# WM Technology, Inc.: Form 10-Q for the period ended Jun 30, 2022

- Company: [WM Technology, Inc.](/companies/maps.md) (CIK 1779474)
- Form: 10-Q
- Filed: 2022-08-09
- Accepted by EDGAR: Aug 9, 2022, 21:04 ET
- Period: 2022-06-30
- Accession: 0001779474-22-000058
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1779474/000177947422000058/maps-20220630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1779474/000177947422000058/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-04-01 to 2022-06-30 | $58.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2022-01-01 to 2022-06-30 | $115.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-04-01 to 2022-06-30 | $3.9m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2022-01-01 to 2022-06-30 | $7.6m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2022-04-01 to 2022-06-30 | $13.3m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2022-01-01 to 2022-06-30 | $26.4m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-04-01 to 2022-06-30 | −$13.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2022-01-01 to 2022-06-30 | −$27.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-04-01 to 2022-06-30 | −$1.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2022-01-01 to 2022-06-30 | −$3.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-04-01 to 2022-06-30 | $11.7m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2022-01-01 to 2022-06-30 | −$2.2m | us-gaap:NetIncomeLoss |
| Operating cash flow | 6 months, 2022-01-01 to 2022-06-30 | −$3.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2022-01-01 to 2022-06-30 | $8.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-06-30 | $47.6m | us-gaap:Cash |
| Current assets | at 2022-06-30 | $90.3m | us-gaap:AssetsCurrent |
| Total assets | at 2022-06-30 | $417.7m | us-gaap:Assets |
| Current liabilities | at 2022-06-30 | $44.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-06-30 | $239.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-06-30 | $118.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 66,929 characters.

*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.

*(dollars in thousands, except for revenue per paying client)*

|  | Three Months Ended June 30, 2022 | 2021 | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $58,294 | $46,931 | $115,746 | $88,085 |
| Net income (loss) | $19,848 | $16,837 | $(11,385) | $24,568 |
| EBITDA(1) | $20,996 | $17,433 | $(8,040) | $26,407 |
| Adjusted EBITDA(1) | $(595) | $8,503 | $(1,548) | $17,477 |
| Average monthly revenue per paying client(2) | $3,509 | $3,706 | $3,652 | $3,609 |
| Average monthly paying clients(3) | 5,537 | 4,221 | 5,282 | 4,068 |
| MAUs (in thousands)(4) | 17,402 | 12,302 | 17,402 | 12,302 |

(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:

*(in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $19,848 | $16,837 | $(11,385) | $24,568 |
| Benefit from income taxes | (1,310) | (392) | (3,058) | (151) |
| Depreciation and amortization expenses | 2,458 | 988 | 6,403 | 1,990 |
| EBITDA | 20,996 | 17,433 | (8,040) | 26,407 |
| Stock-based compensation | 8,094 | 19,433 | 15,611 | 19,433 |
| Change in fair value of warrant liability | (32,234) | (37,791) | (14,015) | (37,791) |
| Transaction related bonuses | 1,073 | 1,550 | 3,030 | 1,550 |
| Transaction costs | — | — | 251 | — |
| Legal settlements and other legal costs | 925 | — | 1,064 | — |
| Warrant transaction costs | — | 5,506 | — | 5,506 |
| Impairment of right-of-use assets | 551 | 2,372 | 551 | 2,372 |
| Adjusted EBITDA | $(595) | $8,503 | $(1,548) | $17,477 |

### 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.

|  | Three Months Ended June 30, 2022 | 2021 | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Average monthly revenue per paying client | $3,509 | $3,706 | $3,652 | $3,609 |

### 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.

|  | Three Months Ended June 30, 2022 | 2021 | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Average monthly paying clients | 5,537 | 4,221 | 5,282 | 4,068 |

### 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.

|  | As of June 30, 2022 | 2021 |
| --- | ---: | ---: |
| MAUs (in thousands) | 17,402 | 12,302 |

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.

*(in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| 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, 2022 | 2021 | Six Months Ended June 30, 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% |

39

### Comparison of Three Months Ended June 30, 2022 and 2021

### Revenues

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| 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

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| 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

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| 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

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Product development expenses | $13,263 | $10,271 | $2,992 | 29 |
| Percentage of revenue | 23% | 22% |  |  |

Product development expenses increased by $3.0 million, or 29% for the three months ended June 30, 2022 compared to the same period in 2021. This increase was primarily due to an increase in personnel-related costs of $7.0 million and an increase in outside services of $0.6 million, offset by capitalized software costs of $4.6 million. The increase in personnel related costs was primarily due to increases in salaries and wages of $4.8 million and an increase in bonus expense of $1.4 million.

### General and Administrative Expenses

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $29,610 | $33,770 | $(4,160) | (12) |
| Percentage of revenue | 51% | 72% |  |  |

General and administrative expenses decreased by $4.2 million, or 12% for the three months ended June 30, 2022 compared to the same period in 2021. This decrease was primarily due to decreases in personnel-related costs of $9.5 million and impairment of right-of-use assets of $1.8 million, offset by increases in insurance costs of $2.2 million for additional insurance coverage as a public company, software costs of $1.2 million, bad debt expense of $1.4 million and professional fees of $2.3 million. The decrease in personnel-related costs includes a decrease in stock-based compensation expense of $9.1 million as a result of the additional stock-based compensation expense recognized in the 2021 period as a result of the Business Combination.

### Depreciation and Amortization Expenses

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization expenses | $2,458 | $988 | $1,470 | 149 |
| Percentage of revenue | 4% | 2% |  |  |

Depreciation and amortization expenses increased $1.5 million, or 149% for the three months ended June 30, 2022 compared to the same period in 2021. The increase was primarily due to increases in capitalized software amortization of $0.9 million and amortization of intangible assets of $0.3 million.

### Other Income (Expense), net

*(dollars in thousands)*

|  | Three Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrant liability | $32,234 | $37,791 | (5,557) | (15) |
| Other expense, net | (678) | (6,069) | 5,391 | (89) |
| Other income (expense), net | $31,556 | $31,722 | (166) | (1) |
| Percentage of revenue | 54% | 68% |  |  |

Other income (expense), net decreased by $0.2 million for the three months ended June 30, 2022 compared to the same period in 2021. The decrease in other income was primarily due to comparatively unfavorable changes in fair value of warrant liability of $5.6 million, offset by a decrease in other expense, net of $5.4 million primarily attributable to transaction costs of $5.5 million recognized in the 2021 period related to the Business Combination.

### Comparison of Six Months Ended June 30, 2022 and 2021

### Revenues

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $115,746 | $88,085 | $27,661 | 31 |

Total revenues increased by $27.7 million, or 31%, for the six months ended June 30, 2022 compared to the same period in 2021. The increase was driven by a 30% increase in average monthly paying clients. Our growth in average monthly revenue per paying client and average monthly paying clients primarily reflects growth in our featured listing product of $11.5 million, WM Business subscription offering of $2.7 million and other ad and SaaS solutions of $13.4 million, which includes revenues attributable to companies we acquired since the second quarter of 2021. For the six months ended June 30, 2022, featured listing product, WM Business subscription offering and other ad and SaaS solutions represented 52%, 20% and 28% of our total revenues, respectively.

### Cost of Revenues

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $7,598 | $3,765 | $3,833 | 102 |
| Gross margin | 93% | 96% |  |  |

Cost of revenues increased by $3.8 million, or 102%, for the six months ended June 30, 2022 compared to the same period in 2021. The increase was primarily related to an increase of $3.1 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

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing expenses | $44,005 | $24,388 | $19,617 | 80 |
| Percentage of revenue | 38% | 28% |  |  |

Sales and marketing expenses increased by $19.6 million, or 80%, for the six months ended June 30, 2022 compared to the same period in 2021. The increase was primarily due to increases in personnel-related costs of $13.8 million, outside services costs of $2.6 million, branding and advertising expense of $1.5 million and website advertising expense of $1.3 million. The increase in personnel-related costs was primarily due to increased headcount, including increases in salaries and wages of $8.6 million and bonus expense of $4.1 million, which includes $2.0 million of expense related to future bonus payouts in connection with prior acquisitions.

### Product Development Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Product development expenses | $26,353 | $18,139 | $8,214 | 45 |
| Percentage of revenue | 23% | 21% |  |  |

Product development expenses increased by $8.2 million, or 45% for the six months ended June 30, 2022 compared to the same period in 2021. The increase was primarily due to increases in personnel-related costs of $14.9 million and outside services costs of $1.4 million, offset by an increase in capitalized software development costs of $8.3 million. The increase in personnel-related costs was primarily due to increases in salaries, wages and bonus of $11.9 million, due to increased headcount, and stock-based compensation costs of $1.9 million driven by the issuance of restricted stock units to our employees during the second half of 2021 and the first half of 2022. Bonus expense for the first half of 2022 includes $0.7 million of expense related to future bonus payouts in connection with prior acquisitions.

### General and Administrative Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $58,665 | $47,136 | $11,529 | 24 |
| Percentage of revenue | 51% | 54% |  |  |

General and administrative expenses increased by $11.5 million, or 24%, for the six months ended June 30, 2022 compared to the same period in 2021. This increase was primarily due to increases in salaries and wages of $2.7 million, insurance costs of $5.4 million as a result of additional insurance coverage as a public company, bad debt expense of $4.0 million due to higher reserves for past due balances, professional services of $3.5 million and software expense of $2.6 million. These increases were partially offset by a decrease in stock-based compensation expense of $4.8 million and a decrease in impairment loss on right-of-use assets of $1.8 million. The decrease in stock-based compensation expense was a result of additional stock-based compensation expense recognized in the 2021 period in connection with the Business Combination.

### Depreciation and Amortization Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization expenses | $6,403 | $1,990 | $4,413 | 222 |
| Percentage of revenue | 6% | 2% |  |  |

Depreciation and amortization expenses increased $4.4 million for the six months ended June 30, 2022 compared to the same period in 2021. The increase was primarily due to increases in capitalized software amortization of $2.6 million, fixed asset depreciation of $0.9 million and intangible asset amortization of $0.9 million. Capitalized software amortization included accelerated depreciation of $1.1 million related to discontinued product features of WM Retail in the first quarter of 2022.

### Other (Expense) Income , net

*(dollars in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrant liability | $14,015 | $37,791 | (23,776) | (63) |
| Other expense, net | (1,180) | (6,041) | 4,861 | (80) |
| Other (expense) income, net | $12,835 | $31,750 | (18,915) | (60) |
| Percentage of revenue | 11% | 36% |  |  |

Other (expense) income, net decreased by $18.9 million for the six months ended June 30, 2022 compared to the same period in 2021. The decrease in other (expense) income, net was primarily due to comparatively unfavorable changes in fair value of warrant liability of $23.8 million, which was partially offset by a decrease in other expense, net of $4.9 million, primarily attributable to transaction costs of $5.5 million recognized in the 2021 period related to the Business Combination.

### Seasonality

Our rapid growth and recent changes in legislation have historically offset seasonal trends in our business. While seasonality has not had a significant impact on our results in the past, our clients may experience seasonality in their businesses which in turn can impact the revenue generated from them. Our business may become more seasonal in the future and historical patterns in our business may not be a reliable indicator of future performance.

### Liquidity and Capital Resources

The following tables show our cash, accounts receivable and working capital as of the dates indicated:

*(in thousands)*

|  | June 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Cash | $47,604 | $67,777 |
| Accounts receivable, net | 27,305 | 17,550 |
| Working capital | 45,462 | 61,134 |

As of June 30, 2022, we had cash of $47.6 million. During the second quarter of 2021, we completed the Business Combination, resulting in proceeds of approximately $80.0 million. Our funds are being used for funding our current operations and potential strategic acquisitions in the future. We also intend to increase our capital expenditures to support the organic growth in our business and operations. We expect to fund our near-term capital expenditures from cash provided by operating activities. We believe that our existing cash and cash generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect, and we could exhaust our available financial resources sooner than we currently expect. We may seek to raise additional funds at any time through equity, equity-linked or debt financing arrangements. Our future capital requirements and the adequacy of available funds will depend on many factors. We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all.

### Sources of Liquidity

We primarily finance our operations and capital expenditures through cash flows generated by operations.

To the extent existing cash and investments and cash from operations are not sufficient to fund future activities, we may need to raise additional funds. We may seek to raise additional funds through equity, equity-linked or debt financings. If we raise additional funds through the incurrence of indebtedness, such indebtedness may have rights that are senior to holders of our equity securities and could contain covenants that restrict operations. Any additional equity financing may be dilutive to stockholders. We may enter into investment or acquisition transactions in the future, which could require us to seek additional equity financing, incur indebtedness, or use cash resources.

### Cash Flows

*(in thousands)*

|  | Six Months Ended June 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities | $(3,814) | $16,539 |
| Net cash used in investing activities | $(10,267) | $(836) |
| Net cash (used in) provided by financing activities | $(6,092) | $56,040 |

#### Net Cash (Used In) Provided by Operating Activities

Cash from operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation and amortization, change in fair value of warrant liability, impairment charges, stock-based compensation, provision for doubtful accounts, deferred taxes and the effect of changes in working capital.

Net cash used in operating activities for the six months ended June 30, 2022 was $3.8 million, which resulted from a net loss of $11.4 million, together with net cash outflows of $2.6 million from changes in operating assets and liabilities, and non-cash items of $10.2 million, consisting of depreciation and amortization of $6.4 million, fair value of warrant liability of $14.0 million, stock-based compensation of $15.6 million, deferred income taxes of $3.1 million, provision for doubtful accounts of $4.7 million and impairment loss on right-of-use asset of $0.6 million. Net cash outflows from changes in operating assets and liabilities were primarily due to an increase in accounts receivable of $13.6 million, partially offset by a decrease in prepaid expenses and other assets of $2.9 million and an increase in accounts payable and accrued expenses of $8.9 million. The changes in operating assets and liabilities are mostly due to fluctuations in timing of cash receipts and payments.

Net cash provided by operating activities for the six months ended June 30, 2021 was $16.5 million, which resulted from net income of approximately $24.6 million, together with net cash inflows of approximately $5.7 million from changes in operating assets and liabilities, and non-cash items of $13.7 million, consisting of depreciation and amortization of $2.0 million, fair value of warrant liability of $37.8 million, stock-based compensation of $19.4 million, impairment loss on right-of-use asset of $2.4 million, provision for doubtful accounts of $0.7 million and deferred income taxes of $0.4 million. The net cash inflows from changes in operating assets and liabilities were primarily due to a decrease in prepaid expenses and other current assets of $4.4 million, an increase in accounts payable and accrued expenses of $1.7 million, an increase in deferred revenue of $1.7 million. These changes were partially offset by an increase in accounts receivables of $2.1 million. The changes in operating assets and liabilities are mostly due to fluctuations in timing of cash receipts and payments.

#### Net Cash Used in Investing Activities

Cash used in investing activities for the six months ended June 30, 2022 was $10.3 million, which resulted from $8.6 million cash paid for purchases of property and equipment, including certain capitalized software development costs, net cash paid for acquisition of $0.7 million and cash paid for an acquisition holdback release of $1.0 million.

Cash used in investing activities for the six months ended June 30, 2021 was $0.8 million for purchases of property and equipment.

#### Net Cash (Used in) Provided by Financing Activities

Cash outflows from financing activities for the six months ended June 30, 2022 was $6.1 million, which primarily consists of repayments of insurance premium financing of $4.3 million and distributions of $1.8 million to the Unit holders other than the Company.

Net cash used in financing activities for the six months ended June 30, 2021 was $56.0 million, which resulted from proceeds from the Business Combination of $80.3 million, distributions of $18.1 million, repurchase of Class B Units of $5.6 million and repayments of insurance premium financing of $0.4 million.

### Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the assumptions and estimates associated with revenue recognition, income taxes, stock-based compensation, capitalized software development costs, goodwill and intangible assets and fair value measurements to have the greatest potential impact on our consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see Note 2 to our condensed consolidated financial statements included herein.

### Revenue Recognition

Our revenues are derived primarily from monthly subscriptions and additional offerings for access to the Weedmaps platform and SaaS solutions. We recognize revenue when the fundamental criteria for revenue recognition are met. We recognize 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) we satisfy these performance obligations in an amount that reflects the consideration we expect to be entitled to in exchange for those services. We exclude sales taxes and other similar taxes from the measurement of the transaction price. The determination of the performance obligations and the timing of satisfaction of such obligations either over time or at a point-in-time requires us to make significant judgement and estimates.

Substantially all of our revenue is generated by providing standard listing subscription services and other paid listing subscriptions services, including featured listings, placements, promoted deals, nearby listings, other display advertising as well as customer relationship management and delivery and logistic services. These arrangements are recognized over-time, generally during a month-to-month subscription period as the products are provided.

### Income Taxes

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.

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. 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 also subject to taxes in foreign jurisdictions. Tax laws and regulations are complex and periodically changing and the determination of our provision for income taxes, including our taxable income, deferred tax assets and tax receivable agreement liability, requires us to make significant judgment, assumptions and estimates. In connection with the Business Combination, the Company entered into a Tax Receivable Agreement (“TRA”) with continuing members that provides for a payment to the continuing members of 85% of the amount of tax benefits, if any, that WM Technology, Inc. realizes, or is deemed to realize, as a result of redemptions or exchanges of WMH 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 within paid-in capital. To date, no payments have been made with respect to the TRA. Our calculation of the TRA asset and liability requires estimates of its future qualified taxable income over the term of the TRA as a basis to determine if the related tax benefits are expected to be realized. As of June 30, 2022, total net deferred tax assets and TRA liability were $183.2 million and $142.7 million, respectively.

### Stock-based Compensation

We measure fair value of employee stock-based compensation awards on the date of grant and allocate the related expense over the requisite service period. The fair value of restricted stock units (“RSUs”) and performance-based restricted stock units (“PRSUs”) is equal to the market price of our Class A common stock on the date of grant. The fair value of the Class P Units is measured using the Black-Scholes-Merton valuation model. When awards include a performance condition that impacts the vesting of the award, we record compensation cost when it becomes probable that the performance condition will be met. The level of achievement of such goals in the performance-based restricted stock awards may cause the actual number of units that ultimately vest to range from 0% to 200% of the original units granted. Forfeitures of stock-based awards are recognized as they occur. For the three and six months ended June 30, 2022, we recognized stock-based compensation expense of $8.1 million and $15.6 million, respectively, and for the three and six months ended June 30, 2021, we recognized stock-based compensation expense of $19.4 million. See Note 11 to our condensed consolidated financial statements included herein.

### Capitalized Software Development Costs

We capitalize certain costs related to the development and enhancement of the Weedmaps platform and SaaS solutions. In accordance with authoritative guidance, we 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. 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 prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded in product development expenses on our consolidated statements of operations. 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. The accounting for website and internal-use software costs requires us to make significant judgement, assumptions and estimates related to the timing and amount of recognized capitalized software development costs. For the three and six months ended June 30, 2022, we capitalized $4.5 million and $8.6 million of costs related to the development of software applications, respectively.

### Goodwill and Intangible Assets

Assets and liabilities acquired from acquisitions are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill. The accounting for goodwill and intangible assets requires us to make significant judgement, estimates and assumptions. Significant estimates and assumptions in valuing acquired intangible assets and liabilities include projected cash flows attributable to the assets or liabilities, asset useful lives and discount rates.

Goodwill is not amortized and is subject to annual impairment testing, or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. Intangible assets deemed to have finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to our future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. At least annually, the remaining useful life is evaluated. See Note 2 to our consolidated financial statements included herein.

### Fair Value Measurements

In connection with the Business Combination, we assumed 12,499,993 Public Warrants and 7,000,000 Private Placement Warrants. As of June 30, 2022, 12,499,973 of the Public Warrants and all of the Private Placement Warrants remained outstanding . The warrants are measured at fair value under ASC 820 - *Fair Value Measurements*. The fair value of the Public Warrants is classified as Level 1 financial instruments and is based on the publicly listed trading price of our Public Warrants. The fair value of the Private Warrants is determined with Level 3 inputs using the Black-Scholes model. The fair value of the Private Placement Warrants may change significantly as additional data is obtained. In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value, and such changes could materially impact our results of operations in future periods. As of June 30, 2022 and December 31, 2021, warranty liability was $13.4 million and $27.5 million, respectively. See Note 4 to our condensed consolidated financial statements included herein.

### Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included herein.

## Market risk

As filed, 1,590 characters.

We have operations both within the United States and in foreign jurisdictions, and we are exposed to market risks in the ordinary course of our business, including the effects of foreign currency fluctuations, interest rate changes and inflation. Information relating to quantitative and qualitative disclosures about these market risks is set forth below.

### Interest Rate Fluctuation Risk

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of June 30, 2022, we did not have any cash equivalents.

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Because we only hold cash and, our portfolio’s fair value is insensitive to interest rate changes. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives.

### Inflation

Other than as set forth in the note above titled “*Growth and Retention of Our Paying Clients”*, we do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

## Controls and procedures

As filed, 4,092 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

### Changes in Internal Control Over Financial Reporting

Other than execution of the material weakness remediation activities described below, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act), during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Remediation of Previously Disclosed Material Weakness

We previously identified and disclosed in our 2021 Annual Report, as well as in our Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2022, a material weakness in our operation of controls over the classification and accounting for the private placement warrants and public warrants (collectively, the “warrants”), which were initially issued by Silver Spike Acquisition Corp in connection with its initial public offering and assumed by the Company in connection with the consummation of the Business Combination. As of June 30, 2022, Management has completed the implementation of our remediation efforts of the material weakness related to accounting for the warrants. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our remediation efforts included demonstrating our ability to effectively operate our controls and enhancing our control design to require the formalized consideration of obtaining additional technical guidance in connection with evaluating significant or unusual transactions. These additional considerations include items such as obtaining additional accounting pronouncements or performing consultations with third party accounting specialists, authoritative bodies or regulators.

## Risk factors

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Investment in our securities involves risk. An investor or potential investor should consider the risks summarized below and under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 (our “2021 Form 10-K”) and the risk factor discussed below when making investment decisions regarding our securities. Except for the risk factor discussed below, we do not believe that there have been any material changes to the risk factors disclosed our 2021 Form 10-K.

***“We track certain performance metrics, including MAUs, with internal tools and do not independently verify such metrics. Certain of our performance metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.***

We calculate and track performance metrics with internal tools, which are not independently verified by any third-party. While we believe our metrics are reasonable estimates of our user or client base for the applicable period of measurement, the methodologies used to measure these metrics and how we define such metrics require significant judgment and may be susceptible to algorithm or other technical errors. For example, user accounts are based on email addresses, and a user could use multiple email addresses to establish multiple accounts, and clients in many instances will have multiple accounts. Additionally, a user could also use technology (such as incognito browsing, blocking or deleting cookies and IP addresses or other similar methods) that may decrease our ability to obtain useful information with respect to the number of and behavior of users, and as a result, we may include users who are not actively engaging with our platform in the manner in which we assume, and/or we may count as unique users multiple visits by the same underlying user. As a result, the data we report may not be accurate, and we believe unique user statistics could include a significant number of repeat underlying users. Our internal tools and processes we use to identify multiple accounts or fraudulent accounts have a number of limitations, and our methodologies for tracking key metrics may change over time, which could result in unexpected changes to our metrics, including historical metrics. Our ability to recalculate our historical metrics may be impacted by data limitations or other factors that require us to apply different methodologies for such adjustments and we generally do not intend to update previously disclosed metrics for any such changes. Though we regularly review our processes for calculating metrics and may adjust our processes for calculating metrics to improve their accuracy, limitations or errors with respect to how we measure data (or the data that we measure) may affect our understanding of certain details of our business, which could affect our longer term strategies. If our performance metrics are not accurate representations of our business, user or client base, or traffic levels; if we discover material inaccuracies in our metrics; or if the metrics we rely on to track our performance do not provide an accurate measurement of our business, user or client base or traffic levels, we may not be able to effectively implement our business strategy, our reputation may be harmed, and our operating and financial results could be adversely affected.

Our clients and investors rely on our key metrics as a representation of our performance. If these third parties do not perceive our user metrics to be accurate representations of our user base or user engagement, or if we discover material inaccuracies in our user metrics, our reputation may be harmed and retailers may be less willing to list a business on our platform, which could negatively affect our business, financial condition, or results of operations.

***Our ability to successfully drive engagement on our platform, as well as changes to our user engagement and advertising strategy and practices, pose risks to our business.***

Our clients use our products and services as they believe the value received from paying for our products and services justifies the cost of those services. We believe the overall level of engagement of our users with our clients is critical to our success and our long-term financial performance. As we evolve our user engagement and advertising strategy and practices, we may not be successful in improving user engagement in a cost-efficient manner, or at all. Certain operating decisions, including the likelihood of decreased usage of pop-under advertisements, may significantly decrease our reported user engagement and/or traffic, increase the cost of generating user engagement and/or traffic or decrease our overall success rate in promoting engagement on our platform. Declining user growth, engagement or traffic could make us less attractive to our clients, which may seriously harm our business. In addition, we continue to compete with other companies to attract and retain consumer attention. A number of factors have affected and could potentially negatively affect our reported user engagement and/or traffic and our overall user engagement with our clients, including if:

- we do not provide a compelling consumer experience to entice consumers to use our products and services, or our consumers don’t have the ability to maximize the consumer experience;
- we are unable to convince consumers and clients of the value and usefulness of our platform and services;
- we are unable to find cost-effective marketing channels or other strategies to drive traffic to our website, including replacing any pop-under advertisements that we have or may discontinue;
- our products fail to operate effectively on the iOS or Android mobile operating systems;
- we are unable to continue to develop products that work with a variety of mobile operating systems, networks, and smartphones;
- we do not provide a compelling consumer experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products;
- consumers engage more with competing platforms or products at the expense of ours or those of our clients;
- if the manner in which we promote engagement or traffic is seen by consumers or clients as unappealing or harm our brand image or reputation;
- there are concerns about the privacy implications, safety, or security of our products;
- our products are subject to increased regulatory scrutiny or approvals, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the consumer experience;
- technical or other problems frustrate the consumer experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner;
- we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; or
- our current or future products reduce consumer activity on our website or our applications by making it easier for our consumers to interact directly with our clients.

Any decrease to consumer retention, growth, or engagement could render our products less attractive to consumers, advertisers, or partners, and could seriously harm our business.

***Future investments in alternative revenue streams or acquisitions could disrupt our business and adversely affect our operating results, financial condition and cash flows.***

We believe that our long-term growth depends in part on our ability to develop and monetize additional aspects of our platform. Developing new products and solutions may involve significant investments of capital, time, resources and managerial attention. We have limited experience with developing, implementing and managing revenue streams other than our core listing business, and there can be no assurance that we will successfully implement any new products or solutions. External factors, such as additional regulatory compliance obligations, may also affect the successful implementation of new products and solutions through our platform.

Additionally, we have made acquisitions recently and may make additional acquisitions that could be material to our business, operating results, financial condition and cash flows. Our ability as an organization to successfully acquire and integrate technologies or businesses is unproven. Acquisitions involve many risks, including the following:

- an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;
- we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us, and potentially across different cultures and languages in the event of a foreign acquisition;
- we may see the acquired business lose customers or contractual partners who no longer wish to do business with the acquired business once we acquire it;
- an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;
- an acquisition may result in a delay or reduction of sales for both us and the company we acquired due to uncertainty about continuity and effectiveness of products or support from either company;
- we may encounter difficulties in, or may be unable to, successfully sell any acquired products;
- an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions;
- potential strain on our financial and managerial controls and reporting systems and procedures;
- potential known and unknown liabilities associated with an acquired company;
- if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants;
- the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions;
- to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing equity holders may be diluted and earnings per share may decrease; and
- managing the varying intellectual property protection strategies and other activities of an acquired company.

We may not succeed in addressing these or other risks or any other problems encountered in connection with the integration of any acquired business. The inability to integrate successfully the business, technologies, products, personnel or operations of any acquired business, or any significant delay in achieving integration, could have a material adverse effect on our business, operating results, financial condition and cash flows.

***A significant portion of our total outstanding shares of our Class A Common Stock may be sold into the market in the near future. This could cause the market price of our Class A Common Stock to drop significantly, even if our business is doing well.***

Sales of a substantial number of shares of our Class A Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A Common Stock. We are unable to predict the effect that sales may have on the prevailing market price of our Class A Common Stock and the public warrants originally issued in the initial public offering of Silver Spike (the “Public Warrants”).

To the extent our Warrants are exercised, additional shares of our Class A Common Stock will be issued, which will result in dilution to the holders of our Class A Common Stock and increase the number of shares eligible for resale in the public market. Sales, or the potential sales, of substantial numbers of shares in the public market by the Selling Securityholders, subject to certain restrictions on transfer until the termination of applicable lock-up periods, could increase the volatility of the market price of our Class A Common Stock or adversely affect the market price of our Class A Common Stock.”

Filed Aug 9, 2022.
Source: SEC EDGAR, the filing index for accession 0001779474-22-000058. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.