations unprofitable or even prohibit our current operations.

We are required to comply with frequently changing federal, state, and local laws and regulations that regulate, among other things, the terms of the financial products and services we offer. New laws or regulations may require us to incur significant expenses to ensure compliance. 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. For example, State attorneys general have indicated that they will take a more active role in enforcing consumer protection laws, including through the establishment of state consumer protection agencies as well as the 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.

In addition, regulators are interpreting existing laws, regulations and rules in new and different ways as they attempt to apply them to novel products and business models such as ours. Changes in the laws, regulations and enforcement priorities applicable to our business, or changes in the way existing laws and regulations are interpreted and applied to us, could have a material impact on our business model, operations and financial position. In some cases, these measures could even directly prohibit some or all of our current business activities in certain jurisdictions or render them unprofitable and/or impractical to continue.

The application of traditional federal and state consumer protection statutes and related regulations to innovative products offered by financial technology companies such as us is often uncertain, evolving and unsettled. To the extent that our products are deemed to be subject to any such laws, we could be subject to additional compliance obligations, including state licensing requirements, disclosure requirements and usury or fee limitations, among other things. Application of such requirements and restrictions to our products and services could require us to make significant changes to our business practices (which may increase our operating expenses and/or decrease revenue) and, in the event of retroactive application of such laws, subject us to litigation or enforcement actions that could result in the payment of damages, restitution, monetary penalties, injunctive restrictions, or other sanctions, any of which could have a material adverse effect on our business, financial position, and results of operations.

 

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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, 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. To the extent the application of these laws or regulations to our new offerings is unclear or evolving, including changing interpretations and the implementation of new or varying regulatory requirements by federal or state governments and regulators, this may significantly affect or change our proposed business model, increase our operating expenses and hinder or delay our anticipated launch timelines for new products and services.

If we were to become directly subject to banking regulations or be subjected to additional third-party risk management obligations, our business model may need to be substantially altered and we may not be able to continue to operate our business as it is currently operated.

We are not currently subject to laws and regulations applicable to traditional banks. However, banking products made available through us by our bank partner remain subject to regulation and supervision by our bank partner’s regulators and we, as a service provider to our bank partner, undertake certain compliance obligations. If we were to become directly subject to banking regulations or if the third-party risk management requirements applicable to us were to change, our business model may need to be substantially altered and we may not be able to continue to operate our business as it is currently operated. Failure by us, or any of our business partners, to comply with applicable laws and regulations could have a material adverse effect on our business, financial position and results of operations.

Our business is subject to extensive regulation 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 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, Member 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. Moreover, any competitors subject to different, or in some cases less restrictive, legislative or regulatory regimes may have or obtain a competitive advantage over us.

We are subject to the regulatory and enforcement authority of the Consumer Financial Protection Bureau (“CFPB”), which oversees compliance with federal consumer financial protection laws. In addition, our partnership with Evolve Bank is subject to the supervisory authority of the Federal Reserve, which is Evolve Bank’s primary federal bank regulator. The CFPB has broad enforcement powers, and upon determining a violation of applicable law has occurred can order, among other things, rescission or reformation of contracts, the refund of moneys, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. At this time, we are unable to predict the outcome of this CFPB investigation, including whether the investigation will result in any action, proceeding, fines or penalties against us. The cost of responding to investigations can be substantial and an adverse resolution to an investigation, including a consent order or other settlement, may have a material adverse effect on our business, financial position, results of operations and future prospects.

In June 2020, we received a Civil Investigative Demand (“CID”) notifying us that the CFPB had opened a non-public investigation into various aspects of our non-recourse cash paycheck advance business in compliance with the prohibition against UDAAPs, the EFTA, and, to the extent it applies, the Truth in Lending Act. We provided the CFPB with all information and documents required by the CID, and on September 27, 2021, the CFPB staff notified us that it currently did not intend to recommend that the CFPB take any enforcement action.

 

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We have been and may in the future also be subject to investigations and potential enforcement actions that may be brought by state regulatory authorities, state attorneys general or other state enforcement authorities and other governmental agencies. Any such actions could subject us to civil money penalties and fines, Member remediations, and increased compliance costs, damage our reputation and brand and limit or prohibit our ability to offer certain products and services or engage in certain business practices. Further, in some cases, regardless of fault, it may be less time-consuming or costly to settle these matters, which may require us to implement certain changes to our business practices, provide remediation to certain individuals or make a settlement payment to a given party or regulatory body.

If we were found to be operating 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 activities regarding consumer finance transactions. 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 in legislation seeking to impose licensing requirements and regulation of parties engaged in non-recourse advance 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 non-recourse advances facilitated through our platform could be rendered void in whole or in part, any of which could have an adverse effect on our business, results of operations, and financial condition. For example, we have received and responded to inquiries from the New York Department of Financial Services in connection with a multi-state investigation of nonrecourse advance and early wage access companies, as well as the Washington State Department of Financial Institutions, the Kentucky Department of Financial Institutions, in each case regarding whether the non-recourse advance products we offer in those states should subject us to state licensing and related requirements. In December 2021, we entered into a Memorandum of Understanding (“MOU”) with the California Department of Financial Protection and Innovation (“CA DFPI”). The MOU requires us to provide the CA DFPI with certain information as requested by the CA DFPI and adhere to certain best practices in connection with our non-recourse cash advance product (including certain disclosures related to us not being licensed by the CA DFPI).

Stringent and changing laws and regulations relating to privacy and data protection could result in claims, harm our results of operations, financial condition, and future prospects, or otherwise harm our business.

We are subject to a variety of laws, rules, directives, and regulations, as well as contractual obligations, relating to the processing of personal information, including personally identifiable information. The regulatory framework for privacy and data protection worldwide is rapidly evolving and, as a result, implementation standards and enforcement practices are likely to continue to evolve for the foreseeable future. Legislators and regulators are increasingly adopting or revising privacy and data protection laws, rules, directives, and regulations that could have a significant impact on our current and planned privacy and data protection-related practices; our processing of consumer or employee information; and our current or planned business activities.

Compliance with current or future privacy and data protection laws (including those regarding security breach notification) affecting consumer and/or employee data to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services (such as products or services that involve us sharing information with third parties or storing sensitive information), which could materially and adversely affect our profitability and could reduce income from certain business initiatives.

 

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Our failure, or the failure of any third party with whom we work, to comply with privacy and data protection laws could result in potentially significant regulatory investigations and government actions, litigations, fines, or sanctions, consumer, funding source, or bank partner actions, and damage to our reputation and brand, all of which could have a material adverse effect on our business. Complying with privacy and data protection laws and regulations may cause us to incur substantial operational costs or require us to change our business practices. We may not be successful in our efforts to achieve compliance either due to internal or external factors, such as resource allocation limitations or a lack of vendor cooperation. We have in the past, and may in the future, receive complaints or notifications from third parties alleging that we have violated applicable privacy and data protection laws and regulations. Non-compliance could result in proceedings against us by governmental entities, consumers, data subjects, or others. We may also experience difficulty retaining or obtaining new consumers in these jurisdictions due to the legal requirements, compliance cost, potential risk exposure, and uncertainty for these entities, and we may experience significantly increased liability with respect to these consumers.

In addition to government regulation, privacy advocates and industry groups may propose new and different self-regulatory standards that may apply to us. Because the interpretation and application of privacy and data protection laws, regulations, rules, and other standards are still uncertain, it is possible that these laws, rules, regulations, and other actual or alleged legal obligations, such as contractual or self-regulatory obligations, may be interpreted and applied in a manner that is inconsistent with our existing data management practices or the functionality of our platform. 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 software, which could have an adverse effect on our business.

Any failure or perceived failure by us to comply with laws, regulations, policies, legal, or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security, may result in governmental investigations and enforcement actions, litigation, fines and penalties, or adverse publicity, and could cause our Members and partners to lose trust in us, which could have an adverse effect on our reputation and business. We expect that there will continue to be new proposed laws, regulations, and industry standards relating to privacy, data protection, marketing, consumer communications, and information security, and we cannot determine the impact such future laws, regulations, and standards may have on our business. Future laws, regulations, standards, and other obligations or any changed interpretation of existing laws or regulations could impair our ability to develop and market new functionality and maintain and grow our Member base and increase revenue. Future restrictions on the collection, use, sharing, or disclosure of data, or additional requirements for express or implied consent of our Members, partners, or end users for the use and disclosure of such information could require us to incur additional costs or modify our platform, possibly in a material manner, and could limit our ability to develop new functionality.

If we are not able to comply with these laws or regulations, or if we become liable under these laws or regulations, we could be directly harmed, and we may be forced to implement new measures to reduce our exposure to this liability. This may require us to expend substantial resources or to discontinue certain products, which would negatively affect our business, financial condition, and operating results. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise adversely affect the growth of our business. Furthermore, any costs incurred as a result of this potential liability could harm our operating results.

Any future litigation against us could be costly and time-consuming to defend.

We have in the past and may in the future become subject to legal proceedings and claims that arise in the ordinary course of business, such as claims brought by our Members in connection with commercial disputes, employment claims made by our current or former employees, or claims for reimbursement following misappropriation of Member data. Litigation might result in substantial costs and may divert management’s attention and resources, which might seriously harm our business, overall financial condition, and operating results. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to

 

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resolve one or more such claims, and might not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby reducing our operating results and leading analysts or potential investors to reduce their expectations of our performance, which could reduce the trading price of our stock.

Risks Relating to Ownership of our Securities

The dual class structure of our Common Stock has the effect of concentrating voting control with Jason Wilk, Dave’s founder, members of the Board and its Chief Executive Officer and President, respectively. This will limit or preclude your ability to influence corporate matters, including the outcome of important transactions, including a change in control.

Shares of our Dave Class V Common Stock will have 10 votes per share, while shares of our Dave Class A Common Stock will have one vote per share. Jason Wilk, Dave’s co-founder and its Chief Executive Officer and President, respectively, holds all of the issued and outstanding shares of our Dave Class V Common Stock. Accordingly, as of January 5, 2022, Mr. Wilk holds approximately 60.0% of the voting power of our capital stock on an outstanding basis and will be able to control matters submitted to its stockholders for approval, including the election of directors, amendments of its organizational documents and any merger, consolidation, sale of all or substantially all of Dave’s assets or other major corporate transactions. Mr. Wilk may have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests This concentrated control may have the effect of delaying, preventing or deterring a change in control of Dave, could deprive its stockholders of an opportunity to receive a premium for their capital stock as part of a sale of Dave and might ultimately affect the market price of shares of our Dave Class A Common Stock. For information about Dave’s dual class structure, see the section titled “Description of Securities.”

Dave’s dual class structure may depress the trading price of our Dave Class A Common Stock.

Dave cannot predict whether its dual class structure will result in a lower or more volatile market price of the Dave Class A Common Stock or in adverse publicity or other adverse consequences. For example, certain index providers have announced restrictions on including companies with multiple-class share structures in certain of their indexes. S&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, pursuant to which companies with multiple classes of shares of common stock are excluded. In addition, several stockholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of Dave’s Common Stock may cause stockholder advisory firms to publish negative commentary about Dave’s corporate governance practices or otherwise seek to cause Dave to change its capital structure. Any such exclusion from indices or any actions or publications by stockholder advisory firms critical of Dave’s corporate governance practices or capital structure could adversely affect the value and trading market of the Dave Class A Common Stock.

Our stock price is volatile.

The trading price of the Dave Class A Common Stock and Public Warrants is volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond Dave’s control. These factors include:

 

   

actual or anticipated fluctuations in operating results;

 

   

failure to meet or exceed financial estimates and projections of the investment community or that Dave provides to the public;

 

   

issuance of new or updated research or reports by securities analysts or changed recommendations for the industry in general;

 

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announcements of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;

 

   

operating and share price performance of other companies in the industry or related markets;

 

   

the timing and magnitude of investments in the growth of the business;

 

   

actual or anticipated changes in laws and regulations;

 

   

additions or departures of key management or other personnel;

 

   

increased labor costs;

 

   

disputes or other developments related to intellectual property or other proprietary rights, including litigation;

 

   

the ability to market new and enhanced solutions on a timely basis;

 

   

sales of substantial amounts of the Dave Class A Common Stock by Dave’s directors, executive officers or significant stockholders or the perception that such sales could occur;

 

   

changes in capital structure, including future issuances of securities or the incurrence of debt; and

 

   

general economic, political and market conditions.

In addition, the stock market in general, and the stock prices of technology companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of Dave Class A Common Stock, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources.

Dave has never paid cash dividends on our capital stock and does not anticipate paying dividends in the foreseeable future.

Dave has never paid cash dividends on our capital stock and currently intends to retain any future earnings to fund the growth of its business. Any determination to pay dividends in the future will be at the discretion of the Board and will depend on Dave’s financial condition, operating results, capital requirements, general business conditions and other factors that the Board may deem relevant. As a result, capital appreciation, if any, of our Dave Class A Common Stock will be the sole source of gain for the foreseeable future.

Anti-takeover provisions contained in the Organizational Documents and applicable laws could impair a takeover attempt.

The Organizational Documents afford certain rights and powers to the Board that could contribute to the delay or prevention of an acquisition that it deems undesirable. Dave is also subject to Section 203 of the DGCL and other provisions of Delaware law that limit the ability of stockholders in certain situations to effect certain business combinations. Any of the foregoing provisions and terms that have the effect of delaying or deterring a change in control could limit the opportunity for stockholders to receive a premium for their shares of Dave Class A Common Stock, and could also affect the price that some investors are willing to pay for the Dave Class A Common Stock. See also “Description of the Securities.”

Dave is subject to risks related to taxation in the United States.

Significant judgments based on interpretations of existing tax laws or regulations are required in determining Dave’s provision for income taxes. Dave’s effective income tax rate could be adversely affected by

 

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various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of Dave’s operations, changes in Dave’s future levels of research and development spending, mergers and acquisitions or the results of examinations by various tax authorities. Although Dave believes its tax estimates are reasonable, if the IRS or any other taxing authority disagrees with the positions taken on its tax returns, Dave could have additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position.

Changes to applicable tax laws and regulations or exposure to additional income tax liabilities could affect Dave’s business and future profitability.

Dave is a U.S. corporation and thus subject to U.S. corporate income tax on its worldwide income. Further, since Dave’s operations and customers are located throughout the United States, Dave will be subject to various U.S. state and local taxes. U.S. federal, state, local and non-U.S. tax laws, policies, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to Dave and may have an adverse effect on its business and future profitability.

For example, several tax proposals have been set forth that would, if enacted, make significant changes to U.S. tax laws. Such proposals include an increase in the U.S. income tax rate applicable to corporations (such as Dave) from 21% to 28%. Congress may consider, and could include, some or all of these proposals in connection with tax reform that may be undertaken. It is unclear whether these or similar changes will be enacted and, if enacted, how soon any such changes could take effect. The passage of any legislation as a result of these proposals and other similar changes in U.S. federal income tax laws could adversely affect Dave’s business and future profitability.

As a result of plans to expand Dave’s business operations, including to jurisdictions in which tax laws may not be favorable, its obligations may change or fluctuate, become significantly more complex or become subject to greater risk of examination by taxing authorities, any of which could adversely affect Dave’s after-tax profitability and financial results.

In the event that Dave’s business expands domestically or internationally, its effective tax rates may fluctuate widely in the future. Future effective tax rates could be affected by operating losses in jurisdictions where no tax benefit can be recorded under U.S. GAAP, changes in deferred tax assets and liabilities, or changes in tax laws. Factors that could materially affect Dave’s future effective tax rates include, but are not limited to: (a) changes in tax laws or the regulatory environment, (b) changes in accounting and tax standards or practices, (c) changes in the composition of operating income by tax jurisdiction and (d) pre-tax operating results of Dave’s business.

Additionally, Dave may be subject to significant income, withholding, and other tax obligations in the United States and may become subject to taxation in numerous additional U.S. state and local and non-U.S. jurisdictions with respect to income, operations and subsidiaries related to those jurisdictions. Dave’s after-tax profitability and financial results could be subject to volatility or be affected by numerous factors, including (a) the availability of tax deductions, credits, exemptions, refunds and other benefits to reduce tax liabilities, (b) changes in the valuation of deferred tax assets and liabilities, if any, (c) the expected timing and amount of the release of any tax valuation allowances, (d) the tax treatment of stock-based compensation, (e) changes in the relative amount of earnings subject to tax in the various jurisdictions, (f) the potential business expansion into, or otherwise becoming subject to tax in, additional jurisdictions, (g) changes to existing intercompany structure (and any costs related thereto) and business operations, (h) the extent of intercompany transactions and the extent to which taxing authorities in relevant jurisdictions respect those intercompany transactions, and (i) the ability to structure business operations in an efficient and competitive manner. Outcomes

 

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from audits or examinations by taxing authorities could have an adverse effect on Dave’s after-tax profitability and financial condition. Additionally, the IRS and several foreign tax authorities have increasingly focused attention on intercompany transfer pricing with respect to sales of products and services and the use of intangibles. Tax authorities could disagree with Dave’s intercompany charges, cross-jurisdictional transfer pricing or other matters and assess additional taxes. If Dave does not prevail in any such disagreements, Dave’s profitability may be affected.

Dave’s after-tax profitability and financial results may also be adversely affected by changes in relevant tax laws and tax rates, treaties, regulations, administrative practices and principles, judicial decisions and interpretations thereof, in each case, possibly with retroactive effect.

Dave’s ability to utilize its net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain limitations.

In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to use its pre-change net operating loss carryforwards (“NOLs”) to offset future taxable income. The limitations apply if a corporation undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period. If Dave has experienced an ownership change at any time since its incorporation, Dave may be subject to limitations on its ability to utilize its existing NOLs and other tax attributes to offset taxable income or tax liability. In addition, future changes in Dave’s stock ownership, which may be outside of Dave’s control, may trigger an ownership change. Similar provisions of state tax law may also apply to limit Dave’s use of accumulated state tax attributes. As a result, even if Dave earns net taxable income in the future, its ability to use its pre-change NOL carryforwards and other tax attributes to offset such taxable income or tax liability may be subject to limitations, which could potentially result in increased future income tax liability to Dave.

The unaudited pro forma condensed combined financial information included in this prospectus may not be indicative of what the actual financial position or results of operations of Dave would have been for the periods presented.

The unaudited pro forma condensed combined financial information for Dave in this prospectus is presented for illustrative purposes only and is not necessarily indicative of what Dave’s actual financial position or results of operations would have been for the periods presented had the Business Combination been completed on the dates indicated. See the section entitled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

There is no guarantee that the Public Warrants will be in the money at the time they become exercisable, and they may expire worthless.

The exercise price for our warrants is $11.50 per share of Dave Class A Common Stock. There is no guarantee that the Public Warrants will be in the money following the time they become exercisable and prior to their expiration, and as such, they may expire worthless.

We may amend the terms of the Public Warrants in a manner that may be adverse to holders of Public Warrants with the approval by the holders of at least 50% of the then-outstanding Public Warrants. As a result, the exercise price of the Public Warrants could be increased, the exercise period could be shortened and the number of shares of Dave Class A Common Stock purchasable upon exercise of a Public Warrant could be decreased, all without a holder’s approval.

The Public Warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The” Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any

 

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defective provision, but requires the approval by the holders of at least 50% of the then-outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then-outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then-outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, convert the Public Warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of Dave Class A Common Stock purchasable upon exercise of a Public Warrant.

We may redeem unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the Dave Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (a) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (b) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (c) to 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 your warrants. None of the Private Warrants will be redeemable by us for cash so long as they are held by the initial purchasers or their permitted transferees.

In addition, we may redeem your warrants after they become exercisable for a number of shares of Dave Class A Common Stock determined based on the redemption date and the fair market value of the Dave 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 Dave Class A Common Stock had your warrants remained outstanding.

We may issue a substantial number of additional shares of Dave Class A Common Stock under an employee incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks.

We may issue additional shares of Dave Class A Common Stock under an employee incentive plan. The issuance of additional Dave Class A Common Stock:

 

   

may significantly dilute the equity interests of our investors;

 

   

could cause a change in control if a substantial number of shares of Dave Class A Common Stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; and

 

   

may adversely affect prevailing market prices for the Dave Class A Common Stock and/or the Public Warrants.

There can be no assurance that Dave Class A Common Stock will be able to comply with the listing standards of Nasdaq.

Prior to the consummation of the Business Combination, VPCC’s Units, VPCC Class A Common Stock and Public Warrants were listed on the NYSE. On December 20, 2021, we provided NYSE with our intention to

 

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delist VPCC’s securities from NYSE and on January 5, 2022, as a result of the Business Combination, VPCC’s securities were delisted from the NYSE. Upon the Closing, the Dave Class A Common Stock and Warrants began trading on the Nasdaq Capital Market under the symbols “DAVE” and “DAVEW,” respectively. There can be no assurance that Dave will be able to comply with the listing standards of Nasdaq. If Nasdaq delists the Dave Class A Common Stock from trading on its exchange for failure to meet the listing standards, our stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that the Dave Class A Common Stock is a “penny stock” which will require brokers trading in the Dave Class A Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

Sales of a substantial number of shares of Dave Class A Common Stock in the public market could occur at any time and although a significant portion of Dave’s total outstanding shares are restricted from immediate resale following the consummation of the Business Combination, they may be sold into the market in the near future. This could cause the market price of the Dave Class A Common Stock to drop significantly, even if our business is doing well.

Sales of a substantial number of the Dave Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of the Dave Class A Common Stock. The Sponsor, the Prior Independent Directors and our current officers and directors hold approximately 19.9% of the outstanding shares Common Stock, including the 5,392,528 shares of Dave Class A Common Stock into which the Founder Shares converted and the 48,450,639 shares of Dave Class V Common Stock convertible into shares of Dave Class A Common Stock, which represents approximately 60.0% of the voting power of the outstanding shares of Common Stock. Pursuant to the terms of the Founder Holder Agreement and the Investor Rights Agreement, the Founder Shares (which converted into shares of Dave Class A Common Stock in connection with the Business Combination), as well as shares of Dave Class A Common Stock held by Dave’s co-founders, may not be transferred until the earlier to occur of (a) one year after the Closing or (b) the date on which we complete a liquidation, merger, share exchange or other similar transaction that results in all of our stockholders having the right to exchange their Dave Class A Common Stock for cash, securities or other property. Notwithstanding the foregoing, if the last reported sale price of the Dave Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing, the shares of Dave Class A Common Stock into which the Founder Shares convert, and any Dave securities held by Dave’s co-founders, will be released from these transfer restrictions.

Pursuant to the Investor Rights Agreement, the certain holders are entitled to, among other things, certain registration rights, including the demand of up to three underwritten offerings and customary piggyback registration rights. Further, pursuant to the Subscription Agreements, we are also required to register additional shares of Dave Class A Common Stock. To satisfy these obligations, we are registering up to 331,404,740 shares of Dave Class A Common Stock, which also covers shares issuable upon exercise of the Public Warrants, pursuant to the registration statement of which this prospectus forms a part. The sale of these shares is likely to have an adverse effect on the trading price of the Dave Class A Common Stock.

For more information about the Investor Rights Agreement and Subscription Agreements, see the subsections entitled “Certain Relationships and Related TransactionsInvestor Rights Agreement.”

 

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If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of our securities may decline.

In addition, fluctuations in the price of Dave securities could contribute to the loss of all or part of your investment. If an active market for our securities develops and continues, the trading price of Dave securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our 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 that may affect the trading price of Dave securities include:

 

   

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to Dave;

 

   

changes in the market’s expectations about Dave’s operating results;

 

   

success of competitors;

 

   

Dave’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning Dave or the market in general;

 

   

operating and stock price performance of other companies that investors deem comparable to Dave;

 

   

Dave’s ability to market new and enhanced products and technologies on a timely basis;

 

   

changes in laws and regulations affecting Dave’s business;

 

   

Dave’s ability to meet compliance requirements;

 

   

commencement of, or involvement in, litigation involving Dave;

 

   

changes in Dave’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of Dave Class A Common Stock available for public sale;

 

   

any major change in the Board or management;

 

   

sales of substantial amounts of Dave Class A Common Stock by Dave’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 Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to Dave could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of Dave’s securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

 

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If securities or industry analysts do not publish or cease publishing research or reports about Dave, its business or its market, or if they change their recommendations regarding the Dave Class A Common Stock adversely, the price and trading volume of the Dave Class A Common Stock could decline.

The trading market for the Dave Class A Common Stock will be influenced by the research and reports that industry or securities analysts may publish about Dave, its business, its market or its competitors. If any of the analysts who may cover Dave change their recommendation regarding the Dave Class A Common Stock adversely, or provide more favorable relative recommendations about its competitors, the price of the Dave Class A Common Stock would likely decline. If any analyst who may cover Dave were to cease their coverage or fail to regularly publish reports on Dave, we could lose visibility in the financial markets, which could cause the stock price or trading volume of Dave securities to decline.

The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.

We qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies, including (a) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (b) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (c) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. As a result, our stockholders may not have access to certain information they deem important. We will remain an emerging growth company until the earliest of (a) the last day of the fiscal year (i) following March 4, 2025, the fifth anniversary of our IPO, (ii) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time) or (iii) in which we are deemed to be a large accelerated filer, which means the market value of the shares of Dave Class A Common Stock that are held by non-affiliates exceeds $700 million as of the last business day of our prior second fiscal quarter, and (b) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three year period.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

We cannot predict if investors will find the Dave Class A Common Stock less attractive because we will rely on these exemptions. If some investors find the Dave Class A Common Stock less attractive as a result, there may be a less active trading market for the Dave Class A Common Stock and our share price may be more volatile.

 

41


USE OF PROCEEDS

All of the securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.

Assuming the cash exercise of all outstanding Dave Warrants, we will receive an aggregate of approximately $131.61 million. We will receive up to an aggregate of approximately $0.21 million from the exercise of Option Shares, assuming the exercise in full of all of the Option Shares for cash. We expect to use the net proceeds from the exercise of the Dave Warrants or Option Shares, if any, for working capital and general corporate purposes. We will have broad discretion over the use of any proceeds from the exercise of the Dave Warrants or Option Shares. There is no assurance that the holders of the Dave Warrants or Option Shares will elect to exercise any or all of their Dave Warrants or Option Shares, as applicable. To the extent that any Dave Warrants are exercised on a “cashless basis,” the amount of cash we would receive from the exercise of the Dave Warrants will decrease.

The Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by the Selling Securityholders for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Securityholders in disposing of the securities. We will bear the costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including all registration and filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent registered public accounting firm.

 

42


DETERMINATION OF OFFERING PRICE

The offering price of the shares of Dave Class A Common Stock underlying the Private Warrants offered hereby is determined by reference to the exercise price of the Dave Warrants of $11.50 per share. The Public Warrants are listed on the Nasdaq Global Market under the symbol “DAVEW.”

We cannot currently determine the price or prices at which shares of our Dave Class A Common Stock or Dave Warrants may be sold by the Selling Securityholders under this prospectus.

 

43


MARKET INFORMATION FOR CLASS A STOCK AND DIVIDEND POLICY

Market Information

Our Dave Class A Common Stock and Public Warrants are currently listed on Nasdaq under the symbols “DAVE” and “DAVEW,” respectively. Prior to the consummation of the Business Combination, VPCC’s Class A Common Stock and Public Warrants were listed on The New York Stock Exchange under the symbols “VPCC” and “VPCC WS,” respectively. As of January 5, 2022, following the completion of the Business Combination, there were 17 holders of record of our Dave Class A Common Stock, one holder of record of our Dave Class V Common Stock, and two holders of record of our Dave Warrants. We currently do not intend to list the Private Warrants offered hereby on any stock exchange or stock market. Our Class V Common Stock is not registered and we do not currently intend to list the Class V Common Stock on any exchange or stock market.

Dividend Policy

We have not paid any cash dividends on our Dave Class A Common Stock to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our Board at such time. We do not anticipate declaring any cash dividends to holders of our Dave Class A Common Stock in the foreseeable future.

 

44


SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF LEGACY DAVE

The following tables set forth summary historical consolidated financial information of Legacy Dave for the periods presented. The consolidated statement of operations information for the years ended December 31, 2020 and 2019 and the other financial information as of December 31, 2020 have been derived from Legacy Dave’s audited consolidated financial statements included elsewhere in this prospectus. The condensed consolidated statements of operations information for the nine months ended September 30, 2021 and 2020 and the other financial information as of September 30, 2021 have been derived from Legacy Dave’s unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus. The unaudited condensed consolidated financial statements of Legacy Dave have been prepared on the same basis as the audited consolidated financial statements of Legacy Dave. In the opinion of Dave’s management, the unaudited condensed consolidated interim financial information reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial information in those statements.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read carefully the following summary information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Legacy Dave’s historical consolidated financial statements and the related notes related thereto, included elsewhere in this prospectus.

 

     (unaudited)
For the Nine Months
Ended September 30,
     For the Year Ended
December 31,
 
     2021      2020      2020      2019  
     (in thousands, except per
share
data)
     (in thousands, except per
share
data)
 
Consolidated Statement of Operations Data:            

Operating revenues:

           

Service based revenue, net

   $ 104,142      $ 85,614      $ 120,595      $ 76,194  

Transaction based revenue, net

     7,711        730        1,201        33  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating revenues, net

     111,853        86,344        121,796        76,227  
  

 

 

    

 

 

    

 

 

    

 

 

 

Operating expenses:

           

Provision for unrecoverable advances

     21,693        14,311        25,539        19,688  

Processing and servicing fees

     16,920        15,696        21,646        15,216  

Advertising and marketing

     38,844        22,642        38,019        22,934  

Compensation and benefits

     34,685        14,898        22,210        9,242  

Other operating expenses

     31,987        10,032        15,763        7,370  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total operating expenses

     144,129        77,579        123,177        74,450  
  

 

 

    

 

 

    

 

 

    

 

 

 

Other (income) expense:

           

Interest income

     (610      (339      (409      (429

Interest expense

     1,494        3        17        852  

Gain on conversion of 2018 convertible notes

     —          —          —          (841

Derivative liability

     —          —          —          536  

Legal settlement and litigation expenses

     952        948        4,467        327  

Other strategic financing and transactional expenses

     253        1,305        1,356        —    

Derivative asset on loans to stockholders

     (33,043      —          —          —    

Changes in fair value of warrant liability

     3,480        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total other (income) expenses, net

     (27,474      1,917        5,431        445  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

45


     (unaudited)
For the Nine Months Ended
September 30,
     For the Year Ended
December 31,
 
     2021      2020      2020      2019  
     (in thousands, except per share
data)
     (in thousands, except per share
data)
 

Net (loss) income before income tax (benefit) expense

     (4,802      6,848        (6,812      1,332  

Income tax (benefit) expense

     (1      (20,805      145        545  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (loss) income

   $ (4,801    $ 27,653      $ (6,957    $ 787  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net (loss) income per share:

           

Basic

   $ (0.05    $ 0.08      $ (0.08    $ 0.00  

Diluted

   $ (0.05    $ 0.08      $ (0.08    $ 0.00  

Weighted-average shares used to compute net (loss) income per share

           

Basic

     100,176,295        88,943,115        90,986,048        76,918,167  

Diluted

     100,176,295        99,364,554        90,986,048        247,773,818  

 

46


UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The Company is providing the following unaudited pro forma condensed combined financial information following the consummation of the Business Combination to aid you in your analysis of the financial aspects of the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information presents the combination of the financial information of VPCC and Legacy Dave adjusted to give effect to the Business Combination and related Transactions.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the previous pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and the option to present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Dave has elected not to present Management’s Adjustments and has only presented Transaction Accounting Adjustments in the following unaudited pro forma condensed combined financial information. Defined terms included below have the same meaning as terms defined and included elsewhere in this prospectus.

The historical financial information of VPCC was derived from the unaudited condensed financial statements of VPCC as of September 30, 2021 and the period from January 14, 2021 (Inception) through September 30, 2021, included elsewhere in this prospectus. The historical financial information of Legacy Dave was derived from the unaudited condensed consolidated financial statements of Legacy Dave as of September 30, 2021 and for the nine months ended September 30, 2021 and 2020, and from the audited consolidated financial statements of Legacy Dave as of December 31, 2020 and for the years ended December 31, 2020 and 2019, included elsewhere in this prospectus. This information should be read together with VPCC’s and Legacy Dave’s unaudited condensed financial statements and audited financial statements and related notes, the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of VPCC,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Dave” and other financial information included elsewhere in this prospectus, as well as the risk factors set forth under the section titled “Risk Factors” beginning on page 14 of this prospectus.

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, VPCC will be treated as the “accounting acquiree” and Legacy Dave as the “accounting acquirer” for financial reporting purposes. Legacy Dave was determined to be the accounting acquirer primarily based on evaluation of the following facts and circumstances that were in place when the Business Combination became effective:

 

   

Existing Legacy Dave Stockholders collectively own a majority of the outstanding shares of the Company immediately following the Closing (92.1% after redemptions of the public stockholders of VPCC) and hold a majority of the voting power immediately following the Closing (96.4% after redemptions of the public stockholders of VPCC);

 

   

by virtue of such voting interest upon the Closing, existing Legacy Dave Stockholders have the ability to control decisions regarding the election and removal of directors and officers of the Company following the Closing;

 

   

Dave’s senior management will be the senior management of the Company.

Additionally, Legacy Dave’s business comprise the ongoing operations of the Company immediately following the consummation of the Business Combination. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Legacy Dave issuing shares for the net assets of VPCC, followed by a recapitalization. Accordingly, the consolidated assets, liabilities, and results of operations of Legacy Dave will become the historical financial statements of the Company, and VPCC’s assets and liabilities will be consolidated with Legacy Dave beginning on the Closing Date.

 

47


The unaudited pro forma condensed combined balance sheet as of September 30, 2021 assumes that the Business Combination and related Transactions occurred on September 30, 2021. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2021 and for the year ended December 31, 2020 gives pro forma effect to the Business Combination and related Transactions as if they had occurred on January 1, 2020. Legacy Dave and VPCC have not had any historical relationship prior to the Business Combination. Affiliates of VPCC are lenders to Legacy Dave, however, there is no effect on the pro forma adjustments. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have been obtained had the Business Combination and related Transactions actually been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. The Company will incur additional costs after the Business Combination in order to satisfy its obligations as an SEC-reporting public company.

The Business Combination and Related Transactions

The aggregate merger consideration for the Business Combination was $3.5 billion, payable in the form of shares of Dave Common Stock valued at $10.00 per share. As part of the recapitalization, the Founder Holders forfeited an aggregate of 951,622 shares of VPCC’s Class B common stock and subjected 1,586,037 shares of Dave Class A Common Stock (the “Founder Holder Earnout Shares”) received upon conversion of an equal number of shares of VPCC’s Class B common stock to forfeiture subject to certain market vesting conditions in two tranches. The unaudited pro forma condensed combined financial statements do not reflect pro forma adjustments related to the recognition of the Founder Holder Earnout Shares because there is no net impact on stockholders’ equity on a pro forma combined basis.

The Founder Holder Earnout Shares are triggered by the below events beginning on the Closing Date and ending on and including the date of the five (5) year anniversary of the Closing:

 

   

Sixty percent (60%) of the Founder Holder Earnout Shares (951,622 Founder Holder Earnout Shares) shall immediately become fully vested and no longer subject to forfeiture upon the occurrence of Triggering Event I, which is defined as the first date on which the Common Share Price is equal to or greater than twelve dollars and fifty cents ($12.50) after the Closing Date, but within the Earnout Period (as defined in the Merger Agreement); provided, that

 

  (i)

in the event of a change of control pursuant to which Dave Stockholders receive, or have the right to receive, cash, securities or other property attributing a value of at least twelve dollars and fifty cents ($12.50) to each share of Class A Common Stock (as agreed in good faith by the Sponsor and the Board), then Triggering Event I shall be deemed to have occurred and;

 

  (ii)

in the event that, and as often as, the number of outstanding shares of Class A Common Stock is changed by reason of any dividend, subdivision, reclassification, recapitalization, split, combination, exchange or any similar event, then the applicable Common Share Price (as defined in the Merger Agreement) threshold (i.e., twelve dollars and fifty cents ($12.50)) will, for all purposes of the Merger Agreement (and the Founder Holder Agreement), in each case be equitably adjusted to reflect such change; and

 

   

The remaining Founder Holder Earnout Shares (634,415 Founder Holder Earnout Shares) shall immediately become fully vested and no longer subject to forfeiture upon the occurrence of Triggering

 

48


 

Event II, which is defined as the first date on which the Common Share Price is equal to or greater than fifteen dollars ($15.00) after the Closing Date, but within the Earnout Period; provided, that

 

  (i)

in the event of a change of control pursuant to which Dave Stockholders receive, or have the right to receive, cash, securities or other property attributing a value of at least fifteen dollars ($15.00) to each share of Class A Common Stock (as agreed in good faith by Sponsor and the Board), then Triggering Event II shall be deemed to have occurred and;

 

  (ii)

in the event that, and as often as, the number of outstanding shares of Class A Common Stock is changed by reason of any dividend, subdivision, reclassification, recapitalization, split, combination, exchange or any similar event, then the applicable Common Share Price threshold (i.e., fifteen dollars ($15.00)) will, for all purposes of the Merger Agreement (and the Founder Holder Agreement), in each case be equitably adjusted to reflect such change.

The Founder Holder Earnout Shares will be recognized at fair value upon the closing of the Business Combination and classified in stockholders’ equity. Because the Business Combination is accounted for as a reverse recapitalization, the issuance of the Founder Holder Earnout Shares will be treated as a deemed dividend and since Legacy Dave does not have retained earnings, the issuance will be recorded within additional-paid-in-capital (“APIC”) and have a net nil impact on APIC. Dave determined the fair value of the Founder Holder Earnout Shares to be approximately $12.1 million based on a valuation using a Monte Carlo simulation with key inputs and assumptions such as stock price, term, dividend yield, risk-free rate, and volatility. The unaudited pro forma condensed combined financial statements do not reflect pro forma adjustments related to the recognition of the Founder Holder Earnout Shares because there is no net impact on stockholders’ equity on a pro forma combined basis.

Concurrently with the execution of the Merger Agreement, VPCC, Legacy Dave and the Selling Holders entered into the Repurchase Agreement, pursuant to which, among other things, the Company agreed to repurchase a certain number of shares of Common Stock from the Selling Holders (including shares of Class V Common Stock issued to Mr. Wilk in connection with the Transactions), at a purchase price of $10.00 per share, on the business day immediately following the effective time of the Second Merger. The Repurchase was contingent on the amount of Available Cash being in excess of $300 million. If Available Cash exceeded $300 million, the number of shares of Common Stock subject to the Repurchase would be equal to the Aggregate Repurchase Price, divided by $10.00 (provided that in no event would the Aggregate Repurchase Price exceed $60 million). 80% of the number of shares of Common Stock subject to the Repurchase were to be allocated to Mr. Wilk, with Mr. Beilman allocated the remaining 20%. Mr. Wilk is one of Dave’s current directors and is the Chief Executive Officer of Dave, and, as mentioned above, Mr. Beilman is the Chief Financial Officer of Dave. The Transactions contemplated by the Merger Agreement, including the Mergers, constituted a Merger as contemplated by VPCC’s First Amended and Restated Certificate of Incorporation. The Mergers were consummated in accordance with the Merger Agreement and Delaware law. Since Available Cash did not exceed $300 million, there were no repurchases.

On March 3, 2021, Legacy Dave issued 8,458,481 stock options to Mr. Wilk. The stock options vest in seven tranches, each of which are vested by satisfying all three vesting conditions: (i) the occurrence of a Liquidity Event, which is defined as the first of (a) the shares of Legacy Dave becoming publicly traded on an internationally recognized stock exchange, which includes a merger resulting in the common stock of the surviving company registered under the Exchange Act or publicly traded on an internationally-recognized stock exchange or (b) a Corporate Transaction which is defined as a change in control, reorganization, merger or transfer of all Legacy Dave’s assets, (ii) the achievement of a specific stock price milestone and (iii) subject to the continuous employment by Mr. Wilk. The first tranche is one-third and the remaining six tranches are one-twelfth of the 8,458,481 shares. The stock options fair value on the grant date was approximately $10.5 million. Upon the Closing of the Business Combination, the Company recognized a cumulative charge to compensation expense and recognized the remaining compensation cost over the derived service period.

 

49


On August 17, 2021 Alameda Research, a PIPE Investor agreed to pre-fund its obligation under the original Subscription Agreement to subscribe for 1,500,000 shares of Class A Common Stock for $15.0 million of the aggregate PIPE subscription amount. On August 17, 2021, Legacy Dave issued a Promissory Note with a principal amount of $15.0 million to Alameda Research and amended the Subscription Agreement to satisfy Alameda Research’s obligation to pay the $15.0 million purchase price under the Alameda Subscription Agreement by way of a full discharge of Legacy Dave’s obligations to pay the principal under the Promissory Note. Upon the Closing of the Business Combination, the Promissory Note was automatically discharged upon the Company’s issuance of 1,500,000 shares of Class A Common Stock to Alameda Research.

On January 27, 2021, Legacy Dave issued warrants contemporaneously with a debt facility. The warrants vest and become exercisable based on Legacy Dave’s aggregated draw on the debt facility in incremental $10.0 million tranches and terminate upon the earliest to occur of (i) the fifth anniversary of the occurrence of a qualified financing event and (ii) the consummation of a liquidity event. Immediately prior to the close of the Business Combination, 1,664,394 of the vested warrants were exercised and net settled for 450,843 shares of Class A Common Stock of the Company after applying an exchange ratio of 1.354387513 upon closing. Legacy Dave and the warrant holders determined Dave would repurchase the exercised shares contingent on the amount of Available Cash being in excess of $300.0 million. Since Available Cash did not exceed $300.0 million, there were no repurchases.

The pro forma adjustments giving effect to the Business Combination and related Transactions are summarized below, and are discussed further in the footnotes to these unaudited pro forma condensed combined financial statements:

 

   

the First Merger;

 

   

immediately following the consummation of the First Merger, the Second Merger;

 

   

the consummation of the Business Combination and reclassification of cash held in the Trust Account to cash and cash equivalents, net of redemptions (see below);

 

   

the consummation of the PIPE Investment;

 

   

the conversion of certain Legacy Dave liabilities to equity;

 

   

the conversion of the Series A, Series B-1 and Series B-2 Convertible Preferred Shares (“Legacy Dave Preferred Stock”) to permanent equity;

 

   

the exercise and net settlement of the Legacy Dave warrants issued in connection with the senior secured debt facility;

 

   

the accounting for transaction costs incurred by both VPCC and Legacy Dave;

 

   

the exercise of the Legacy Dave call options and derecognition of the related loans, related accrued interest receivable and derivative asset to stockholders;

 

   

the accounting for Mr. Wilk’s stock options which include vesting terms satisfied by the Business Combination; and

 

   

the discharge of Legacy Dave’s obligation to pay the Promissory Note in exchange for shares of the Company.

The unaudited pro forma condensed combined financial information also reflects the redemption into cash of VPCC’s common stock by public stockholders of VPCC who elected to exercise their redemption rights for a total of 22,417,767 shares and an aggregate payment of $224.2 million:

Legacy Dave stockholders held 342,649,141 of the Company Common Stock immediately after the Business Combination, which approximates a 92.1% ownership level. The following summarizes the pro forma

 

50


common shares outstanding (excluding the potential dilutive effect of Dave Options, Dave Warrants and the Founder Holder Earnout Shares as further described in Note 4):

 

     Class A Shares      Class V Shares      %  

Stockholders

        

Former Dave stockholders and preferred shareholders

     294,198,502        48,450,639        92.1

VPCC sponsor shares(1)

     3,806,491        —          1.0

Founder Holder Earnout Shares(2)

     1,586,037        —          0.4

VPCC public stockholders

     2,958,831        —          0.8

PIPE Investment

     21,000,000        —          5.7
  

 

 

    

 

 

    

 

 

 

Total shares of Dave common stock outstanding at closing of the Transaction

     323,549,861        48,450,639        100.0

 

(1)

Gives effect to the Founder Holders’ forfeiture of an aggregate of 951,622 shares of VPCC’s Class B common stock as the net redemption percentage exceeded 35% per the Business Combination Agreement.

(2)

Founder Holder Earnout Shares subject to market vesting conditions: (i) 951,622 Founder Holder Earnout Shares are vested upon Triggering Event I and (ii) 634,415 Founder Holder Earnout Shares are vested upon Triggering Event II.

The following unaudited pro forma condensed combined balance sheet as of September 30, 2021 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2021 and for the year ended December 31, 2020 are based on the historical financial statements of VPCC and Legacy Dave. The unaudited pro forma adjustments are based on information currently available, assumptions, and estimates underlying the unaudited pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information.

 

51


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

(in thousands, except share data)

 

     As of
September 30, 2021
                  As of
September 30,
2021
 
     Dave, Inc.
(Historical)
     VPC Impact
Acquisition
Holdings III,
Inc.
(Historical)
     Transaction
Accounting
Adjustments
           Pro Forma
Combined
 

Assets

             

Current assets:

             

Cash and cash equivalents

   $ 21,307      $ 120        253,782       3A      $ 216,973  
           195,000       3D     
           (29,041     3H     
           (224,195     3B     

Marketable securities

     13,755        —               13,755  

Member advances, net of allowance for unrecoverable advances

     44,868        —               44,868  

Prepaid income taxes

     2,701        —               2,701  

Deferred issuance costs

     3,469           (3,469     3H        —    

Prepaid expenses and other current assets

     3,478        —               3,478  

Prepaid expenses

     —          918             918  
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current assets

     89,578        1,038        192,077          282,693  

Property and equipment, net

     636        —               636  

Lease right-of-use assets

     3,169        —               3,169  

Intangible assets, net

     6,504        —               6,504  

Derivative asset on loans to stockholders

     33,505        —          (33,505     3K        —    

Debt facility commitment fee, long-term

     145                145  

Restricted cash, net of current portion

     319        —               319  

Investments held in Trust Account

     —          253,782        (253,782     3A        —    
  

 

 

    

 

 

    

 

 

      

 

 

 

Total assets

   $ 133,856      $ 254,820        (95,210      $ 293,466  
  

 

 

    

 

 

    

 

 

      

 

 

 

Liabilities, convertible preferred stock, and stockholders’ deficit

             

Current liabilities:

             

Accounts payable

   $ 14,577      $ —             $ 14,577  

Accrued expenses

     9,836        2,269             12,105  

Lease liabilities, short-term

     1,898                1,898  

Legal settlement accrual

     3,201                3,201  

Note payable

     14,608           (14,608     3I        —    

Other current liabilities

     777        —               777  
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current liabilities

     44,897        2,269        (14,608        32,558  

Lease liabilities, long-term

     1,484        —               1,484  

Long-term debt facility

     30,000                30,000  

Convertible debt, long-term

     695        —          (695     3E        —    

Interest payable, convertible notes

     22        —          (22     3E        —    

Warrant liability

     3,586        21,811        (3,586     3L        21,811  

Other non-current liabilities

     545        —               545  

Deferred underwriting fee payable

     —          8,882             8,882  
  

 

 

    

 

 

    

 

 

      

 

 

 

Total liabilities

     81,229        32,962        (18,911        95,280  
  

 

 

    

 

 

    

 

 

      

 

 

 

 

52


     As of
September 30, 2021
                 As of
September 30,
2021
 
     Dave, Inc.
(Historical)
    VPC Impact
Acquisition
Holdings III,
Inc.
(Historical)
    Transaction
Accounting
Adjustments
           Pro Forma
Combined
 

Commitments and contingencies (Note 11)

           

Convertible preferred stock

           

Series A convertible preferred stock, par value per share $0.000001

     9,881       —         (9,881     3F      $ —    

Series B-1 convertible preferred stock, par value per share $0.000001

     49,675       —         (49,675     3F        —    

Series B-2 convertible preferred stock, par value per share $0.000001

     12,617       —         (12,617     3F        —    

Class A common stock subject to possible redemption

     —         253,766       (253,766     3C        —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Total Convertible preferred stock

     72,173       253,766       (325,939        —    

Stockholders’ deficit:

           

Common stock, par value per share $0.000001

     0.1       —         —         3E        0.1  
         —         3F     
         —         3G     
         —         3K     

Preferred stock, $0.0001 par value

     —         —              —    

Class A common stock, $0.0001 par value

     —         —         2       3C        2  
         (2     3B        (2

Class B common stock, $0.0001 par value

     —         1       (1     3G        —    

Class V common stock, $0.0001 par value

         1       3G        1  

Treasury stock

     (5     —              (5

Additional paid-in capital

     13,285       —         253,764       3C        228,672  
         195,000       3D     
         717       3E     
         72,173       3F     
         (31,909     3G     
         (21,678     3H     
         1,945       3J     
         (15,121     3K     
         (33,505     3K     
         3,586       3L     
         14,608       3I     
         (224,193     3B     

Loans to stockholders

     (15,121     —         15,121       3K        —    

Accumulated deficit

     (17,705     (31,909     31,909       3G        (30,482
         (10,832     3H     
         (1,945     3J     
  

 

 

   

 

 

   

 

 

      

 

 

 

Total stockholders’ deficit

     (19,546     (31,908     249,640          198,186  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities, convertible preferred stock, and stockholders’ deficit

   $ 133,856     $ 254,820       (95,210      $ 293,466  
  

 

 

   

 

 

   

 

 

      

 

 

 

See accompanying notes to unaudited pro forma condensed combined financial information.

 

53


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(in thousands, except share and per share data)

 

     Nine Months
Ended
September 30,
2021
    Period From
January 14,
2021
(Inception)
Through
September 30,
2021
               Nine Months
Ended
September 30,
2021
 
     Dave, Inc.
(Historical)
    VPC Impact
Acquisition
Holdings III,
Inc.
(Historical)
    Transaction
Accounting
Adjustments
         Pro Forma
Combined
 

Operating revenues:

           

Service based revenue, net

   $ 104,142     $ —            $ 104,142  

Transaction based revenue, net

     7,711       —              7,711  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating revenues, net

     111,853       —         —            111,853  
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating expenses:

           

Provision for unrecoverable advances

     21,693       —              21,693  

Processing and servicing fees

     16,920       —              16,920  

Advertising and marketing

     38,844       —              38,844  

Compensation and benefits

     34,685       —         1,725     3EE      36,410  

Other operating expenses

     31,987       —              31,987  

Formation and operational costs

     —         3,402            3,402  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     144,129       3,402       1,725          149,256  
  

 

 

   

 

 

   

 

 

      

 

 

 

Other (income) expense:

           

Interest income

     (610     —         212     3GG      (4
         394     3II   

Interest expense

     1,494       —         (9   3BB      1,485  

Legal settlement and litigation expenses

     952       —              952  

Other strategic financing and transactional expenses

     253       —              253  

Derivative asset on loans to stockholders

     (33,043     —         33,043     3FF      —    

Changes in fair value of warrant liability

     3,480       3,820       (3,480   3HH      3,820  

Transaction costs allocated to warrant liabilities

     —         600            600  

Interest earned on marketable securities held in Trust Account

     —         (16     16     3AA      —    
  

 

 

   

 

 

   

 

 

      

 

 

 

Total other (income) expenses, net

     (27,474     4,404       30,176          7,106  
  

 

 

   

 

 

   

 

 

      

 

 

 

Net (loss) income before provision for income taxes

     (4,802     (7,806     (31,901        (44,509

Income tax benefit

     (1     —         —       3DD    $ (1
  

 

 

   

 

 

   

 

 

      

 

 

 

Net (loss) income

   $ (4,801   $ (7,806   $ (31,901      $ (44,508

Net loss per share of common stock - basic and diluted

   $ (0.05         

Weighted average shares of common stock outstanding - basic

     100,176,295           

Weighted average shares of common stock outstanding - diluted

     100,176,295           

Net loss per share - Class A common stock redeemable shares - basic and diluted

     $ (0.29        $ (0.12

Weighted average shares outstanding - Class A common stock redeemable shares - basic and diluted

       20,481,452       4      321,964,058  

Net loss per share - Class B - basic and diluted

     $ (0.29       

Weighted average shares outstanding - Class B - basic and diluted

       6,207,710         

Net loss per share - Class V - basic and diluted

            $ (0.12

Weighted average shares outstanding - Class V - basic and diluted

         4      48,450,639  

See accompanying notes to unaudited pro forma condensed combined financial information.

 

54


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS—(Continued)

(in thousands, except share and per share data)

 

     Year Ended December 31,
2020
                Year Ended
December 31, 2020
 
     Dave, Inc.
(Historical)
    VPC Impact
Acquisition
Holdings III,
Inc.
(Historical)(1)
     Transaction
Accounting
Adjustments
         Pro Forma
Combined
 
     As Restated                          

Operating Revenues:

            

Service based revenue, net

   $ 120,595     $ —             $ 120,595  

Transaction based revenue, net

     1,201       —               1,201  
  

 

 

   

 

 

    

 

 

      

 

 

 

Total operating revenue, net

     121,796       —          —            121,796  
  

 

 

   

 

 

    

 

 

      

 

 

 

Operating expenses:

            

Provision for unrecoverable advances

     25,539       —               25,539  

Processing and servicing fees

     21,646       —               21,646  

Advertising and marketing

     38,019       —               38,019  

Compensation and benefits

     22,210       —          4,235     3EE      26,445  

Other operating expenses

     15,763       —          10,832     3CC      26,595  
  

 

 

   

 

 

    

 

 

      

 

 

 

Total operating expenses

     123,177       —          15,067          138,244  
  

 

 

   

 

 

    

 

 

      

 

 

 

Other (income) expense:

            

Interest income

     (409     —          272     3GG      (137

Interest expense

     17       —          (17   3BB      —    

Legal settlement and litigation expenses

     4,467       —               4,467  

Other strategic financing and transactional expenses

     1,356       —               1,356  
  

 

 

   

 

 

    

 

 

      

 

 

 

Total other expense, net

     5,431       —          255          5,686  
  

 

 

   

 

 

    

 

 

      

 

 

 

Loss before provision for income taxes

     (6,812     —          (15,322        (22,134

Provision for income taxes

     145       —          —       3DD      145  
  

 

 

   

 

 

    

 

 

      

 

 

 

Net loss

   $ (6,957   $ —        $ (15,322      $ (22,279

Net loss per share of common stock - basic and diluted

   $ (0.08          

Weighted average shares of common stock outstanding - basic and diluted

     90,986,048            

Net loss per share - Class A common stock redeemable shares - basic and diluted

     $ —             $ (0.06

redeemable shares - basic and diluted

       —          4      321,964,058  

Net loss per share - Class B - basic and diluted

     $ —            

Weighted average shares outstanding - Class B - basic and diluted

       —            

Net loss per share - Class V - basic and diluted

     $ —             $ (0.06

Weighted average shares outstanding - Class V - basic and diluted

       —          4      48,450,639  

 

(1)

As VPCC’s date of inception is January 14, 2021, no statement of operations data exists for the year ended December 31, 2020.

See accompanying notes to unaudited pro forma condensed combined financial information.

 

55


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands, except share and per share data)

NOTE 1—BASIS OF PRESENTATION

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, VPCC will be treated as the “accounting acquiree” and Legacy Dave as the “accounting acquirer” for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Legacy Dave issuing shares for the net assets of VPCC, followed by a recapitalization. The net assets of VPCC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Legacy Dave.

The unaudited pro forma condensed combined balance sheet as of September 30, 2021, assumes that the Business Combination and related Transactions occurred on September 30, 2021. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2021, and for the year ended December 31, 2020, gives pro forma effect to the Business Combination as if it had been completed on January 1, 2020. These periods are presented on the basis that Legacy Dave is the acquirer for accounting purposes.

The pro forma adjustments reflecting the consummation of the Business Combination and related Transactions are based on certain currently available information and certain assumptions and methodologies that Dave believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the differences may be material. Dave believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination and related Transactions based on information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination and related Transactions taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the Company. They should be read in conjunction with the historical financial statements and notes thereto of VPCC and Legacy Dave.

NOTE 2—ACCOUNTING POLICIES AND RECLASSIFICATIONS

Upon consummation of the Business Combination, management will perform a comprehensive review of the two entities’ accounting policies. As a result of the review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material impact on the financial statements of the Company. Based on its initial analysis, management did not identify any differences that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.

As part of the preparation of these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align VPCC’s financial statement presentation with that of Legacy Dave.

 

56


NOTE 3—ADJUSTMENTS TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and related Transactions and has been prepared for informational purposes only.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 replaces the previous pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (“Transaction Accounting Adjustments”) and present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”). Dave has elected not to present Management’s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information. Legacy Dave and VPCC have not had any historical relationship prior to the Business Combination. Affiliates of VPCC are lenders to Legacy Dave, however, there is no effect on the pro forma adjustments. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted had the Company filed consolidated income tax returns during the periods presented. Dave has not reflected the income tax benefit in the pro forma statement of operations, as Dave does not believe that the income tax benefit is realizable and records a full valuation allowance against all deferred tax assets.

The unaudited pro forma condensed combined financial statements do not reflect pro forma adjustments related to the recognition of the Founder Holder Earnout Shares because there is no net impact on stockholders’ equity on a pro forma combined basis.

The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of Legacy Dave’s shares outstanding, assuming the Business Combination and related Transactions occurred on January 1, 2020.

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2021 are as follows:

 

(A)

Reflects the reclassification of $253.8 million held in the Trust Account to cash and cash equivalents.

 

(B)

Reflects the reduction in cash and VPCC’s APIC in the amount of $224.2 million related to the redemptions.

 

(C)

Reflects the reclassification of VPCC’s Common Stock subject to possible redemption into permanent equity.

 

(D)

Reflects cash proceeds from the concurrent PIPE Investment in the amount of $195.0 million and corresponding offset to APIC, excluding the $15.0 million PIPE prefunding with Alameda Research. The total PIPE Investment including the prefunding is $210.0 million.

 

(E)

Reflects the conversion of approximately $0.7 million of Legacy Dave convertible notes and approximately $0.02 million of accrued interest into fully vested shares of Company Common Stock. Using an exchange ratio of 1.354387513, the $0.72 million of Legacy Dave liabilities converted into approximately 225,331 shares of Company Common Stock upon the consummation of the Business Combination.

 

57


(F)

Reflects the conversion of the Legacy Dave Preferred Stock into Company Common Stock in accordance with the Merger Agreement.

 

(G)

Reflects the elimination of VPCC’s retained earnings and Legacy Dave’s par value of common shares upon consummation of the Business Combination.

 

(H)

Reflects an adjustment of approximately $29.0 million to reduce cash and approximately $3.5 million to reduce deferred offering costs for transaction costs incurred by VPCC and Legacy Dave in relation to the Business Combination and PIPE Investment, including advisory, banking, printing, legal and accounting services. As part of the Business Combination, approximately $10.8 million was expensed and recorded in accumulated deficit, and the remaining approximately $21.7 million was determined to be equity issuance costs and offset to APIC.

 

(I)

Reflects the conversion of approximately $14.6 million of Legacy Dave notes payable held at fair value related to the amended PIPE subscription agreement in August 2021 with Alameda Research into fully vested shares of Company Common Stock.

 

(J)

Reflects compensation expense of approximately $1.7 million recorded in additional-paid-in-capital and offset to accumulated deficit, related to Mr. Wilk’s stock options expected to vest upon closing of the Business Combination. The value of the stock options was estimated using a Monte Carlo simulation. This model requires the input of certain assumptions, including the risk-free interest rate, volatility, dividend yield and expected life. The options were granted in nine tranches each of which contain service, market and performance conditions. Vesting commences on the grant date, however, no compensation charges are recognized until the performance condition is probable upon the completion of the Business Combination. On the date of the Business Combination, there is a cumulative expense for the amount vested between the grant date and the date of the Business Combination. The cumulative stock-based compensation expense as of the date of the Business Combination was $1.9 million. See Note (EE) for further details.

 

(K)

Reflects the exercise of Legacy Dave call options in exchange for the forgiveness of the related loans to stockholders of approximately $14.5 million and related accrued interest receivable of $0.6 million. Dave reclassified the loan and derivative asset of approximately $33.5 million to APIC. See Note (FF) for further details.

 

(L)

Reflects the net share settlement of 1,664,394 Legacy Dave warrants issued in connection with the senior secured debt facility into 332,876 shares immediately prior to the Business Combination. Using an exchange ratio of 1.354387513, the shares converted into approximately 450,843 Company Common Stock on a post combination basis. The cashless exercise is treated as a reclassification of the warrant liability of $3.6 million to APIC, with no repurchase of common stock.

Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2021 and the year ended December 31, 2020 are as follows:

 

(AA)

Elimination of interest income and unrealized gain on the Trust Account.

 

(BB)

Elimination of interest expense of $0.009 million for the nine months ended September 30, 2021 and $0.02 million for the year ended December 31, 2020 related to Legacy Dave convertible debt that converted to Company Common Stock upon the closing of the Business Combination.

 

(CC)

Reflects the transaction costs of $10.8 million as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statement of operations. This is a non-recurring item.

 

(DD)

The net effect of all adjustments impacting the pro forma statement of operations results in a reduction of the income tax benefit of approximately $6.7 million for the nine months ended September 30, 2021 and

 

58


  approximately $3.2 million for the year ended December 31, 2020 based on the application of the blended statutory tax rate of 21%. However, Dave has not reflected the income tax benefit in the pro forma statement of operations, as Dave does not believe that the income tax benefit is realizable and records a full valuation allowance against all deferred tax assets.

 

(EE)

Reflects estimated compensation expense related to Mr. Wilk’s stock options. The value of the stock options was estimated using a Monte Carlo simulation. This model requires the input of certain assumptions, including the risk-free interest rate, volatility, dividend yield and expected life. The options were granted in nine tranches each of which contain service, market and performance conditions. Vesting commences on the grant date, however, no compensation charges are recognized until the performance condition is probable upon the completion of the Business Combination. On the date of the Business Combination, there is a cumulative expense for the amount vested between the grant date and the date of the Business Combination. Stock-based compensation expense for the nine months ended September 30, 2021 was approximately $1.7 million and approximately $4.2 million for the year ended December 31, 2020, inclusive of a cumulative expense of approximately $1.9 million. The cumulative expense recognized is a non-recurring item. See NOTE (J) for further details. This is a non-recurring item.

 

(FF)

Reflects the elimination of historical changes in fair value of the call option of approximately $33.0 million for the nine months ended September 30, 2021 and nil for the year ended December 31, 2020. This is a non-recurring item.

 

(GG)

Elimination of interest income from the loans to stockholders related to the call option of approximately $0.2 million for the nine months ended September 30, 2021 and approximately $0.3 million for the year ended December 31, 2020.

 

(HH)

Reflects the elimination of historical changes in fair value of the Legacy Dave warrant of approximately $3.5 million for the nine months ended September 30, 2021 and nil for the year ended December 31, 2020 upon exercise of the warrant immediately prior to the closing of the Business Combination. This is a non-recurring item.

 

(II)

Reflects the elimination of historical changes in fair value of the Legacy Dave Note Payable of approximately $0.4 million for the nine months ended September 30, 2021 and nil for the year ended December 31, 2020.

NOTE 4—EARNINGS PER SHARE

Represents the net earnings per share calculated under the two-class method using the historical weighted average outstanding shares and the issuance of additional shares in connection with the Business Combination and PIPE Investment, assuming the shares were outstanding since January 1, 2020. VPCC used the two-class method to compute net income per common share, because it had issued multiple classes of common stock. The two-class method requires earnings for the period to be allocated between multiple classes of common stock based upon their respective rights to receive distributed and undistributed earnings. As the Business Combination and PIPE Investment are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and PIPE Investment have been outstanding for the entire period presented. Additionally, this calculation has been retroactively adjusted to eliminate the number of redeemed shares for the entire period.

 

59


The unaudited pro forma condensed combined financial information has been prepared for the nine months ended September 30, 2021:

 

     (in thousands, except share data)  
     Redemptions  
Stockholders    Class A Shares      Class V Shares  

Numerator

     

Net loss (in thousands)

   $ (38,686    $ (5,822

Denominator(1)

     

Former Dave stockholders and preferred stockholders

     294,198,502        48,450,639  

VPCC sponsor shares(2)

     3,806,491        —    

VPCC public stockholders

     2,958,831        —    

PIPE Investment

     21,000,000        —    
  

 

 

    

 

 

 

Total shares of Dave common stock outstanding at closing of the Transaction

     321,963,824        48,450,639  

Net loss per share

     

Basic and diluted

   $ (0.12    $ (0.12

 

(1)

The denominator excludes the effect of the Founder Holder Earnout Shares due to the uncertainty related to the market vesting conditions.

(2)

Gives effect to the Founder Holders’ forfeiture of an aggregate of 951,622 shares of VPCC’s Class B common stock as the net redemption percentage exceeded 35% per the Merger Agreement.

The unaudited pro forma condensed combined financial information has been prepared for the year ended December 31, 2020:

 

     (in thousands, except share data)  
Stockholders    Class A Shares      Class V Shares  

Numerator

     

Net loss (in thousands)

   $ (19,365    $ (2,914

Denominator(1)

     

Former Dave stockholders and preferred stockholders

     294,198,502        48,450,639  

VPCC sponsor shares(2)

     3,806,491        —    

VPCC public stockholders

     2,958,831        —    

PIPE Investment

     21,000,000        —    
  

 

 

    

 

 

 

Total shares of Dave common stock outstanding at closing of the Transaction

     321,963,824        48,450,639  

Net loss per share

     

Basic and diluted

   $ (0.06    $ (0.06

 

(1)

The denominator excludes the effect of the Founder Holder Earnout Shares due to the uncertainty related to the market vesting conditions.

(2)

Gives effect to the Founder Holders’ forfeiture of an aggregate of 951,622 shares of VPCC’s Class B common stock as the net redemption percentage exceeded 35% per the Merger Agreement.

VPCC had 6,344,150 Public Warrants and 5,100,214 Private Warrants outstanding as of September 30, 2021 which were converted into 6,344,150 Dave Public Warrants and 5,100,214 Dave Private Warrants

 

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(collectively, the “Warrants”). Each Warrant entitles the holder to purchase one share of Class A Common Stock at $11.50 per one share. These Warrants are not exercisable until March 4, 2022. As the Company is in a loss position in 2021, any shares issued upon exercise of these Warrants would have an anti-dilutive effect on earnings per share and, therefore, have not been considered in the calculation of pro forma net loss per common share.

Legacy Dave had Legacy Dave Warrants outstanding as of September 30, 2021. The Legacy Dave Warrants were exercisable for a variable number of shares determined by a fixed percentage of the outstanding equity upon achievement of specified thresholds of the aggregate amount of delayed draw term loans funded by the lenders. The 1,664,394 Legacy Dave Warrants were share settled immediately prior to Closing and are reflected in the table above. See Note (L) above for further details.

There were 33,057,116 Dave Options outstanding immediately after the Business Combination. As the Company is in a loss position in 2021, any shares issued upon exercise of these Dave Options would have an anti-dilutive effect on earnings per share and, therefore, have not been considered in the calculation of pro forma net loss per common share.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which Dave’s management believes is relevant to an assessment and understanding of Dave’s results of operations and financial condition. This discussion and analysis should be read together with the section of this prospectus entitled “Summary Historical Consolidated Financial Information of Legacy Dave” and the audited and unaudited condensed consolidated financial statements and related notes that are included elsewhere in this prospectus. This discussion and analysis should also be read together with the section of this prospectus entitled “Business,” Dave’s unaudited condensed consolidated financial statements and related notes as of and for the nine months ended September 30, 2021 and Dave’s audited consolidated financial statements for the two years ended December 31, 2020, and December 31, 2019, included elsewhere in this prospectus.

Overview

Dave offers a suite of innovative financial products aimed at helping our Members improve their financial health. Our budgeting tool helps Members manage their upcoming bills to avoid overspending. To help Members avoid punitive overdraft fees, Dave offers cash advances through its flagship 0% interest ExtraCash product. We also help Members generate extra income for spending or emergencies through our Side Hustle product, where we present Members with supplemental work opportunities. Through Dave Banking, we provide a modern checking account experience with valuable tools for building long-term financial health.

Market research conducted by Dave found that legacy financial institutions commonly require a more extensive banking relationship and days or even weeks of wait times to access their features and services, which can potentially be more onerous in order to obtain premium features (e.g., access to increased interest rates requires direct deposit or higher minimum daily balances). Even new challenger banks often take multiple days or even weeks before allowing members to access certain premium features, according to the same research. In contrast, Members are able to utilize all of Dave’s products individually and instantly, whether or not their banking relationship is with us. As an example, our ExtraCash product allows new Members to access up to $250 to cover an overdraft at their existing bank. We are able to do this by leveraging our proprietary machine learning engine that analyzes a Member’s prior transaction history at their existing bank. This flexible approach to Member choice and speed to value has been a key driver of our growth engine and best-in-class brand favorability.

We have only begun to address the many inequities in financial services, but our progress to date demonstrates the demand for Dave to rewire the financial system for the everyday person. Since inception and through the date of this prospectus, approximately 10 million Members have registered on the Dave app and over five million of them have used at least one of our current products. We have added more than one million new banking relationships over the last 12 months, and we believe that we have a substantial opportunity to grow our Member base going forward. We believe the value proposition of our platform approach will continue to accelerate as a result of our data-driven perspective of our Members, allowing us to introduce products and services that address their changing life circumstances.

Business Combination and Public Company Costs

On June 7, 2021, Dave entered into the Merger Agreement with VPCC, First Merger Sub and Second Merger Sub, pursuant to which (a) First Merger Sub merged with and into Dave, with Dave surviving the First Merger as a wholly owned subsidiary of the combined company, and (b) as soon as practicable, but in any event within three days following the Effective Time and as part of the same overall transaction as the First Merger, Dave (as the surviving entity of the First Merger) merged with and into Second Merger Sub, with Second Merger Sub

surviving the merger as a wholly owned subsidiary of the combined company. The Merger was consummated on January 5, 2022. Dave is deemed the accounting predecessor and the combined entity is the successor registrant

 

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with the SEC, meaning that Dave’s consolidated financial statements for previous periods are to be disclosed in the registrant’s future periodic reports filed with the SEC.

While the legal acquirer in the Merger Agreement is VPCC, for financial accounting and reporting purposes under accounting principles generally accepted in the United States (“GAAP”), Legacy Dave is the accounting acquirer and the Business Combination is accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the consolidated financial statements of Legacy Dave in many respects. Under this method of accounting VPCC is treated as the “acquired” company for financial reporting purposes. For accounting purposes, Legacy Dave is deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a recapitalization of Legacy Dave (i.e., a capital transaction involving the issuance of stock by VPCC for Dave Capital Stock). Accordingly, the consolidated assets, liabilities and results of operations of Legacy Dave will become the historical consolidated financial statements of the combined company, and VPCC’s assets, liabilities and results of operations have been consolidated with Dave beginning on the Closing Date. Operations prior to the Business Combination will be presented as those of Legacy Dave in future reports. The net assets of VPCC are recognized at historical cost (which is expected to be consistent with carrying value), with no goodwill or other intangible assets recorded.

As a consequence of the consummation of the Business Combination, Dave became the successor to an SEC-registered and NASDAQ-listed company which required and will require Dave to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Dave expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, and legal and administrative resources, including increased audit, compliance and legal fees.

Recent Developments

In January 2021, Dave OD Funding I, LLC, a Delaware LLC and subsidiary of Dave Inc. (“Dave OD Funding”), entered into a $100.0 million delayed draw credit facility (the “Existing Financing Agreement”) with Victory Park Management, LLC, an affiliate of VPCC. The facility has an interest rate of 6.95% annually plus a base rate defined as the greater of three-month LIBOR (as of the last business day of each calendar month) and 2.55%. The facility, which contains multiple tranches, allows Dave OD Funding to draw on the facility based upon eligible receivables outstanding and qualified cash. We have guaranteed up to $50 million of Dave OD Funding’s obligations under the Existing Financing Agreement. This limited guaranty is secured by a first-priority lien against substantially all of our assets. Warrants were also issued by Dave in connection with the facility. At September 30, 2021, $30.0 million of term loans under the facility were outstanding. In November 2021, Dave OD Funding entered into an amendment of the Existing Financing Agreement which added a $20 million credit line (as amended, the “Credit Facility”) which has an interest rate of 8.95% annually plus a base rate defined as the greater of three-month LIBOR (as of the last business day of each calendar month) and 2.55%.

In August 2021, VPCC announced that it entered into an amendment to the PIPE subscription agreement it previously entered into with Alameda Research Ventures LLC (“Alameda Research”), in connection with the proposed Business Combination with Dave. The amendment called for a $15 million pre-funding of Alameda Research’s PIPE Investment, which was facilitated through the issuance of a promissory note by Dave to Alameda Research. Legacy Dave’s obligations to repay the principal amount of such promissory note were discharged through the issuance to Alameda Research of 1.5 million shares of Dave at the Closing of the Business Combination.

Restatement of Consolidated Financial Statements

We have restated our previously issued consolidated financial statements as of and for the years ended December 31, 2020 and 2019. The determination to restate these consolidated financial statements was made by

 

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our management after its review of records related to Member advances, net of allowance for unrecoverable advances, in connection with its preparation of the Company’s consolidated financial statements for the six months ended June 30, 2021. See Note 2—Restatement of Previously Issued Financial Statements to our consolidated financial statements included elsewhere in this prospectus.

COVID-19 Impact

There are many uncertainties regarding the current global pandemic involving a novel strain of coronavirus (“COVID-19”), and Dave continues to closely monitor the impact of the pandemic on all aspects of its business, including how it has and may in the future impact its Members, employees, suppliers, vendors, and business partners. The duration and magnitude of the continuing effects of COVID-19 on Dave’s Members remain uncertain and dependent on various factors, including the continued severity and transmission rate of the virus, new variants of the virus, the nature of and duration for which preventive measures remain in place, the extent and effectiveness of containment and mitigation efforts, including vaccination programs, and the type of stimulus measures and other policy responses that the U.S. government may further adopt.

Beginning in March 2020, Dave’s business and operations were disrupted by the conditions caused by COVID-19, which adversely affected Members’ spending levels and disposable income. Governmental actions such as the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) helped mitigate the effects of COVID-19 on Dave’s Members. In particular, stimulus funds and enhanced unemployment benefits provided under the CARES Act created additional financial support for Dave’s Members; however, the overall economic conditions and increased levels of unemployment may negatively impact the creditworthiness of our Members and could impact the default rate on our Advance business. Dave actively monitors the performance of its Advance portfolio and will continue to assess the impact of the COVID-19 pandemic. At the onset of the pandemic, Dave made some underwriting modifications in response and intends to make additional adjustments to its risk management policies as necessary.

For more information concerning COVID-19, see the section titled “Risk Factors—Our business, financial condition and results of operations have and may continue to be adversely affected by the COVID-19 pandemic or other similar epidemics or adverse public health developments, including government responses to such events” and “—Our non-recourse cash advances expose us to credit risk of our Members and if our underwriting criteria for making advances is not sufficient to mitigate against this risk, our financial condition and operating results could be adversely affected if a substantial number of our Members fail to repay the cash advance they receive.”

Comparability of Financial Information

Dave’s future results of operations and financial position may not be comparable to historical results as a result of the consummation of the Business Combination.

Key Factors Affecting Operating Results

Dave’s future operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including Member growth and activity, product expansion, competition, industry trends and general economic conditions.

Member Growth and Activity

Dave has made significant investments in its platform and is dependent on continued Member growth, as well as our ability to offer new products and services and generate additional revenues from our existing members using

 

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such additional products and services. Member growth and activity is critical to our ability to increase our scale, capture market share and earn an attractive return on our technology, product and marketing investments. Growth in Members and Member activity will depend heavily on our ability to continue to offer attractive products and services and the success of our marketing and Member acquisition efforts.

Product Expansion

Dave aims to develop and offer a best-in-class financial services platform with integrated products and services that improve the financial wellbeing of our Members. Dave has invested, and continues to make significant investments heavily in the development, improvement and marketing of its financial products and is dependent on the continued growth in the number of products Dave offers that are utilized by our Members.

Competition

Dave faces competition from several financial services-oriented institutions. In its reportable segment, as well as in potential new lines of business, Dave may compete with more established institutions, some of which have more financial resources. Dave competes at multiple levels, including competition among other financial institutions and lenders in its Advances business, competition for deposits in its Checking Product from traditional banks and digital banking products, competition for subscribers to its financial management tools, and competition with other technology platforms for the enterprise services that Dave provides. Some of Dave’s competitors may at times seek to increase their market share by undercutting pricing terms prevalent in that market, which could adversely affect our market share for any of our products and services or require us to incur higher member acquisition costs.

Key Components of Statements of Operations

Basis of presentation

Currently, Dave conducts business through one operating segment which constitutes a single reportable segment. For more information about Dave’s basis of presentation, refer to Note 1 in the accompanying audited consolidated financial statements of Dave beginning on Page F-41 in this prospectus.

Service based revenue, net

Service based revenue, net primarily consists of optional tips, optional express processing fees and subscriptions charged to Members, net of processor-related costs associated with advance disbursements. Service based revenue, net also consists of lead generation fees from Dave’s Side Hustle advertising partners as well as fees earned related to the Rewards Product for Members who make debit card spending transactions at participating merchants.

Transaction based revenue, net

Transaction based revenue, net consists of interchange and ATM revenues from Dave’s Checking Product, net of ATM-related fees, and are recognized at the point in time the transactions occur, as the performance obligation is satisfied.

Operating expenses

Dave classifies its operating expenses into the following five categories:

Provision for Unrecoverable Advances

The provision for unrecoverable advances primarily consists of an allowance for unrecoverable advances at a level estimated to be adequate to absorb credit losses inherent in the outstanding advances receivable. Dave

 

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currently estimates the allowance balance required using historical loss and collections experience, and, if relevant, the nature and volume of the portfolio, economic conditions, and other factors. Changes to the allowance have a direct impact on the provision for unrecoverable advances in the consolidated statement of operations. Dave considers advances more than 120 days past due or which become uncollectible based on information available to us as impaired. All impaired advances are deemed uncollectible and subsequently written off and are a direct reduction to the allowance for unrecoverable advances. Subsequent recoveries, if any, of Member advances written-off are recorded as a reduction to Member advances, resulting in a reduction to the allowance for unrecoverable advances and a corresponding reduction to the provision for unrecoverable advances in the consolidated statements of operations when collected.

Processing and Servicing Fees

Processing and servicing fees consist of fees paid to Dave’s processing partners for the recovery of advances, tips, expedited processing fees and subscriptions. These expenses also include fees paid for services to connect Members’ bank accounts to Dave’s application. Except for processing and servicing fees associated with advance disbursements which are recorded against revenue, all other processing and service fees are expensed as incurred.

Advertising and Marketing

Advertising and marketing expenses consist primarily of fees Dave pays to its platform partners. Dave incurs advertising and marketing expenses for online, social media and television advertising and for partnerships and promotional advertising. Advertising and marketing expenses are recognized as incurred and typically deliver a benefit over an extended period of time. All advertising and marketing costs are expensed as incurred.

Compensation and Benefits

Compensation and benefits expenses represent the compensation, inclusive of stock-based compensation and benefits, that Dave provides to our employees and the payments Dave makes to third-party contractors. While Dave has an in-house customer service function, Dave employs third-party contractors to conduct call center operations and handle routine customer service inquiries and support.

Other Operating Expenses

Other operating expenses consist primarily of technology and infrastructure (third-party SaaS), commitments to charity, transaction based costs (program expenses, association fees, processor fees, losses from Member-disputed transactions, and fraud), depreciation and amortization of property and equipment and intangible assets, general and recurring legal fees, rent, certain sales tax related costs, office related expenses, public relations costs, professional service fees, travel and entertainment, and insurance. Costs associated with technology and infrastructure, rent, depreciation and amortization of our property and equipment and intangible assets, professional service fees, travel and entertainment, public relations costs, utilities, office-related expenses and insurance technology and infrastructure (third-party subscriptions), depreciation and amortization of property and equipment and intangible assets, general and recurring legal fees, rent, office-related expenses, public relations costs, professional service fees, travel and entertainment and insurance vary based upon Dave’s investment in infrastructure, business development, risk management and internal controls and are generally not correlated with our operating revenues or other transaction metrics.

Dave expects its operating expenses to increase for the foreseeable future with the growth of its business, and as a result of operating as a public company, including compliance with the rules and regulations of the SEC, legal, audit, additional insurance expenses, investor relations activities and other administrative and professional services.

 

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Other (income) expenses

Other (income) expenses consist of interest income, interest expense, gain on conversion of convertible notes, loss on the derivative liability associated with convertible notes, legal settlement, litigation expenses, derivative asset fair value adjustments, other strategic financing and transactional expenses, and warrant liability fair value adjustments.

Provision for income taxes

Provision for income taxes consists of the federal and state corporate income taxes accrued on income resulting from the sale of our services. On March 27, 2020, the CARES Act was signed into law, which among other things, includes certain income tax provisions for corporations; however, these benefits did not impact Dave’s current tax provision.

Results of Operations

Comparison of the Nine Months Ended September 30, 2021 and 2020

Operating revenues

 

     For the Nine Months
Ended
September 30,
(unaudited)
     Change  
(in thousands, except for percentages)    $      %  
     2021      2020      2021/2020      2021/2020  

Service based revenue, net

           

Processing fees, net

   $ 57,410      $ 47,705      $ 9,705        20

Tips

     33,067        25,042        8,025        32

Subscriptions

     13,055        12,337        718        6

Other

     610        530        80        15

Transaction based revenue, net

     7,711        730        6,981        956
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 111,853      $ 86,344      $ 25,509        30
  

 

 

    

 

 

    

 

 

    

 

 

 

Service based revenue, net—

Processing Fees, net

Processing fees, net of processor costs associated with advance disbursements, for the nine months ended September 30, 2021 increased by approximately $9.7 million, or 20%, compared to the nine months ended September 30, 2020. The increase was primarily attributable to increases in advance volume of approximately $711.9 million to approximately $961.7 million along with a higher average advance amount period over period. Processing fees tend to increase as advance volume increases, but may not always trend ratably as processing fees vary depending on the total amount of the advance. Approximately 99% and 98% of Members chose to pay a processing fee to expedite an advance for the nine months ended September 30, 2021 and 2020, respectively. The average processing fees paid to expedite these advances were approximately $5.08 and $4.51, for the nine months ended September 30, 2021 and 2020, respectively.

Tips

Tips for the nine months ended September 30, 2021 increased by approximately $8.0 million, or 32%, compared to the nine months ended September 30, 2020. The increase was primarily attributable to increases in advance volume of approximately $711.9 million to approximately $961.7 million period over period. Tips tend to increase as advance volume increases, but may not always trend ratably as tips often vary depending on the total amount of the advance. Approximately 79.8% and 78.7% of Members chose to leave a tip for the nine months ended September 30, 2021 and 2020, respectively. The average amount of tip Members chose to leave was approximately $4.48 and $3.62, for the nine months ended September 30, 2021 and 2020, respectively.

 

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Subscriptions

Subscriptions for the nine months ended September 30, 2021 increased by approximately $0.7 million, or 6%, compared to the nine months ended September 30, 2020. The increase was primarily attributable to an increase in the number of paying Members on Dave’s platform.

Other

Other revenue for the nine months ended September 30, 2021 increased by approximately $0.08 million, or 15%, compared to the nine months ended September 30, 2020. The increase was primarily attributable to increases in leads related to Dave’s Side Hustle advertising partners.

Transaction based revenue, net—Transaction based revenue, net for the nine months ended September 30, 2021 increased by approximately $7.0 million or 956%, compared to the nine months ended September 30, 2020. This increase was primarily attributable to the growth in Members engaging with Dave’s Checking Product and corresponding growth in the number of transactions initiated by Members.

Operating expenses

 

     For the Nine Months
Ended
September 30,
(unaudited)
     Change  
(in thousands, except for percentages)    $      %  
     2021      2020      2021/2020      2021/2020  

Provision for unrecoverable advances

   $ 21,693      $ 14,311      $ 7,382        52

Processing and servicing fees

     16,920        15,696        1,224        8

Advertising and marketing

     38,844        22,642        16,202        72

Compensation and benefits

     34,685        14,898        19,787        133

Other operating expenses

     31,987        10,032        21,955        219
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 144,129      $ 77,579      $ 66,550        86
  

 

 

    

 

 

    

 

 

    

 

 

 

Provision for unrecoverable advances—The provision for unrecoverable advances totaled approximately $21.7 million for the nine months ended September 30, 2021, compared to approximately $14.3 million for the nine months ended September 30, 2020. The increase of approximately $7.4 million, or 52%, was primarily attributable to increases in provision expense related to Member advances aged over 120 days and those that have become uncollectible based on information available to Dave.

The increase in provision expense related to Member advances aged over 120 days and those which have become uncollectible based on information available to Dave, period over period, was driven primarily by aged receivables and the increase in advance volume from approximately $711.9 million to approximately $961.7 million for the nine months ended September 30, 2020 and 2021, respectively. All impaired advances deemed uncollectible are subsequently written-off and are a direct reduction to the allowance for unrecoverable advances.

Overall, the Company had improved loss and collections experience period over period. The changes to the Company’s historical loss and collections experience directly affected the historical loss rates utilized in the calculation of the allowance for uncollectible advances. The changes in the allowance for unrecoverable advances, period over period, had a direct impact on the provision for unrecoverable advances.

For information on the aging of Member cash advances and a rollforward of the allowance for unrecoverable advances, refer to the tables in Note 3 to the condensed consolidated financial statements of Dave beginning on page F-41 of this prospectus.

 

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Processing and service fees—Processing and servicing fees totaled approximately $16.9 million for the nine months ended September 30, 2021, compared to approximately $15.7 million for the nine months ended September 30, 2020. The increase of approximately $1.2 million, or 8%, was primarily attributable to the increase in advance volume from $711.9 million to $961.7 million for the nine months ended September 30, 2020 and 2021, respectively, inclusive of cost savings due to volume associated discounts from our processors.

Advertising and marketing—Advertising and marketing for the nine months ended September 30, 2021 increased by approximately $16.2 million or 72%, compared to the nine months ended September 30, 2020. This increase was primarily attributable to increased marketing efforts and promotions across various social media platforms and television.

Compensation and benefits—Compensation and benefits for the nine months ended September 30, 2021 increased by approximately $19.8 million or 133%, compared to the nine months ended September 30, 2020. This increase was primarily attributable to the following:

 

   

an increase in payroll and related costs of approximately $8.9 million, primarily due to hiring and increased headcount throughout the business;

 

   

an increase in consultants and contractor costs of approximately $5.4 million, primarily due to Dave’s need to supplement recruiting efforts, increase IT security, marketing, and augmenting customer service resources; and

 

   

an increase in stock-based compensation of approximately $5.4 million, primarily due to an increase of approximately $2.1 million from new stock option grants related to increased headcount to support the growth of the business and an increase of approximately $3.2 million from certain stock options modifications.

Other operating expenses—Other operating expenses totaled approximately $32.0 million for the nine months ended September 30, 2021 compared to approximately $10.0 million for the nine months ended September 30, 2020. The increase of approximately $22.0 million or 219%, was primarily attributable to the following:

 

   

an increase in expenses related to Dave’s Checking Product of approximately $13.3 million, primarily attributable to the growth in Members and the number of transactions processed;

 

   

an increase in chargeback related expenses of approximately $4.0 million, primarily due to non-recurring fraudulent activity in relation to Dave’s Checking Product (see “Risk Factors—Risks related to Dave’s Business and Industry—Fraudulent and other illegal activity involving our products and services could lead to reputational damage to us, reduce the use of our platform and services and may adversely affect our financial position and results of operations.”);

 

   

an increase in charitable contribution expenses of approximately $1.2 million, primarily due to increased amounts pledged to charitable meal donations related to increased Members’ tips;

 

   

an increase in technology and infrastructure expenses of approximately $1.8 million, primarily due to increased spending to support the growth of Dave’s business and development of new products and features

 

   

an increase in depreciation and amortization of $0.8 million, primarily due to equipment purchases for increased headcount and amortization of internally developed software; and

 

   

an increase in rent expense of $0.5 million, primarily due to additional leased office space.

 

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Other (income) expense

 

     For the Nine Months
Ended
September 30,
(unaudited)
     Change  
(in thousands, except for percentages)    $      %  
     2021      2020      2021/2020      2021/2020  

Interest income

   $ (610    $ (339    $ (271      80

Interest expense

     1,494        3        1,491        49700

Legal settlement and litigation expenses

     952        948        4        0

Other strategic financing and transactional expenses

     253        1,305        (1,052      -81

Changes in fair value of derivative asset on loans to stockholders

     (33,043      —          (33,043      100

Changes in fair value of warrant liability

     3,480        —          3,480        100
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ (27,474    $ 1,917      $ (29,391      -1533
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest income—Interest income totaled approximately $0.6 million for the nine months ended September 30, 2021, compared to $0.3 million for the nine months ended September 30, 2020. The increase of approximately $0.3 million, or 80%, was primarily attributable to a fair value adjustment associated with a promissory note issued in connection with the $15 million pre-funding of Alameda Research’s PIPE Investment.

Interest expense—The increase of approximately $1.5 million was primarily attributable to interest paid related to Dave’s $100.0 million Senior Secured Loan Facility with Victory Park Management, LLC.

Legal settlement and litigation expenses—Legal settlement and litigation expenses totaled approximately $1.0 million, for the nine months ended September 30, 2021, compared to approximately $0.9 million for the nine months ended September 30, 2020. See “Business —Legal and Regulatory Proceedings” for more information regarding pending legal actions.

Other strategic financing and transactional expenses—Other strategic financing and transactional expenses totaled approximately $0.3 million for the nine months ended September 30, 2021, compared to approximately $1.3 million for the nine months ended September 30, 2020. The decrease of approximately $1.0 million, or 81%, was primarily attributable reduced spend on audit and compliance related expenses associated with potential strategic financing alternatives.

Derivative asset on loans to stockholders—Changes in fair value of derivative asset on loans to stockholders totaled approximately $33.0 million for the nine months ended September 30, 2021, compared to $0 for the nine months ended September 30, 2020. The increase of approximately $33.0 million, or 100%, was primarily attributable to fair value adjustments associated with options issued in connection with loans to stockholders resulting from an increase in the fair value of Dave’s common stock.

Changes in fair value of warrant liability—Changes in fair value of warrant liability totaled approximately $3.5 million for the nine months ended September 30, 2021, compared to $0 for the nine months ended September 30, 2020. The increase of approximately $3.5 million, or 100%, was primarily attributable to fair value adjustments associated with certain warrants issued in connection with the Existing Financing Agreement.

 

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Provision for income taxes

 

     For the Nine Months
Ended
September 30,
(unaudited)
     Change  
(in thousands, except for percentages)    $      %  
     2021      2020      2021/2020      2021/2020  

Income tax benefit

   $ (1    $ (20,805    $ 20,804        -100
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ (1    $ (20,805    $ 20,804        -100
  

 

 

    

 

 

    

 

 

    

 

 

 

Changes in income tax benefit—Income tax benefit for the nine months ended September 30, 2021 decreased by $20.8 million or 100%, compared to the nine months ended September 30, 2020. This decrease was primarily attributable to a year-to-date pre-tax loss in 2021 relative to year-to-date pre-tax income in 2020, resulting in an increase in the valuation allowance on deferred tax assets in 2021 relative to a decrease in the valuation allowance in 2020. The decrease was partially offset by the 2021 nontaxable mark-to-market gain on the derivative asset related to stockholder loans.

Comparison of the Years Ended December 31, 2020 and 2019

Operating revenues

 

     For the Years Ended
December 31,
     Change  
(in thousands, except for percentages)    $      %  
     2020      2019      2020/2019      2020/2019  

Service based revenue, net

           

Processing fees, net

   $ 66,969      $ 45,093      $ 21,876        49

Tips

     36,189        20,684        15,505        75

Subscriptions

     16,678        9,185        7,493        82

Other

     759        1,232        (473      -38

Transaction based revenue, net

     1,201        33        1,168        3539
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 121,796      $ 76,227      $ 45,569        60
  

 

 

    

 

 

    

 

 

    

 

 

 

Service based revenue, net—

Processing Fees, net

Processing fees, net of processor costs associated with advance disbursements, for the year ended December 31, 2020 increased by approximately $21.9 million, or 49%, compared to the year ended December 31, 2019. The increase was primarily attributable to the increases in advance volume of approximately $665.4 million to approximately $1,007.0 million along with a higher average advance amount period over period. Processing fees tend to increase as advance volume increases, but may not always trend ratably as processing fees vary depending on the total amount of the advance. Approximately 98% of Members chose to pay a processing fee to expedite the advance for the years ended December 31, 2021 and 2020, respectively. The average processing fees paid to expedite these advances were approximately $4.56 and $4.34, respectively.

Tips

Tips for the year ended December 31, 2020 increased by approximately $15.5 million, or 75%, compared to the year ended December 31, 2019. The increase was primarily attributable to increases in advance volume of approximately $665.4 million to approximately $1,007.0 million period over period. Tips tend to increase as advance volume increases, but may not always trend ratably as tips often vary depending on the total amount of

 

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the advance. Approximately 81% and 80% of Members chose to leave a tip for the year ended December 31, 2020 and 2019, respectively. The average amount of tip Members chose to leave were approximately $3.72 and $3.21, respectively.

Subscriptions

Subscriptions for the year ended December 31, 2020 increased by approximately $7.5 million, or 82%, compared to the year ended December 31, 2019. The increase was primarily attributable to an increase in paying Members on Dave’s platform.

Other

Other revenue for the year ended December 31, 2020 decreased by approximately $0.5 million, or 38%, compared to the year ended December 31, 2019. The decrease was primarily attributable to decreases in average revenue per lead related to Dave’s Side Hustle advertising partners.

Transaction based revenue, net—Transaction based revenue, net for the year ended December 31, 2020 increased by approximately $1.2 million or 3,539%, compared to the year ended December 31, 2019. This increase was primarily attributable to the growth in Members engaging with Dave’s Checking Product and corresponding growth in the number of transactions initiated by Members.

Operating expenses

 

     For the Year Ended
December 31,
     Change  
(in thousands, except for percentages)    $      %  
     2020      2019      2020/2019      2020/2019  

Provision for unrecoverable advances

   $ 25,539      $ 19,688      $ 5,851        30

Processing and servicing fees

     21,646        15,216        6,430        42

Advertising and marketing

     38,019        22,934        15,085        66

Compensation and benefits

     22,210        9,242        12,968        140

Other operating expenses

     15,763        7,370        8,393        114
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 123,177      $ 74,450      $ 48,727        65
  

 

 

    

 

 

    

 

 

    

 

 

 

Provision for unrecoverable advances—The provision for unrecoverable advances totaled approximately $25.5 million for the year ended December 31, 2020, compared to approximately $19.7 million for the year ended December 31, 2019. The increase of approximately $5.9 million, or 30%, was primarily attributable to increases in provision expense related to Member advances aged over 120 days and those that have become uncollectible based on information available to Dave of approximately $8.7 million, offset by a decrease in the provision expense related to Member advances aged 120 days and under of approximately $2.9 million.

The increase in provision expense related to Member advances, aged over 120 days and those that have become uncollectible based on information available to Dave was driven primarily by aged receivables and the increase in advance volume from approximately $665.4 million to approximately $1,007.0 million for the years ended December 31, 2019 and 2020, respectively. All impaired advances deemed uncollectible are subsequently written-off and are a direct reduction to the allowance for unrecoverable advances.

The decrease in provision expense related to Member advances aged 120 days and under, was primarily attributed to the advance volume growth from 2018 to 2019 that significantly outpaced the advance volume growth from 2019 to 2020, resulting in a higher increase to the allowance for unrecoverable advances and corresponding higher provision for unrecoverable advances expense during the year ended December 31, 2019 as compared to December 31, 2020. In addition, Dave also had improved loss and collections experience year over

 

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year which directly affected the historical loss rates utilized in the calculation of the allowance for recoverable advances. The changes in the allowance for unrecoverable advances, period over period, had a direct impact on the provision for unrecoverable advances.

For information on the aging of Member cash advances and a rollforward of the allowance for unrecoverable advances, refer to the tables in Note 5 to the consolidated financial statements of Legacy Dave beginning on page F-41 of this prospectus.

Processing and servicing fees—Processing and servicing fees totaled approximately $21.6 million for the year ended December 31, 2020, compared to approximately $15.2 million for the year ended December 31, 2019. The increase of approximately $6.4 million, or 42%, was primarily attributable to the increase in advance volume from $665.4 million to $1,007.0 million for the years ended December 31, 2019 and 2020, respectively, offset by volume associated discounts and cost savings due to price reductions from our processors.

Advertising and marketing—Advertising and marketing totaled approximately $38.0 million for the year ended December 31, 2020, compared to approximately $22.9 million for the year ended December 31, 2019. The increase of approximately $15.1 million, or 66%, was primarily attributable to increased marketing efforts and promotions across various social media platforms and television.

Compensation and benefits—Compensation and benefits increased approximately 140% to approximately $22.2 million for the year ended December 31, 2020 from approximately $9.2 million for the year ended December 31, 2019. The increase of approximately $13.0 million is primarily attributable to the following:

 

   

an increase in payroll and related costs of approximately $10.9 million, primarily due to hiring and increased headcount throughout the business;

 

   

an increase in consultants and contractor costs of approximately $1.0 million, primarily due to Dave’s need to supplement recruiting efforts, increase IT security, marketing, and augmenting customer service resources; and

 

   

an increase in stock-based compensation of approximately $1.1 million, primarily due to new grants related to increased headcount to support the growth of the business.

Other operating expenses—Other operating expenses increased approximately 114% to approximately $15.8 million for the year ended December 31, 2020 from approximately $7.4 million for the year ended December 31, 2019. The increase of approximately $8.4 million is primarily attributable to the following:

 

   

an increase in expenses related to Dave’s Checking Product of approximately $2.5 million, primarily attributable to the growth in Members and the number of transactions processed;

 

   

an increase in charitable contribution expenses of approximately $2.4 million, primarily due to increased amounts pledged to charitable tree and meal donations related to increased Members’ tips;

 

   

an increase in technology and infrastructure expenses of approximately $1.9 million, primarily due to increased spending to support the growth of our business and development of new products and features;

 

   

an increase in depreciation and amortization of $0.9 million, primarily due to equipment purchases for increased headcount and amortization of internally developed software; and

 

   

an increase in fines and penalties of $0.2 million, primarily attributable to fines and penalties related to sales tax filings in certain states.

 

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Other (income) expense

 

     For the Year Ended
December 31,
     Change  
(in thousands, except for percentages)    $      %  
         2020              2019          2020/2019      2020/2019  

Interest income

   $ (409    $ (429    $ 20        -5

Interest expense

     17        852        (835      -98

Gain on conversion of 2018 convertible notes

     —          (841      841        -100

Derivative liability

     —          536        (536      -100

Legal settlement and litigation expenses

     4,467        327        4,140        1266

Other strategic financing and transactional expenses

     1,356        —          1,356        100
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,431      $ 445      $ 4,986        1120
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense—Interest expense totaled approximately $.02 million for the year ended December 31, 2020, compared to approximately $0.8 million for the year ended December 31, 2019. The decrease of approximately $0.8 million, or 98%, was primarily attributable to interest expense related to the convertible promissory notes issued in 2018.

Gain on conversion of 2018 convertible notes—The decrease of approximately $0.8 million, or 100%, was related to the 2019 conversion of the convertible promissory notes issued in 2018 to B-2 preferred shares.

Derivative liability—Derivative liability totaled $0 for the year ended December 31, 2020, compared to approximately $0.5 million for the year ended December 31, 2019. The decrease of approximately $0.5 million, or 100%, was primarily attributable to the extinguishment of the derivative liability associated with 2018 convertible notes that converted during 2019.

Legal settlement and litigation expenses—Legal settlement and litigation expenses totaled approximately $4.5 million for the year ended December 31, 2020, compared to $0.3 million for the year ended December 31, 2019. The increase of approximately $4.1 million, or 1,266%, was primarily attributable to an accrual made relating to Dave’s class action lawsuit settlement, net of estimated insurance reimbursements and professional fees associated with various legal matters.

Other strategic financing and transactional expenses—Other strategic financing and transactional expenses totaled approximately $1.4 million for the year ended December 31, 2020, compared to $0 for the year ended December 31, 2019. The increase of approximately $1.4 million, or 100%, was primarily attributable to fees associated with the evaluation of financing and strategic alternatives.

Provision for income taxes

 

     For the Year
Ended
December 31,
     Change  
(in thousands, except for percentages)    $      %  
     2020      2019      2020/2019      2020/2019  

Provision for income taxes

   $ 145      $ 545      $ (400      -73
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 145      $ 545      $ (400      -73
  

 

 

    

 

 

    

 

 

    

 

 

 

Provision for income taxes for the year ended December 31, 2020 decreased by approximately $0.4 million or 73%, compared to the year ended December 31, 2019. This relative decrease was primarily attributable to the pre-tax income in 2019 relative to the pre-tax loss in 2020. The relative decrease was partially offset by the fact that federal and state net operating losses were utilized for the year ended December 31, 2019, while similar loss

 

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carryforwards were no longer available for the year ended December 31, 2020. The relative decrease was also partially offset by the significant increase in the valuation allowance for the year ended December 31, 2020, relative to the increase for the year ended December 31, 2019, primarily attributable to increases in the deferred tax assets associated with the allowance for member advances and accrued expenses.

Non-GAAP Financial Measures

In addition to Dave’s results determined in accordance with GAAP, Dave believes the following non-GAAP measures are useful in evaluating its operational performance. Dave uses the following non-GAAP measures to evaluate its ongoing operations and for internal planning and forecasting purposes. Dave believes that non-GAAP financial information, when taken collectively, may be helpful in assessing its operating performance and are more indicative of our operational performance and facilitate an alternative comparison among fiscal periods. These non-GAAP financial measures are not, and should not be viewed as, substitutes for GAAP reporting measures.

Adjusted EBITDA

“Adjusted EBITDA” is defined as net (loss) income adjusted for interest expense (income), income tax benefit, depreciation and amortization, stock-based compensation and other discretionary items determined by management. Adjusted EBITDA is intended as a supplemental measure of Dave’s performance that is neither required by, nor presented in accordance with, GAAP. Dave believes that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing Dave’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating Adjusted EBITDA Dave may incur future expenses similar to those excluded when calculating these measures. In addition, Dave’s presentation of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. Dave’s computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.

Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. Dave compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA on a supplemental basis. The reconciliation of net loss to Adjusted EBITDA below should be reviewed and no single financial measure should be relied upon to evaluate Dave’s business.

The following table reconciles net (loss) income to Adjusted EBITDA for the nine months ended September 30, 2021 and 2020, respectively:

 

     For the Nine Months Ended
September 30,
 
(in thousands)          2021                  2020        

Net (loss) income

   $ (4,801    $ 27,653  

Interest expense (income), net

     884        (336

Income tax benefit

     (1      (20,805

Depreciation and amortization

     2,059        1,219  

Stock-based compensation

     6,342        932  

Legal settlement and litigation expenses

     952        948  

Other strategic financing and transactional expenses

     253        1,305  

Changes in fair value of derivative asset on loans to stockholders

     (33,043      —    

Changes in fair value of warrant liability

     3,480        —    
  

 

 

    

 

 

 

Adjusted EBITDA

   $ (23,875    $ 10,916  
  

 

 

    

 

 

 

 

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The following table reconciles net (loss) income to Adjusted EBITDA for the years ended December 31, 2020 and 2019, respectively:

 

     For the Year Ended
December 31,
 
(in thousands)    2020      2019  

Net (loss) income

   $ (6,957    $ 787  

Interest (income) expense, net

     (392      423  

Provision for income taxes

     145        545  

Depreciation and amortization

     1,718        805  

Stock-based compensation

     1,525        446  

Legal settlement and litigation expenses

     4,467        327  

Other strategic financing and transactional expenses

     1,356        —    

Gain on conversion of 2018 convertible notes

     —          (841

Derivative liability

     —          536  
  

 

 

    

 

 

 

Adjusted EBITDA

   $ 1,862      $ 3,028  
  

 

 

    

 

 

 

Liquidity and Capital Resources

Since inception, Legacy Dave has financed its operations primarily from the issuance of preferred stock through its Series A and Series B funding rounds, issuances of convertible notes, and funds from borrowings under the Existing Financing Agreement. As of September 30, 2021 and December 31, 2020, Legacy Dave’s cash and marketable securities balances were $35.4 million (unaudited) and $22.7 million, respectively.

As an early-stage company, the expenses Legacy Dave has incurred since inception are consistent with Dave’s strategy and approach to capital allocation. Dave expects to incur net losses in accordance with Dave’s operating plan as Dave continues to expand and improve upon its financial platform.

Dave’s ability to access capital when needed is not assured and, if capital is not available to Dave when, and in the amounts needed, Dave could be required to delay, scale back or abandon some or all of Dave’s development programs and other operations, which could materially harm Dave’s business, prospects, financial condition and operating results.

Dave believes that its cash on hand should be sufficient to meet its working capital and capital expenditure requirements for a period of at least 12 months from the date of this prospectus and sufficient to fund its operations. Dave may raise additional capital through follow-on public offerings or debt financings. The amount and timing of Dave’s future funding requirements, if any, will depend on many factors, including the pace and results of Dave’s research and development efforts. No assurances can be provided that additional funding will be available at terms acceptable to Dave, if at all. If Dave is unable to raise additional capital it may significantly curtail its operations, modify existing strategic plans and/or dispose of certain operations or assets.

 

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Cash Flows Summary

 

     (unaudited)                
Total cash (used in) provided by:    For the Nine Months
Ended
September 30,
     For the Year Ended
December 31,
 
(in thousands)    2021      2020      2020      2019  

Operating activities

   $ (22,099    $ (4,320    $ (9,146    $ (10,928

Investing activities

     (220      2,682        3,422        (19,695

Financing activities

     38,876        179        4,241        33,867  
  

 

 

    

 

 

    

 

 

    

 

 

 

Net increase (decrease) in cash and cash equivalents and restricted cash

   $ 16,557      $ (1,459    $ (1,483    $ 3,244  
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash Flows From Operating Activities

Legacy Dave recorded a net loss of approximately $4.8 million for the nine months ended September 30, 2021 and net income of approximately $27.7 million for the nine months ended September 30, 2020. Legacy Dave reported cash used in operating activities of approximately $22.1 million and $4.3 million for the nine months ended September 30, 2021 and 2020, respectively.

Net cash used in operating activities for the nine months ended September 30, 2021 included net loss of approximately $4.8 million adjusted for non-cash items of approximately $33.0 million for the increase in fair value of derivative assets, approximately $21.7 million for the provision for unrecoverable advances, approximately $6.3 million for stock-based compensation expense, approximately $3.5 million for the change in fair value of warrant liabilities, approximately $2.1 million for depreciation and amortization expense, and approximately $0.6 million in non-cash interest. Further changes in cash flows from operations included an increase in Member advances of approximately $27.8 million, a decrease in other current liabilities of approximately $2.0 million, and a decrease in prepaid expenses and other current assets of approximately $0.6 million. These changes were partially offset by an increase in accrued expenses of approximately $4.5 million, an increase in accounts payable of approximately $6.0 million and a decrease in prepaid income taxes of approximately $1.3 million.

Net cash used in operating activities for the nine months ended September 30, 2020, included net income of approximately $27.7 million adjusted for non-cash items of approximately $14.3 million for the provision for unrecoverable advances, approximately $1.2 million for depreciation and amortization, approximately $0.9 million for stock-based compensation, and approximately $0.2 million in non-cash interest from loans to stockholders. Further changes in cash flows from operations included an increase in Member advances of approximately $20.9 million, an increase in prepaid expenses and other current assets of approximately $2.8 million, and a decrease in accounts payable of approximately $1.3 million. These changes were partially offset by increases in accrued expenses of approximately $1.3 million and increases in other current and non-current liabilities of approximately $0.7 million.

Legacy Dave recorded a net loss of approximately $7.0 million for the year ended December 31, 2020 and net income of approximately $0.8 million for the year ended December 31, 2019. Legacy Dave reported negative cash flows from operating activities of approximately $9.1 million and $10.9 million for the years ended December 31, 2020 and 2019, respectively.

Net cash used in operating activities for the year ended December 31, 2020 included a net loss of approximately $7.0 million, adjusted for non-cash items of approximately $25.5 million for provision for unrecoverable advances, approximately $1.7 million for depreciation and amortization and approximately $1.5 million for stock-based compensation expense. Further changes in cash flows from operations included an increase in Member advances of approximately $35.2 million, an increase in prepaid income taxes of approximately

 

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$4.0 million, an increase in prepaid expenses and other current assets of approximately $2.6 million, and a decrease in income taxes payable of approximately $0.5 million. These changes were offset primarily by an increase in accrued expenses of approximately $3.4 million, an increase in other current liabilities of approximately $2.5 million, an increase in accounts payable of approximately $2.0 million, and an increase in legal settlement accrual of approximately $3.2 million.

Net cash used in operating activities for the year ended December 31, 2019, included net income of approximately $0.8 million, adjusted for non-cash items of approximately $19.7 million for provision for unrecoverable advances, approximately $0.8 million for depreciation and amortization, approximately $0.4 million for stock-based compensation expense, and approximately $0.5 million for changes in fair value of derivative assets and liabilities. These non-cash items were offset by an approximately $0.8 million gain on conversion related to the 2018 Convertible Notes. Further changes in cash flows from operations included an increase in Member advances of approximately $39.3 million and an increase in prepaid expenses and other current assets of approximately $1.2 million. These changes were primarily offset by an increase in accounts payable of approximately $4.9 million, an increase in accrued expenses of approximately $1.7 million, an increase in income taxes payable of approximately $0.5 million, and an increase in interest payable, convertible notes of approximately $0.5 million.

Cash Flows From Investing Activities

During the nine months ended September 30, 2021, net cash used in investing activities was approximately $0.2 million. This included the sale of marketable securities of approximately $3.9 million, partially offset by payments for internally developed software costs of approximately $3.9 million and the purchase of property and equipment of approximately $0.2 million.

During the nine months ended September 30, 2020, net cash provided by investing activities was approximately $2.7 million. This included payments for internally developed software costs of approximately $2.8 million, the purchase of property and equipment of approximately $0.2 million, and the purchase of marketable securities of approximately $0.1 million, partially offset by the sale of marketable securities of $5.8 million.

During the year ended December 31, 2020, net cash provided by investing activities was approximately $3.4 million. This included the sale of marketable securities of approximately $7.8 million, partially offset by the capitalization of internally developed software costs of approximately $4.0 million, the purchase of property and equipment of approximately $0.2 million and the purchase of marketable securities of approximately $0.1 million.

During the year ended December 31, 2019, net cash used in investing activities was approximately $19.7 million. This included the purchase of marketable securities of approximately $32.9 million, capitalization of internally developed software costs of approximately $1.7 million, the purchase of a derivative asset on Loans to Stockholders (as defined below) of approximately $0.5 million, and the purchase of property and equipment of approximately $0.4 million, partially offset by the sale of marketable securities of approximately $15.8 million.

Cash Flows From Financing Activities

During the nine months ended September 30, 2021, net cash provided by financing activities was approximately $38.9 million, which consisted of proceeds from borrowings of approximately $45.0 million and proceeds from the exercise of stock options of approximately $1.4 million, partially offset by the repayment of borrowings under Dave’s line of credit of approximately $3.9 million and payment of deferred issuance costs of approximately $3.6 million.

During the nine months ended September 30, 2020, net cash provided by financing activities was approximately $0.2 million, which consisted of approximately $0.2 million in proceeds from the exercise of stock options.

 

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During the year ended December 31, 2020, net cash provided by financing activities was approximately $4.2 million, which consisted of $3.9 million in line of credit borrowings and approximately $0.3 million in proceeds from issuance of common stock for stock option exercises, including early exercises.

During the year ended December 31, 2019, net cash provided by financing activities was approximately $33.9 million, which consisted of approximately $49.7 million from proceeds from issuance of preferred stock, $1.5 million in line of credit borrowings, and approximately $0.7 million in proceeds from issuance of convertible debt, partially offset by approximately $14.4 million in loans to stockholders, $2.0 million in repayment of convertible debt, $1.5 million in line of credit repayments, and other insignificant fluctuations.

Contractual Obligations and Commitments

Contractual obligations represent future cash commitments and liabilities under agreements with third parties and exclude contingent liabilities for which Dave cannot reasonably predict future payment. Dave’s contractual obligations result from leases for office space and the principal and interest owed under the Existing Financing Agreement it entered into with Victory Park Management, LLC, an affiliate of VPCC. Dave also has unrecognized tax benefits that, if recognized, would affect the effective tax rate at December 31, 2020. Dave does not have tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefit will significantly increase or decrease within 12 months of the reporting date. Additionally, the expected timing of payment of the obligations presented below is estimated based on current information.

The following table summarizes Dave’s contractual obligations and other commitments as of December 31, 2020 and the years in which these obligations are due:

 

     Payments Due By Period  
As of December 31, 2020
(in thousands)
   Total      Less
than
1 year
     1-3
Years
     3-5
years
 

Operating lease obligations

   $ 1,829      $ 525      $ 698      $ 606  

Line of credit

     3,910        3,910        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 5,739      $ 4,435      $ 698      $ 606  
  

 

 

    

 

 

    

 

 

    

 

 

 

At September 30, 2021, $30.0 million of term loans under the Existing Financing Agreement were outstanding. For more information on the facility, see “—Recent Developments.”

Off-Balance Sheet Arrangements

Dave does not have any “off-balance sheet arrangements,” as defined by the SEC regulations.

Critical Accounting Policies and Estimates

Legacy Dave’s consolidated financial statements have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires Dave to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, as well as the reported revenues and expenses incurred during the reporting periods. Dave’s estimates are based on its historical experience and on various other factors that Dave believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Dave’s critical accounting estimates and assumptions are evaluated on an ongoing basis including those related to the: (i) realization of tax assets and estimates of tax liabilities; (ii) valuation of equity securities; (iii) fair value of derivatives; (iv) valuation of notes payable and warrant liabilities; and (v) allowance for unrecoverable advances.

 

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Actual results may differ from these estimates under different assumptions or conditions. Dave believes that the accounting policies discussed below are critical to understanding its historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

While Dave’s significant accounting policies are described in the notes to its audited consolidated financial statements, Dave believes that the following accounting policies require a greater degree of judgment and complexity and are the most critical to understanding its financial condition and historical and future results of operations.

Fair Value of Financial Instruments

Dave is required to account for certain financial instruments at fair value with changes in fair value reported in earnings, and may elect fair value accounting for certain other financial instruments in accordance with GAAP.

Financial instruments carried at fair value include marketable securities, derivative assets related to loans to stockholders, warrant liability and the derivative liability related to Dave’s convertible notes.

Dave applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards (“ASC”) ASC 820, Fair Value Measurements and Disclosures, which provides a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. Fair value represents the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Dave uses the following hierarchy in measuring the fair value of Dave’s assets and liabilities, focusing on the most observable inputs when available:

 

   

Level 1. Quoted prices in active markets for identical assets or liabilities.

 

   

Level 2. Observable inputs other than Level 1 quoted prices, such as quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

   

Level 3. Valuations are based on inputs that are unobservable and significant to the overall fair value measurement of the assets or liabilities. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Derivative Asset

Dave recorded a derivative asset related to the call option on loans to stockholders. The derivative asset is carried at estimated fair value on Dave’s consolidated balance sheets. Changes in the estimated fair value of the derivatives are reported as (gain) loss on derivatives in the accompanying consolidated statements of operations. Dave utilizes the binomial option pricing model to compute the fair value of the derivative asset and to mark to market the fair value of the derivative at each balance sheet date. The binomial option-pricing model considers a range of assumptions related to the fair value of common stock (see below Fair Value of Common Stock for further details), volatility, dividend yield and risk-free interest rate. The binomial option pricing model includes subjective input assumptions that can materially affect the fair value estimates.

Warrant Liability

Dave recorded a warrant liability associated with the $100.0 million Existing Financing Agreement with Victory Park Management, LLC. The warrant liability is carried on Dave’s consolidated balance sheets as a long-term

 

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liability estimated at fair value. Changes in the estimated fair value of the warrant liability are reported as (gain) loss in the accompanying consolidated statements of operations. Dave utilizes the binomial option-pricing model to compute the fair value and to mark to market the fair value of the warrant liability at each consolidated balance sheet date. The binomial option-pricing model considers a range of assumptions related to the fair value of common stock (see below Fair Value of Common Stock for further details), volatility, dividend yield and risk-free interest rate. The binomial option pricing model includes subjective input assumptions that can materially affect the fair value estimates.

Note Payable

The Company has elected to measure the note payable debt instrument at fair value using the fair value option of ASC 825-10. Dave identified an embedded derivative related to a convertible feature in its promissory note with Alameda Research and in accordance with ASC 815-15-25-1 criterion (b), since the Company has elected to apply the fair value option to the debt, the Contingently Exercisable Share Settled Put/Call Option and any other embedded features will not be separated from the debt host. The note payable is carried on Dave’s consolidated balance sheets as a current liability estimated at fair value with changes in fair value reflected in earnings. Dave used a market yield approach to determine the fair value of the promissory note. The market yield approach model includes subjective input assumptions that can materially affect the fair value estimates.

Derivative Liability

Dave identified an embedded derivative related to a convertible feature in the 2018 convertible notes. The embedded derivative is carried on Dave’s consolidated balance sheets as a bifurcated embedded derivative liability estimated at fair value. Changes in the estimated fair value of the derivatives are reported as (gain) loss on derivatives in the accompanying consolidated statements of operations. Dave determined the fair value of certain embedded derivatives on issued convertible notes using Level 3 inputs, including expected maturity or conversion date, discount rate, and probability. Significant increases or decreases in the inputs would result in different fair value measurements for the embedded feature.

Please refer to Note 3 in the accompanying audited consolidated financial statements of Dave for the year ended December 31, 2020 included elsewhere in this prospectus.

Allowance for Unrecoverable Advances

Dave maintains an allowance for unrecoverable advances at a level estimated to be adequate to absorb credit losses inherent in outstanding Member advances. Dave currently estimates the allowance balance required using historical loss and collections experience, and, if relevant, the nature and volume of the portfolio, economic conditions, and other factors. Interpretations of the nature of volume of the portfolio and projections of future economic conditions involve a high degree of subjectivity. Changes to the allowance have a direct impact on the provision for unrecoverable advances in the consolidated statement of operations.

Dave considers advances over 120 days past due or which become uncollectible based on information available to us as impaired. All impaired advances are deemed uncollectible and subsequently written-off and are a direct reduction to the allowance for unrecoverable advances. Subsequent recoveries of Member advances written-off, if any, are recorded as a reduction to Member advances when collected, resulting in a reduction to the allowance for unrecoverable advances and a corresponding reduction to the provision for unrecoverable advances expense in the consolidated statements of operations.

Income Taxes

Dave follows ASC 740, Income Taxes (“ASC 740”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial

 

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statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more-likely-than-not that the asset will not be realized.

In order to determine the Company’s interim provisions for income taxes, the Company uses an estimated annual effective tax rate for the full fiscal year, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates, adjusted for discrete items recognized during the interim period. Certain significant or unusual items are separately recognized in the quarter during which they occur and can cause the effective tax rate to vary from quarter to quarter.

ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained in a court of last resort, based on the technical merits. If more-likely-than-not, the amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized upon examination, including compromise settlements. For tax positions not meeting the more-likely-than-not threshold, no tax benefit is recorded. Dave has estimated approximately $0.1 million and $0 of uncertain tax positions as of September 30, 2021 and 2020, respectively. The estimated uncertain tax positions as of December 31, 2020 were approximately $0.1 million.

Dave’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense within the statement of operations. Dave recognized approximately $0.004 million and $0 million of interest expense and penalties as a component of income tax expense during the nine-month periods ended September 30, 2021 and 2020, respectively. There was approximately $0.006 million and $0 of accrued interest and penalties as of September 30, 2021 and 2020, respectively. There was approximately $0.003 million of accrued interest and penalties as of December 31, 2020.

Dave is subject to income tax in jurisdictions in which it operates, including the United States. For U.S. income tax purposes, Dave is taxed as a C-corporation.

Dave recognizes deferred taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. Dave recorded a valuation allowance against its deferred tax assets, net of certain deferred tax liabilities, at September 30, 2021 and 2020, as well as at December 31, 2020. Based upon management’s assessment of all available evidence, Dave has concluded that it is more-likely-than-not that the deferred tax assets, net of certain deferred tax liabilities, will not be realized.

Emerging Growth Company Status

Dave is an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. Dave expects to remain an emerging growth company and to continue to take advantage of the benefits of the extended transition period, although it may decide to early adopt such new or revised accounting standards to the extent permitted by such standards. Dave expects to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and non-public companies until the earlier of the date Dave (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. This may make it difficult or impossible to compare Dave’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. See Note 3 of the accompanying audited consolidated financial statements and Note 2 of the accompanying unaudited condensed consolidated financial statements of Dave included elsewhere in this prospectus for the recent accounting pronouncements adopted and the recent accounting pronouncements not yet adopted for the years ended December 31, 2020 and 2019 and for the nine months ended September 30, 2021.

 

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In addition, Dave intends to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an emerging growth company, Dave intends to rely on such exemptions, Dave is not required to, among other things: (a) provide an auditor’s attestation report on Dave’s system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (b) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd- Frank Wall Street Reform and Consumer Protection Act; (c) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the consolidated financial statements (auditor discussion and analysis); and (d) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.

Dave will remain an emerging growth company under the JOBS Act until the earliest of (1) the last day of the fiscal year (a) following March 4, 2026, (b) in which Dave has total annual gross revenue of at least $1.07 billion, (c) in which Dave is deemed to be a “large accelerated filer” under the rules of the SEC, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which Dave has issued more than $1.0 billion in non-convertible debt securities during the previous three years.

Recently Issued Accounting Standards

Refer to Note 3, “Significant Accounting Policies,” of Dave’s audited consolidated financial statements included elsewhere in this prospectus for a discussion of the impact of recent accounting pronouncements.

Internal Control Over Financial Reporting

In connection with the audit of Legacy Dave’s consolidated financial statements for the years ended December 31, 2020 and 2019, material weaknesses in Legacy Dave’s internal control over financial reporting were identified. 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 Legacy Dave’s annual or interim financial statements will not be prevented or detected on a timely basis. For more information concerning the material weaknesses identified, see section titled “Risk Factors—Legacy Dave identified material weaknesses in its internal control over financial reporting, which for the years ended December 31, 2020 and 2019 resulted in a restatement of its financial statements. If Dave is unable to remediate these material weaknesses, or if it identifies additional material weaknesses in the future or otherwise fails to maintain effective internal control over financial reporting, it may not be able to accurately or timely report its financial condition or results of operations, which may adversely affect Dave’s business and share price.”

Quantitative and Qualitative Disclosures about Market Risk

Dave is exposed to a variety of market and other risks, including the effects of changes in interest rates and inflation, as well as risks to the availability of funding sources, hazard events and specific asset risks.

Interest Rate Risk

Dave holds cash and cash equivalents and marketable securities for working capital purposes. Dave does not have material exposure to market risk with respect to investments, as any investments Dave enters into are primarily highly liquid investments. As of September 30, 2021, Dave had cash and cash equivalents and marketable securities of $35.4 million, consisting of operating, savings and money market accounts which are not materially affected by changes in the general level of U.S. interest rates. Furthermore, all of the Convertible Notes issued by Dave accrue interest at a fixed rate.

 

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Dave also has interest rate exposure as a result of its outstanding term loans under the Existing Financing Agreement. As of September 30, 2021, the aggregate outstanding principal amounts of the term loans was $30.0 million. The term loans bear interest at an annual rate equal to 6.95% plus a base rate defined as the greater of three-month LIBOR (as of the last day of each calendar month) and 2.55%. If overall interest rates increase by 100 basis points, our interest expense would not be materially affected.

Credit Risk

Financial instruments that potentially subject Dave to credit risk consist of cash, Member advances and deposits. Dave maintains its cash with major financial institutions. At times, cash account balances with any one financial institution may exceed FDIC insurance limits ($250 per depositor per institution). Dave believes the financial institutions that hold Dave’s cash are financially sound and, accordingly, minimal credit risk exists with respect to cash. The Member advances are also subject to credit risk. See “Risk Factors—Risk Related to Daves Business and Industry—Our non-recourse cash advances expose us to credit risk of our Members and if our underwriting criteria for making advances is not sufficient to mitigate against this risk, our financial condition and operating results could be adversely affected if a substantial number of our Members fail to repay the cash advance they receive.”

Inflation Risk

Dave does not believe that inflation has had, or currently has, a material effect on its business.

 

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BUSINESS

Overview

In the story of David vs. Goliath, the small underdog is able to outsmart and defeat his larger adversary. This is the spirit behind the name “Dave.” We have built an integrated financial services online platform that provides millions of Americans with seamless access to a variety of intuitive financial products at a fraction of the cost and with much higher speed to value than that of the legacy financial services incumbents, such as traditional banks and other financial institutions. Our mission is to create financial opportunity that advances America’s collective potential.

Based on the Company’s observation and analysis of data gathered from its Members, legacy financial institutions charge high fees for financial banking products, which disproportionately burdens tens of millions of Americans who need it most. We see this dynamic playing out with our Members who we believe are on average paying between $300-$400 in overdraft, maintenance and other fees to their existing bank for basic checking services.

According to a report by the Center for Financial Services Innovation (“CFSI”), legacy financial institutions charge approximately $30 billion in fees annually. The Consumer Financial Protection Bureau (“CFPB”) reports that more than 50 million Americans overdraft multiple times per year. According to the Financial Health Network, by 2023 approximately 45 million Americans will be “financially vulnerable,” 65 million Americans will be unbanked or underbanked and 185 million Americans will fall into the low or volatile income and credit-challenged category. Given these dynamics, our potential Member opportunity is significant. We estimate that our total addressable market consists of between 150 million to 180 million Americans who are in need of financial stability and are either not served or underserved by legacy financial institutions.

Dave offers a suite of innovative financial products aimed at helping our Members improve their financial health. Our budgeting tool helps Members manage their upcoming bills to avoid overspending. To help Members avoid punitive overdraft fees, Dave offers cash advances through its flagship 0% interest ExtraCash product. We also help Members generate extra income for spending or emergencies through our Side Hustle product, where we present Members with supplemental work opportunities. Through Dave Banking, we provide a modern checking account experience with valuable tools for building long-term financial health.

Market research conducted by Dave found that legacy financial institutions commonly require a more extensive banking relationship and days or even weeks of wait times to access their features and services, which can potentially be more onerous in order to obtain premium features (e.g., access to increased interest rates requires direct deposit or higher minimum daily balances). Even new challenger banks often take multiple days or even weeks before allowing members to access certain premium features, according to the same research. In contrast, Members are able to utilize all of Dave’s products individually and instantly, whether or not their banking relationship is with us. As an example, our ExtraCash product allows new Members to access up to $250 to cover an overdraft at their existing bank. We are able to do this by leveraging our proprietary machine learning engine that analyzes a Member’s prior transaction history at their existing bank. This flexible approach to Member choice and speed to value has been a key driver of our growth and best-in-Class brand favorability. According to market research conducted by Dave in June 2021 through a third-party using a quantitative online survey of 2,021 respondents across the United States 73% of respondents rated Dave in the two highest favorable categories (42% very favorable and 30% somewhat favorable) compared to other bank innovators.

We have only begun to address the many inequities in financial services, but our progress to date demonstrates the demand for Dave to rewire the financial system for the everyday person. Since inception and through the date of this prospectus, approximately 10 million Members have registered on the Dave app and over five million of them have used at least one of our current products. We have added more than one million new banking

relationships over the last 12 months, and we believe that we have a substantial opportunity to grow our Member

 

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base going forward. We believe the value proposition of our platform approach will continue to accelerate as a result of our data-driven perspective of our Members, allowing us to introduce products and services that address their changing life circumstances.

Our Strategy

Americans have been underserved by existing financial products. We take a unique approach to serving our large addressable market with the following strategy:

 

   

Offering a suite of products that help solve critical Member pain points, driving low acquisition costs.

 

   

Creating frictionless access to a suite of financial products.

 

   

Leveraging data to offer ExtraCash at unbeatable prices and speed to value.

 

   

Focusing on community building with our Member base.

 

   

Generating a “flywheel” by cross-selling existing Members to new products at no additional Member acquisition costs, resulting in lower consumer pricing.

Offering products to solve critical Member pain points: One in five Americans are either unbanked (no checking account) or underbanked (access to a checking account, but pay significant fees or have limited access to credit). Household financial insecurity is even more pervasive. Today, more than 150 million Americans are financially vulnerable, with 40% unable to afford a one-time $400 emergency expense and nearly 69% of full-time workers are living paycheck-to-paycheck, according to results from the 2020 “Getting Paid in America” survey conducted by the American Payroll Association (APA).

Retail banks—large-scale depository institutions, regional banks, credit unions and other traditional financial institutions—are largely set up to serve Americans who are financially stable. For these Americans, existing financial services offerings largely address their needs; they offer mortgages, savings accounts, credit cards, wealth management and more. To the contrary, low-income or low-balance consumers are discouraged from participating through overdraft fees, minimum account balance fees, minimum credit score requirements and other requirements. Historically, Members have incurred an average of $300-400 per year in fees from their legacy banks.

At Dave, we have built an online platform that offers the following financial products to directly address the financial instability that these Americans face:

Insights: As spending and earning dynamics have become more complex over time, we offer a personal financial management tool to support Members with budgeting, wherever someone banks. These insights help people to manage their income and expenses between paychecks, helping them to spend and save in a smarter way and avoid liquidity jams that may cause them to overdraft.

ExtraCash: Many Americans are often unable to maintain a positive balance between paychecks, driving a reliance on overdraft as an expensive form of credit to put food on the table or gas in their car. Traditional banks charge up to $34 for access to as little as $5 of overdraft, whereas many others in the financial services sector don’t allow for overdraft at all. Dave invented a free overdraft alternative called ExtraCash, which allows Members to advance funds to their account and avoid a fee altogether. Members may receive an advance of up to $100 and Dave Banking Members may receive an advance of up to $200.

Side Hustle: Dave seeks to help Members improve their financial health by presenting new job opportunities to them. Through our partnership with leading employers—including Doordash, Airbnb, Lyft, Rover and more—Members can quickly submit applications and improve their income with flexible employment. Members have generated more than $157 million of new income through applications submitted using Dave’s Side Hustle product since it was launched in 2018.

 

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Dave Banking: Dave offers a full-service digital checking account through our partnership with Evolve Bank and Trust. We do not have overdraft and minimum balance fees, we allow for early paycheck payment and help our Members build credit with their rent and utility payments. Dave Banking Members also have access to Insights and higher ExtraCash limits.

Creating frictionless access to high-impact products: In order to access the financial tools many retail banks offer, consumers are often first required to establish a checking account with that bank. Banks may also require a direct deposit relationship, creating friction to discourage switching banks. Innovators in the consumer banking space have largely retained this model, requiring a primary banking relationship in order to access their tools around financial health.

At Dave, we have seen that this approach is exclusionary and discourages participation in the banking system for tens of millions of Americans. As part of our philosophy of solving critical financial pain points for consumers, we intentionally offer each of our products on a standalone basis, meeting Members where they are and allowing them to engage with Dave on their own terms. Members do not need to have a Dave Banking account to access our Insights, ExtraCash or Side Hustle products. We believe that smart, high-impact products that are easy to access will engender Member loyalty and engagement across multiple products.

Leveraging data to offer high impact products quickly and at advantageous pricing: We offer our high impact ExtraCash and Insights products to Members in a matter of minutes. When a Member connects their existing bank account to Dave, we analyze up to several years of historical spending and income data using our proprietary machine-learning algorithms. To date, we have analyzed more than 30 billion Member transactions. This allows us to offer immediate budgeting insights such as an upcoming utility bill and rapidly approve Members for up to $100 of ExtraCash (up to $200 of ExtraCash for Dave Banking Members). While early wage access and cash advance products have become increasingly common across banking innovators, these products typically depend on multiple direct deposits into a new bank account—often requiring multiple weeks and pay cycles. At Dave, a Member can receive free budgeting advice and much-needed cash in a matter of minutes, without signing up for a new bank account.

This wealth of data, combined with our machine-learning capabilities and underwriting excellence are competitive advantages that will increase with Member scale. We expect to continue to develop these technologies and use them for product expansion in the future.

Focusing on community building with our Members: We take our mission to advance America’s collective potential seriously. That’s why we have developed financial products that address the needs of more than 150 million Americans.

To date, we have helped our Members avoid approximately $1 billion in overdraft fees from their legacy bank relationships through our ExtraCash product. Through our charity program, we have delivered 13 million meals and pledged approximately $7 million to Feeding America and other causes. Members have submitted one million job applications through our Side Hustle product and generated $157 million in income to supplement their income. Dave is consistently recognized as one of the best startup employers in Los Angeles, and was voted #1 in 2020 by Forbes.

Generating a virtual “flywheel”: Our aim is to create the most trusted, integrated financial services platform that will generate a cycle whereby positive Member experiences will lead to more products adopted per Member and enhanced profitability for each additional product at no additional acquisition cost. We refer to this cycle as our “Dave Flywheel”. Ten million Americans have downloaded and registered accounts on the Dave app, and more than five million Americans have connected their existing bank accounts to Dave. We have accomplished this significant Member scale with only $61 million of equity capital raised, reflecting our highly efficient and profitable growth model.

 

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This Member acquisition efficiency is a testament to Dave’s product-market fit and trusted brand. Dave enjoys the highest user impression among competing brands—73% in the two highest favorable categories—with other bank innovators at 45-50% based on Dave’s market research. Our unique ability to offer an immediate short-term solution to near-term financial instability, without requiring a bank account, has proven highly compelling to a broad range of Members. Further, our digitally-native interface and the community impact of our products creates a compelling Member experience that paves the way to offer additional products within our ecosystem. Since the full launch of Dave Banking in December 2020, more than one million of our existing Members have opened a Dave Banking account, significantly broadening their relationship with us. Importantly, this growth has been driven almost entirely organically. To date, these Members have more than doubled their revenue contribution to Dave. This increase in revenue is driven by both new Transaction revenue and also increased engagement with existing products, highlighting the power of our flywheel.

Our Product Platform

Our intuitive and Member-friendly app provides a fast, seamless experience across all of our products. We are committed to delivering a delightful Member experience; we continuously listen to our Members’ feedback and implement improvements on a rapid release cycle. As of September 30, 2021, we had received nearly one million ratings across all app stores, with a 4.8 average on Apple and a 4.5 average on Android.

Dave’s current product platform includes:

Advice and Financial Wellness: “Insights”

We believe that understanding and visibility are core to a Member’s financial health. That’s why we began our product offering with Insights, a tool that helps Members understand their spending and savings habits and learn better financial management.

This automated financial management tool leverages historical bank account data to help Members understand both recurring and commonly occurring charges, helping Members create forward looking budgets and understand potential upcoming pain points. Insights notifies Members when there is a chance of an overdraft, and allows Members to opt into Dave’s ExtraCash feature for up to $100 of additional liquidity (or $200 in the case of Dave Banking Members). We charge a $1 monthly subscription for access to the Insights product.

Overdraft Protection: “ExtraCash”

ExtraCash is our 0% APR advance product that gives Members access to much-needed liquidity to avoid overdraft fees or bridge themselves to their next paycheck. Members do not need a bank account with Dave to access ExtraCash but they do need to have a checking account with another financial institution. No credit check is required and eligibility for ExtraCash is based on the verification of the Member’s checking account and the Member’s identity. Once a Member connects his or her bank account to the Dave app, data regarding the Member’s account is gathered and analyzed. The amount of the advance available to a Member is a function of a proprietary machine-learning algorithm that analyzes historical spending, savings and earnings patterns based on data gathered from the Member’s bank account, among other data points. This process is fully automated unless there are any issues flagged via our Member identification processes. Timing of the repayment of the advance is determined when the advance is made and is based on the estimated date that the Member will receive his or her next paycheck, which typically ranges from seven to 10 days from when they apply for an advance. A Member is limited to one ExtraCash advance per pay period and may only have one advance outstanding at any given time. The maximum term for an ExtraCash advance is 14 days. Dave develops and manages the entire risk management and decisioning process associated with issuing and servicing ExtraCash advances. Since the payback date is an estimate of the Member’s next paycheck date, we primarily manage repayment performance

 

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in the 30 days following the estimated repayment date. Specifically, we assess dollars repaid relative to dollars owed over this period. The table below summarizes repayment performance over the historical period.

 

     For Years Ended December 31,     For Nine Months Ended September 30,  
         2019           2020             2020           2021      

30-Day Repayment Rate

     95.9     95.4     96.0     95.8

There are no fees associated with the delivery of ExtraCash funds to a checking account (typically delivered within two to five business days) via ACH. Should a Member wish to receive their funds on an expedited basis (guaranteed within eight hours, though often significantly faster), there is an optional instant transfer fee. The instant transfer fee ranges from $1.99 to $5.99, depending on the size of the advance taken. Use of this expedited transfer feature is entirely optional. Further, we give Members the option to leave a tip based on what they think is fair when they use ExtraCash if they feel we have provided substantial value to them.

On the agreed upon repayment date, we trigger an automated withdrawal from the Member’s account for the ExtraCash advance amount plus the optional instant transfer fee and optional tip, if a Member opted for those services. We take a consumer-friendly approach to the withdrawal process by attempting to check Member balances before initiating all withdrawals. In the event there are insufficient funds to cover the repayment amount, we do not attempt the withdrawal and will wait until the Member has a sufficient balance before initiating the transaction, which will typically be no more than 14 days, but varies based on each Member’s paycheck cycle. In select circumstances where Member balance information is unavailable, we may elect to initiate a withdrawal. Consistent with our reserve methodology, we deem a Member advance that has been outstanding for more than 120 days to be uncollectible and is therefore written off.

Job Application Portal: “Side Hustle”

Side Hustle is our streamlined job application portal for Dave Members to find supplemental or temporary work. We focus on “gig economy,” part-time, seasonal, remote and other flexible types of employment opportunities. Members can apply to dozens of jobs in-app using saved information and credentials. A side hustle can be an important part of a Member’s long-term financial health, as it allows Members to quickly address unexpected expenses or cash needs with incremental income.

Demand Deposit Account: “Dave Banking”

Dave Banking is our FDIC-insured digital demand deposit account with zero minimums, premium features, and rewards. Our Dave Banking demand deposit accounts are currently issued by Evolve Bank & Trust (“Evolve”), an Arkansas-based, nationally chartered bank owned by Evolve Bancorp, Inc.

Members can open a Dave Banking account in minutes through the Dave mobile application, add funds to their account and begin spending using a Dave Banking virtual debit card. Dave Banking accounts also include a physical Dave Debit MasterCard that can be used at any of the 37,000 MoneyPass ATM network locations to make no-fee withdrawals at these in-network ATMs.

Dave Banking accounts can be funded with a direct deposit, an external debit card, an external bank account, or mobile check capture. There are no fees for a Dave Banking account, making it accessible for people of all financial situations.

Our Dave Banking account includes some of the best features and rewards in banking, including:

 

   

Zero account minimums;

 

   

37,000 MoneyPass ATM network locations to make no-fee withdrawals;

 

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Paychecks delivered up to two days earlier than the scheduled payment date with direct deposit into the Dave Banking account, a feature accessible with no additional mandatory fees;

 

   

Access to mobile wallets such as Apple Pay and Google Pay;

 

   

Access to a free credit-building membership, where Members can build credit based on rent and utility payments made from their account; and

 

   

Up to $200 in ExtraCash capacity for short-term emergencies.

Dave Banking 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.

Our Dave Banking demand deposit accounts are currently issued by Evolve. Evolve is also the issuer of all Dave Banking debit cards and sponsors access to debit networks for payment transactions, funding transactions and associated settlement of funds under a sponsorship agreement with Dave. Evolve also provides sponsorship and support for ACH and associated funds settlement. Under the agreement between Dave Banking and Evolve, Evolve receives all of the program revenue and transaction fees, and passes them on to Dave, minus any obligations owed to Evolve. Dave pays all payment network fees and other program-specific expenses associated with Dave Banking. 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” below for additional information.

Our Business Model

We offer a range of financial products and services through a single platform delivered via a mobile application.

Our revenue is primarily broken into the following categories:

 

   

Service Revenue: in 2020, 99% of revenue, approximately $120.6 million in revenue

 

   

Insights (subscription fee)

 

   

ExtraCash (optional instant transfer convenience fees and optional tips)

 

   

Other (Side Hustle lead)

 

   

Transaction Revenue: in 2020, 1% of revenue, approximately $1.2 million in revenue

 

   

Dave Banking (interchange fees, out-of-network ATM fees)

We originate ExtraCash advances directly pursuant to applicable exemptions across various states in the U.S., and we service all the advances that we originate.

ExtraCash advances have historically been funded through balance sheet cash. Beginning in January 2021, subsequent to the formation of Dave OD Funding, a subsidiary of Dave which is consolidated in Dave’s financial statements, ExtraCash advances have been funded through a combination of balance sheet cash and funding available under Dave OD Funding’s credit facility with Victory Park Capital, an affiliate of VPCC. Advances are originated at Dave and transferred to Dave OD Funding for servicing. Cash is transferred back from Dave OD Funding to Dave through the acquisition of newly originated advance receivables and by distributions following the repayment of advances by Members. Proceeds of borrowings under the credit facility are used by Dave OD Funding to purchase advance receivables. The Company, through Dave OD Funding, continues to service all advances that it originates.

In addition, we depend on certain key third-party partners to provide certain of our products and services. Our Dave Banking demand deposit accounts and associated debit cards are currently issued by Evolve. We are party

 

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to a Bank Services Agreement with Evolve, which has an initial two-year term ending on July 13, 2022, 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 180 days prior to the end of any such term. In addition, upon the occurrence of certain early termination events, either we or Evolve may terminate the agreement immediately upon written notice to the other party. The Bank Services Agreement does not prohibit Evolve 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 Evolve allows us to provide deposit accounts and debit cards while complying with various federal, state, and other laws. Evolve also sponsors access to debit networks and ACH for payment transactions, funding transactions and associated settlement of funds.

In connection with our arrangements with Evolve, we have also entered into a multi-year service agreement with Galileo Financial Technologies, LLC (f/k/a Galileo Financial Technologies, Inc.) (“Galileo”), a payment processing platform, in which Galileo has agreed to process all of our transactions for our Dave Banking 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 Dave Banking accounts and debit cards. We pay the greater of actual fees or the minimum monthly fee for these services. Following the initial four-year term, the service agreement 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 four months 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 Growth Strategy

We believe we are in the early stages of realizing the full value of our existing platform. We seek to capitalize on the structural advantages inherent in being a digitally native, customer-centric, and built-to-scale platform as we continue capturing market share and economic gains. Our multi-pronged growth strategy is designed to continue building upon the momentum we have generated to date to create even greater value for consumers:

 

   

Continue penetrating our large addressable market;

 

   

Accelerate cross-sell into Dave Banking;

 

   

Scale new Dave Banking Members;

 

   

Deliver new products and features to cross-sell to Members; and

 

   

Evaluate additional strategic acquisitions.

Continue penetrating our large addressable market: More than 150 million Americans are in need of more financial stability. Approximately 10-15 million Americans are “unbanked”—without access to a checking account. Approximately 20 million of the most vulnerable Americans have access to a checking account, but overdraft their accounts 10-20 times each year. Another 20-25 million incur multiple overdraft fees per year, and are underserved by existing bank relationships. Beyond these populations, another 100 million people or more are living paycheck-to-paycheck, have significant debt or need more from their banking relationship. Framed differently, 40% of Americans are unable to afford a one-time $400 emergency and more than 75% of full-time workers are living paycheck-to-paycheck. Therefore, while we have achieved significant user scale, there remains significant runway for growth in our core product markets.

With the over $350 million in cash raised from the Business Combination (including approximately $210 million in cash held in the Trust Account immediately prior to Closing and an additional $250 million in cash proceeds received at Closing from the PIPE Investment, less, among other things, transaction expenses, redemptions, and cash consideration paid at Closing to the Legacy Dave Stockholders of up to the lower of (A) the amount (which may be zero) by which the Parent Closing Cash (as defined in the Merger Agreement) exceeds $210,000,000.00 and (B) $60,000,000.00), we will have the ability to substantially increase our marketing spend versus our historical expenditure levels. We believe we have developed a highly efficient Member acquisition approach that will allow us to effectively deploy the expanded marketing spend and drive new Member growth.

 

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Accelerate cross-sell into Dave Banking: The rapid scaling of Dave Banking to date, with more than one million signups since the fourth quarter of 2020, highlights the strong intrinsic demand for the product. To date, these users have come entirely from Dave’s existing Member base, with minimal marketing spend. This user scale reflects a 31% penetration rate of the total Dave connected account population (the population of Members who have connected their external bank account to the Dave app). We believe there remains significant penetration opportunity in the existing Dave Member base. Furthermore, as we continue to help new Members solve challenging pain financial pain points, we believe Dave Banking will be an attractive additional product over time.

Scale Dave Banking adoption and monetization: In addition to penetration of Dave’s existing Member base and cross-selling to existing Members, we will launch our first scaled marketing campaigns targeting the core checking account. We believe this will attract higher-intent bank users, accelerating growth in the Transaction segment. In an effort to attract higher-spending Members within this user population, we plan to offer various incentives and promotions to Members who deposit most or all of their paychecks into a Dave Banking account.

Deliver new products and features: Our product development teams, inclusive of Product Management, Engineering, Design and Data Science, are constantly innovating. We are continually optimizing our current products, while also developing new features and solutions. We build products for our Members that we believe not only impact their daily financial lives, but are also intuitive and easy to use. While at the same time, we design our products to drive value for our business and be technically scalable.

Leveraging both quantitative and qualitative Member data, we seek to solve Member financial challenges and drive greater engagement. We begin by listening to our Members and then flowing through our phases of product development—research and development, prototyping and design, Member validation and Member testing, development and launch—and then ongoing learning and iterating.

In 2021, we are developing several new products and services to continue our mission to better serve our Members. We are focusing on products that have particularly strong Member engagement characteristics. We believe that a scaled, highly engaged Member population will provide a strong setup for monetization through ExtraCash and Dave Banking over time. Examples of new products and services are:

 

   

Goals-Based Savings (“Goals”): Goals will further Dave’s mission of making financial health easy, accessible and rewarding. Members will have the ability to establish financial goals—for large purchases, rainy day funds or small indulgences. As Goals increases in popularity, we expect that it will encourage Members to check their Dave apps more often, invite friends to the app and improve their own savings habits.

 

   

Peer-to-Peer Money Transfer (“P2P”): P2P will leverage community to enhance the financial health of Members, while also increasing the frequency and depth of engagement with the Dave app. P2P will allow Members to send money to one another quickly and easily, with commentary and messages. These funds could be used for repayment or bill splitting, but also to help a friend in need.

Evaluate Additional Strategic Acquisitions: We believe acquisitions will be an important tool to accelerate realization of our strategic roadmap going forward. We plan to be intentional in evaluating opportunities to serve larger populations with our leading products, to enhance value-add and engagement with our current Members and to enter new product spaces.

Marketing

Member acquisition relies primarily on paid and organic online advertising and social media. Dave also relies on television (streaming and linear), paid search, organic web traffic and e-mail marketing. Referrals and spend incentives drive incremental acquisition and engagement. Marketing creative content and online ads feature Member-generated content produced and edited by a lean, experienced, in-house team, well-versed in tailoring messages for our target segments.

 

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Product marketing efforts are aimed at increasing Member engagement, through-funnel conversion and, retention at a very low cost.

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, commerce 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 Member base. These competitors include:

 

   

Banking Competitors: Traditional banks and credit unions (e.g., Bank of America, Chase, 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, MoneyLion).

 

   

Innovators in Consumer Finance: Consumer-oriented commerce enablement platforms (e.g., Affirm, Afterpay), finance-oriented social networks (e.g., CashApp, Venmo), and lending platforms (e.g., OpenLending, LendingClub).

We believe other market participants do not adequately meet the needs of an estimated 150 to 180 million Americans who make up our target market. We believe our ease of access, speed-to-value, data-driven approach and powerful flywheel will allow us to continue to efficiently scale and generate strong returns.

Management

Leadership talent and vision are core priorities at Dave. We have carefully built our team to include experts who will help develop our unique and innovative solutions. Our founding team includes serial entrepreneurs, experienced designers and technology experts. Sourcing from some of the largest and most successful companies in consumer and financial technology, we have hired leaders in People, Product and Commercial. Our Legal and Regulatory functions are led by veterans from high-growth financial services firms. We will continue to focus on building our leadership team as we grow and diversify our business.

Customer Service

Our mission is to deliver a “center of excellence” utilizing the voice of our Members to ensure they have successful interactions with our platform. We are customer centric and devoted to providing transformational experiences. We offer omni channel support guided by Member data and artificial intelligence to augment all of our responses via chatbot, chatting with an agent, contacting us by phone, emailing with us or reaching out via social media. We use seamless tools to give us a 360-degree view of our Members’ journeys with the goal of offering the right resolutions to the right problems. Our 24/7 knowledge center provides best practices to empower Members to employ our tools and services effectively. We also review feedback from Members via Member satisfaction surveys, net promoter score tracking and app ratings to guide process updates and optimize our products. Our approach enables us to resolve a large variety of inquiries with ease, customization and efficiency.

Employees and Culture

Every day, our small but mighty team works together to create financial opportunities for our Members that advance America’s collective potential. It’s this mission and the opportunity to impact the lives of millions of

 

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current and future Members that gets us out of bed each day. But, being mission driven alone is not enough to attract great talent. We’ve made significant strides towards setting the foundation to becoming a great place to work.

We know that great people leaders have a multiplying effect on what a business is able to achieve. This insight has led us to invest very early in defining what it means to be a great leader at Dave. Our leaders aspire to create purpose, foster growth, lead through change, communicate with clarity and consistency and prioritize Dave-wide success. We are embedding this definition of leadership into all aspects of the employee experience at Dave to ensure that over time, we’re building the cadre of high performing leaders that inspire their teams to deliver our mission and business results.

Because of our mission, we’ve also invested early on in social impact. At Dave, we define social impact as removing the tension between profit vs. purpose and creating positive business outcomes through positive social outcomes. Our Head of Social works across our team to build the internal and external capacity to scale Dave’s industry leadership as a mission driven brand through innovative partnerships, strategic philanthropy, impact measurement and reporting, and thought leadership. In support of and closely aligned to Dave’s social impact work, we work to ensure diversity, equity, inclusion and belonging are a way of doing business through diagnostics, strategy and goal setting and program development.

Over the last year, we’ve made significant updates to our compensation, benefits and wellness programs. When we decided to go Virtual First, meaning Dave employees can live and work anywhere in the United States (including U.S. territories), excluding Hawaii for the time being, we also decided to have one pay scale that we will apply nationally and will be based on the California labor market. This decision recognizes that regardless of where Dave employees choose to live, their time and effort is of equal value to Dave. Given our mission, we also invested early on in supporting the financial wellness of our own team by not only ensuring we’re paying market competitive compensation but also providing a 401k match and implementing a benefits offering that allows all Dave employees to access to a personal financial advisor.

Finally, as a fintech company working to reinvent so many aspects of our legacy financial system, we’re no strangers to the unknown. We acknowledge that building a company and culture that employees can be proud of and recommend to their closest friends is not always linear. As such, we have mechanisms in place, including quarterly engagement pulse surveys, to track how we’re doing so that we can listen, learn and course correct.

As of September 30, 2021, we had approximately 225 employees across all locations. None of our employees are represented by a labor union or covered by a collective bargaining agreement.

Regulatory Environment

We operate in a complex regulatory environment consisting of U.S. federal and state laws that is rapidly evolving. These laws cover most aspects of our business and include laws, regulations, rules and guidance relating to, among other things, consumer finance and protection, privacy and data protection, banking, and payments. For example, with respect to our non-recourse cash advance product, certain state laws may, if applicable, regulate the charges or fees we can assess and how we may obtain repayment from our Members. In addition, other federal and state laws, public policy, and general principles of equity, such as laws prohibiting unfair and deceptive acts or practices, may apply to our activities in banking, non-recourse cash advances, payments, and other areas. These laws and regulations impact our business both directly and indirectly, including by way of our partnership with Evolve, which provides deposit accounts and debit cards to our Members. Ensuring ongoing compliance with these laws and regulations imposes significant burdens on our business operations. See “Risk Factors—We operate in an uncertain regulatory environment and may from time to time be subject to governmental investigations or other inquiries by state, federal and local governmental authorities” and “—Our business is subject to extensive regulation and oversight in a variety of areas, including registration and licensing requirements under federal, state and local laws and regulations.

 

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In addition, we may become subject to additional legal or regulatory requirements we are not subject to today if laws or regulations change in the jurisdictions in which we operate, or if we were to release new products or services. In addition, the regulatory framework for our products and services is evolving and uncertain and specifically the framework that applies to our non-recourse cash advance business, as federal and state governments and regulators consider the application of existing laws and potential adoption of new laws. The potential for new laws and regulations, as well as ongoing uncertainty regarding the application of existing laws and regulations to our current products and services, may negatively affect our business. This could include the need to modify the way in which we generate revenue from certain business lines, obtain new licenses, or comply with additional laws and regulations in order to conduct our business.

State licensing requirements and regulation

We believe that none of our current business lines require us to obtain any state licenses. However, the application of state licensing requirements (including those applicable to consumer lenders) to our business model is not always clear and state regulators may request or require that we obtain licenses or otherwise comply with additional requirements in the future, which may result in changes to our business practices. In addition, if we are found to have engaged in activities subject to state licensure for which we lack the requisite license, or in activities that are otherwise deemed to be in violation of state lending laws, the relevant state authority may impose fines, impose restrictions on our operations in the relevant state, or seek other remedies for activities conducted in the state.

U.S. federal consumer protection requirements

Here we summarize several of the material federal consumer protection and other laws applicable to our business. Many states have laws and regulations that are similar to the federal laws described, but the degree and nature of such laws and regulations vary from state to state. 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 Evolve.

We are subject to regulation by the CFPB, which oversees compliance with and enforces federal consumer financial protection laws. The CFPB directly and significantly influences the regulation of consumer financial products and services, including the products and services we provide. The CFPB has substantial power to regulate such products and services and the banks and non-bank entities that provide them, as well as their respective third-party service providers. This power includes rulemaking authority in enumerated areas of federal law such as truth in lending, credit discrimination, electronic fund transfers and truth in savings. Under Title X of the Dodd-Frank Act, the CFPB also 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, commonly referred to as “UDAAPs.” The CFPB may also seek a range of other remedies, including restitution, refunds of money, disgorgement of profits or compensation for unjust enrichment, civil money penalties, rescission of contracts, public notification of the violation, and restrictions on the target’s conduct, activities and functions. Moreover, 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.

Our business activities, either directly or indirectly through our partnership with Evolve, 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 grants the FTC and bank regulators enforcement authority to prevent and redress violations of this prohibition. Whether a particular act or practice violates these laws or the prohibition against UDAAPs enforced by the CFPB frequently involves a highly subjective and/or fact-specific judgment.

 

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Truth in Savings Act. The federal Truth in Savings Act (“TISA”) and Regulation DD which implements it require that consumers be provided various disclosures concerning terms and conditions of deposit accounts. They also impose disclosure requirements and restrictions on advertising regarding deposit accounts. TISA and Regulation DD apply to the demand deposit accounts opened by our Members at Evolve.

 

   

Electronic Fund Transfer Act and NACHA Rules. The federal Electronic Fund Transfer Act (“EFTA”) and Regulation E which 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. EFTA also limits consumers’ liability for unauthorized electronic fund transfers and requires banks and other financial services companies to comply with certain transaction error resolution procedures. Electronic fund transfers within the scope of EFTA include ACH transfers and debit card transfers. In addition, transfers performed by ACH are subject to specific authorization, timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (“NACHA”). NACHA operating rules further imposes maximum tolerances on the volume of ACH transfers that may be returned as unauthorized or for other reasons. Exceeding those tolerances may result in limitations being imposed on our ability to initiate ACH transactions. Many transfers of funds in connection with the provision and repayment of our non-recourse cash advances are performed by electronic fund transfers, including ACH transfers. We also facilitate the electronic transfer of funds requested by our Members between their deposit accounts with Evolve and their accounts at other financial institutions.

 

   

Payday, Vehicle Title, and Certain High-Cost Installment Loans Final Rule. In 2017, the CFPB issued a final rule intended to provide various consumer protections with respect to certain short-term credit products. The rule was later stayed by federal district court order in an industry challenge to the rule, and the effective date of many provisions of the rule were separately delayed by the CFPB in June 2019. A section pertaining to underwriting was subsequently rescinded in July 2020. The CFPB may engage in rulemaking in the future to amend the regulation and implement new underwriting and other requirements and restrictions that could negatively impact our business and require us to change our practices should they be deemed to apply to us. However, certain nonrecourse advance products, including ours, are currently excluded from coverage by the rule provided certain consumer contract requirements are met and the advance provider does not engage in certain activities with respect to such products. We must comply with those exclusion-related requirements and restrictions to maintain our exclusion from the substantive portions of the rule.

 

   

Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act (“GLBA”) imposes limitations on financial institutions’ disclosure of nonpublic personal information about a consumer to nonaffiliated third parties. In certain circumstances, GLBA 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 Member information.

Given our novel business model and products, and the subjective nature of certain laws and regulations such as the prohibition against UDAAPs, we have been and may in the future become subject to regulatory scrutiny or legal challenge with respect to our compliance with these and other regulatory requirements. Additional or different requirements may also apply to our business in the future as the regulatory framework in which we operate is evolving and uncertain. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, we may not have been, and may not always be, in compliance with these and other laws. No assurance is given that our compliance policies and procedures have been or will be effective or adequate as laws change or are applied to us in a new manner.

 

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Regulation of our bank partnership model

Pursuant to our partnership with Evolve, we offer our Members FDIC-insured, non-interest-bearing deposit accounts and debit cards that Members can use to access their account balances. These deposit accounts and debit cards are provided by Evolve. Under the terms of our agreement with Evolve, as well as the agreements between our Members and Evolve, each Member that chooses to open a deposit account has a deposit account at Evolve and a debit card issued by Evolve. With respect to these deposit accounts and debit cards, we act as the program manager and service provider to Evolve to provide customer support and technology features to Members using their Evolve accounts through our platform.

Evolve is a state-chartered bank chartered in Arkansas and is subject to regulation and supervision by the Federal Reserve and the Federal Deposit Insurance Corporation (“FDIC”). Many laws and regulations that apply directly to Evolve indirectly impact us (and our products) as Evolve’s service provider. As such, our partnership with Evolve is subject to the supervision and enforcement authority of the Federal Reserve, Evolve’s primary banking regulator.

Other regulatory requirements

In addition to the requirements described above, we are subject to and work to comply with other state and federal laws and regulations applicable to consumer financial products and services. These laws and regulations may be enforced by various state banking and consumer protection agencies, state attorneys general, the CFPB, and private litigants, among others.

Bank Secrecy Act and Anti-Money Laundering. Given our involvement in payments, banking transactions, and our arrangements with Evolve, we are subject to compliance obligations related to U.S. anti-money laundering (“AML”) laws and regulations. We have developed and currently operate an AML program designed to prevent our products from being used to facilitate money laundering, terrorist financing, and other financial crimes. Our program is also designed to prevent our products from being used to 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. Our programs are designed to address these legal and regulatory requirements and to assist in managing risks associated with money laundering and terrorist financing.

Privacy and Information Security Laws. We collect, store, use, disclose, and otherwise process a wide variety of information and data, including personally identifiable information (“PII”) that we acquire in connection with our Members’ use of our products and services, for various purposes in our business, including to help ensure the integrity of our services and to provide features and functionality to our Members. This aspect of our business is subject to numerous privacy, cybersecurity, and other laws and regulations in the United States, including the federal GLBA and various state laws such as the California Consumer Privacy Act (“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 legal and regulatory framework for privacy and security issues is rapidly evolving, and, although we endeavor to comply with these laws and regulations and our own policies and documentation, we may fail to do so or be alleged to have failed to do so. Any actual or perceived failure to comply with legal and regulatory requirements applicable to us, including those relating to privacy or security, or any failure to protect the information that we collect from our Members from cyberattacks, or any similar actual or perceived failure by our third-party service providers and partners, may result in private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on our ability to continue to operate, among other things. Please see the section titled “Risk Factors—Risks Relating to Dave’s Business and Industry—Stringent and changing laws and regulations relating to privacy and data protection could result in claims, harm our results of operations, financial condition, and future prospects, or otherwise harm our business”.

 

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Laws Governing Marketing and Member Communications. In addition, there are federal and state laws and regulations on marketing activities conducted over the internet, through email, or by mail or telephone, including 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, among other things, the FTC’s Do-Not-Call Registry and other requirements in connection with telemarketing activities, and state telemarketing laws. Our marketing activities may subject us to some or all of these laws and regulations.

New Laws and Regulations. 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 consumer protection, cybersecurity, privacy, electronic transfers, state licensing, and the regulation of nonrecourse advances. As we continue to develop and expand, we monitor for additional rules and regulations that may impact our business.

Intellectual Property

Intellectual property and proprietary rights are important to the success of our business. We rely on a combination of patent, copyright, trademark, and trade secret laws in the United States and other jurisdictions, as well as license agreements, confidentiality procedures, non-disclosure agreements, and other contractual protections, to establish and protect our intellectual property and proprietary rights, including our proprietary technology, software, know-how, and brand. However, these laws, agreements, and procedures provide only limited protection. As of September 30, 2021, we own five registered trademarks in the United States and have seven pending trademark applications in various stages of review by the PTO. Although we take steps to protect our intellectual property and proprietary rights, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, or the reverse engineering of our technology and other proprietary information, including by third parties who may use our technology or other proprietary information to develop services that compete with ours. Moreover, others may independently develop technologies or services that are competitive with ours or that infringe on, misappropriate, or otherwise violate our intellectual property and proprietary rights. Policing the unauthorized use of our intellectual property and proprietary rights can be difficult. The enforcement of our intellectual property and proprietary rights also depends on any legal actions we may bring against any such parties being successful, but these actions are costly, time-consuming, and may not be successful, even when our rights have been infringed, misappropriated, or otherwise violated. In addition, aspects of our platform and services include software covered by open source licenses. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our services.

Although we rely on intellectual property and proprietary rights, including patents, copyrights, trademarks, and trade secrets, as well as contractual protections, in our business, we also seek to preserve the integrity and confidentiality of our intellectual property and proprietary rights through appropriate technological restrictions, such as physical and electronic security measures. We believe that factors such as the technological and creative skills of our personnel and frequent enhancements to our network are also essential to establishing and maintaining our technology leadership position.

See the section titled “Risk Factors—Risks Related to Dave’s Business and Industry” for a more comprehensive description of risks related to our intellectual property and proprietary rights.

Facilities

We operate out of our headquarters in Los Angeles, California. We maintain approximately 36,000 square feet of general office space in West Hollywood, California pursuant to a multi-year lease, as well as a sublease agreement for approximately 3,500 square feet located in Los Angeles, California. The lease for the West

 

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Hollywood property is scheduled to expire in March 2026 and the sublease for the Los Angeles space is scheduled to expire in October 2023.

Legal and Regulatory Proceedings

We may, from time to time, be subject to various claims and legal proceedings in the ordinary course of business, including arbitrations, class actions and other litigation. We are also the subject of various actions, inquiries, investigations, and proceedings by regulatory and other governmental agencies. The outcomes of the legal and regulatory matters discussed below are inherently uncertain and some of these matters may result in adverse judgments or awards, including penalties, injunctions or other relief, and could materially and adversely impact our business, financial condition, operating results and cash flows.

State Regulatory Investigations

In August 2019, the New York Department of Financial Services notified us that it and ten other state regulators (collectively, the “States”) were requesting information concerning our non-recourse cash advance product as part of a broader investigation of companies offering nonrecourse advance and early wage access products. The investigation seeks to understand whether such products constitute activity subject to state licensure and consumer credit laws. In April 2020, we received a request for additional information and notice that an additional seven states had joined the broader inquiry. We have responded to all information requests and the States have not further engaged with us or communicated any conclusions or investigative findings.

In December 2021, we entered into a Memorandum of Understanding (“MOU”) with the California Department of Financial Protection and Innovation (“CA DFPI”). The MOU requires us to provide the CA DFPI with certain information as requested by the CA DFPI and adhere to certain best practices in connection with our non-recourse cash advance product (including certain disclosures related to us not being licensed by the CA DFPI).

We have received inquiries from the states of Washington (2018) and Kentucky (2020) related to our non-recourse cash advance business and whether our activities are subject to each state’s consumer credit laws. We responded to all requests from these states and have received no further communications from them.

Class Action Lawsuit

On September 16, 2020, a class action lawsuit, Stoffers v. Dave Inc. was filed in Los Angeles Superior Court in connection with the data breach we experienced in June 2020. For more information about the data breach, see the section titled “Risk Factors—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 and liability.” Dave is in the process of settling this matter and estimates the settlement to be approximately $3.2 million, which is included with legal settlement expenses, net of insurance reimbursements, within the statements of operations for the year ended December 31, 2020.

Other Legal Matters

Martinsek v. Dave Inc.

In January 2020, a former employee of the Company, Zachary Martinsek, filed a complaint in the California Superior Court for the County of Los Angeles against the Company and the Company’s Chief Executive Officer, asserting claims for, among other things, breach of contract, breach of fiduciary duty, conversion, and breach of the implied covenant of good faith and fair dealing. The complaint alleges that the Company and the Chief Executive Officer misappropriated approximately 6.8 million shares (as adjusted for a 10:1 forward stock split in November 2020) by rescinding a stock option agreement and a restricted stock purchase agreement between the

 

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Company and Mr. Martinsek under which such shares were issued and repurchasing the shares. The Company rescinded the agreements for failure of consideration. The Company and the Chief Executive Officer answered, denying all claims and asserting defenses. Discovery has commenced, but no trial date has been set. The Company is vigorously defending against this claim.

Whalerock v. Dave Inc.

Whalerock Industries Holding Company, LLC (“Whalerock”) filed an unlawful detainer action against the Company on or about August 4, 2020, which was dismissed by Whalerock on March 18, 2021. On or about March 29, 2021, Whalerock initiated new litigation against the Company seeking declaratory relief. The Company and Whalerock entered into a sublease in May 2020 whereby the Company would sublease certain space from Whalerock located in West Hollywood, California. This matter involves a dispute between the Company and Whalerock over when the 18-month sublease commenced. The Company believes the lease commencement date was June 15th, 2021, when the California stay-at home order was lifted and the Company was legally allowed to use the sublease premises. The total rent payments in dispute total approximately $1.8 million. The Company is actively litigating this matter and cannot reasonably estimate the most likely outcome at this time.

 

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MANAGEMENT

Executive Officers and Directors

The following table sets forth certain information, including ages as of February 2, 2022, of our executive officers and members of our board of directors (the “Board”).

 

Name

   Age   

Position

Executive Officers

     
Jason Wilk    36    Chief Executive Officer, President and Director
Kyle Beilman    34    Chief Financial Officer and Secretary

Non-Employee Directors

     
Brendan Carroll    44    Director(1)(3)
Andrea Mitchell    50    Director(2) (3)
Michael Pope    55    Director(1)
Dan Preston    36    Director(1)(2)

 

(1)

Member of the audit committee.

(2)

Member of the compensation committee.

(3)

Member of the nominating and corporate governance committee.

Information about Executive Officers and Directors

Executive Officers

Jason Wilk. Mr. Wilk has served as Chief Executive Officer since the Closing. Mr. Wilk is the co-founder and has served as Chief Executive Officer of Dave since May 2016. Mr. Wilk has over 15 years of experience building digital companies. In April 2010, Mr. Wilk founded WriteyBoard, an international whiteboard and furniture solution for startup companies and small businesses, where he still acts as current advisor. Prior to WriteyBoard, from January 2010 to July 2016, Mr. Wilk founded and served as Chief Executive Officer of AllScreen.TV, a technology platform that enabled large media outlets to syndicate their digital content to over 500 publishers. Mr. Wilk began his career as the founder and Chief Executive Officer of 1DaySports.com, which was acquired in 2008. Mr. Wilk holds a B.B.A. from Loyola Marymount University, College of Business Administration where he studied international business and technology.

Kyle Beilman. Mr. Beilman has served as Chief Financial Officer since the Closing and prior to this, has served as Dave’s Chief Financial Officer since January 2021. Mr. Beilman served as Dave’s Chief Operating Officer from October 2019 to January 2021 and Chief Financial Officer from July 2017 to October 2019. Since January 2021, Mr. Beilman has served as Vice President of Dave OD Funding I, LLC, a wholly owned subsidiary of Dave. Prior to Dave, Mr. Beilman worked in corporate strategy at Red Bull from January 2016 to July 2017. Mr. Beilman began his career in investment banking at Centerview Partners from August 2013 to January 2016 and Moelis & Company from May 2012 to August 2013. Mr. Beilman holds a B.S. from the University of Southern California Marshall School of Business.

Non-Employee Directors

Brendan Carroll. Mr. Carroll serves as a member of the board of directors of the Company. Mr. Carroll joined Dave as a director upon the Closing. Mr. Carroll is a Senior Partner at Victory Park Capital Advisors, LLC (“Victory Park”), which he co-founded in 2007. He is responsible for strategic initiatives and firm operations in addition to sourcing, evaluating and executing investment opportunities. Mr. Carroll also oversees marketing, fundraising, business development and investor relations for the firm. Mr. Carroll has served as member of the board of directors of Victory Park portfolio company, johnnie-O, since 2015, and has served as a member of the board of directors and as the Co-Chief Executive Officer of each of VPC Impact Acquisition Holdings II (Nasdaq: VPCB), a special purpose acqu