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

- Company: [WM Technology, Inc.](/companies/maps.md) (CIK 1779474)
- Form: 10-Q
- Filed: 2022-11-08
- Accepted by EDGAR: Nov 8, 2022, 02:47 ET
- Period: 2022-09-30
- Accession: 0001779474-22-000084
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1779474/000177947422000084/maps-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1779474/000177947422000084/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $50.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $166.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $4.3m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $11.9m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $12.0m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-01-01 to 2022-09-30 | $38.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | −$19.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$46.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | −$2.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | −$5.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$5.2m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$7.4m | us-gaap:NetIncomeLoss |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$10.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2022-01-01 to 2022-09-30 | $13.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-09-30 | $34.2m | us-gaap:Cash |
| Current assets | at 2022-09-30 | $62.0m | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $393.9m | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $37.1m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-09-30 | $224.9m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-09-30 | $115.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 75,777 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.

Founded in 2008, WM Technology, Inc. operates a leading online cannabis marketplace for consumers together with a comprehensive set of eCommerce and compliance software solutions for cannabis businesses, which are sold to retailers and brands in the United States state-legal and Canadian cannabis markets. Our comprehensive business-to-consumer (“B2C”) and business-to-business (“B2B”) suite of products afford cannabis retailers and brands of all sizes integrated tools to compliantly run their businesses and to reach, convert, and retain consumers.

Our business primarily consists of our commerce-driven marketplace, Weedmaps, and its fully integrated suite of end-to-end SaaS solutions software offering, Weedmaps for Business. The Weedmaps marketplace provides cannabis consumers with information regarding cannabis retailers and brands. In addition, the Weedmaps marketplace aggregates data from a variety of sources including retailer point-of-sale solutions to provide consumers with the ability to browse by strain, pricing, cannibinoids and other information regarding locally available cannabis products, through our website and mobile apps. The marketplace provides consumers with product discovery, access to deals and discounts, and reservation of products for pickup by consumers or delivery to consumers by participating retailers. The marketplace also provides education and learning information to help newer consumers learn about the types of products to purchase. We believe the size, loyalty and engagement 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.

Weedmaps for Business, our SaaS offering, is a comprehensive set of eCommerce and compliance software solutions catered towards cannabis retailers, delivery services and brands. These solutions support cannabis businesses at every stage in the consumer funnel, enabling them to:

- Strategically reach prospective cannabis consumers;
- Manage pick-up, delivery and inventory in compliance with local regulations;
- Help improve the customer experience by creating online browsing and ordering offerings functionality on a brand, retailer or delivery operator’s website and by extending that functionality in-store with kiosks;
- Foster customer loyalty and re-engage with segments of consumers;
- Leverage the Weedmaps for Business products in conjunction with any other preferred software solutions via integrations and application programming interfaces (“APIs”); and
- Make informed marketing and merchandising decisions using performance analytics and consumer and brand insights to promote products to specific consumer groups.

We charge a monthly fee to retailer and brand clients for access to our WM Pages subscription package which includes:

- WM Listings: A listing page for a retailer, delivery service or brand on the Weedmaps marketplace, enabling our clients to be discovered by the marketplace’s consumers;
- WM Orders: Software for retailers to receive pick-up and delivery orders directly from a WM listing and have the orders be connected directly with a client’s point-of-sale (“PoS”) system (for certain PoS systems). The marketplace also enables brands to route customer purchase interest to a retailer that carries the brand’s product;
- WM Store: Customizable menus for brands, retailers and delivery operators to embed on their website that facilitate customer pick-up or delivery orders and reach to more customers by bringing the breadth of the Weedmaps marketplace to a client’s own website;
- WM Connectors: Centralized integration tool that allows for easier menu management, automatic inventory updates and streamlined order fulfillment workflows to enable clients to save time and integrate disparate software systems; and
- WM Insights: An insights and analytics platform for clients leveraging data across the Weedmaps marketplace and software solutions.

We also offer other add-on products for additional fees, including:

- Featured Listings: Premium Placement ad solutions on high visibility locations on the Weedmaps marketplace to maximize clients’ listing and deal presence;
- WM Deals: Discount and promotion pricing tools that let clients strategically reach prospective price-conscious cannabis customers with deals or discounts to drive conversion;
- WM Ads: Ad solutions on the Weedmaps marketplace designed for clients to amplify their businesses and reach more highly engaged cannabis consumers throughout their buying journey;
- WM AdSuite: Omni-channel (on and off platform) marketing solution with access to the Weedmaps marketplace and off marketplace outlets including certain publishers, out-of-home units in addition to other media solutions;
- WM CRM: Customer relationship management software allowing clients to reach new consumers, build loyalty, and grow revenue with our compliant app, text and marketing tools;
- WM Dispatch: Compliant, automated, and optimized last-mile delivery software that helps clients manage their delivery fleets and logistics. This product streamlines the delivery experience from in-store to front-door; and
- WM Screens: In-store digital menu signage and kiosk solution and media management tool enabling clients to enhance the in-store experience, impact omnichannel retail and centralize operations with revenue-driving and customizable digital signage

We sell our Weedmaps for Business suite in the United States and currently offer some of our Weedmaps for Business solutions 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.

Our mission is to power a transparent and inclusive global cannabis economy. Our technology addresses the challenges facing both consumers seeking to understand cannabis products and businesses who serve cannabis users in a legally compliant fashion. Over the past 14 years, the Weedmaps marketplace has 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. Weedmaps for Business is a set of eCommerce-enablement tools designed to help retailers and brands get the best out of the Weedmaps’ consumer experience, create labor efficiencies, and manage compliance needs.

We hold a strong belief in the importance of enabling safe, legal access to cannabis for consumers worldwide. We believe we offer the only comprehensive software platform that allows cannabis retailers to reach their target audience, quickly and cost effectively, addressing a wide range of needs. We are committed to building the software solutions that power cannabis businesses compliantly in the industry, to advocating for legalization, licensing and social equity of cannabis, and to facilitating further learning through partnership with subject matter experts on providing detailed, accurate information about cannabis.

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 5,576 and 5,380 average monthly paying business clients during the three and nine months ended September 30, 2022, respectively, on the supply-side of our marketplace. 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 9,200 listing pages as of September 30, 2022. 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 September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $50,500 | $50,884 | $166,246 | $138,969 |
| Net (loss) income | $(10,464) | $49,205 | $(21,849) | $73,773 |
| EBITDA(1) | $(10,592) | $50,578 | $(18,632) | $76,985 |
| Adjusted EBITDA(1) | $(9,630) | $10,424 | $(11,178) | $27,901 |
| Average monthly revenue per paying client(2) | $3,019 | $3,817 | $3,433 | $3,682 |
| Average monthly paying clients(3) | 5,576 | 4,444 | 5,380 | 4,194 |

(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).

### Revenue

We offer Weedmaps for 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 Weedmaps for 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.

### Net Income (Loss) to EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts

Our financial statements, including net income (loss), are prepared in accordance with GAAP. For more information regarding the components within our net income (loss), see “Components of Our Results of Operations” below.

Net (loss) income for the three months ended September 30, 2022 and 2021 was $(10.5) million and $49.2 million, respectively. The decrease in net income of $59.7 million in the three months ended September 30, 2022 was primarily due to a decrease in revenue of $0.4 million, an increase in operating expenses of $23.3 million, a decrease in other income of $39.0 million, which includes a decrease in change in fair value of warrant liability of $39.2 million, and a decrease in provision for income taxes of $3.0 million.

Net (loss) income for the nine months ended September 30, 2022 and 2021 was $(21.8) million and $73.8 million, respectively. The decrease in net income of $95.6 million in the nine months ended September 30, 2022 was primarily due to an increase in revenue of $27.3 million, offset by an increase in operating expenses of $70.9 million, a decrease in other income of $57.9 million, which includes a decrease in change in fair value of warrant liability of $63.0 million, and a decrease in provision for income taxes of $5.9 million. For more information regarding the components of our net (loss) income, see “Components of Our Results of Operations” below.

To provide investors with additional information regarding our financial results, we have disclosed EBITDA, Adjusted EBITDA, and Adjusted EBITDA before Provision for Doubtful Accounts, all 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. Adjusted EBITDA is further adjusted to exclude provision for doubtful accounts for the case of Adjusted EBITDA before Provision for Doubtful Accounts. Below we have provided a reconciliation of net (loss) income (the most directly comparable GAAP financial measure) to EBITDA; from EBITDA to Adjusted EBITDA; and from Adjusted EBITDA to Adjusted EBITDA before Provision for Doubtful Accounts

We present EBITDA, Adjusted EBITDA, and Adjusted EBITDA before Provision for Doubtful Accounts 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, Adjusted

EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts 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 EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements;
- EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts do not reflect changes in, or cash requirements for, our working capital needs; and
- EBITDA, Adjusted EBITDA, and Adjusted EBITDA before Provision for Doubtful Accounts do not reflect tax payments that may represent a reduction in cash available to us.

Because of these limitations, you should consider EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts alongside other financial performance measures, including net income (loss) and our other GAAP results.

A reconciliation of net income (loss) to non-GAAP EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts is as follows:

*(in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Net (loss) income | $(10,464) | $49,205 | $(21,849) | $73,773 |
| (Benefit from) provision for income taxes | (2,641) | 393 | (5,699) | 242 |
| Depreciation and amortization expenses | 2,513 | 980 | 8,916 | 2,970 |
| EBITDA | (10,592) | 50,578 | (18,632) | 76,985 |
| Stock-based compensation | 1,639 | 4,192 | 17,250 | 23,625 |
| Change in fair value of warrant liability | (6,590) | (45,837) | (20,605) | (83,628) |
| Transaction related bonuses | 1,039 | — | 4,069 | 1,550 |
| Legal settlements and other legal costs | 2,148 | — | 3,212 | — |
| Reduction in force | 1,960 | — | 1,960 | — |
| Impairment loss | 766 | — | 1,317 | 2,372 |
| Transaction costs | — | 1,450 | 251 | 1,450 |
| Warrant transaction costs | — | 41 | — | 5,547 |
| Adjusted EBITDA | $(9,630) | $10,424 | $(11,178) | $27,901 |
| Provision for doubtful accounts | 10,176 | 2,355 | 14,867 | 3,015 |
| Adjusted EBITDA before Provision for Doubtful Accounts | $546 | $12,779 | $3,689 | $30,916 |

### 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 September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Average monthly revenue per paying client | $3,019 | $3,817 | $3,433 | $3,682 |

### 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 September 30, 2022 increased approximately 25% to 5,576 average monthly paying clients from 4,444 average monthly paying clients in the same period in 2021. Average monthly paying clients for the nine months ended September 30, 2022 increased approximately 28% to 5,380 average monthly paying clients from 4,194 average monthly paying clients in the same period in 2021. The increase in average monthly paying clients in the three and nine months ended September 30, 2022 as compared to the same periods in 2021 was primarily due to new client acquisitions across existing and new states and new clients acquired through acquisitions. This growth was fully offset by a decline in our Revenue Per Paying Client. We expected these pressures given the continued liquidity challenges that clients are facing.

|  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Average monthly paying clients | 5,576 | 4,444 | 5,380 | 4,194 |

### Monthly Active Users

In addition to key financial and operational metrics listed above, we also previously reported Monthly Active Users (“MAUs”), which represented, in any given period, the total number of unique users who opened our Weedmaps mobile app or gained access to our Weedmaps.com website, including through paid advertising channels, during the final calendar month of the period. As discussed in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Prior 10-Q”), we decided to reevaluate the value to investors of continuing to report MAUs as a key metric on a quarterly or annual basis. We believe that historically, our MAU correlated to the level of our marketing expenditure (which, as previously explained, utilized pop-under advertisements). We observed this as we downshifted our marketing spend, including to rely less on the use of pop-under advertisements, during the third quarter.

In the quarter ended September 30, 2022, our MAUs decreased to 11.2 million in the final month of the quarter ended September 30, 2022 from 17.4 million in the final month of quarter ended June 30, 2022. Our listing page visits, which is the number of visits to retailer and brand listing pages on the marketplace, remained relatively steady during the same period, decreasing slightly from 13.3 million in the final month of the quarter ended June 30, 2022 to 12.8 million during the final month of the quarter ended September 30, 2022. We believe this reflects, among other things, the value proposition the marketplace provides to repeat cannabis consumers.

We are evaluating alternative metrics to provide investors that will shed more clarity on down-funnel marketplace behavior than MAUs historically have, and we have determined not to report MAUs going forward..

### 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.

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 our collections on 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 14-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 Weedmaps for 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 Weedmaps for 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 Weedmaps for 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, we 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, we 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 Weedmaps for 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 Weedmaps for 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 provision for doubtful accounts and professional and outside services related to legal and other consulting services.

### 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 September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $50,500 | $50,884 | $166,246 | $138,969 |
| Operating expenses: |  |  |  |  |
| Cost of revenues | 4,272 | 2,035 | 11,870 | 5,800 |
| Sales and marketing | 17,882 | 12,806 | 61,887 | 37,194 |
| Product development | 11,988 | 7,782 | 38,341 | 25,921 |
| General and administrative | 33,490 | 23,220 | 92,155 | 70,356 |
| Depreciation and amortization | 2,513 | 980 | 8,916 | 2,970 |
| Total operating expenses | 70,145 | 46,823 | 213,169 | 142,241 |
| Operating (loss) income | (19,645) | 4,061 | (46,923) | (3,272) |
| Other income (expenses) |  |  |  |  |
| Change in fair value of warrant liability | 6,590 | 45,837 | 20,605 | 83,628 |
| Other expense, net | (50) | (300) | (1,230) | (6,341) |
| (Loss) income before income taxes | (13,105) | 49,598 | (27,548) | 74,015 |
| (Benefit from) provision for income taxes | (2,641) | 393 | (5,699) | 242 |
| Net (loss) income | (10,464) | 49,205 | (21,849) | 73,773 |
| Net (loss) income attributable to noncontrolling interests | (5,300) | 28,370 | (14,484) | 48,675 |
| Net (loss) income attributable to WM Technology, Inc. | $(5,164) | $20,835 | $(7,365) | $25,098 |

41

|  | Three Months Ended September 30, 2022 | 2021 | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | 100% | 100% | 100% | 100% |
| Operating expenses: |  |  |  |  |
| Cost of revenues | 8% | 4% | 7% | 4% |
| Sales and marketing | 35% | 25% | 37% | 27% |
| Product development | 24% | 15% | 23% | 19% |
| General and administrative | 66% | 46% | 55% | 51% |
| Depreciation and amortization | 5% | 2% | 5% | 2% |
| Total operating expenses | 139% | 92% | 128% | 102% |
| Operating (loss) income | (39)% | 8% | (28)% | (2)% |
| Other income (expenses) |  |  |  |  |
| Change in fair value of warrant liability | 13% | 90% | 12% | 60% |
| Other expense, net | 0% | (1)% | (1)% | (5)% |
| (Loss) income before income taxes | (26)% | 97% | (17)% | 53% |
| (Benefit from) provision for income taxes | (5)% | 1% | (3)% | 0% |
| Net (loss) income | (21)% | 97% | (13)% | 53% |
| Net (loss) income attributable to noncontrolling interests | (10)% | 56% | (9)% | 35% |
| Net (loss) income attributable to WM Technology, Inc. | (10)% | 41% | (4)% | 18% |

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

### Revenues

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $50,500 | $50,884 | $(384) | (1) |

Total revenues remained consistent for the three months ended September 30, 2022 compared to the same period in 2021. Compared to the prior year period, revenue increased $1.3 million from our Weedmaps for Business and other SaaS subscriptions, offset by a decrease in revenue from featured and deal listings of $1.7 million. For the three months ended September 30, 2022, featured and deal listings, Weedmaps for Business and other SaaS subscriptions and other ad solutions represented approximately 69%, 24% and 7% of our total revenues, respectively.

### Cost of Revenues

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $4,272 | $2,035 | $2,237 | 110 |
| Gross margin | 92% | 96% |  |  |

Cost of revenues was $4.3 million for the three months ended September 30, 2022 compared to $2.0 million for the same period in 2021. The increase was primarily related to an increase of $1.5 million for cost of revenue associated with WM CRM and WM AdSuite and an increase of $0.7 million of server costs.

### Sales and Marketing Expenses

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing expenses | $17,882 | $12,806 | $5,076 | 40 |
| Percentage of revenue | 35% | 25% |  |  |

Sales and marketing expenses increased by $5.1 million, or 40%, for the three months ended September 30, 2022 compared to the same period in 2021. The increase was primarily due to an increase in personnel-related costs of $6.2 million, an increase in outside services of $0.5 million and an increase in travel and entertainment of $0.3 million, offset by a decrease in website advertising expense of $2.0 million. The increase in personnel-related costs was primarily due to increased headcount and it includes an increase in salaries and wages of $4.4 million, an increase in bonus expense of $1.1 million, an increase in payroll taxes of $0.4 million and an increase in stock-based compensation expense of $0.3 million. Bonus expense for the three months ended September 30, 2022 includes $0.8 million of expense related to future bonus payouts in connection with prior acquisitions.

### Product Development Expenses

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Product development expenses | $11,988 | $7,782 | $4,206 | 54 |
| Percentage of revenue | 24% | 15% |  |  |

Product development expenses increased by $4.2 million, or 54%, for the three months ended September 30, 2022 compared to the same period in 2021. This increase was primarily due to increases in personnel-related expense of $4.0 million and outside services expense of $0.3 million. The increase in personnel-related costs was primarily due to increased headcount and it includes increases in salaries and wages of $4.0 million and bonus expense of $0.8 million, which includes a $0.2 million expense related to future bonus payouts in connection with prior acquisitions, offset by a decrease in stock-based compensation expense of $0.8 million due to the additional stock-based compensation expense recognized in the 2021 period as a result of the Business Combination.

### General and Administrative Expenses

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $33,490 | $23,220 | $10,270 | 44 |
| Percentage of revenue | 66% | 46% |  |  |

General and administrative expenses increased by $10.3 million, or 44%, for the three months ended September 30, 2022 compared to the same period in 2021. This increase was primarily due to an increase in provision for doubtful accounts of $7.8 million, an increase in personnel-related costs of $2.2 million, an increase in professional fees of $1.4 million, an increase in software expense of $0.8 million, and an increase in impairment loss of $0.8 million, offset by decreases in insurance costs of $1.8 million, rent expense of $0.6 million and outside services of $0.5 million. The increase in provision for doubtful accounts included a higher reserve for at-risk customers that indicated financial difficulties and the impact from macroeconomic factors. The increase in personnel-related costs includes an increase in severance costs of $2.0 million, due to the reduction in force in the 2022 period, an increase in salaries and wages of $1.3 million, an increase in employee benefits of $0.8 million and an increase in bonus expense of $0.2 million, which includes a $0.1 million expense in the 2022 period related to future bonus payouts in connection with prior acquisitions, offset by a decrease in stock-based compensation expense of $2.0 million. Stock-based compensation expense decreased primarily due to an adjustment to reverse all expense previously recognized related to the performance-based restricted stock units in the third quarter of 2022 when we determined that attainment on these awards was not probable. The increase in professional fees of $1.4 million includes a $2.1 million expense related to certain legal settlements and other legal costs incurred in the 2022 period and an increase in other professional fees of $0.8 million, offset by a decrease in transaction costs of $1.5 million, which was incurred in the 2021 period related to the Business Combination.

### Depreciation and Amortization Expenses

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization expenses | $2,513 | $980 | $1,533 | 156 |
| Percentage of revenue | 5% | 2% |  |  |

Depreciation and amortization expenses increased $1.5 million, or 156%, for the three months ended September 30, 2022 compared to the same period in 2021. The increase was primarily due to an increases in capitalized software amortization of $1.2 million and intangible asset amortization of $0.4 million.

### Other Income, net

*(dollars in thousands)*

|  | Three Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrant liability | $6,590 | $45,837 | (39,247) | (86) |
| Other expense, net | (50) | (300) | 250 | (83) |
| Other income, net | $6,540 | $45,537 | (38,997) | (86) |
| Percentage of revenue | 13% | 89% |  |  |

Other income, net decreased by $39.0 million for the three months ended September 30, 2022 compared to the same period in 2021. The decrease in other income, net was primarily due to comparatively unfavorable changes in fair value of warrant liability of $39.2 million.

### Comparison of Nine Months Ended September 30, 2022 and 2021

### Revenues

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $166,246 | $138,969 | $27,277 | 20 |

Total revenues increased by $27.3 million, or 20%, for the nine months ended September 30, 2022 compared to the same period in 2021. The increase was driven by a 28% increase in average monthly paying clients. Our growth in average monthly paying clients primarily reflects growth in our featured and deal listings of $17.1 million, Weedmaps for Business and other SaaS subscriptions of $7.8 million and other ad solutions of $2.4 million. For the nine months ended September 30, 2022, featured and deal listings, Weedmaps for Business and other SaaS subscriptions, and other ad solutions represented approximately 70%, 23% and 7% of our total revenues, respectively.

### Cost of Revenues

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $11,870 | $5,800 | $6,070 | 105 |
| Gross margin | 93% | 96% |  |  |

44

Cost of revenues increased by $6.1 million, or 105%, for the nine months ended September 30, 2022 compared to the same period in 2021. The increase was primarily related to an increase of $4.7 million for cost of revenue associated with WM CRM and WM AdSuite and an increase of $1.3 million of server costs.

### Sales and Marketing Expenses

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing expenses | $61,887 | $37,194 | $24,693 | 66 |
| Percentage of revenue | 37% | 27% |  |  |

Sales and marketing expenses increased by $24.7 million, or 66%, for the nine months ended September 30, 2022 compared to the same period in 2021. The increase was primarily due to an increase in personnel-related costs of $20.1 million, an increase in outside services costs of $3.1 million, an increase in branding and advertising expense of $1.5 million and an increase in travel and entertainment of $0.9 million. The increases were partially offset by decreases in website advertising expense of $0.7 million and events expense of $0.5 million. The increase in personnel-related costs was primarily due to increased headcount, including increases in salaries and wages of $13.0 million, bonus expense of $5.3 million, payroll taxes of $1.2 million and stock-based compensation of $0.3 million. The increase in bonus expense of $5.3 million includes a $2.8 million expense incurred in the 2022 period related to future bonus payouts in connection with prior acquisitions.

### Product Development Expenses

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Product development expenses | $38,341 | $25,921 | $12,420 | 48 |
| Percentage of revenue | 23% | 19% |  |  |

Product development expenses increased by $12.4 million, or 48%, for the nine months ended September 30, 2022 compared to the same period in 2021. The increase was primarily due to an increase in personnel-related expense of $10.6 million, an increase in outside services expense of $1.6 million and an increase in travel and entertainment of $0.3 million. The increase in personnel-related costs was primarily due to increased headcount and it includes an increase in salaries and wages expense of $12.7 million, an increase in bonus expense of $3.4 million, which includes a $0.8 million expense incurred in the 2022 period related to future bonus payouts in connection with prior acquisitions, and an increase in payroll tax expense of $0.6 million, offset by an increase in capitalized software development costs of $6.3 million. Bonus expense for the nine months ended September 30, 2022 includes $0.8 million of expense related to future bonus payouts in connection with prior acquisitions.

### General and Administrative Expenses

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $92,155 | $70,356 | $21,799 | 31 |
| Percentage of revenue | 55% | 51% |  |  |

General and administrative expenses increased by $21.8 million, or 31%, for the nine months ended September 30, 2022 compared to the same period in 2021. This increase was primarily due to an increase in provision for doubtful accounts of $11.9 million, an increase in professional services of $4.8 million, an increase in salaries and wages of $4.0 million, an increase in insurance costs of $3.5 million as a result of additional insurance coverage as a public company, an increase in software expense of $3.3 million, an increase in employee benefits expense of $1.7 million, an increase in facilities expense of $1.6 million, an increase in severance expense of $1.0 million, which includes a $2.0 million expense related to the reduction in force in the 2022 period offset by $1.0 million decrease related to other severance expense incurred in the 2021 period, and an increase in travel expense of $0.4 million. The increase in provision for doubtful accounts included a higher reserve for at-risk customers that indicated financial difficulties and the impact from macroeconomic factors. These increases were partially offset by a decrease in stock-based compensation expense of $6.9 million, a decrease in rent expense of $1.8 million, a decrease in impairment loss of $1.1 million, and a decrease in bonus expense of $0.4 million, which includes a decrease in $1.2 million of transaction related bonuses, resulting from a $0.4 million transaction related bonus expense recognized in the 2022 period related to future bonus payouts in connection with prior acquisitions as compared to a $1.6 million transaction related bonus expense recognized in the 2021 period related to the Business Combination. Stock-based compensation expense decreased primarily due to an adjustment to reverse all expense previously recognized related to the performance-based restricted stock units in the third quarter of 2022 when we determined that attainment on these awards was not probable. The increase in professional fees of $4.8 million includes a $3.2 million expense related to certain legal settlements and other legal costs incurred in the 2022 period, increase in other professional fees of $2.8 million, offset by a decrease in transaction costs of $1.2 million, which resulted from transaction costs of $0.5 million incurred in the 2022 period as compared to transactions costs of $1.6 million in 2021.

### Depreciation and Amortization Expenses

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization expenses | $8,916 | $2,970 | $5,946 | 200 |
| Percentage of revenue | 5% | 2% |  |  |

Depreciation and amortization expenses increased $5.9 million for the nine months ended September 30, 2022 compared to the same period in 2021. The increase was primarily due to an increase in capitalized software amortization of $3.9 million, an increase in intangible asset amortization of $1.3 million and an increase in fixed asset depreciation of $0.7 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 Income , net

*(dollars in thousands)*

|  | Nine Months Ended September 30, 2022 | 2021 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrant liability | $20,605 | $83,628 | (63,023) | (75) |
| Other expense, net | (1,230) | (6,341) | 5,111 | (81) |
| Other income, net | $19,375 | $77,287 | (57,912) | (75) |
| Percentage of revenue | 12% | 56% |  |  |

Other income, net decreased by $57.9 million for the nine months ended September 30, 2022 compared to the same period in 2021. The decrease in other income, net was primarily due to comparatively unfavorable changes in fair value of warrant liability of $63.0 million, which was partially offset by a decrease in other expense, net of $5.1 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)*

|  | September 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Cash | $34,170 | $67,777 |
| Accounts receivable, net | 16,642 | 17,550 |
| Working capital | 24,937 | 61,134 |

As of September 30, 2022, we had cash of $34.2 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)*

|  | Nine Months Ended September 30, 2022 | 2021 |
| --- | ---: | ---: |
| Net cash (used in) provided by operating activities | $(10,466) | $28,880 |
| Net cash used in investing activities | $(14,848) | $(23,246) |
| Net cash (used in) provided by financing activities | $(8,293) | $52,382 |

#### 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 nine months ended September 30, 2022 was $10.5 million, which resulted from a net loss of $21.8 million, together with net cash outflows of $4.7 million from changes in operating assets and liabilities, and non-cash items of $16.0 million, consisting of depreciation and amortization of $8.9 million, fair value of warrant liability of $20.6 million, stock-based compensation of $17.3 million, deferred income taxes of $5.7 million, provision for doubtful accounts of $14.9 million and impairment loss of $1.3 million. Net cash outflows from changes in operating assets and liabilities were primarily due to an increase in accounts receivable of $13.1 million and a decrease in deferred revenue of $1.5 million, partially offset by a decrease in prepaid expenses and other current assets of $5.2 million and an increase in accounts payable and accrued expenses of $5.0 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 nine months ended September 30, 2021 was $28.9 million, which resulted from net income of approximately $73.8 million, together with net cash inflows of approximately $6.8 million from changes in operating assets and liabilities, and non-cash items of $51.6 million, consisting of depreciation and amortization of

$3.0 million, fair value of warrant liability of $83.6 million, stock-based compensation of $23.6 million, impairment loss of $2.4 million and provision for doubtful accounts of $3.0 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 $7.2 million, an increase in accounts payable and accrued expenses of $3.3 million and an increase in deferred revenue of $2.5 million. These changes were partially offset by an increase in accounts receivables of $6.4 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 nine months ended September 30, 2022 was $14.8 million, which resulted from $13.1 million cash paid for purchases of property and equipment, including certain capitalized software development costs, $0.7 million net cash paid for an acquisition and $1.0 million cash paid for an acquisition holdback release.

Cash used in investing activities for the nine months ended September 30, 2021 was $23.2 million, which resulted from cash paid for acquisitions of $16.0 million, purchases of property and equipment of $4.2 million and cash paid for other investments of $3.0 million.

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

Cash outflows from financing activities for the nine months ended September 30, 2022 was $8.3 million, which primarily consists of repayments of insurance premium financing of $5.8 million and distributions of $2.4 million to the Unit holders other than the Company.

Net cash provided by financing activities for the nine months ended September 30, 2021 was $52.4 million, which primarily resulted from proceeds from the Business Combination of approximately $80.0 million, distributions of $18.1 million, repurchase of Class B Units of $5.6 million and repayments of insurance premium financing of $3.7 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, provision for doubtful accounts, 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 marketplace 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. 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. 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. 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., on a pro rata basis. We are 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 September 30, 2022, total net deferred tax assets and TRA liability were $186.3 million and $142.9 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 nine months ended September 30, 2022, we recognized stock-based compensation expense of $1.6 million and $17.3 million, respectively, and for the three and nine months ended September 30, 2021, we recognized stock-based compensation expense of $4.2 million and $23.6 million, respectively. See Note 12 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 marketplace 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 months ended September 30, 2022 and 2021, we capitalized software development costs of $3.6 million and $3.7 million, respectively. For the nine months ended September 30, 2022 and 2021, we capitalized software development costs of $12.2 million and $3.7 million, respectively.

### Accounts Receivable

We measure credit losses on our 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 credit loss model, lifetime expected credit losses are measured and recognized at each reporting date based on historical, current and forecast information.

We calculate 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 our accounts receivable include balance of customer account and aging status. We recorded an allowance for doubtful accounts of $13.9 million and $5.2 million as of September 30, 2022 and December 31, 2021, respectively. See Note 2 to our condensed consolidated financial statements included herein.

### 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 September 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 September 30, 2022 and December 31, 2021, warrant liability was $6.9 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, 1,595 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 September 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, 2,496 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 September 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

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 September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 5,228 characters.

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 of our prior 10-Q. 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 and Prior 10-Q.

***We track certain performance metrics 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 performance 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. For example, we determined to discontinue reporting MAUs as a key operational metric as a result of our reevaluation of the value of this metric to investors in light of its significant quarterly fluctuations that we do not believe necessarily reflect the underlying and most important trends in our business. 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.

***If we do not successfully manage the transition associated with the resignation of our chief executive officer and the appointment of a new chief executive officer, it could have an adverse impact on our business.***

On November 7, we announced that Doug Francis, co-founder and Executive Chair, will be taking a more active role in leading WM Technology. Mr. Francis succeeds Chris Beals, who has decided to step down from his role as our chief executive officer and a member of our board of directors. We have begun an executive search for a new chief executive officer. Leadership transitions can be inherently difficult to manage, and an inadequate transition to a new chief executive officer may cause disruption to our business. In addition, if we are unable to attract and retain a qualified candidate to become our chief executive officer in a timely manner, our ability to meet our financial and operational goals and strategic plans may be adversely impacted. This may also make it more difficult for us to retain and hire key management and other team members

Filed Nov 8, 2022.
Source: SEC EDGAR, the filing index for accession 0001779474-22-000084. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.