Filed Pursuant to Rule 424(b)(3)
Registration No. 333-261466
Prospectus Supplement No. 3
(To Prospectus dated May 5, 2022)
This prospectus supplement updates and supplements the prospectus
dated May 5, 2022 (the “Prospectus”), which forms a part of our
Registration Statement on Form S-1, as amended (Registration No.
333-261466). This prospectus supplement is being filed to update
and supplement the information in the Prospectus with the
information contained in our Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission on August 9, 2022 (the
“Quarterly Report on Form 10-Q”). Accordingly, we have attached the
Quarterly Report on Form 10-Q to this prospectus
supplement.
You should read this prospectus supplement in conjunction with the
Prospectus, including any amendments or supplements to it. This
prospectus supplement is not complete without, and may not be
delivered or used except in conjunction with, the Prospectus,
including any amendments or supplements to it. This prospectus
supplement is qualified by reference to the Prospectus, except to
the extent that the information provided by this prospectus
supplement supersedes information contained in the Prospectus. You
should not assume that the information provided in this prospectus
supplement, the Prospectus or any prior prospectus supplement is
accurate as of any date other than their respective dates. Neither
the delivery of this prospectus supplement, the Prospectus or any
prior prospectus supplement, nor any sale made hereunder or
thereunder, shall under any circumstances create any implication
that there has been no change in our affairs since the date of this
prospectus supplement, or that the information contained in this
prospectus supplement, the Prospectus or any prior prospectus
supplement is correct as of any time after the date of that
information.
Our Class A Common Stock is listed on The Nasdaq Global Select
Market (“Nasdaq”) under the symbol “MAPS.” On August 9, 2022, the
closing price of our Class A Common Stock was $3.57.
SEE THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 5 OF THE
PROSPECTUS, AS UPDATED AND SUPPLEMENTED UNDER SIMILAR HEADINGS IN
ANY FURTHER AMENDMENTS OR SUPPLEMENTS TO THE 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 the Prospectus or this prospectus
supplement is truthful or complete. Any representation to the
contrary is a criminal offense.
The date of this prospectus supplement is August 9,
2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________________
FORM 10-Q
_______________________________________________________________________________
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2022
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period from ____
to ____
Commission file number 001-39021
_______________________________________________________________________________
WM TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
_______________________________________________________________________________
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Delaware |
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98-1605615 |
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(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer Identification No.) |
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41 Discovery
Irvine, California
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92618 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
(844) 933-3627
(Registrant’ telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Class A Common Stock, $0.0001 par value per share |
MAPS |
The Nasdaq Global Select Market |
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Warrants, each whole warrant exercisable for one share of Class A
Common Stock at an exercise price of $11.50 per share
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MAPSW |
The Nasdaq Global Select Market |
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports); and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate web site, if any, every
Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files). Yes ☒ No
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act:
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Large accelerated filer |
☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
As of August 5, 2022, there were 89,028,275 shares of the
registrant’s Class A common stock outstanding and 56,274,066 shares
of Class V common stock outstanding.
WM TECHNOLOGY, INC.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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”),
about us and our industry that involve substantial risks and
uncertainties. All statements other than statements of historical
facts contained in this report, including statements regarding our
future results of operations and financial condition, business
strategy, and plans and objectives of management for future
operations, are forward-looking statements. In some cases,
forward-looking statements may be identified by words such as
“anticipate,” “believe,” “continue,” “could,” “design,” “estimate,”
“expect,” “intend,” “may,” “plan,” “potentially,” “predict,”
“project,” “should,” “will,” “would,” or the negative of these
terms or other similar expressions. These forward-looking
statements include, but are not limited to, statements concerning
the following:
•our
financial and business performance, including key business metrics
and any underlying assumptions thereunder;
•our
market opportunity and our ability to acquire new clients and
retain existing clients;
•our
expectations and timing related to commercial product
launches;
•the
success of our go-to-market strategy;
•our
ability to scale our business and expand our
offerings;
•our
competitive advantages and growth strategies;
•our
future capital requirements and sources and uses of
cash;
•our
ability to obtain funding for our future operations;
•the
outcome of any known and unknown litigation and regulatory
proceedings;
•changes
in domestic and foreign business, market, financial, political and
legal conditions;
•future
global, regional or local economic and market conditions affecting
the cannabis industry;
•the
development, effects and enforcement of and changes to laws and
regulations, including with respect to the cannabis
industry;
•our
ability to successfully capitalize on new and existing cannabis
markets, including our ability to successfully monetize our
solutions in those markets;
•our
ability to manage future growth;
•our
ability to develop new products and solutions, bring them to market
in a timely manner, and make enhancements to our platform and our
ability to maintain and grow our two sided digital network,
including our ability to acquire and retain paying
clients;
•the
effects of competition on our future business;
•our
success in retaining or recruiting, or changes required in,
officers, key employees or directors; and
•the
possibility that we may be adversely affected by other economic,
business or competitive factors.
You should not rely on forward-looking statements as predictions of
future events. We have based the forward-looking statements
contained in this Quarterly Report on Form 10-Q primarily on our
current expectations and projections about future events and trends
that we believe may affect our business, financial condition, and
operating results. The outcome of the events described in these
forward-looking statements is subject to risks, uncertainties, and
other factors described in the section titled “Risk Factors” and
included in our Annual Report on Form 10-K for the year ended
December 31, 2021, filed with the SEC on February 25, 2022.
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 risks and
uncertainties that could have an impact on the forward-looking
statements contained in this Quarterly Report on Form 10-Q. The
results, events, and circumstances reflected in the forward-looking
statements may not be achieved or occur, and actual results,
events, or circumstances could differ materially from those
described in the forward-looking statements.
In addition, statements that “we believe,” and similar statements
reflect our beliefs and opinions on the relevant subject. These
statements are based on information available to us as of the date
of this Quarterly Report on Form 10-Q. While we believe that
information provides a reasonable basis for these statements, that
information may be limited or incomplete. Our statements should not
be read to indicate that we have conducted an exhaustive inquiry
into, or review of, all relevant information. These statements are
inherently uncertain, and investors are cautioned not to unduly
rely on these statements.
The forward-looking statements made in this Quarterly Report on
Form 10-Q relate only to events as of the date on which the
statements are made. We undertake no obligation to update any
forward-looking statements made in this Quarterly Report on Form
10-Q to reflect events or circumstances after the date of this
Quarterly Report on Form 10-Q or to reflect new information or the
occurrence of unanticipated events, except as required by law. We
may not actually achieve the plans, intentions, or expectations
disclosed in our forward-looking statements, and you should not
place undue reliance on our forward-looking statements. Our
forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures, or
investments.
Part I - Financial Information
Item 1. Financial Statements
WM TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except for share data)
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June 30, 2022 |
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December 31, 2021 |
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Assets |
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Current assets |
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Cash |
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$ |
47,604 |
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$ |
67,777 |
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Accounts receivable, net |
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27,305 |
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17,550 |
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Prepaid expenses and other current assets |
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15,375 |
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13,607 |
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Total current assets |
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90,284 |
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98,934 |
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Property and equipment, net |
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21,211 |
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13,283 |
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Goodwill |
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67,156 |
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45,295 |
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Intangible assets, net |
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11,259 |
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8,299 |
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Right-of-use assets |
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33,805 |
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36,549 |
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Deferred tax assets |
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183,222 |
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152,097 |
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Other assets |
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10,774 |
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10,687 |
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Total assets |
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$ |
417,711 |
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$ |
365,144 |
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Liabilities and Equity |
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Current liabilities |
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Accounts payable and accrued expenses |
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$ |
31,317 |
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$ |
23,155 |
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Deferred revenue |
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7,522 |
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8,057 |
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Operating lease liabilities, current |
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5,885 |
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5,463 |
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Other current liabilities |
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98 |
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1,125 |
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Total current liabilities |
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44,822 |
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37,800 |
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Operating lease liabilities, non-current |
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36,321 |
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39,377 |
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Tax Receivable Agreement liability |
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142,726 |
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128,567 |
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Warrant liability |
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13,445 |
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27,460 |
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Other long-term liabilities |
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2,473 |
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— |
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Total liabilities |
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239,787 |
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233,204 |
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Commitments and contingencies (Note 3) |
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Stockholders’ equity |
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Preferred Stock - $0.0001 par value; 75,000,000 shares authorized;
no shares issued and outstanding at June 30, 2022 and December 31,
2021
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— |
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— |
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Class A Common Stock - $0.0001 par value; 1,500,000,000 shares
authorized; 88,836,328 shares issued and outstanding at June 30,
2022 and 65,677,361 shares issued and outstanding at December 31,
2021
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9 |
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7 |
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Class V Common Stock - $0.0001 par value; 500,000,000 shares
authorized, 56,466,013 shares issued and outstanding at June 30,
2022 and 65,502,347 shares issued and outstanding at December 31,
2021
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5 |
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7 |
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Additional paid-in capital |
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59,135 |
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2,173 |
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Retained earnings |
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59,168 |
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61,369 |
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Total WM Technology, Inc. stockholders’ equity |
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118,317 |
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63,556 |
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Noncontrolling interests |
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59,607 |
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68,384 |
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Total equity |
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177,924 |
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131,940 |
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Total liabilities and equity |
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$ |
417,711 |
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$ |
365,144 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except for share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenues |
$ |
58,294 |
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$ |
46,931 |
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$ |
115,746 |
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$ |
88,085 |
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Operating expenses |
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Cost of revenues |
3,858 |
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1,908 |
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7,598 |
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3,765 |
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Sales and marketing |
22,123 |
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15,271 |
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44,005 |
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24,388 |
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Product development |
13,263 |
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10,271 |
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26,353 |
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18,139 |
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General and administrative |
29,610 |
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33,770 |
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58,665 |
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47,136 |
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Depreciation and amortization |
2,458 |
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988 |
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6,403 |
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1,990 |
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Total operating expenses |
71,312 |
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62,208 |
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143,024 |
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95,418 |
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Operating loss |
(13,018) |
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(15,277) |
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(27,278) |
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(7,333) |
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Other income (expenses) |
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Change in fair value of warrant liability |
32,234 |
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37,791 |
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14,015 |
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37,791 |
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Other expense, net |
(678) |
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(6,069) |
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(1,180) |
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(6,041) |
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Income (loss) before income taxes |
18,538 |
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16,445 |
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(14,443) |
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24,417 |
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Benefit from income taxes |
(1,310) |
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(392) |
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(3,058) |
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(151) |
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Net income (loss) |
19,848 |
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16,837 |
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(11,385) |
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24,568 |
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Net income (loss) attributable to noncontrolling
interests |
8,156 |
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12,574 |
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(9,184) |
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20,305 |
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Net income (loss) attributable to WM Technology, Inc. |
$ |
11,692 |
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$ |
4,263 |
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$ |
(2,201) |
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$ |
4,263 |
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Class A Common Stock: |
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Basic income (loss) per share |
$ |
0.14 |
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$ |
0.07 |
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$ |
(0.03) |
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$ |
0.07 |
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Diluted income (loss) per share |
$ |
0.13 |
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$ |
(0.17) |
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$ |
(0.03) |
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$ |
(0.17) |
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Class A Common Stock: |
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Weighted average basic shares outstanding |
86,425,352 |
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63,738,563 |
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79,476,383 |
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63,738,563 |
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Weighted average diluted shares outstanding |
87,230,850 |
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71,347,746 |
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79,476,383 |
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71,347,746 |
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The accompanying notes are an integral part of these condensed
consolidated financial statements.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except for share data)
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Three and Six Months Ended June 30, 2022
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Common Stock
Class A |
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Common Stock
Class V |
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Additional Paid-in Capital
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Retained Earnings |
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Total WM Technology, Inc. Stockholders’ Equity |
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Non-controlling Interests
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Total Equity
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Shares |
Par Value |
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Shares |
Par Value |
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As of December 31, 2021
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65,677,361 |
$ |
7 |
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65,502,347 |
$ |
7 |
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$ |
2,173 |
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$ |
61,369 |
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$ |
63,556 |
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$ |
68,384 |
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$ |
131,940 |
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Stock-based compensation |
— |
— |
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— |
— |
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7,246 |
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— |
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7,246 |
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681 |
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7,927 |
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Issuance of common stock - vesting of restricted stock units, net
of shares withheld for taxes |
879,284 |
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— |
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— |
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— |
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(6) |
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— |
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(6) |
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(7) |
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(13) |
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Issuance of common stock for acquisition (Note 6) |
4,721,706 |
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— |
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— |
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— |
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12,836 |
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— |
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12,836 |
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15,889 |
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28,725 |
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Issuance of common stock - Class A Unit exchange |
4,295,574 |
1 |
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(4,295,574) |
(1) |
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3,669 |
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— |
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3,669 |
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(3,669) |
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— |
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Issuance of common stock - Class P Unit exchange |
7,525,045 |
— |
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— |
— |
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6,427 |
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— |
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6,427 |
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(6,427) |
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— |
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Issuance of common stock - warrants exercised |
20 |
— |
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— |
— |
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— |
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— |
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— |
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— |
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— |
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Impact of Tax Receivable Agreement due to exchanges of Class A
Units |
— |
— |
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— |
— |
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|
11,625 |
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— |
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|
11,625 |
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— |
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|
11,625 |
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Net loss |
— |
— |
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— |
— |
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— |
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(13,893) |
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(13,893) |
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(17,340) |
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(31,233) |
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|
As of March 31, 2022 |
83,098,990 |
8 |
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61,206,773 |
6 |
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|
43,970 |
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|
47,476 |
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|
91,460 |
|
|
57,511 |
|
|
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|
148,971 |
|
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Share-based compensation |
— |
— |
|
|
— |
|
— |
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|
8,015 |
|
|
— |
|
|
8,015 |
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|
598 |
|
|
|
|
8,613 |
|
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Distributions |
— |
— |
|
|
— |
|
— |
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|
— |
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|
— |
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|
— |
|
|
(1,790) |
|
|
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|
(1,790) |
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Issuance of common stock - vesting of restricted stock
units |
543,118 |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
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|
— |
|
|
— |
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|
— |
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Impact of Tax Receivable Agreement due to exchanges of Class A
Units |
|
— |
|
|
— |
— |
|
|
2,282 |
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|
— |
|
|
2,282 |
|
|
— |
|
|
|
|
2,282 |
|
|
Class A Common shares issued - Class A Unit exchange |
4,740,760 |
1 |
|
|
(4,740,760) |
|
(1) |
|
|
4,436 |
|
|
— |
|
|
4,436 |
|
|
(4,436) |
|
|
|
|
— |
|
|
Class A Common shares issued - Class P Unit exchange |
453,460 |
— |
|
|
— |
— |
|
|
432 |
|
|
— |
|
|
432 |
|
|
(432) |
|
|
|
|
— |
|
|
Net income |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
11,692 |
|
|
11,692 |
|
|
8,156 |
|
|
|
|
19,848 |
|
|
As of June 30, 2022 |
88,836,328 |
$ |
9 |
|
|
56,466,013 |
$ |
5 |
|
|
$ |
59,135 |
|
|
$ |
59,168 |
|
|
$ |
118,317 |
|
|
$ |
59,607 |
|
|
|
|
$ |
177,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands, except for share data)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three and Six Months Ended June 30, 2021
|
|
|
Common Stock
Class A |
|
Common Stock
Class V |
|
Additional Paid-in Capital
|
|
Retained Earnings |
|
Total WM Technology, Inc. Stockholders’ Equity |
|
Non-controlling Interests
|
|
Members’ Equity |
|
Total Equity
|
|
|
Shares |
Par Value |
|
Shares |
Par Value |
|
|
|
|
|
|
|
As of December 31, 2020
|
— |
$ |
— |
|
|
— |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
29,271 |
|
|
$ |
29,271 |
|
|
Distributions to members |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,513) |
|
|
(10,513) |
|
|
Repurchase of Class B Units |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(106) |
|
|
(106) |
|
|
Net income |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
7,731 |
|
|
7,731 |
|
|
As of March 31, 2021 |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26,383 |
|
|
26,383 |
|
|
Share-based compensation |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
19,433 |
|
|
— |
|
|
19,433 |
|
|
Distributions to members |
— |
— |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,597) |
|
|
(7,597) |
|
|
Repurchase of Class B Units |
— |
— |
|
|
— |
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
(5,459) |
|
|
(5,459) |
|
|
Proceeds and shares issued in the Business Combination (Note
6) |
63,738,563 |
6 |
|
|
65,502,347 |
7 |
|
|
(20,212) |
|
|
986 |
|
|
(19,213) |
|
|
(45,425) |
|
|
(20,674) |
|
|
(85,312) |
|
|
Net income |
— |
— |
|
|
|
— |
|
|
— |
|
|
4,263 |
|
|
4,263 |
|
|
5,227 |
|
|
7,347 |
|
|
16,837 |
|
|
As of June 30, 2021
|
63,738,563 |
$ |
6 |
|
|
65,502,347 |
$ |
7 |
|
|
$ |
(20,212) |
|
|
$ |
5,249 |
|
|
$ |
(14,950) |
|
|
$ |
(20,765) |
|
|
$ |
— |
|
|
$ |
(35,715) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
Cash flows from operating activities |
|
|
|
|
Net (loss) income |
$ |
(11,385) |
|
|
$ |
24,568 |
|
|
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities: |
|
|
|
|
Depreciation and amortization |
6,403 |
|
|
1,990 |
|
|
Change in fair value of warrant liability |
(14,015) |
|
|
(37,791) |
|
|
Impairment loss on right-of-use asset |
551 |
|
|
2,372 |
|
|
Stock-based compensation |
15,611 |
|
|
19,433 |
|
|
Deferred income taxes |
(3,058) |
|
|
(392) |
|
|
Provision for doubtful accounts |
4,691 |
|
|
660 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
Accounts receivable |
(13,612) |
|
|
(2,104) |
|
|
Prepaid expenses and other assets |
2,867 |
|
|
4,362 |
|
|
Other assets |
(87) |
|
|
32 |
|
|
Accounts payable and accrued expenses |
8,851 |
|
|
1,737 |
|
|
Deferred revenue |
(631) |
|
|
1,672 |
|
|
Net cash (used in) provided by operating activities |
(3,814) |
|
|
16,539 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchases of property and equipment |
(8,554) |
|
|
(836) |
|
|
Cash paid for acquisitions, net of cash acquired |
(713) |
|
|
— |
|
|
Cash paid for acquisition holdback release |
(1,000) |
|
|
— |
|
|
Net cash used in investing activities |
(10,267) |
|
|
(836) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Taxes paid related to net share settlement of equity
awards |
(13) |
|
|
— |
|
|
Proceeds from the Business Combination |
— |
|
|
80,284 |
|
|
Repayment of note payable |
— |
|
|
(205) |
|
|
Distributions |
(1,790) |
|
|
(18,110) |
|
|
Repurchase of Class B Units |
— |
|
|
(5,565) |
|
|
Repayments of insurance premium financing |
(4,289) |
|
|
(364) |
|
|
Net cash (used in) provided by financing activities |
(6,092) |
|
|
56,040 |
|
|
|
|
|
|
|
Net (decrease) increase in cash |
(20,173) |
|
|
71,743 |
|
|
Cash – beginning of period |
67,777 |
|
|
19,919 |
|
|
Cash – end of period |
$ |
47,604 |
|
|
$ |
91,662 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
(Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
Supplemental disclosures of noncash activities |
|
|
|
|
Issuance of equity for acquisitions |
$ |
28,725 |
|
|
$ |
— |
|
|
Insurance premium financing |
$ |
4,598 |
|
|
$ |
11,092 |
|
|
Stock-based compensation capitalized for software
development |
$ |
929 |
|
|
$ |
— |
|
|
Accrued liabilities assumed in connection with
acquisition |
$ |
586 |
|
|
$ |
— |
|
|
Holdback liability recognized in connection with
acquisition |
$ |
98 |
|
|
$ |
— |
|
|
Capitalized assets included in accounts payable and accrued
expenses |
$ |
1,434 |
|
|
$ |
— |
|
|
Warranty liability assumed from the Business
Combination |
$ |
— |
|
|
$ |
193,978 |
|
|
Tax receivable agreement liability recognized in connection with
the Business Combination |
$ |
— |
|
|
$ |
126,150 |
|
|
Deferred tax assets recognized in connection with the Business
Combination |
$ |
— |
|
|
$ |
147,973 |
|
|
Other assets assumed from the Business Combination |
$ |
— |
|
|
$ |
1,053 |
|
The accompanying notes are an integral part of these condensed
consolidated financial statements.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Organization
WM Technology, Inc. (the “Company”) is one of the oldest and
largest marketplace and technology solutions providers exclusively
servicing the cannabis industry, primarily consumers, retailers,
delivery services and brands in the United States state-legal and
Canadian cannabis markets. The Company’s business primarily
consists of its commerce-driven marketplace, Weedmaps, and its
monthly subscription software offering, WM Business. The Company’s
Weedmaps marketplace provides information on the cannabis plant and
the industry and advocates for legalization. The Weedmaps
marketplace provides consumers with information regarding cannabis
retailers and brands, as well as the strain, pricing, and other
information regarding locally available cannabis products, through
the Company’s website and mobile apps, permitting product
discovery, access to deals and discounts, and reservation of
products for pickup by consumers or delivery to consumers by
participating retailers. WM Business, the Company’s subscription
package, is a comprehensive set of eCommerce and compliance
software solutions catered towards cannabis retailers, delivery
services and brands where clients receive access to a standard
listing page and its suite of software solutions, including WM
Orders, WM Dispatch, WM Store, WM Dashboard, WM Connectors
(integrations and API platform), as well as access to its WM
Exchange products, where available. The Company charges a monthly
fee to clients for access to its WM Business subscription package
and then offers other add-on products for additional fees,
including its featured listings and its Sprout (client relationship
management), Cannveya (delivery and logistics software) and
Enlighten (software, digital signage services and multi-media
offerings) solutions. The Company sells its WM Business offering in
the United States, currently offers some of its WM Business
solutions in Canada and has a limited number of non-monetized
listings in several other countries including Austria, Germany, the
Netherlands, Spain and Switzerland. The Company operates in the
United States, Canada, and other foreign jurisdictions where
medical and/or adult cannabis use is legal under state or
applicable national law. The Company is headquartered in Irvine,
California.
WM Technology, Inc. was initially incorporated in the Cayman
Islands on June 7, 2019 under the name “Silver Spike Acquisition
Corp” (“Silver Spike”). Silver Spike was formed for the purpose of
effecting a merger, amalgamation, share exchange, asset
acquisition, share purchase, reorganization or similar business
combination with one or more businesses. On June 16, 2021 (the
“Closing Date”), Silver Spike consummated the business combination
(the “Business Combination”), pursuant to that certain Agreement
and Plan of Merger, dated December 10, 2020 (the “Merger
Agreement”), by and among Silver Spike, Silver Spike Merger Sub
LLC, a Delaware limited liability company and a wholly owned direct
subsidiary of Silver Spike Acquisition Corp. (“Merger Sub”), WM
Holding Company, LLC, a Delaware limited liability company (when
referred to in its pre-Business Combination capacity, “Legacy WMH”
and following the Business Combination, “WMH LLC”), and Ghost Media
Group, LLC, a Nevada limited liability company, solely in its
capacity as the initial holder representative (the “Holder
Representative”). On the Closing Date, and in connection with the
closing of the Business Combination (the “Closing”), Silver Spike
was domesticated and continues as a Delaware corporation, changing
its name to WM Technology, Inc.
The Company was reorganized into an Up-C structure, in which
substantially all of the assets and business of the Company are
held by WMH LLC and continue to operate through WMH LLC and its
subsidiaries, and WM Technology, Inc.’s material assets are the
equity interests of WMH LLC indirectly held by it. Legacy WMH was
determined to be the accounting acquirer in the Business
Combination, which was accounted for as a reverse recapitalization
in accordance with accounting principles generally accepted in the
United States of America (“GAAP”).
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. Summary of Significant Accounting
Policies
The summary of significant accounting policies presented below is
designed to assist in understanding the Company’s condensed
consolidated financial statements. Such condensed consolidated
financial statements and accompanying notes are the representations
of the Company’s management, who is responsible for their integrity
and objectivity. Management believes that these accounting policies
conform to GAAP in all material respects, and have been
consistently applied in preparing the accompanying condensed
consolidated financial statements.
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with GAAP and
applicable rules and regulations of the U.S. Securities and
Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and
Article 10-1 of Regulation S-X. Accordingly, certain information
and footnotes required by GAAP in annual financial statements have
been omitted or condensed and these interim financial statements
should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2021,
filed with the SEC on February 25, 2022. The condensed financial
statements of the Company include all adjustments of a normal
recurring nature which, in the opinion of management, are necessary
for a fair statement of the Company’s financial position as of June
30, 2022, and results of its operations and its cash flows for the
interim periods presented. The results of operations for the three
and six months ended June 30, 2022 are not necessarily indicative
of the results to be expected for the entire year. There have been
no significant changes in the Company’s accounting policies from
those described in the Company’s audited consolidated financial
statements and the related notes to those statements.
Pursuant to the Merger Agreement, the Business Combination was
accounted for as a reverse recapitalization in accordance with GAAP
(the “Reverse Recapitalization”). Under this method of accounting,
Silver Spike was treated as the acquired company and Legacy WMH was
treated as the acquirer for financial statement reporting
purposes.
Accordingly, for accounting purposes, the Reverse Recapitalization
was treated as the equivalent of Legacy WMH issuing stock for the
net assets of Silver Spike, accompanied by a
recapitalization.
Legacy WMH was determined to be the accounting acquirer based on
evaluation of the following facts and circumstances:
•Legacy
WMH Class A Unit holders, through their ownership of the Class V
Common Stock, had the greatest voting interest in the Company with
over 50% of the voting interest;
•Legacy
WMH selected the majority of the new board of directors of the
Company;
•Legacy
WMH senior management was the senior management of the Company;
and
•Legacy
WMH was the larger entity based on historical operating activity
and had the larger employee base.
Thus, the financial statements included in this quarterly report
reflect (i) the historical operating results of Legacy WMH prior to
the Business Combination; (ii) the combined results of the WMH LLC
and Silver Spike following the Business Combination; and (iii) the
acquired assets and liabilities of Silver Spike stated at
historical cost, with no goodwill or other intangible assets
recorded.
Principles of Consolidation
The condensed consolidated financial statements include the
accounts of WM Technology, Inc. and WM Holding Company, LLC,
including their wholly and majority owned subsidiaries. In
conformity with GAAP, all significant intercompany accounts and
transactions have been eliminated.
Foreign Currency
Assets and liabilities denominated in a foreign currency are
translated into U.S. dollars using the exchange rates in effect at
the balance sheet date. Revenue and expense accounts are translated
at the average exchange rates during the periods. The impact of
exchange rate fluctuations from translation of assets and
liabilities is insignificant for the three and six months ended
June 30, 2022 and 2021.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Use of Estimates
The preparation of consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
interim condensed consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
Significant estimates made by management include, among others, the
valuation of accounts receivable, the useful lives of long-lived
assets, income taxes, website and internal-use software development
costs, leases, valuation of goodwill and other intangible assets,
valuation of warrant liability, deferred tax asset, tax receivable
agreement liability, revenue recognition, stock-based compensation,
and the recognition and disclosure of contingent
liabilities.
Risks and Uncertainties
The Company operates in a relatively new industry where laws and
regulations vary significantly by jurisdiction. Currently, the
majority of U.S. states permit medical cannabis, and several permit
adult use. Additionally, while a number of U.S. legislators have
introduced various bills to legalize cannabis at the federal level,
none of these bills has become law. Currently, under federal law,
cannabis, other than hemp (defined by the U.S. government as
Cannabis sativa L. with a THC concentration of not more than 0.3%
on a dry weight basis), is still a Schedule I controlled substance
under the Controlled Substances Act (“CSA”). Even in states or
territories that have legalized cannabis to some extent, the
cultivation, possession, and sale of cannabis all violate the CSA
and are punishable by imprisonment, substantial fines, and
forfeiture. Moreover, individuals and entities may violate federal
law if they aid and abet another in violating the CSA, or conspire
with another to violate the law, and violating the CSA is a
predicate for certain other crimes, including money laundering laws
and the Racketeer Influenced and Corrupt Organizations Act. If any
of the states that permit use of cannabis were to change their laws
or the federal government was to actively enforce the CSA or other
laws related to the federal prohibition on cannabis, the Company’s
business could be adversely affected.
In addition, the Company’s ability to grow and meet its operating
objectives depends largely on the continued legalization and
regulation of cannabis on a widespread basis. There can be no
assurance that such legalization will occur on a timely basis, or
at all.
Fair Value Measurements
The Company follows the guidance in ASC 820 -
Fair Value Measurements
for its financial assets and liabilities that are re-measured and
reported at fair value at each reporting period.
The fair value of the Company’s financial assets and liabilities
reflects management’s estimate of amounts that the Company would
have received in connection with the sale of the assets or paid in
connection with the transfer of the liabilities in an orderly
transaction between market participants at the measurement date. In
connection with measuring the fair value of its assets and
liabilities, the Company seeks to maximize the use of observable
inputs (market data obtained from independent sources) and to
minimize the use of unobservable inputs (internal assumptions about
how market participants would price assets and liabilities). The
following fair value hierarchy is used to classify assets and
liabilities based on the observable inputs and unobservable inputs
used in order to value the assets and liabilities:
•Level
1: Quoted prices in active markets for identical assets or
liabilities. An active market for an asset or liability is a market
in which transactions for the asset or liability occur with
sufficient frequency and volume to provide pricing information on
an ongoing basis.
•Level
2: Observable inputs other than Level 1 inputs. Examples of Level 2
inputs include quoted prices in active markets for similar assets
or liabilities and quoted prices for identical assets or
liabilities in markets that are not active.
•Level
3: Unobservable inputs based on the Company assessment of the
assumptions that market participants would use in pricing the asset
or liability.
Accounts Receivable
Accounts receivable is recorded at the invoiced amount and does not
bear interest.
The Company measures credit losses on its trade accounts receivable
using the current expected credit loss model under ASC 326
Financial Instruments – Credit Losses,
which is based on the expected losses rather than incurred losses.
Under the
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
credit loss model, lifetime expected credit losses are measured and
recognized at each reporting date based on historical, current and
forecast information.
The Company calculates the expected credit losses on a pool basis
for those trade receivables that have similar risk characteristics.
For those trade receivables that do not share similar risk
characteristics, the allowance for doubtful accounts is calculated
on an individual basis. Risk characteristics relevant to the
Company’s accounts receivable include balance of customer account
and aging status.
Account balances are written off against the allowance when it is
determined that it is probable that the receivable will not be
recovered. The Company recorded a provision for doubtful accounts
of $8.0 million and $5.2 million as of June 30, 2022 and
December 31, 2021, respectively.
The following table summarizes the changes in the allowance for
doubtful accounts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
Allowance, beginning of period |
$ |
7,242 |
|
|
$ |
675 |
|
|
$ |
5,169 |
|
|
$ |
914 |
|
|
|
Addition to allowance |
1,932 |
|
|
545 |
|
|
4,691 |
|
|
660 |
|
|
|
Write-off, net of recoveries |
(1,203) |
|
|
(501) |
|
|
(1,889) |
|
|
(855) |
|
|
|
Allowance, end of period |
$ |
7,971 |
|
|
$ |
719 |
|
|
$ |
7,971 |
|
|
$ |
719 |
|
|
Investments in Equity Securities
Investments in equity securities that do not have a readily
determinable fair value and qualify for the measurement alternative
for equity investments provided in ASC 321,
Investments – Equity Securities
are accounted for at cost, less any impairment, plus or minus
changes resulting from observable price changes in orderly
transactions for an identical or similar investment of the same
issuer. As of June 30, 2022 and December 31, 2021, the carrying
value of the Company’s investments in equity securities without a
readily determinable fair value was $6.5 million, which is
recorded within Other assets on the Company’s condensed
consolidated balance sheets.
Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation, and consist of internally developed software,
computer equipment, furniture and fixtures and leasehold
improvements. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets and generally
over five years for computer equipment, seven years for furniture
and fixtures and five years for leasehold improvements. Maintenance
and repairs are expensed as incurred. When assets are retired or
otherwise disposed of, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain
or loss is reflected in the Company’s condensed consolidated
statements of operations.
Capitalized website and internal-use software development costs are
included in property and equipment in the accompanying condensed
consolidated balance sheets. The Company capitalizes certain costs
related to the development and enhancement of the Weedmaps platform
and SaaS solutions. The Company began to capitalize these costs
when preliminary development efforts were successfully completed,
management has authorized and committed project funding, and it was
probable that the project would be completed and the software would
be used as intended. Capitalization ceases upon completion of all
substantial testing. Maintenance and training costs are expensed as
incurred. Such costs are amortized when placed in service, on a
straight-line basis over the estimated useful life of the related
asset, generally estimated to be three years. Costs incurred for
enhancements that were expected to result in additional features or
functionality are capitalized and expensed over the estimated
useful life of the enhancements, generally three years. Product
development costs that do not meet the criteria for capitalization
are expensed as incurred.
The Company assess impairment of property and equipment when an
event and change in circumstance indicates that the carrying value
of such assets may not be recoverable. If an event and a change in
circumstance indicates that the carrying amount of an asset (or
asset group) may not be recoverable and the expected undiscounted
cash flows attributable to the asset are less than its carrying
value, an impairment loss, if any, equals to the excess of the
asset’s carrying value over its fair value is
recognized.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Leases
The Company classifies arrangements meeting the definition of a
lease as operating or financing leases, and leases are recorded on
the consolidated balance sheet as both a right-of-use asset (“ROU”)
and lease liability, calculated by discounting fixed lease payments
over the lease term at the rate implicit in the lease or the
Company’s incremental borrowing rate. Lease liabilities are
increased by interest and reduced by payments each period, and the
right-of-use asset is amortized over the lease term. For operating
leases, interest on the lease liability and the amortization of the
right-of-use asset result in straight-line rent expense over the
lease term. For finance leases, interest on the lease liability and
the amortization of the right-of-use asset results in front-loaded
expense over the lease term. Variable lease expenses are recorded
when incurred.
In calculating the right-of-use asset and lease liability, the
Company elects to combine lease and non-lease components for all
classes of assets. The Company excludes short-term leases having
initial terms of 12 months or less from the new guidance as an
accounting policy election, and instead recognizes rent expense on
a straight-line basis over the lease term.
The Company assess impairment of ROU assets when an event and
change in circumstance indicates that the carrying value of such
ROU assets may not be recoverable. If an event and a change in
circumstance indicates that the carrying value of an ROU asset may
not be recoverable and the estimated fair value attributable to the
ROU asset is less than its carrying value, an impairment loss, if
any, equals to the excess of the ROU asset’s carrying value over
its fair value is recognized.
Total net lease costs for the three and six months ended June 30,
2022 were $2.3 million and $4.8 million, respectively.
Total lease costs for the three and six months ended June 30, 2021
were $3.1 million and $6.0 million,
respectively.
Sublease rental income is recognized as a reduction to the related
lease expense on a straight-line basis over the sublease term. For
the three and six months ended June 30, 2022, the Company recorded
contra rent expense of $0.4 million and $0.8 million,
respectively.
During the three and six months ended June 30, 2022, the Company
recognized an impairment charge of $0.6 million and an
impairment charge of $2.4 million for the three and six months
ended and June 30, 2021 related to certain ROU assets reducing the
carrying values of the lease assets to their estimated fair values.
The fair values were estimated using an income approach based on
management’s forecast of future cash flows expected to be derived
based on the sublease market rent. The impairment charges are
included in general and administrative expenses in the consolidated
statements of operations.
Warrant Liability
The Company assumed 12,499,993 public warrants originally issued in
the initial public offering of Silver Spike (the “Public Warrants”)
and 7,000,000 Private Placement Warrants that were originally
issued in a private placement by Silver Spike (the “Private
Placement Warrants” and together with the Public Warrants, the
“Warrants”) upon the Closing, all of which were issued in
connection with Silver Spike’s initial public offering and entitle
the holder to purchase one share of Class A Common Stock at an
exercise price of at $11.50 per share. As of June 30, 2022,
12,499,973 Public Warrants and 7,000,000 Private Placement Warrants
remained outstanding. The Public Warrants are publicly traded and
are exercisable for cash unless certain conditions occur, such as
the failure to have an effective registration statement related to
the shares issuable upon exercise or redemption by the Company
under certain conditions, at which time the warrants may be
cashless exercised. The Private Placement Warrants are
transferable, assignable or salable in certain limited exceptions.
The Private Placement Warrants are exercisable for cash or on a
cashless basis, at the holder’s option, and are non-redeemable so
long as they are held by the initial purchasers or their permitted
transferees. If the Private Placement Warrants are held by someone
other than the initial purchasers or their permitted transferees,
the Private Placement Warrants will cease to be Private Placement
Warrants, and become Public Warrants and be redeemable by the
Company and exercisable by such holders on the same basis as the
other Public Warrants.
The Company evaluated the Warrants under ASC 815-40
-
Derivatives and Hedging - Contracts in Entity’s Own
Equity,
and concluded they do not meet the criteria to be classified in
stockholders’ equity. Specifically, the exercise of the Warrants
may be settled in cash upon the occurrence of a tender offer or
exchange that involves 50% or more of our Class A equity holders.
Because not all of the voting stockholders need to participate in
such tender offer or exchange to trigger the potential cash
settlement and the Company does not control the occurrence of such
an event, the Company concluded that the Warrants do not meet the
conditions to be classified in equity. Since the Warrants meet the
definition of a derivative under ASC 815, the Company recorded
these warrants as liabilities on the condensed consolidated balance
sheets at fair value, with subsequent changes in their respective
fair values recognized in change in fair value of warrant
liabilities within the condensed consolidated statements of
operations at each reporting date.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Tax Receivable Agreement
In connection with the Business Combination, the Company entered
into a tax receivable agreement (the “Tax Receivable Agreement”)
with continuing members that provides for a payment to the
continuing Class A Unit holders of 85% of the amount of tax
benefits, if any, that the Company realizes, or is deemed to
realize, as a result of redemptions or exchanges of Units. In
connection with such potential future tax benefits resulting from
the Business Combination, the Company has established a deferred
tax asset for the additional tax basis and a corresponding TRA
liability of 85% of the expected benefit. The remaining 15% is
recorded to additional paid-in capital.
Revenue Recognition
The Company’s revenues are derived primarily from monthly
subscriptions and additional offerings for access to the Company’s
Weedmaps platform and SaaS solutions. The Company recognizes
revenue when the fundamental criteria for revenue recognition are
met. The Company recognizes revenue by applying the following
steps: the contract with the customer is identified; the
performance obligations in the contract are identified; the
transaction price is determined; the transaction price is allocated
to the performance obligations in the contract; and revenue is
recognized when (or as) the Company satisfies these performance
obligations in an amount that reflects the consideration it expects
to be entitled to in exchange for those services. The Company
excludes sales taxes and other similar taxes from the measurement
of the transaction price. For clients that pay in advance for
listing and other services, the Company records deferred revenue
and recognizes revenue over the applicable subscription
term.
The Company offers WM Business subscriptions, which include access
to the Weedmaps marketplace and certain SaaS solutions. As add-ons
for additional fees, the Company offers other products, including
featured listings, placements, promoted deals, nearby listings,
other display advertising, client relationship management, digital
menu, and delivery and logistics services. The Company’s WM
Business subscriptions generally have one-month terms that
automatically renew unless notice of cancellation is provided in
advance. The Company has a fixed inventory of featured listing and
display advertising in each market, and price is generally
determined through a competitive auction process that reflects
local market demand. Revenues for these arrangements are recognized
over-time, generally during a month-to-month subscription period as
the products are provided. The Company rarely needs to allocate the
transaction price to separate performance obligations. In the rare
case that allocation of the transaction price is needed, the
Company recognizes revenue in proportion to the standalone selling
prices of the underlying services at contract
inception.
Disaggregation of revenue
The following table presents the Company’s revenues disaggregated
by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
WM Business subscriptions |
$ |
11,563 |
|
|
$ |
10,636 |
|
|
$ |
22,984 |
|
|
$ |
20,258 |
|
|
Featured listings |
29,634 |
|
|
25,809 |
|
|
60,119 |
|
|
48,609 |
|
|
Other Ad and SaaS solutions |
17,097 |
|
|
10,486 |
|
|
32,643 |
|
|
19,218 |
|
|
Total revenues |
$ |
58,294 |
|
|
$ |
46,931 |
|
|
$ |
115,746 |
|
|
$ |
88,085 |
|
Deferred revenue primarily consists of billings or payments
received in advance of revenue recognition from subscription
offerings, as described above, and is recognized as the revenue
recognition criteria are met. Deferred revenue as of December 31,
2021 of $8.1 million was fully recognized in the first quarter of
fiscal year 2022, and the deferred revenue balance as of June 30,
2022 of $7.5 million is expected to be fully recognized within the
next twelve months. The Company generally invoices customers and
receives payment on an upfront basis and payments do not include
significant financing components or variable consideration and
there are generally no rights of return or refunds after the
subscription period has passed.
All revenues during the periods presented were recognized over
time, as opposed to at a point in time. Substantially all of the
revenue has been generated in the United States during the periods
presented.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Cost of Revenues
The Company’s cost of revenue primarily consists of web hosting,
internet service costs, credit card processing costs and inventory
costs related to multi-media offerings.
Product Development Costs
Product development costs include salaries and benefits for
employees, including engineering and technical teams who are
responsible for building new products, as well as improving
existing products. Product development costs that do not meet the
criteria for capitalization are expensed as incurred.
Advertising
The Company expenses the cost of advertising in the period
incurred. Advertising expense totaled $5.4 million and $4.8 million
for the three months ended June 30, 2022 and 2021, respectively,
and $10.3 million and $7.8 million for the six months ended June
30, 2022 and 2021, respectively, and are included in sales and
marketing expense in the accompanying condensed consolidated
statements of operations.
Stock-Based Compensation
The Company measures fair value of employee stock-based
compensation awards on the date of grant and allocates the related
expense over the requisite service period. The fair value of
restricted stock units and performance-based restricted stock units
is equal to the market price of the Company’s common stock on the
date of grant. The fair value of the Class P Units is measured
using the Black-Scholes-Merton valuation model. The expected
volatility is based on the historical volatility and implied
volatilities for comparable companies, the expected life of the
award is based on the simplified method. When awards include a
performance condition that impacts the vesting of the award, the
Company records compensation cost when it becomes probable that the
performance condition will be met and the expense will be
attributed over the performance period.
The Company accounts for nonemployee stock-based transactions using
the fair value of the consideration received (i.e., the value of
the goods or services) or the fair value of the equity instruments
issued, whichever is more reliably measurable.
Income Taxes
The Company uses the asset and liability method of accounting for
income taxes under ASC 740 - Income Taxes. Under the guidance,
deferred tax assets and liabilities are recognized for the future
tax consequences of (i) temporary differences between the financial
statement carrying amounts and the tax bases of existing assets and
liabilities and (ii) operating loss and tax credit carryforwards.
Deferred income tax assets and liabilities are based on enacted tax
rates applicable to the future period when those temporary
differences are expected to be recovered or settled. The effect of
a change in tax rates on deferred tax assets and liabilities is
recognized in income in the period the rate change is enacted. A
valuation allowance is provided for deferred tax assets when it is
more-likely-than-not the deferred tax assets will not be
realized.
The tax provision for interim periods is determined using an
estimate of the Company’s annual effective tax rate, adjusted for
discrete items, if any, that arise during the period. Each quarter,
the Company updates its estimate of its annual effective tax rate,
and if the estimated annual effective tax rate changes, the Company
makes a cumulative adjustment in such period. The quarterly tax
provision, and estimate of the Company’s annual effective tax rate,
is subject to variation due to several factors, including
variability in pre-tax income (or loss), revaluations of the
warrant liability, changes in flow-through income not subject to
tax and tax law developments.
As a result of the Business Combination, WM Technology, Inc. became
the sole managing member of WMH LLC, which is treated as a
partnership for U.S. federal and most applicable state and local
income tax purposes. As a partnership, WMH LLC is not subject to
U.S. federal and certain state and local income taxes. Accordingly,
no provision for U.S. federal and state income taxes has been
recorded in the financial statements for the period of January 1 to
June 16, 2021 as this period was prior to the Business Combination.
Any taxable income or loss generated by WMH LLC is passed through
to and included in the taxable income or loss of its members,
including WM Technology, Inc. following the Business Combination,
on a pro rata basis. WM Technology, Inc. is subject to U.S. federal
income taxes, in addition to state and local income taxes with
respect to its allocable share of any taxable income of WMH LLC
following the Business Combination. The Company is also subject to
taxes in foreign jurisdictions.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the three and six months ended June 30, 2022, the Company
recorded an income tax benefit of $1.3 million and $3.1 million,
respectively, and for the three and six months ended June 30, 2021
an income tax benefit of $0.4 million and $0.2 million was
recorded. The income tax benefit for the three and six months
quarter of 2022 was the result of the tax benefit of the Company’s
pro rata share of losses and tax credits flowing through from WM
Holding LLC. The tax benefit related to U.S. federal and state tax
benefits from certain Business Combination-related expenses offset,
in part, by income taxes recorded during the period ended March 31,
2021 as a result of an audit performed by the Canada Revenue Agency
on prior years income taxes paid by the Company’s subsidiary, WM
Canada Holdings, Inc. The effective tax rates differ from the
federal statutory rate of 21% primarily due to the impact of
warrant valuations, non-controlling interests represented by the
portion of the flow-through income not subject to tax, permanent
stock-based compensation and state taxes.
During the six months ended June 30, 2022, the Company acquired
additional interest in WM Holding Company LLC (“LLC Interests”) in
connection with the exchange of LLC Interests, and activity
relating to its stock compensation plan. The Company recognized a
deferred tax asset in the amount of $28.1 million associated
with the basis difference in its investment in WM Holding Company
LLC upon acquisition of these LLC Interests, some of which are
related to the additional tax basis increases generated from
expected future payments under the Tax Receivable Agreement
(“TRA”), some of which are partially offset by the TRA liability
amount of $14.2 million, and these amounts were recorded
through equity.
ASC 740 prescribes a recognition threshold and a measurement
attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For
those benefits to be recognized, a tax position must be
more-likely-than-not to be sustained upon examination by taxing
authorities. The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. The
Company does not believe it has any uncertain income tax positions
that are more-likely-than-not to materially affect its condensed
consolidated financial statements.
Segment Reporting
The Company and its subsidiaries operate in one business
segment.
Earnings Per Share
Basic income (loss) per share is computed by dividing net income
(loss) attributable to WM Technology, Inc. by the weighted-average
number of shares of Class A Common Stock outstanding during the
period.
Diluted income (loss) per share is computed giving effect to all
potential weighted-average dilutive shares for the period. The
dilutive effect of outstanding awards or financial instruments, if
any, is reflected in diluted income (loss) per share by application
of the treasury stock method or if-converted method, as applicable.
Stock awards are excluded from the calculation of diluted EPS in
the event they are antidilutive or subject to performance
conditions for which the necessary conditions have not been
satisfied by the end of the reporting period. See Note 12 for
additional information on dilutive securities.
Prior to the Business Combination, the membership structure of
Legacy WMH included units which had profit interests. The Company
analyzed the calculation of earnings per unit for periods prior to
the Business Combination and determined that it resulted in values
that would not be meaningful to the users of these condensed
consolidated financial statements. As a result, earnings per share
information has not been presented for periods prior to the
Business Combination on June 16, 2021.
Concentrations of Credit Risk
The Company’s financial instruments are potentially subject to
concentrations of credit risk. The Company places its cash with
high quality credit institutions. From time to time, the Company
maintains cash balances at certain institutions in excess of the
Federal Deposit Insurance Corporation limit. Management believes
that the risk of loss is not significant and has not experienced
any losses in such accounts.
Recent Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (“FASB”)
issued ASU 2021-08, Business Combinations (Topic 805): Accounting
for Contract Assets and Contract Liabilities from Contracts with
Customers (“ASU 2021-08”). The amendments in ASU 2021-08 require
that an entity recognize and measure contract assets and contract
liabilities acquired in a business combination in accordance with
Accounting Standards Codification (“ASC”) 606, Revenue from
Contracts from Customers (“ASC 606”). At the acquisition date, an
acquirer should account for the related revenue contracts in
accordance with ASC 606 as if it had originated the contracts. To
achieve this, an acquirer may assess how the acquiree applied ASC
606 to
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
determine what to record for the acquired revenue contracts.
Generally, this should result in an acquirer recognizing and
measuring the acquired contract assets and contract liabilities
consistent with how they were recognized and measured in the
acquiree’s financial statements (if the acquiree financial
statements were prepared in accordance with generally accepted
accounting principles). For public business entities, the
amendments in ASU 2021-08 are effective for fiscal years beginning
after December 15, 2022, including interim periods within those
fiscal years. Early adoption of ASU 2021-08 is permitted, including
adoption in an interim period. An entity that early adopts in an
interim period should apply the amendments (1) retrospectively to
all business combinations for which the acquisition date occurs on
or after the beginning of the fiscal year that includes the interim
period of early application and (2) prospectively to all business
combinations that occur on or after the date of initial
application. The Company adopted this new guidance as of January 1,
2022. The adoption did not have a material impact on the Company’s
condensed consolidated financial statements.
3. Commitments and
Contingencies
Litigation
During the ordinary course of the Company’s business, it is subject
to various claims and litigation. Management believes that the
outcome of such claims or litigation will not have a material
adverse effect on the Company’s financial position, results of
operations or cash flow.
4. Fair Value Measurements
The following table presents information about the Company’s
liabilities that are measured at fair value on a recurring basis at
June 30, 2022 and December 31, 2021, and indicates the fair value
hierarchy of the valuation inputs the Company utilized to determine
such fair value (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level |
|
June 30, 2022 |
|
December 31, 2021 |
|
Liabilities: |
|
|
|
|
|
|
|
Warrant liability – Public Warrants |
|
1 |
|
$ |
8,125 |
|
|
$ |
16,750 |
|
|
Warrant liability – Private Placement Warrants |
|
3 |
|
5,320 |
|
|
10,710 |
|
|
Total warrant liability |
|
|
|
$ |
13,445 |
|
|
$ |
27,460 |
|
The following tables summarize the changes in the fair value of the
warrant liabilities (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2022 |
|
Six Months Ended June 30, 2022 |
|
Public Warrants |
|
Private Placement Warrants |
|
Warrant Liabilities |
|
Public Warrants |
|
Private Placement Warrants |
|
Warrant Liabilities |
|
Fair value, beginning of period |
$ |
27,500 |
|
|
$ |
18,179 |
|
|
$ |
45,679 |
|
|
$ |
16,750 |
|
|
$ |
10,710 |
|
|
$ |
27,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation inputs or other assumptions |
(19,375) |
|
|
(12,859) |
|
|
(32,234) |
|
|
(8,625) |
|
|
(5,390) |
|
|
(14,015) |
|
|
Fair value, end of period |
$ |
8,125 |
|
|
$ |
5,320 |
|
|
$ |
13,445 |
|
|
$ |
8,125 |
|
|
$ |
5,320 |
|
|
$ |
13,445 |
|
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three and Six Months Ended June 30, 2021 |
|
|
Public Warrants |
|
Private Warrants |
|
Warrant Liabilities |
|
Fair value, beginning of period |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
Warrant liability acquired |
|
100,750 |
|
|
93,228 |
|
|
193,978 |
|
|
Change in valuation inputs or other assumptions |
|
(21,375) |
|
|
(16,416) |
|
|
(37,791) |
|
|
Fair value, end of period |
|
$ |
79,375 |
|
|
$ |
76,812 |
|
|
$ |
156,187 |
|
Public Warrants
The Company determined the fair value of the Public Warrants, based
on the publicly listed trading price of such warrants as of the
valuation date. Accordingly, the Public Warrants are classified as
Level 1 financial instruments. The fair value of the Public
Warrants was $8.1 million and $16.8 million as of June 30, 2022 and
December 31, 2021, respectively.
Private Placement Warrants
The estimated fair value of the Private Placement Warrants is
determined with Level 3 inputs using the Black-Scholes model. The
significant inputs and assumptions in this method are the stock
price, exercise price, volatility, risk-free rate, and term or
maturity. The underlying stock price input is the closing stock
price as of each valuation date and the exercise price is the price
as stated in the warrant agreement. The volatility input was
determined using the historical volatility of comparable publicly
traded companies which operate in a similar industry or compete
directly against the Company. Volatility for each comparable
publicly traded company is calculated as the annualized standard
deviation of daily continuously compounded returns. The
Black-Scholes analysis is performed in a risk-neutral framework,
which requires a risk-free rate assumption based upon
constant-maturity treasury yields, which are interpolated based on
the remaining term of the Private Placement Warrants as of each
valuation date. The term/maturity is the duration between each
valuation date and the maturity date, which is five years following
the date the Business Combination closed, or June 16,
2026.
The following table provides quantitative information regarding
Level 3 fair value measurements inputs at their measurement
dates:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
December 31, 2021 |
|
Exercise price |
|
$ |
11.50 |
|
|
$ |
11.50 |
|
|
Stock price |
|
$ |
3.29 |
|
|
$ |
5.98 |
|
|
Volatility |
|
67.5 |
% |
|
52.4 |
% |
|
Term (years) |
|
3.96 |
|
4.46 |
|
Risk-free interest rate |
|
3.00 |
% |
|
1.18 |
% |
Significant changes in the volatility would result in a significant
lower or higher fair value measurement, respectively.
The fair value of the Private Placement Warrants was $5.3 million
and $10.7 million as of June 30, 2022 and December 31, 2021,
respectively.
The Warrants were accounted for as liabilities in accordance with
ASC 815-
Derivatives and Hedging
and are presented within warrant liability on the accompanying
condensed consolidated balance sheets. The warrant liabilities are
measured at fair value at inception and on a recurring basis, with
changes in fair value presented within change in fair value of
warrant liability in the condensed consolidated statements of
operations.
There were no transfers in or out of Level 3 from other levels in
the fair value hierarchy.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. Business Combination
As previously discussed in Note 1, on June 16, 2021, the Company
consummated the Business Combination pursuant to the Merger
Agreement.
In connection with the Closing, the following
occurred:
•Silver
Spike was domesticated and continues as a Delaware corporation,
changing its name to “WM Technology, Inc.”
•The
Company was reorganized into an Up-C structure, in which
substantially all of the assets and business of the Company are
held by WMH LLC and continue to operate through WMH LLC and its
subsidiaries, and WM Technology, Inc.’s material assets are the
equity interests of WMH LLC indirectly held by it.
•The
Company consummated the sale of 32,500,000 shares of Class A Common
Stock for a purchase price of $10.00 per share (together, the “PIPE
Financing”) pursuant to certain subscription agreements dated as of
December 10, 2020, for an aggregate price of
$325.0 million.
•The
Company contributed approximately
$80.3 million
of cash to WMH LLC, representing (a) the net amount held in the
Company’s trust account following the redemption of 10,012 shares
of Class A Common Stock originally sold in the Silver Spike’s
initial public offering, less (b) cash consideration of
$455.2 million
paid to Legacy WMH Class A equity holders, plus (c)
$325.0 million in aggregate proceeds from the PIPE Financing,
less (d) the aggregate amount of transaction expenses incurred by
the parties to the Business Combination Agreement.
•The
Company transferred
$455.2 million
to the Legacy WMH equity holders as cash
consideration.
•The
Legacy WMH equity holders retained an aggregate of 65,502,347 Class
A Units and 25,896,042 Class P Units.
•The
Company issued 65,502,347 shares of Class V Common Stock to Class A
Unit holders, representing the same number of Class A Units
retained by the Legacy WMH equity holders.
•The
Company, the Holder Representative and the Class A Unit holders
entered into the Tax Receivable Agreement, pursuant to which WM
Technology, Inc. will pay to WMH LLC Class A equity holders 85% of
the net income tax savings that WM Technology, Inc. actually
realizes as a result of increases in the tax basis of WMH LLC’s
assets as a result of the exchange of Units for cash in the
Business Combination and future exchanges of the Class A Units for
shares of Class A Common Stock or cash pursuant to the Exchange
Agreement, and certain other tax attributes of WMH LLC and tax
benefits related to the Tax Receivable Agreement, including tax
benefits attributable to payments under the Tax Receivable
Agreement.
Concurrently with the closing of the Business Combination, the Unit
holders entered into the Exchange Agreement. The terms of the
Exchange Agreement, among other things, provide the Unit holders
(or certain permitted transferees thereof) with the right from time
to time at and after 180 days following the Business Combination to
exchange their vested Paired Interests for shares of Class A Common
Stock on a one-for-one basis, subject to customary conversion rate
adjustments for stock splits, stock dividends and
reclassifications, or Class P Units for shares of Class A Common
Stock with a value equal to the value of such Class P Units less
their participation threshold, or in each case, at the Company’s
election, the cash equivalent of such shares of Class A Common
Stock.
6. Acquisitions
Eyechronic
On January 14, 2022, the Company acquired all the equity interests
of Eyechronic LLC (“Eyechronic”) d/b/a Enlighten, a Delaware
limited liability company and a provider of software, digital
signage services and multi-media offerings to dispensaries and
brands, for total consideration of approximately
$29.4 million. The Company accounted for the Eyechronic
acquisition as an acquisition of a business under ASC
805.
The acquired assets and liabilities of Eyechronic were recorded at
their preliminary acquisition date fair values. The purchase price
allocations are subject to change as the Company continues to
gather information relevant to its determination of the fair value
of the assets and liabilities acquired primarily related to, but
not limited to, intangible assets. Any adjustments to the purchase
price allocations will be made as soon as practicable but no later
than one year from the acquisition date.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the components of consideration and
the preliminary estimated fair value of assets acquired (in
thousands):
|
|
|
|
|
|
|
|
|
|
Consideration Transferred: |
|
|
|
Cash consideration
(1)
|
|
$ |
697 |
|
|
Share consideration
(2)
|
|
28,725 |
|
|
Total consideration |
|
$ |
29,422 |
|
____________________________________
(1)Includes
$0.2 million settlement of pre-existing accounts payable with
seller and holdback of $0.1 million recorded within other
current liabilities on the Company’s condensed consolidated balance
sheets.
(2)The
fair value of share consideration was calculated based on 5,399,553
shares of Class A common stock multiplied by the share price on the
closing date of $5.32. This includes 677,847 of holdback shares to
be issued subject to customary indemnification
obligations.
|
|
|
|
|
|
|
|
|
|
Estimated Assets Acquired and Liabilities Assumed: |
|
|
|
Assets acquired: |
|
|
|
Cash |
|
$ |
118 |
|
|
Accounts receivable |
|
835 |
|
|
Other current assets |
|
37 |
|
|
Fixed assets |
|
2,826 |
|
|
Software technology |
|
826 |
|
|
Trade name |
|
103 |
|
|
Customer relationships |
|
3,203 |
|
|
Order Backlog |
|
199 |
|
|
Goodwill |
|
21,861 |
|
|
Total assets acquired |
|
30,008 |
|
|
|
|
|
|
Liabilities assumed: |
|
|
|
Accounts payable |
|
$ |
(460) |
|
|
Other current liabilities |
|
(8) |
|
|
Deferred revenue |
|
(96) |
|
|
Other liabilities |
|
(22) |
|
|
Total liabilities assumed |
|
(586) |
|
|
|
|
|
|
Total net assets acquired |
|
$ |
29,422 |
|
During the six months ended June 30, 2022, the Company incurred
transaction expenses associated with the Eyechronic acquisition of
$0.1 million, which is included in general and administrative
expenses in the condensed consolidated statements of
operations.
The revenue and operating loss from Eyechronic included the
Company’s condensed consolidated statements of operations for the
three and six months ended June 30, 2022 were not material. Pro
forma revenue and earnings amounts on a combined basis have not
been presented as they are not material to the Company’s historical
pre-acquisition financial statements.
For acquisitions, the excess of the purchase price over the
estimated fair values of the net assets acquired, including
identifiable intangible assets, is recorded as goodwill. Goodwill
is primarily attributable to the expected synergies from combining
operations. Goodwill recognized was allocated to the Company’s one
operating segment and is generally deductible for tax
purposes.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The fair values of the trade name and software technology
intangible assets are determined using an “income approach”,
specifically, the relief-from royalty approach, which is a commonly
accepted valuation approach. This approach is based on the
assumption that in lieu of ownership, a firm would be willing to
pay a royalty in order to exploit the related benefits of these
assets. Owning these intangible assets means that the underlying
entity wouldn’t have to pay for the privilege of deploying those
assets. Therefore, a portion of the acquired entity’s earnings,
equal to the after-tax royalty that would have been paid for the
use of the assets, can be attributed to the firm’s ownership. The
fair values of the customer relationships and customer backlog
assets were also determined using an “income approach”,
specifically a multi-period excess earnings approach, which is a
commonly accepted valuation approach. Under this approach, the net
earnings attributable to the asset or liability being measured are
isolated using the discounted projected net cash flows. These
projected cash flows are isolated from the projected cash flows of
the combined asset group over the remaining economic life of the
intangible asset or liability being measured. Both the amount and
the duration of the cash flows are considered from a market
participant perspective. Where appropriate, the net cash flows were
adjusted to reflect the potential attrition of existing customers
in the future, as existing customers are a “wasting” asset and are
expected to decline over time.
Sprout
On September 3, 2021, the Company acquired certain assets and
liabilities of the Sprout business (“Sprout"), a leading,
cloud-based customer relationship management (“CRM”) and marketing
platform for the cannabis industry, for total consideration of
approximately $31.2 million. The Company accounted for the
Sprout acquisition as an acquisition of a business under ASC
805-
Business Combinations.
The acquired assets and liabilities of Sprout were recorded at
their preliminary acquisition date fair values. The purchase price
allocations are subject to change as the Company continues to
gather information relevant to its determination of the fair value
of the assets and liabilities acquired primarily related to, but
not limited to, intangible assets. Any adjustments to the purchase
price allocations will be made as soon as practicable but no later
than one year from the acquisition date.
The following table summarizes the components of consideration and
the preliminary estimated fair value of assets acquired (in
thousands):
|
|
|
|
|
|
|
|
|
|
Consideration Transferred: |
|
|
|
Cash consideration |
|
$ |
12,000 |
|
|
Share consideration(1)
|
|
19,186 |
|
|
Total consideration |
|
$ |
31,186 |
|
|
|
|
|
|
|
|
|
|
|
Estimated Assets Acquired and Liabilities Assumed: |
|
|
|
Assets acquired: |
|
|
|
Software
technology |
|
$ |
2,973 |
|
|
Trade name |
|
217 |
|
|
Customer relationships |
|
1,410 |
|
|
Goodwill |
|
26,686 |
|
|
Total assets acquired |
|
31,286 |
|
|
|
|
|
|
Liabilities assumed: |
|
|
|
Other current liabilities |
|
(100) |
|
|
Total net assets acquired |
|
$ |
31,186 |
|
___________________________________
(1)The
fair value of share consideration issued in connection with the
Spout acquisition was calculated based on 1,244,258 shares of Class
A common stock issued multiplied by the share price on the closing
date of $15.42.
For acquisitions, the excess of the purchase price over the
estimated fair values of the net assets acquired, including
identifiable intangible assets, is recorded as goodwill. Goodwill
is primarily attributable to the expected synergies from combining
operations. Goodwill recognized was allocated to the Company’s one
operating segment and is generally deductible for tax
purposes.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The fair values of the trade name intangible assets are determined
using an “income approach”, specifically, the relief-from royalty
approach, which is a commonly accepted valuation approach. This
approach is based on the assumption that in lieu of ownership, a
firm would be willing to pay a royalty in order to exploit the
related benefits of this asset. Owning that intangible asset means
that the underlying entity wouldn’t have to pay for the privilege
of deploying that asset. Therefore, a portion of the acquired
entity’s earnings, equal to the after-tax royalty that would have
been paid for the use of the asset, can be attributed to the firm’s
ownership. The fair value of the software technology intangible
asset was also determined using an “income approach”, specifically
a multi-period excess earnings approach, which is a commonly
accepted valuation approach. Under this approach, the net earnings
attributable to the asset or liability being measured are isolated
using the discounted projected net cash flows. These projected cash
flows are isolated from the projected cash flows of the combined
asset group over the remaining economic life of the intangible
asset or liability being measured. Both the amount and the duration
of the cash flows are considered from a market participant
perspective. Where appropriate, the net cash flows were adjusted to
reflect the potential attrition of existing customers in the
future, as existing customers are a “wasting” asset and are
expected to decline over time. The fair value of the customer
relationships are determined using an “income approach”,
specifically, the With-and-Without method, which is a commonly
accepted valuation approach. This method estimates the value of
customer-related assets by quantifying the impact on cash flows
under a scenario in which the customer-related assets must be
replaced and assuming all of the existing assets are in place
except the customer-related assets. Essentially, it estimates the
intangible asset’s value by calculating the difference between the
two discounted cash-flow models. One that represents the status quo
for the business enterprise with the asset in place and the second
that represents the business enterprise with everything in place
besides the customer-related asset. The projected cash flow period
is the time-period it takes to build back up to that status quo.
The difference between the two cash flows represents the calculated
value of the customer-related asset.
Transport Logistics Holding
On September 29, 2021, the Company acquired all of the equity
interests of Transport Logistics Holding Company, LLC (“TLH”), a
logistics platform that enables the compliant delivery of cannabis,
for total consideration of approximately $15.1 million. The
Company accounted for the TLH acquisition as an acquisition of a
business under ASC 805-
Business Combinations.
The acquired assets of TLH were recorded at their preliminary
acquisition date fair values. The purchase price allocations are
subject to change as the Company continues to gather information
relevant to its determination of the fair value of the assets and
liabilities acquired primarily related to, but not limited to,
intangible assets. Any adjustments to the purchase price
allocations will be made as soon as practicable but no later than
one year from the acquisition date.
The following table summarizes the components of consideration and
the preliminary estimated fair value of assets acquired (in
thousands):
|
|
|
|
|
|
|
|
|
|
Consideration Transferred: |
|
|
|
Cash consideration
(1)
|
|
$ |
5,000 |
|
|
Share consideration(2)
|
|
10,126 |
|
|
Total consideration |
|
$ |
15,126 |
|
|
|
|
|
|
|
|
|
|
|
Estimated Assets Acquired: |
|
|
|
Software technology |
|
$ |
249 |
|
|
Trade name |
|
59 |
|
|
Customer relationships |
|
170 |
|
|
Goodwill |
|
14,648 |
|
|
Total asset acquired |
|
$ |
15,126 |
|
____________________________________
(1)Includes
holdback of $1.0 million, which was paid during the second quarter
of 2022.
(2)The
fair value of share consideration issued in connection with the TLH
acquisition was calculated based on 694,540 shares of Class A
common stock issued multiplied by the share price on the closing
date of $14.58.
For acquisitions, the excess of the purchase price over the
estimated fair values of the net assets acquired, including
identifiable intangible assets, is recorded as goodwill. Goodwill
is primarily attributable to the expected synergies
from
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
combining operations. Goodwill recognized was allocated to the
Company’s one operating segment and is generally deductible for tax
purposes.
The fair values of the trade name intangible assets are determined
using an “income approach”, specifically, the relief-from royalty
approach, which is a commonly accepted valuation approach. This
approach is based on the assumption that in lieu of ownership, a
firm would be willing to pay a royalty in order to exploit the
related benefits of this asset. Owning that intangible asset means
that the underlying entity wouldn’t have to pay for the privilege
of deploying that asset. Therefore, a portion of the acquired
entity’s earnings, equal to the after-tax royalty that would have
been paid for the use of the asset, can be attributed to the firm’s
ownership. The fair value of the software technology intangible
asset was also determined using an “income approach”, specifically
a multi-period excess earnings approach, which is a commonly
accepted valuation approach. Under this approach, the net earnings
attributable to the asset or liability being measured are isolated
using the discounted projected net cash flows. These projected cash
flows are isolated from the projected cash flows of the combined
asset group over the remaining economic life of the intangible
asset or liability being measured. Both the amount and the duration
of the cash flows are considered from a market participant
perspective. Where appropriate, the net cash flows were adjusted to
reflect the potential attrition of existing customers in the
future, as existing customers are a “wasting” asset and are
expected to decline over time. The fair value of the customer
relationships are determined using an “income approach”,
specifically, the With-and-Without method, which is a commonly
accepted valuation approach. This method estimates the value of
customer-related assets by quantifying the impact on cash flows
under a scenario in which the customer-related assets must be
replaced and assuming all of the existing assets are in place
except the customer-related assets. Essentially, it estimates the
intangible asset’s value by calculating the difference between the
two discounted cash-flow models. One that represents the status quo
for the business enterprise with the asset in place and the second
that represents the business enterprise with everything in place
besides the customer-related asset. The projected cash flow period
is the time-period it takes to build back up to that status quo.
The difference between the two cash flows represents the calculated
value of the customer-related asset.
7. Goodwill and Intangible
Assets
A summary of changes in goodwill for the six months ended June 30,
2022 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
Balance at December 31, 2021 |
|
$ |
45,295 |
|
|
Acquisition of Eyechronic |
|
21,861 |
|
|
Balance at June 30, 2022 |
|
$ |
67,156 |
|
Intangible assets consisted of the following as of June 30, 2022
and December 31, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
|
Weighted Average Amortization Period (Years) |
|
Gross Intangible Assets |
|
Accumulated Amortization |
|
Net Intangible Assets |
|
Trade and domain names |
|
14.4 |
|
$ |
7,634 |
|
|
$ |
(4,388) |
|
|
$ |
3,246 |
|
|
Software technology |
|
6.9 |
|
7,520 |
|
|
(3,852) |
|
|
3,668 |
|
|
Customer relationships |
|
11.2 |
|
4,783 |
|
|
(545) |
|
|
4,238 |
|
|
Order backlog |
|
1.0 |
|
199 |
|
|
(92) |
|
|
107 |
|
|
Total intangible assets |
|
10.7 |
|
$ |
20,136 |
|
|
$ |
(8,877) |
|
|
$ |
11,259 |
|
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
Weighted Average Amortization Period (Years) |
|
Gross Intangible Assets |
|
Accumulated Amortization |
|
Net Intangible Assets |
|
Trade and domain names |
14.3 |
|
$ |
7,532 |
|
|
$ |
(4,081) |
|
|
$ |
3,451 |
|
|
Software technology |
7.7 |
|
6,691 |
|
|
(3,222) |
|
|
3,469 |
|
|
Customer relationships |
3.4 |
|
1,580 |
|
|
(201) |
|
|
1,379 |
|
|
Total intangible assets |
10.4 |
|
$ |
15,803 |
|
|
$ |
(7,504) |
|
|
$ |
8,299 |
|
Amortization expense for intangible assets was $0.8 million and
$1.4 million during the three and six months ended June 30, 2022,
respectively. Amortization expense for intangible assets was $0.2
million and $0.4 million for the three and six months ended June
30, 2021, respectively.
The estimated future amortization expense of intangible assets as
of June 30, 2022 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Remaining period in 2022 (six months) |
|
$ |
1,324 |
|
|
Year ended December 31, 2023 |
|
2,135 |
|
|
Year ended December 31, 2024 |
|
1,898 |
|
|
Year ended December 31, 2025 |
|
1,565 |
|
|
Year ended December 31, 2026 |
|
1,318 |
|
|
Thereafter |
|
3,019 |
|
|
|
|
$ |
11,259 |
|
8. Accounts Payable and Accrued
Expenses
Accounts payable and accrued expenses as of June 30, 2022 and
December 31, 2021 consisted of the following (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
|
December 31, 2021 |
|
Accounts payable |
|
$ |
10,098 |
|
|
$ |
4,298 |
|
|
Accrued employee expenses |
|
11,659 |
|
|
10,088 |
|
|
Other accrued liabilities |
|
9,560 |
|
|
8,769 |
|
|
|
|
$ |
31,317 |
|
|
$ |
23,155 |
|
As of June 30, 2022 and December 30, 2021, other accrued
liabilities included short-term insurance premium financing of
$4.5 million and $4.2 million, respectively.
9. Warrant Liability
At June 30, 2022, there were 12,499,973 Public Warrants outstanding
and 7,000,000 Private Placement Warrants outstanding.
As part of Silver Spike’s initial public offering, 12,500,000
Public Warrants were sold. The Public Warrants entitle the holder
thereof to purchase one share of Class A Common Stock at a price of
$11.50 per share, subject to adjustments. The Public Warrants may
be exercised only for a whole number of shares of Class A Common
Stock. No fractional shares will be issued upon exercise of the
warrants. The Public Warrants will expire at 5:00 p.m. New York
City time on June 16, 2026, or earlier upon redemption or
liquidation. The Public Warrants are listed on the NYSE under the
symbol “MAPSW.”
The Company may redeem the Public Warrants starting July 16, 2021,
in whole and not in part, at a price of $0.01 per Public Warrant,
upon not less than 30 days’ prior written notice of redemption to
each holder of Public Warrants, and if, and only if, the reported
last sales price of the Company’s Class A Common Stock equals or
exceeds $18.00 per share (as adjusted
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
for share splits, share dividends, rights issuances, subdivisions,
reorganizations, recapitalization and the like) for any 20 trading
days within a 30-trading day period ending on the third trading day
prior to the date the Company sends the notice of redemption to the
holders of Public Warrants.
Simultaneously with Silver Spike’s initial public offering, Silver
Spike consummated a private placement of 7,000,000 Private
Placement Warrants with Silver Spike’s sponsor (“Silver Spike
Sponsor”). Each Private Placement Warrant is exercisable for one
share of Class A Common Stock at a price of $11.50 per share,
subject to adjustment. The Private Placement Warrants (including
the shares of Class A Common Stock issuable upon exercise of the
Private Placement Warrants) are not transferable, assignable or
salable until 30 days after the completion of the Business
Combination, subject to certain exceptions, and they are
nonredeemable as long as they are held by Silver Spike Sponsor or
its permitted transferees. Silver Spike Sponsor, as well as its
permitted transferees, has the option to exercise the Private
Placement Warrants on a cashless basis and will have certain
registration rights related to such Private Placement Warrants.
Otherwise, the Private Placement Warrants have terms and provisions
that are identical to those of the Public Warrants. If the Private
Placement Warrants are held by holders other than Silver Spike
Sponsor or its permitted transferees, the Private Placement
Warrants will be redeemable by the Company and exercisable by the
holders on the same basis as the Public Warrants.
The Company may exercise its redemption right even if it is unable
to register or qualify the underlying securities for sale under all
applicable state securities laws.
If the Company calls the Public Warrants for redemption, management
will have the option to require all holders that wish to exercise
the Public Warrants to do so on a “cashless basis,” as described in
the warrant agreement. The exercise price and number of Class A
Common Stock issuable upon exercise of the Public Warrants may be
adjusted in certain circumstances including in the event of a share
dividend, extraordinary dividend or recapitalization,
reorganization, merger or consolidation. However, the Public
Warrants will not be adjusted for issuances of shares of Class A
Common Stock at a price below its exercise price. Additionally, in
no event will the Company be required to net cash settle the Public
Warrants.
The Private Placement Warrants are identical to the Public Warrants
underlying the units sold in the initial public offering, except
that the Private Placement Warrants and the Class A Common Stock
issuable upon the exercise of the Private Placement Warrants were
not transferable, assignable or salable until 30 days after the
completion of the Business Combination, subject to certain limited
exceptions. Additionally, the Private Placement Warrants will be
exercisable on a cashless basis and be non-redeemable so long as
they are held by the initial purchasers or their permitted
transferees. If the Private Placement Warrants are held by someone
other than the initial purchasers or their permitted transferees,
the Private Placement Warrants will be redeemable by the Company
and exercisable by such holders on the same basis as the Public
Warrants.
The Company concluded the Public Warrants and Private Placement
Warrants, or the Warrants, meet the definition of a derivative
under ASC 815- Derivatives and Hedging (as described in Note 2) and
are recorded as liabilities. Upon the Closing, the fair value of
the Warrants was recorded on the balance sheet. The fair value of
the Warrants are remeasured as of each balance sheet date, which
resulted in non-cash gains of $32.2 million and $14.0 million
in the condensed consolidated statements of operations for the
three and six months ended June 30, 2022 and a non-cash gain of
$37.8 million in the condensed consolidated statements of
operations for the three and six months ended June 30,
2021.
10. Equity
Class A Common Stock
Voting Rights
Each holder of the shares of Class A Common Stock is entitled to
one vote for each share of Class A Common Stock held of record by
such holder on all matters on which stockholders generally are
entitled to vote. The holders of the shares of Class A Common Stock
do not have cumulative voting rights in the election of directors.
Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors,
by a plurality) of the votes entitled to be cast by all
stockholders present in person or represented by proxy, voting
together as a single class. Notwithstanding the foregoing, the
holders of the outstanding shares of Class A Common Stock are
entitled to vote separately upon any amendment to the Company’s
certificate of incorporation (including by merger, consolidation,
reorganization or similar event) that would alter or change the
powers, preferences or special rights of such class of common stock
in a manner that is disproportionately adverse as compared to the
Class V Common Stock.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Dividend Rights
Subject to preferences that may be applicable to any outstanding
preferred stock, the holders of shares of Class A Common Stock are
entitled to receive ratably such dividends, if any, as may be
declared from time to time by the Company’s board of directors out
of funds legally available therefor.
Rights upon Liquidation, Dissolution and Winding-Up
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of our affairs, the holders of the shares
of Class A Common Stock are entitled to share ratably in all assets
remaining after payment of the Company’s debts and other
liabilities, subject to prior distribution rights of preferred
stock or any class or series of stock having a preference over the
shares of Class A Common Stock, then outstanding, if
any.
Preemptive or Other Rights
The holders of shares of Class A Common Stock have no preemptive or
conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the shares of
Class A Common Stock. The rights, preferences and privileges of
holders of shares of Class A Common Stock will be subject to those
of the holders of any shares of the preferred stock that the
Company may issue in the future.
Class V Common Stock
Voting Rights
Each holder of the shares of Class V Common Stock is entitled to
one vote for each share of Class V Common Stock held of record by
such holder on all matters on which stockholders generally are
entitled to vote. The holders of shares of Class V Common Stock do
not have cumulative voting rights in the election of directors.
Generally, all matters to be voted on by stockholders must be
approved by a majority (or, in the case of election of directors,
by a plurality) of the votes entitled to be cast by all
stockholders present in person or represented by proxy, voting
together as a single class. Notwithstanding the foregoing, the
holders of the outstanding shares of Class V Common Stock are
entitled to vote separately upon any amendment to the Company’s
certificate of incorporation (including by merger, consolidation,
reorganization or similar event) that would alter or change the
powers, preferences or special rights of such class of common stock
in a manner that is disproportionately adverse as compared to the
Class A Common Stock.
Dividend Rights
The holders of the Class V Common Stock will not participate in any
dividends declared by the Company’s board of
directors.
Rights upon Liquidation, Dissolution and Winding-Up
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of our affairs, the holders of Class V
Common Stock are not entitled to receive any of the Company’s
assets.
Preemptive or Other Rights
The holders of shares of Class V Common Stock do not have
preemptive, subscription, redemption or conversion rights. There
will be no redemption or sinking fund provisions applicable to the
Class V Common Stock.
Issuance and Retirement of Class V Common Stock
In the event that any outstanding share of Class V Common Stock
ceases to be held directly or indirectly by a holder of Class A
Units, such share will automatically be transferred to us for no
consideration and thereupon will be retired. The Company will not
issue additional shares of Class V Common Stock other than in
connection with the valid issuance or transfer of Units in
accordance with the governing documents of WMH LLC.
Preferred Stock
Pursuant to the amended and restated certificate of incorporation
in effect as of June 15, 2021, the Company was authorized to issue
75,000,000 shares of preferred stock with such designations, voting
and other rights and preferences as may be determined from time to
time by the Company’s board of directors. As of June 30, 2022,
there were no shares of preferred stock issued or
outstanding.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Noncontrolling Interests
The noncontrolling interest represents the Units held by holders
other than the Company. As of June 30, 2022, the noncontrolling
interests owned 41.7% of the Units outstanding. The noncontrolling
interests’ ownership percentage can fluctuate over time, including
as the WMH LLC equity holders elect to exchange Units for Class A
Common Stock. The Company has consolidated the financial position
and results of operations of WMH LLC and reflected the
proportionate interest held by the WMH LLC Unit equity holders as
noncontrolling interests.
11. Stock-based Compensation
WM Holding Company, LLC Equity Incentive Plan
The Company has accounted for the issuance of Class A-3 and
Class B Units issued under WM Holding Company, LLC’s Equity
Incentive Plan in accordance with ASC 718 -
Stock Based Compensation.
The Company considers the limitation on the exercisability of the
Class A-3 and Class B Units to be a performance condition
and records compensation cost when it becomes probable that the
performance condition will be met.
In connection with the Business Combination, each of the Class A-3
Units outstanding prior to the Business Combination were cancelled,
and the holder thereof received a number of Class A units
representing limited liability company interests of WMH LLC (the
“Class A Units”) and an equivalent number of shares of Class V
Common Stock, par value $0.0001 per share (together with the Class
A Units, the “Paired Interests”), and each of the Class B Units
outstanding prior to the Business Combination were cancelled and
holders thereof received a number of Class P units representing
limited liability company interests of WMH LLC (the “Class P Units”
and together with the Class A Units, the “Units”), each in
accordance with the Merger Agreement.
Concurrently with the closing of the Business Combination, the Unit
holders entered into an exchange agreement (the “Exchange
Agreement”). The terms of the Exchange Agreement, among other
things, provide the Unit holders (or certain permitted transferees
thereof) with the right from time to time at and after 180 days
following the Business Combination to exchange their vested Paired
Interests for shares of Class A Common Stock on a one-for-one
basis, subject to customary conversion rate adjustments for stock
splits, stock dividends and reclassifications, or Class P Units for
shares of Class A Common Stock with a value equal to the value of
such Class P Units less their participation threshold, or in each
case, at the Company’s election, the cash equivalent of such shares
of Class A Common Stock.
A summary of the Class P Unit activity for the six months ended
June 30, 2022 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of Units |
|
Outstanding Class P Units, December 31, 2021 |
|
25,660,529 |
|
|
Cancellations |
|
(27,891) |
|
|
Exchanged for Class A Common Stock |
|
(9,892,357) |
|
|
Outstanding, Class P Units, June 30, 2022 |
|
15,740,281 |
|
|
Vested, June 30, 2022 |
|
14,575,755 |
As of June 30, 2022, unrecognized stock-based compensation expense
for non-vested Class P Units was $2.9 million, which is expected to
be recognized over a weighted-average period of 1.7 years. For the
three and six months ended June 30, 2022, the Company recorded
stock-based compensation expense for the Class P Units of
$0.6 million and $1.3 million, respectively. For the
three and six months ended June 30, 2021, the Company recorded
stock-based compensation expense for the Class P Units of $19.4
million, which represented the life-to-date expense on the Class P
Units through June 30, 2021. Due to the Business Combination
completed in the second quarter of 2021, certain limitations on
exercisability related to the Class P Units were removed. The
stock-based compensation during the 2021 period also included a
one-time incremental expense of $4.1 million related to an
award modification as a result of an advisory agreement entered
into with a former executive.
WM Technology, Inc. Equity Incentive Plan
In connection with the Business Combination, the Company adopted
the WM Technology, Inc. 2021 Equity Incentive Plan (the “2021
Plan”). The 2021 Plan permits the granting of incentive stock
options to employees and for the grant of nonstatutory stock
options, stock appreciation rights, restricted stock awards,
restricted stock unit awards, performance awards and other forms of
stock awards to employees, directors and consultants. As of June
30, 2022, 25,768,971 shares of Class A
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Common Stock are authorized for issuance pursuant to awards under
the 2021 Plan. The number of shares of Class A Common stock
reserved for issuance under the 2021 Plan will automatically
increase on January 1 of each year for a period of ten years
commencing on January 1, 2022 and ending on (and including) January
1, 2031, in an amount equal to five percent (5%) of the total
number of shares of the Company’s capital stock outstanding on
December 31 of the preceding year; provided, however that the Board
may act prior to January 1st of a given year to provide that the
increase for such year will be a lesser number of shares of Common
Stock. As of June 30, 2022, 11,662,673 shares of Class A Common
Stock are available for future issuance.
A summary of the restricted stock unit (“RSU”) activity for the six
months ended June 30, 2022 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of RSUs |
|
Weighted-average Grant Date Fair Value |
|
Non-vested at December 31, 2021
|
|
5,829,881 |
|
|
$ |
10.91 |
|
|
Granted |
|
5,976,006 |
|
$ |
5.78 |
|
|
Vested |
|
(855,788) |
|
|
$ |
8.99 |
|
|
Forfeited |
|
(705,915) |
|
|
$ |
10.90 |
|
|
Non-vested at June 30, 2022
|
|
10,244,184 |
|
$ |
8.08 |
|
As of June 30, 2022, unrecognized stock-based compensation expense
for non-vested RSUs was $75.9 million, which is expected to be
recognized over a weighted-average period of 3.0 years. For the
three and six months ended June 30, 2022, the Company recorded
stock-based compensation expense for the RSUs of $5.6 million
and $10.6 million, respectively.
The Company grants performance-based restricted stock units
(“PRSUs”) with performance and service-based vesting conditions.
The level of achievement of such goals may cause the actual number
of units that ultimately vest to range from 0% to 200% of the
original units granted. The Company recognizes expense ratably over
the vesting period for the PRSUs when it is probable that the
performance criteria specified will be achieved. The fair value is
equal to the market price of the Company’s common stock on the date
of grant.
A summary of the PRSU activity for the six months ended June 30,
2022 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of PRSUs |
|
Weighted-average Grant Date Fair Value |
|
Non-vested at December 31, 2021
|
|
2,437,500 |
|
|
$ |
6.40 |
|
|
Granted |
|
— |
|
|
$ |
— |
|
|
Vested |
|
— |
|
|
$ |
— |
|
|
Forfeited |
|
— |
|
|
$ |
— |
|
|
Non-vested at June 30, 2022
|
|
2,437,500 |
|
$ |
6.40 |
|
As of June 30, 2022, unrecognized stock-based compensation expense
for non-vested PRSUs was $11.4 million, which is expected to
be recognized over a weighted-average period of 1.5 years. For the
three and six months ended June 30, 2022, the Company recorded
stock-based compensation expense for the PRSUs of $1.9 million
and $3.8 million, respectively.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company recorded stock-based compensation cost related to the
Class P Units, RSUs and PRSUs in the following expense categories
on the accompanying condensed consolidated statements of operations
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Sales and marketing |
$ |
2,072 |
|
|
$ |
3,826 |
|
|
$ |
3,883 |
|
|
$ |
3,826 |
|
|
Product development |
1,516 |
|
|
1,994 |
|
|
2,928 |
|
|
1,994 |
|
|
General and administrative |
4,506 |
|
|
13,613 |
|
|
8,800 |
|
|
13,613 |
|
|
Total stock-based compensation expense |
8,094 |
|
|
19,433 |
|
|
15,611 |
|
|
19,433 |
|
|
Amount capitalized to software development |
519 |
|
|
— |
|
|
929 |
|
|
— |
|
|
Total stock-based compensation cost |
$ |
8,613 |
|
|
$ |
19,433 |
|
|
$ |
16,540 |
|
|
$ |
19,433 |
|
12. Earnings Per Share
Basic income (loss) per share of Class A Common Stock is computed
by dividing net earnings (loss) attributable to WM Technology, Inc.
by the weighted-average number of shares of Class A Common Stock
outstanding during the period. Diluted income (loss) per share of
Class A Common Stock adjusts basic net income (loss) per share of
Class A Common Stock for the potentially dilutive impact of
securities. For warrants that are liability-classified, during
periods when the impact is dilutive, the Company assumes share
settlement of the instruments as of the beginning of the reporting
period and adjusts the numerator to remove the change in fair value
of the warrant liability, net of the portion attributable to
non-controlling interests, and adjusts the denominator to include
the dilutive shares calculated using the treasury stock
method.
Prior to the Business Combination, the membership structure of WMH
included units which had profit interests. The Company analyzed the
calculation of net earnings (loss) per unit for periods prior to
the Business Combination and determined that it resulted in values
that would not be meaningful to the users of these condensed
consolidated financial statements. Therefore, net earnings per
share information has not been presented for periods prior to the
Business Combination on June 16, 2021.
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The computation of income (loss) per share attributable to WM
Technology, Inc. and weighted-average shares of the Company’s Class
A Common Stock outstanding are as follows for the three and six
months ended June 30, 2022 and June 30, 2021 (amounts in thousands,
except for share and per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Numerator: |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
19,848 |
|
|
$ |
16,837 |
|
|
$ |
(11,385) |
|
|
$ |
24,568 |
|
|
Less: net income attributable to WMH prior to the Business
Combination |
— |
|
|
7,347 |
|
|
— |
|
|
15,078 |
|
|
Less: net income (loss) attributable to noncontrolling interests
after the Business Combination |
8,156 |
|
|
5,227 |
|
|
(9,184) |
|
|
5,227 |
|
|
Net income (loss) attributable to WM Technology, Inc. Class A
Common Stock - basic |
11,692 |
|
|
4,263 |
|
|
(2,201) |
|
|
4,263 |
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Public and Private Placement Warrants, net of amounts attributable
to noncontrolling interests |
— |
|
|
16,061 |
|
|
— |
|
|
16,061 |
|
|
Net income (loss) attributable to WM Technology, Inc. Class A
Common Stock - diluted |
$ |
11,692 |
|
|
$ |
(11,798) |
|
|
$ |
(2,201) |
|
|
$ |
(11,798) |
|
|
Denominator: |
|
|
|
|
|
|
|
|
Weighted average of shares of Class A Common Stock outstanding -
basic |
86,425,352 |
|
63,738,563 |
|
79,476,383 |
|
63,738,563 |
|
Weighted average effect of dilutive securities: |
|
|
|
|
|
|
|
|
Public warrants |
— |
|
|
4,877,681 |
|
— |
|
|
4,877,681 |
|
Private warrants |
— |
|
|
2,731,502 |
|
— |
|
|
2,731,502 |
|
Acquisition holdback shares |
677,847 |
|
— |
|
|
— |
|
|
— |
|
|
Restricted stock units |
127,651 |
|
— |
|
|
— |
|
|
— |
|
|
Weighted average of shares of Class A Common Stock outstanding -
diluted |
87,230,850 |
|
71,347,746 |
|
79,476,383 |
|
71,347,746 |
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share of Class A Common Stock -
basic |
$ |
0.14 |
|
|
$ |
0.07 |
|
|
$ |
(0.03) |
|
|
$ |
0.07 |
|
|
Net income (loss) per share of Class A Common Stock -
diluted |
$ |
0.13 |
|
|
$ |
(0.17) |
|
|
$ |
(0.03) |
|
|
$ |
(0.17) |
|
Shares of the Class V Common Stock do not participate in the
earnings or losses of the Company and are therefore not
participating securities. As such, separate presentation of basic
and diluted earnings per share of Class V Common Stock under the
two-class method has not been presented.
The Company excluded the following securities from its computation
of diluted shares outstanding, as their effect would have been
anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Class A Units |
56,466,013 |
|
|
65,502,347 |
|
|
56,466,013 |
|
|
65,502,347 |
|
|
Class P Units |
15,740,281 |
|
|
25,679,121 |
|
|
15,740,281 |
|
|
25,679,121 |
|
|
RSUs |
— |
|
|
— |
|
— |
|
10,244,184 |
|
|
— |
|
|
PRSUs |
2,437,500 |
|
|
— |
|
|
2,437,500 |
|
|
— |
|
|
Public Warrants |
12,499,973 |
|
|
— |
|
|
12,499,973 |
|
|
— |
|
|
Private Placement Warrants |
7,000,000 |
|
|
— |
|
|
7,000,000 |
|
|
— |
|
|
Acquisition holdback shares |
— |
|
|
— |
|
|
677,847 |
|
|
— |
|
WM TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
13. Related Party Transactions
During the second quarter of 2022, the Company entered into a
sublease agreement with an affiliate to a member of the board of
directors. The sublease commenced on June 1, 2022, and the term is
for the remainder of the original lease and will expire on February
28, 2025, or sooner in the event that the original lease is
cancelled prior to the expiration date. The monthly base rent,
after the rent abatement period for the first four months, is
$69,095. As of June 30, 2022, the security deposit for the sublease
of approximately $0.1 million is included in other long-term
liabilities on the accompanying condensed balance sheets. For the
three and six months ended June 30, 2022, income on the sublease
was approximately $0.1 million and this amount is netted with
rent expense and included in general and administrative expenses on
the accompanying condensed statements of operations.
14. Subsequent Events
To decrease costs and maintain a streamlined organization to
support its business, the Company committed to a reduction in force
that resulted in the termination of approximately 10% of the
Company’s workforce on August 4, 2022. In connection with the
reduction in force, the Company currently estimates it will incur
between approximately $2 million and $3 million of costs,
consisting primarily of cash severance costs, which the Company
expects to recognize in the third quarter of 2022. The estimates of
costs and expenses that the Company expects to incur in connection
with the workforce reduction are subject to a number of assumptions
and actual results may differ. The Company may also incur
additional costs not currently contemplated due to events that may
occur as a result of, or that are associated with, the workforce
reduction.
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition
and results of operations should be read together with our
condensed consolidated financial statements and the related notes
to those statements included in Item 1 “Financial Statements” in
this Quarterly Report on Form 10-Q. In addition to historical
financial information, the following discussion and analysis
contains forward-looking statements that involve risks,
uncertainties, and assumptions. Our actual results and timing of
selected events may differ materially from those anticipated in
these forward-looking statements as a result of many factors,
including those discussed under “Risk Factors” and included
elsewhere herein and in our Annual Report on Form 10-K for the year
ended December 31, 2021.
Overview
On June 16, 2021, WM Holding Company, LLC (when referred to in its
pre-Business Combination capacity, “Legacy WMH” and following the
Business Combination, “WMH LLC”) completed its previously announced
business combination with Silver Spike Acquisition Corp (“Silver
Spike”). Legacy WMH was deemed to be the accounting acquirer under
accounting principles generally accepted in the United States of
America (“GAAP”). In connection with the closing, Silver Spike
changed its name to WM Technology, Inc. As used in this Quarterly
Report on Form 10-Q, unless the context requires otherwise,
references to the “Company,” “we,” “us,” and “our,” and similar
references refer to WM Technology, Inc, and its subsidiaries
following the Business Combination and to Legacy WMH prior to the
Business Combination.
WM Technology, Inc. is one of the oldest and largest marketplace
and technology solutions providers exclusively servicing the
cannabis industry, primarily consumers, retailers and brands in the
United States state-legal and Canadian cannabis markets. Our
business primarily consists of our commerce-driven marketplace,
Weedmaps, and our monthly subscription software offering, WM
Business. Our Weedmaps marketplace provides information on the
cannabis plant and the industry and advocates for legalization. The
Weedmaps marketplace provides consumers with information regarding
cannabis retailers and brands, as well as the strain, pricing, and
other information regarding locally available cannabis products,
through our website and mobile apps, permitting product discovery,
access to deals and discounts, and reservation of products for
pickup by consumers or delivery to consumers by participating
retailers. We believe the size of our user base and the frequency
of consumption of cannabis of that user base is highly valuable to
our clients and results in clients paying for our services. WM
Business, our subscription package, is a comprehensive set of
eCommerce and compliance software solutions catered towards
cannabis retailers, delivery services and brands where clients
receive access to a standard listing page and our suite of software
solutions, including WM Orders, WM Dispatch, WM Store, WM
Dashboard, our WM Connectors (integrations and API platform), as
well as access to our WM Exchange products, where available. We
charge a monthly fee to clients for access to our WM Business
subscription package and then offer other add-on products for
additional fees, including our featured listings and our Sprout
(customer relationship management), Cannveya (delivery and
logistics software) and Enlighten (software, digital signage
services and multi-media offerings) solutions. We sell our WM
Business offering in the United States, currently offer some of our
WM Business solutions in Canada (including a third party
integration that enables our clients to accept payments from
consumers, currently available only in Canada) and have a limited
number of non-monetized listings in several other countries,
including Austria, Germany, the Netherlands, Spain and Switzerland.
We operate in the United States, Canada, and other foreign
jurisdictions where medical and/or adult cannabis use is legal
under state or applicable national law. We are headquartered in
Irvine, California.
We were founded in 2008 and operate a leading online marketplace
with a comprehensive set of eCommerce and compliance software
solutions sold to retailers and brands in the U.S. state-legal and
Canadian cannabis markets. The Company’s mission is to power a
transparent and inclusive global cannabis economy. We address the
challenges facing both consumers seeking to understand cannabis
products and businesses who serve cannabis patients and customers
in a legally compliant fashion with our Weedmaps marketplace and WM
Business software solutions. Over the past 13 years, we have grown
the Weedmaps marketplace to become a premier destination for
cannabis consumers to discover and browse information regarding
cannabis and cannabis products, permitting product discovery and
order-ahead for pickup or delivery by participating retailers. WM
Business is a set of eCommerce-enablement tools designed to help
our retailer and brand clients get the best out of their Weedmaps
experience, while creating labor efficiency and managing their
compliance needs.
We have grown the Weedmaps marketplace to become the premier
destination for cannabis consumers to discover and browse
information regarding cannabis and cannabis products with 17.4
million monthly active users (“MAUs”) as of June 30, 2022 on the
demand side and 5,537 and 5,282 average monthly paying business
clients during the three and six months ended June 30, 2022,
respectively, on the supply-side of our marketplace, see “—Monthly
Active Users” below for additional information regarding MAUs.
These paying clients include retailers, brands and other client
types (such as doctors). Further, these clients, who can choose to
purchase multiple listings solutions for each business, had
purchased over 9,400 listing pages as of June 30, 2022 (of the over
17,600 listing pages on the marketplace). The Weedmaps marketplace
provides consumers with information regarding cannabis retailers
and brands, as well as the strain, pricing, and other information
regarding locally
available cannabis products, through our website and mobile apps,
permitting product discovery and order-ahead for pickup or delivery
by participating retailers. Our weedmaps.com site, our iOS Weedmaps
mobile application and our Android Weedmaps mobile application also
have educational content including news articles, information about
cannabis strains, a number of “how-to” guides, policy white-papers
and research to allow consumers to educate themselves on cannabis
and its history, uses and legal status. While consumers can
discover cannabis products, brands, and retailers on our site, we
neither sell (or fulfill purchases of) cannabis products, nor do we
process payments for cannabis transactions across our marketplace
or SaaS solutions.
Business Combination and Public Company Costs
On June 16, 2021, Silver Spike consummated the business combination
(the “Business Combination”) pursuant to the certain Agreement and
Plan of Merger, dated December 10, 2020 (the “Merger Agreement”),
by and among Silver Spike, Silver Spike Merger Sub LLC, a Delaware
limited liability company and a wholly owned direct subsidiary of
Silver Spike Acquisition Corp. (“Merger Sub”), Legacy WMH, and
Ghost Media Group, LLC, a Nevada limited liability company, solely
in its capacity as the initial holder representative (the “Holder
Representative”). Pursuant to the Merger Agreement, Merger Sub
merged with and into Legacy WMH, whereupon the separate limited
liability company existence of Merger Sub ceased and Legacy WMH
became the surviving company and continued in existence as a
subsidiary of Silver Spike. On the Closing Date, and in connection
with the Closing, Silver Spike changed its name to WM Technology,
Inc. Legacy WMH was deemed to be the accounting acquirer in the
Business Combination based on an analysis of the criteria outlined
in Accounting Standards Codification 805. While Silver Spike was
the legal acquirer in the Business Combination, because Legacy WMH
was deemed the accounting acquirer, the historical financial
statements of Legacy WMH became the historical financial statements
of the combined company, upon the Closing.
The Business Combination was accounted for as a “reverse
recapitalization.” A reverse recapitalization does not result in a
new basis of accounting, and the financial statements of the
combined entity represent the continuation of the financial
statements of Legacy WMH in many respects. Under this method of
accounting, Silver Spike was treated as the “acquired” company for
financial reporting purposes. For accounting purposes, Legacy WMH
was deemed to be the accounting acquirer in the transaction and,
consequently, the transaction was treated as a recapitalization of
Legacy WMH (i.e., a capital transaction involving the issuance of
stock by Silver Spike for the stock of Legacy WMH). Accordingly,
the consolidated assets, liabilities and results of operations of
Legacy WMH became the historical financial statements of the
combined company, and Silver Spike’s assets, liabilities and
results of operations were consolidated with Legacy WMH beginning
on the acquisition date. Operations prior to the Business
Combination are presented as those of Legacy WMH. The net assets of
Silver Spike were recognized at historical cost (which are
consistent with carrying value), with no goodwill or other
intangible assets recorded.
As a consequence of the Business Combination, Legacy WMH became the
successor to an SEC-registered and Nasdaq-listed company which
requires us to hire additional personnel and implement procedures
and processes to address public company regulatory requirements and
customary practices. We have and expect to continue 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, legal and
administrative resources, including increased audit and legal
fees.
Key Operating and Financial Metrics
We monitor the following key financial and operational metrics to
evaluate our business, measure our performance, identify trends
affecting our business, formulate business plans, and make
strategic decisions.
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
|
2021 |
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2022 |
|
2021 |
|
(dollars in thousands, except for revenue per paying
client) |
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Revenues |
$ |
58,294 |
|
|
$ |
46,931 |
|
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$ |
115,746 |
|
|
$ |
88,085 |
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Net income (loss) |
$ |
19,848 |
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$ |
16,837 |
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$ |
(11,385) |
|
|
$ |
24,568 |
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EBITDA(1)
|
$ |
20,996 |
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|
$ |
17,433 |
|
|
$ |
(8,040) |
|
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$ |
26,407 |
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Adjusted EBITDA(1)
|
$ |
(595) |
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$ |
8,503 |
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$ |
(1,548) |
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$ |
17,477 |
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Average monthly revenue per paying client(2)
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$ |
3,509 |
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$ |
3,706 |
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$ |
3,652 |
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$ |
3,609 |
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Average monthly paying clients(3)
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5,537 |
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4,221 |
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5,282 |
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4,068 |
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MAUs (in thousands)(4)
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17,402 |
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12,302 |
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17,402 |
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12,302 |
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___________________________
(1)For
further information about how we calculate EBITDA and Adjusted
EBITDA as well as limitations of its use and a reconciliation of
EBITDA and Adjusted EBITDA to net income, see “—EBITDA and Adjusted
EBITDA” below.
(2)Average
monthly revenue per paying client is defined as the average monthly
revenue for any particular period divided by the average monthly
paying clients in the same respective period.
(3)Average
monthly paying clients are defined as the average of the number of
paying clients billed in a month across a particular period (and
for which services were provided).
(4)See
“—Monthly Active Users” below for additional information regarding
MAUs.
Revenue
We offer WM Business subscriptions, which include access to the
Weedmaps marketplace and certain SaaS solutions. As add-ons for
additional fees, we offer other products, including featured
listings, placements, promoted deals, nearby listings, other
display advertising, customer relationship management, digital
menus, and delivery and logistics services. Our WM Business
subscriptions generally have one-month terms that automatically
renew unless notice of cancellation is provided in advance. We have
a fixed inventory of featured listing and display advertising in
each market, and price is generally determined through a
competitive auction process that reflects local market demand,
though we are testing a more dynamic, performance-based pricing
model for these solutions across several markets. For clients that
pay us in advance for listing and other services we record deferred
revenue and recognize revenue over the applicable subscription
term.
EBITDA and Adjusted EBITDA
To provide investors with additional information regarding our
financial results, we have disclosed EBITDA and Adjusted EBITDA,
both of which are non-GAAP financial measures that we calculate as
net income (loss) before interest, taxes and depreciation and
amortization expense in the case of EBITDA and further adjusted to
exclude stock-based compensation, change in fair value of warrant
liability, transaction related bonuses, transaction costs, legal
settlements and other non-cash, unusual and/or infrequent costs in
the case of Adjusted EBITDA. Below we have provided a
reconciliation of net (loss) income (the most directly comparable
GAAP financial measure) to EBITDA and from EBITDA to Adjusted
EBITDA.
We present EBITDA and Adjusted EBITDA because these metrics are a
key measure used by our management to evaluate our operating
performance, generate future operating plans and make strategic
decisions regarding the allocation of investment capacity.
Accordingly, we believe that EBITDA and Adjusted EBITDA provide
useful information to investors and others in understanding and
evaluating our operating results in the same manner as our
management.
EBITDA and Adjusted EBITDA have limitations as an analytical tool,
and you should not consider it in isolation or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are as follows:
•although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized may have to be replaced in the
future, and both EBITDA and Adjusted EBITDA do not reflect cash
capital expenditure requirements for such replacements or for new
capital expenditure requirements;
•EBITDA
and Adjusted EBITDA do not reflect changes in, or cash requirements
for, our working capital needs; and
•EBITDA
and Adjusted EBITDA do not reflect tax payments that may represent
a reduction in cash available to us.
Because of these limitations, you should consider EBITDA and
Adjusted EBITDA alongside other financial performance measures,
including net income and our other GAAP results.
A reconciliation of net income (loss) to non-GAAP EBITDA and
Adjusted EBITDA is as follows:
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2022 |
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2021 |
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2022 |
|
2021 |
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(in thousands) |
|
Net income (loss) |
$ |
19,848 |
|
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$ |
16,837 |
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$ |
(11,385) |
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$ |
24,568 |
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Benefit from income taxes |
(1,310) |
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(392) |
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(3,058) |
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(151) |
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Depreciation and amortization expenses |
2,458 |
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988 |
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6,403 |
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1,990 |
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EBITDA |
20,996 |
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17,433 |
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(8,040) |
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26,407 |
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Stock-based compensation |
8,094 |
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19,433 |
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15,611 |
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19,433 |
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Change in fair value of warrant liability |
(32,234) |
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(37,791) |
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(14,015) |
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(37,791) |
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Transaction related bonuses |
1,073 |
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1,550 |
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3,030 |
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1,550 |
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Transaction costs |
— |
|
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— |
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251 |
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— |
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Legal settlements and other legal costs |
925 |
|
|
— |
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1,064 |
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— |
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Warrant transaction costs |
— |
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5,506 |
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— |
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5,506 |
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Impairment of right-of-use assets |
551 |
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|
2,372 |
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|
551 |
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2,372 |
|
|
Adjusted EBITDA |
$ |
(595) |
|
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$ |
8,503 |
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$ |
(1,548) |
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$ |
17,477 |
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Average Monthly Revenue Per Paying Client
Average monthly revenue per paying client measures how much
clients, for the period of measurement, are willing to pay us for
our subscription and additional offerings and the efficiency of the
bid-auction process for our featured listings placements. We
calculate this metric by dividing the average monthly revenue for
any particular period by the average monthly number of paying
clients in the same respective period.
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Three Months Ended June 30, |
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Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Average monthly revenue per paying client |
$ |
3,509 |
|
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$ |
3,706 |
|
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$ |
3,652 |
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$ |
3,609 |
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Average Monthly Paying Clients
We define average monthly paying clients as the monthly average of
clients billed each month over a particular period (and for which
services were provided). Our paying clients include both individual
cannabis businesses as well as retail sites or businesses within a
larger organization that have independent relationships with us,
many of whom are owned by holding companies where decision-making
is decentralized such that purchasing decisions are made, and
relationships with us are located, at a lower organizational level.
In addition, any client may choose to purchase multiple listing
solutions for each of their retail sites or businesses. Average
monthly paying clients for the three months ended June 30, 2022
increased approximately 31% to 5,537 average monthly paying clients
from 4,221 average monthly paying clients in the same period in
2021. Average monthly paying clients for the six months ended June
30, 2022 increased approximately 30% to 5,282 average monthly
paying clients from 4,068 average monthly paying clients in the
same period in 2021. The increase in average monthly paying clients
in the three and six months ended June 30, 2022 as compared to the
same periods in 2021 was primarily due to broad increases
throughout our Featured Listing product, WM Business subscription
offering and other ad solutions.
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Three Months Ended June 30, |
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Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Average monthly paying clients |
5,537 |
|
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4,221 |
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5,282 |
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4,068 |
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Monthly Active Users
In any given period, we calculate our monthly active users by
determining the total number of unique users who opened our
Weedmaps mobile app or gained access to our Weedmaps.com website
during the final calendar month of the period. This number has been
reported as Monthly Active Users (“MAUs”). This statistic includes
users who gain access to the website through paid advertising
channels. In the second quarter of 2022, our board of directors
received an internal complaint regarding the calculation,
definition, and reporting of our MAUs. In response, the board of
directors formed a special committee (the “Special Committee”) of
independent directors to conduct an internal investigation with the
assistance of outside counsel. As a result of this internal
investigation, we have determined to provide the following
information.
As we have previously disclosed, one of the ways in which we
acquire users is through paid advertising. To an increasing degree
over time, growth of our monthly active users, reported as MAUs,
has been driven by the purchase of pop-under advertisements, which
are marketing advertisements on third party websites that
automatically present our platform on users’ screens in certain
circumstances. Our internal data suggests that the vast majority of
users who are directed to weedmaps.com via pop-under advertisements
close the site without clicking on any links. Based on management’s
review, users whose access to the website resulted from these
pop-under advertisements represented approximately 65% of our MAUs
as of June 30, 2022, and 54%, 50% and 54% of our MAUs as of March
31, 2022, December 31, 2021 and September 30, 2021,
respectively.
Our management has utilized pop-under advertisements, and other
digital marketing strategies, based on the belief that they have
provided a cost-effective means of promoting awareness of the
weedmaps.com website and Weedmaps mobile apps. However, we expect
to shift our marketing spend in the coming months to rely less on
the use of pop-under advertisements.
In addition, there are inherent limitations on the ability of
online platforms to identify unique, rather than repeat, users
across sessions. In particular, incognito browsing, usage across
devices or mobile and internet platforms, blocking or deleting
cookies and IP addresses or other similar methods employed by users
limits our ability to identify unique users and, as a result, we
believe it is likely that our MAUs may include a significant number
of repeat underlying users.
Prior to and in the course of the internal investigation described
above, we have continued to review user engagement metrics to
determine which metrics may be most useful for investors in
evaluating our evolving business and quarterly results of
operations, and we intend to update investors on those efforts in
connection with the results of operations for the quarter ending
September 30, 2022.
The information described above and currently under further review
by the Special Committee is not expected to affect our financial
results under GAAP or the reporting or disclosure of any currently
disclosed non-GAAP financial metric.
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As of June 30,
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2022 |
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2021 |
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MAUs (in thousands) |
17,402 |
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12,302 |
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For information regarding risks associated with relying on certain
metrics, including MAUs, see “Part II—Item 1A. Risk Factors”
below.
Factors Affecting Our Performance
Growth of Our Two-Sided Weedmaps Marketplace
We have historically grown through and intend to focus on
continuing to grow through the expansion of our two-sided
marketplace, which occurs through growth of the number and type of
businesses and consumers that we attract to our platform. We
believe that expansion of the number and types of cannabis
businesses that choose to list on our platform will continue to
make our platform more compelling for consumers and drive traffic
and consumer engagement, which in turn will make our platform more
valuable to cannabis businesses.
Growth and Retention of Our Paying Clients
Our revenue grows primarily through acquiring and retaining paying
clients and increasing the revenue per paying client over time. We
have a history of attracting new paying clients and increasing
their annual spend with us over time, primarily due to the value
they receive once they are onboarded and able to take advantage of
the benefits of participating in our two-sided marketplace and
leveraging our software solutions. Our monthly net dollar
retention, which is defined as total revenue from clients in a
given month who were paying clients in the immediately preceding
month, averaged at 98% in the first half of 2022.
Prices of certain commodity products, including gas prices, are
historically volatile and subject to fluctuations arising from
changes in domestic and international supply and demand, labor
costs, competition, market speculation, government regulations,
trade restrictions and tariffs, the effects of the coronavirus
(COVID-19) pandemic and Russia’s initiation of military action
against Ukraine. Increasing prices in the component materials for
the goods or services of our clients may impact their ability to
maintain or increase their spend with us and their ability to pay
their invoices on time. Rapid and significant changes in commodity
prices, such as fuel, may negatively affect our revenue if our
clients are unable to mitigate inflationary increases through
various customer pricing actions and cost reduction initiatives.
This could also negatively impact our net dollar retention and
collections on our accounts receivable.
Regulation and Maturation of Cannabis Markets
We believe that we will have significant opportunities for greater
growth as more jurisdictions legalize cannabis for medical and/or
adult-use and the regulatory environment continues to develop.
Thirty-eight U.S. states, the District of Columbia, Puerto Rico,
and several U.S. territories have legalized some form of
whole-plant cannabis cultivation, sales, and use for certain
medical purposes. Nineteen of those states and the District of
Columbia have also legalized cannabis use by adults for non-medical
or adult-use purposes, and several other states are at various
stages of similar legalization measures. We intend to explore new
expansion opportunities as additional jurisdictions legalize
cannabis for medical or adult use and leverage our business model
informed by our 13-year operating history to enter new
markets.
We also have a significant opportunity to monetize transactions
originating from users engaging with a retailer on the Weedmaps
marketplace or tracked via one of our WM Business solutions. Given
U.S. federal prohibitions on plant-touching businesses and our
current policy not to participate in the chain of commerce
associated with the sale of cannabis products, we do not charge
take-rates or payment fees for transactions originating from users
who engage with a retailer on the Weedmaps platform or tracked via
one of our WM Business solutions. A change in U.S. federal
regulations could result in our ability to engage in such
monetization efforts without adverse consequences to our
business.
Our long-term growth depends on our ability to successfully
capitalize on new and existing cannabis markets. Each market must
reach a critical mass of both cannabis businesses and consumers for
listing subscriptions, advertising placements and other solutions
to have meaningful appeal to potential clients. As regulated
markets mature and as we incur expenses to attract paying clients
and convert non-paying clients to paying clients, we may generate
losses in new markets for an extended period.
Furthermore, we compete with cannabis-focused and general two-sided
marketplaces, internet search engines, and various other newspaper,
television and media companies and other software providers. We
expect competition to intensify in the future as the regulatory
regime for cannabis becomes more settled and the legal market for
cannabis becomes more accepted, which may encourage new
participants to enter the market, including established companies
with substantially greater financial, technical and other resources
than existing market participants. Our current and future
competitors may also enjoy other competitive advantages, such as
greater name recognition, more offerings and larger marketing
budgets.
Brand Recognition and Reputation
We believe that maintaining and enhancing our brand identity and
our reputation is critical to maintaining and growing our
relationships with clients and consumers and to our ability to
attract new clients and consumers. Historically, a substantial
majority of our marketing spending was on out-of-home advertising
on billboards, buses and other non-digital outlets. Starting in
2019, consistent with the overall shift in perceptions regarding
cannabis, a number of demand-side digital advertising platforms
allowed us to advertise online. We also invested in growing our
internal digital performance advertising team. We believe there is
an opportunity to improve market efficiency through digital
channels and expect to shift our marketing spending accordingly.
Over the longer term, we expect to shift and accelerate our
marketing spend to additional online and traditional channels, such
as broadcast television or radio, as they become available to
us.
Negative publicity, whether or not justified, relating to events or
activities attributed to us, our employees, clients or others
associated with any of these parties, may tarnish our reputation
and reduce the value of our brand. Given our high visibility and
relatively long operating history compared to many of our
competitors, we may be more susceptible to the risk of negative
publicity. Damage to our reputation and loss of brand equity may
reduce demand for our platform and have an adverse effect on our
business, operating results and financial condition. Moreover, any
attempts to rebuild our reputation and restore the value of our
brand may be costly and time consuming, and such efforts may not
ultimately be successful.
We also believe that the importance of our brand recognition and
reputation will continue to increase as competition in our market
continues to develop. If our brand promotion activities are not
successful, our operating results and growth may be adversely
impacted.
Investments in Growth
We intend to continue to make focused organic and inorganic
investments to grow our revenue and scale operations to support
that growth.
Given our long operating history in the United States and the
strength of our network, often businesses will initially list on
our platform without targeted sales or marketing efforts by us.
However, we plan to accelerate our investments in marketing to
maintain and increase our brand awareness through both online and
offline channels. We also plan to invest in expanding our business
listings thereby enhancing our client and consumer experience, and
improving the depth and quality of information provided on our
platform. We also intend to continue to invest in several areas to
continue enhancing the functionality of our WM Business offering.
We expect significant near-term investments to enhance our data
assets and evolve our current listings
and software offerings to our brand clients, among other areas. We
anticipate undertaking such investments in order to be positioned
to capitalize on the rapidly expanding cannabis
market.
On January 14, 2022, we acquired Eyechronic LLC (“Eyechronic”)
d/b/a Enlighten, a Delaware limited liability company and a
provider of software, digital signage services and multi-media
offerings to dispensaries and brands. We are continuing to
integrate Eyechronic and our other acquisitions and will continue
to invest in them appropriately to scale during this fiscal year
2022.
On September 3, 2021, the Company acquired certain assets of the
Sprout business (“Sprout"), a leading, cloud-based customer
relationship management (“CRM”) and marketing platform for the
cannabis industry.
On September 29, 2021, the Company acquired all of the equity
interests of Transport Logistics Holding Company, LLC (“TLH”),
which is the parent company of Cannveya & CannCurrent. Cannveya
is a logistics platform that enables the compliant delivery of
cannabis and CannCurrent is a technology integrations and
connectors platform facilitating custom integrations with third
party technology providers.
As operating expenses and capital expenditures fluctuate over time,
we may accordingly experience short-term, negative impacts to our
operating results and cash flows.
Components of Our Results of Operations
Revenues
We offer WM Business subscriptions, which include access to the
Weedmaps marketplace and certain SaaS solutions. As add-ons for
additional fees, we offer other products, including featured
listings, placements, promoted deals, nearby listings, other
display advertising, customer relationship management, digital
menus, and delivery and logistics services. Our WM Business
subscriptions generally have one-month terms that automatically
renew unless notice of cancellation is provided in advance. We have
a fixed inventory of featured listing and display advertising in
each market, and price is generally determined through a
competitive auction process that reflects local market demand,
though we are testing a more dynamic, performance-based pricing
model for these solutions across several markets. For clients that
pay us in advance for listing and other services we record deferred
revenue and recognize revenue over the applicable subscription
term.
Cost of Revenues
Cost of revenues primarily consists of web hosting, internet
service, credit card processing costs and inventory costs related
to multi-media offerings.
Selling and Marketing Expenses
Selling and marketing expenses consist of salaries, benefits,
travel expense and incentive compensation for our sales and
marketing employees. In addition, sales and marketing expenses
include business acquisition marketing, events cost, and branding
and advertising costs. We expect our sales and marketing expenses
to increase on an absolute basis as we enter new markets. Over the
longer term, we expect sales and marketing expense to increase in a
manner consistent with revenue growth, however, we may experience
fluctuations in some periods as we enter and develop new markets or
have large one-time marketing projects.
Product Development Expenses
Product development costs consist of salaries and benefits for
employees, including engineering and technical teams who are
responsible for building new products, as well as maintaining and
improving existing products. Product development costs that do not
meet the criteria for capitalization are expensed as incurred. The
majority of our new software development costs have historically
been expensed. We believe that continued investment in our platform
is important for our growth and expect our product development
expenses will increase in a manner consistent with revenue growth
as our operations grow.
General and Administrative Expenses
General and administrative expenses consist primarily of payroll
and related benefit costs for our employees involved in general
corporate functions including our senior leadership team as well as
costs associated with the use by these functions of software and
facilities and equipment, such as rent, insurance, and other
occupancy expenses. General and administrative expenses also
include professional and outside services related to legal and
other consulting services. General and administrative expenses are
primarily driven by increases in headcount required to support
business growth and meeting our obligations as a public company. We
expect general and administrative expenses to decline as a
percentage of revenue as we scale our business and leverage
investments in these areas.
Depreciation and Amortization Expenses
Depreciation and amortization expenses primarily consist of
depreciation on computer equipment, furniture and fixtures,
leasehold improvements, capitalized software development costs and
amortization of purchased intangibles. We expect depreciation and
amortization expenses to increase on an absolute basis for the
foreseeable future as we scale our business.
Results of Operations
The following tables set forth our results of operations for the
periods presented and express the relationship of certain line
items as a percentage of net sales for those periods. The
period-to-period comparison of financial results is not necessarily
indicative of future results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
(in thousands) |
|
Revenues |
$ |
58,294 |
|
|
$ |
46,931 |
|
|
$ |
115,746 |
|
|
$ |
88,085 |
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of revenues |
3,858 |
|
|
1,908 |
|
|
7,598 |
|
|
3,765 |
|
|
Sales and marketing |
22,123 |
|
|
15,271 |
|
|
44,005 |
|
|
24,388 |
|
|
Product development |
13,263 |
|
|
10,271 |
|
|
26,353 |
|
|
18,139 |
|
|
General and administrative |
29,610 |
|
|
33,770 |
|
|
58,665 |
|
|
47,136 |
|
|
Depreciation and amortization |
2,458 |
|
|
988 |
|
|
6,403 |
|
|
1,990 |
|
|
Total operating expenses |
71,312 |
|
|
62,208 |
|
|
143,024 |
|
|
95,418 |
|
|
Operating loss |
(13,018) |
|
|
(15,277) |
|
|
(27,278) |
|
|
(7,333) |
|
|
Other income (expenses) |
|
|
|
|
|
|
|
|
Change in fair value of warrant liability |
32,234 |
|
|
37,791 |
|
|
14,015 |
|
|
37,791 |
|
|
Other expense, net |
(678) |
|
|
(6,069) |
|
|
(1,180) |
|
|
(6,041) |
|
|
Income (loss) before income taxes |
18,538 |
|
|
16,445 |
|
|
(14,443) |
|
|
24,417 |
|
|
Benefit from income taxes |
(1,310) |
|
|
(392) |
|
|
(3,058) |
|
|
(151) |
|
|
Net income (loss) |
19,848 |
|
|
16,837 |
|
|
(11,385) |
|
|
24,568 |
|
|
Net income (loss) attributable to noncontrolling
interests |
8,156 |
|
|
12,574 |
|
|
(9,184) |
|
|
20,305 |
|
|
Net income (loss) attributable to WM Technology, Inc. |
$ |
11,692 |
|
|
$ |
4,263 |
|
|
$ |
(2,201) |
|
|
$ |
4,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
|
Revenues |
100 |
% |
|
100 |
% |
|
100 |
% |
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Cost of revenues |
7 |
% |
|
4 |
% |
|
7 |
% |
|
4 |
% |
|
Sales and marketing |
38 |
% |
|
33 |
% |
|
38 |
% |
|
28 |
% |
|
Product development |
23 |
% |
|
22 |
% |
|
23 |
% |
|
21 |
% |
|
General and administrative |
51 |
% |
|
72 |
% |
|
51 |
% |
|
54 |
% |
|
Depreciation and amortization |
4 |
% |
|
2 |
% |
|
6 |
% |
|
2 |
% |
|
Total operating expenses |
122 |
% |
|
133 |
% |
|
124 |
% |
|
108 |
% |
|
Operating (loss) income |
(22) |
% |
|
(33) |
% |
|
(24) |
% |
|
(8) |
% |
|
Other income (expenses) |
|
|
|
|
|
|
|
|
Change in fair value of warrant liability |
55 |
% |
|
81 |
% |
|
12 |
% |
|
43 |
% |
|
Other income, net |
(1) |
% |
|
(13) |
% |
|
(1) |
% |
|
(7) |
% |
|
Income (loss) before income taxes |
32 |
% |
|
35 |
% |
|
(12) |
% |
|
28 |
% |
|
Benefit from income taxes |
(2) |
% |
|
(1) |
% |
|
(3) |
% |
|
0 |
% |
|
Net income (loss) |
34 |
% |
|
36 |
% |
|
(10) |
% |
|
28 |
% |
|
Net income (loss) attributable to noncontrolling
interests |
14 |
% |
|
27 |
% |
|
(8) |
% |
|
23 |
% |
|
Net income (loss) attributable to WM Technology, Inc. |
20 |
% |
|
9 |
% |
|
(2) |
% |
|
5 |
% |
Comparison of Three Months Ended June 30, 2022 and
2021
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
2022 |
|
2021 |
|
($) |
|
(%) |
|
(dollars in thousands) |
|
Revenues |
$ |
58,294 |
|
|
$ |
46,931 |
|
|
$ |
11,363 |
|
|
24 |
|
Total revenues increased by $11.4 million, or 24% for the
three months ended June 30, 2022 compared to the same period in
2021. The increase was primarily driven by a 31% increase in
average monthly paying clients. Our growth in average monthly
paying clients primarily reflects growth in our featured listing
product of $3.8 million, WM Business subscription offering of $0.9
million and other ad and SaaS solutions of $6.6 million, which
includes revenues attributable to companies we acquired since the
second quarter of 2021. For the three months ended June 30, 2022,
featured listing product, WM Business subscription offering and
other ad and SaaS solutions represented 51%, 20% and 29% of our
total revenues, respectively.
Cost of Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
2022 |
|
2021 |
|
($) |
|
(%) |
|
(dollars in thousands) |
|
Cost of revenues |
$ |
3,858 |
|
|
$ |
1,908 |
|
|
$ |
1,950 |
|
|
102 |
|
|
Gross margin |
93 |
% |
|
96 |
% |
|
|
|
|
Cost of revenues was $3.9 million for the three months ended June
30, 2022 compared to $1.9 million for the same period in 2021. The
increase was primarily related to an increase of $1.6 million
attributable to inventory costs of certain advertising revenue as
well as the cost of revenue attributable to a company we acquired
in the third quarter of 2021.
Sales and Marketing Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Change |
|
2022 |
|
2021 |
|
($) |
|
(%) |
|
(dollars in thousands) |
|
Sales and marketing expenses |
$ |
22,123 |
|
|
$ |
15,271 |
|
|
$ |
6,852 |
|
|
45 |
|
|
Percentage of revenue |
38 |
% |
|
33 |
% |
|
|
|
|
Sales and marketing expenses increased by $6.9 million, or 45%
for the three months ended June 30, 2022 compared to the same
period in 2021. The increase was primarily due to increases in
personnel-related costs of $4.9 million, branding and advertising
costs of $1.0 million, outside services costs of $0.8 million,
website advertising expense of $0.3 million as more advertising
options become available in the cannabis industry, and travel and
entertainment expense of $0.5 million, offset by a decrease in
event expense of $1.0 million. The increase in personnel-related
costs was attributable to increased headcount and a $0.8 million of
bonus expense related to future bonus payouts in connection with
prior acquisitions, offset by a decrease in stock-based
compensation expense of $1.8 million due to additional
stock-based compensation expense recognized in the 2021 period as a
result of the Business Combination.
Product Development Expenses