# WM Technology, Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [WM Technology, Inc.](/companies/maps.md) (CIK 1779474)
- Form: 10-Q
- Filed: 2023-08-09
- Accepted by EDGAR: Aug 8, 2023, 18:01 ET
- Period: 2023-06-30
- Accession: 0001779474-23-000062
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1779474/000177947423000062/maps-20230630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1779474/000177947423000062/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $50.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $98.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-04-01 to 2023-06-30 | $3.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 6 months, 2023-01-01 to 2023-06-30 | $6.7m | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2023-04-01 to 2023-06-30 | $9.2m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-01-01 to 2023-06-30 | $20.1m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $3.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | −$365.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | $1.2m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$1.2m | us-gaap:NetIncomeLoss |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $4.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $5.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $24.6m | us-gaap:Cash |
| Current assets | at 2023-06-30 | $47.3m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $188.7m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $32.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-06-30 | $68.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-06-30 | $20.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 75,557 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, 2022.*

### 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 (the “Business Combination”) with Silver Spike Acquisition Corp (“Silver Spike”). 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, and headquartered in Irvine, California, 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 both storefront locations and delivery operators (“retailers”) and brands in the U.S. states, U.S. territories and Canadian legalized 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 our fully integrated suite of end-to-end Software-as-a-Service (“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 (“POS”) solutions, to provide consumers with the ability to browse by strain, price, cannabinoids 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 (retailers complete orders and process payments outside of the Weedmaps marketplace as Weedmaps serves only as a portal, passing a consumer’s inquiry to the dispensary). 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 our user base is highly valuable to our clients and results in clients, mainly cannabis retailers, brands, paying for access to our marketplace and other tools that streamline front and back-end operations and help manage compliance needs. These tools support cannabis businesses at every stage in the consumer funnel, enabling them to:

- Strategically reach prospective cannabis consumers.
- Manage pickup, delivery and inventory in compliance with local regulations.
- Help improve the customer experience by creating online browsing and ordering functionality on a brand or retailer (including 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”).
- Make informed marketing and merchandising decisions using performance analytics and consumer and brand insights to promote products to specific consumer groups.

Our solutions are designed to address these challenges facing cannabis consumers and businesses. The Weedmaps marketplace allows cannabis users to search for and browse cannabis products from retailers and brands, and ultimately reserve products from certain local retailers, in a manner similar to other technology platforms with breadth and depth of product, brand and retailer selection. With the development of Weedmaps for Business, we offer an end-to-end platform for licensed cannabis retailers to comply with state law. We sell a monthly subscription offering to retailer and brand clients as well as upsell and add-on offerings to licensed clients. Our current subscription package includes:

- WM Listings: A listing page with product menu for a retailer or brand on the Weedmaps marketplace, enabling our clients to be discovered by the marketplace’s users. This also allows clients to disclose their license information, hours of operation, contact information, discount policies and other information that may be required under applicable state law.
- WM Orders: Software for retailers to receive pickup and delivery orders directly from a Weedmaps listing and connect orders directly with a client’s 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. After a dispensary receives the order request from the consumer, the dispensary and the consumer can continue to communicate, adjust items in the request, and handle any stock issues, prior to and while the dispensary processes and fulfills the order.
- WM Store: Customizable online store which allows retailers and brands to import their Weedmaps listing menu or product reservation functionality to their own white-labeled WM Store website or separately owned website. WM Store facilitates customer pickup or delivery orders and enables retailers to reach more customers by bringing the breadth of the Weedmaps marketplace to a client’s own website.
- WM Connectors: A centralized integration platform, including API tools, for easier menu management, automatic inventory updates and streamlined order fulfillment to enable clients to save time and more easily integrate into the WM Technology ecosystem and integrate with disparate software systems. This creates business efficiencies and improves the accuracy and timeliness of information across Weedmaps, creating a more positive experience for consumers and businesses.
- WM Insights: An insights and analytics platform for clients leveraging data across the Weedmaps marketplace and software solutions. WM Insights provides data and analytics on user engagement and traffic trends to a client’s listing page. For Brand clients, WM Insights allows them to monitor their brand and product rankings, identify retailers not carrying products and keep track of top brands and products by category and state.

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

- 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 including:
- Featured Listings: Premium placement ad solutions on high visibility locations on the Weedmaps marketplace (desktop and mobile) to amplify our clients’ businesses and maximize clients’ listings 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. In some jurisdictions, it is required by applicable law to showcase discounts.
- Other WM Ads solutions: Includes banner ads and promotion tiles on our marketplace as well as banner ads that can be tied to keyword searches. These products provide clients with targeted ad solutions in highly visible slots across our digital surfaces.
- WM AdSuite: Omni-channel (on and off platform) marketing solution with access to the Weedmaps marketplace and cannabis-friendly off marketplace outlets including certain publishers, out-of-home units in addition to other media solutions. These campaigns leverage proprietary first-party Weedmaps data to target verified cannabis consumers.
- 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. The tools also allow for retargeting and re-engagement of cannabis consumers.
- WM Dispatch: Compliant, automated and optimized logistics and fulfillment last-mile delivery software (including driver apps) that helps clients manage their delivery fleets. This product streamlines the delivery experience from in-store to front-door.
- 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 charge a monthly fee to retailer, delivery and brand clients for access to our subscription package, which includes WM Listings, WM Orders, WM Store, WM Connectors and WM Insights. Depending on the market, the other add-on products are available for additional fees.

We sell our Weedmaps for Business suite in the United States, 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 national law. As of June 30, 2023, we actively operated in over 30 U.S. states and territories that have adult-use and/or medical-use regulations in place. We define actively operated markets as those U.S. states or territories with greater than $1,000 monthly revenue.

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, Weedmaps 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 to provide detailed, accurate information about cannabis.

The Weedmaps marketplace is a premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products with 5,609 and 5,625 average monthly paying business clients during the three and six months ended June 30, 2023, 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 June 30, 2023. 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 website, 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 website, we neither sell (or fulfill purchases of) cannabis products, nor do we process payments for cannabis transactions across our marketplace or SaaS solutions.

As we continue to expand the presence and increase the number of consumers on the Weedmaps marketplace and broaden our offerings, we generate more value for our business clients. As we continue to expand the presence and increase the number of cannabis businesses listed on weedmaps.com, we become a more compelling marketplace for consumers. To capitalize on the growth opportunities of our two-sided marketplace and solutions, we plan to continue making investments in raising brand awareness, increasing penetration within existing markets and expanding to new markets, as well as continuing to develop and monetize new solutions to extend the functionality of our platform. These investments serve to deepen the consumer experience with our platform and continue to provide a high level of support to our business clients.

### 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, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $50,852 | $58,294 | $98,859 | $115,746 |
| Net income (loss) | $1,983 | $19,848 | $(1,986) | $(11,385) |
| EBITDA(1) | $4,826 | $20,996 | $4,024 | $(8,040) |
| Adjusted EBITDA(1) | $10,227 | $(595) | $17,357 | $(1,548) |
| Average monthly revenue per paying client(2) | $3,022 | $3,509 | $2,929 | $3,652 |
| Average monthly paying clients(3) | 5,609 | 5,537 | 5,625 | 5,282 |

(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 (loss), see “Net Income (Loss) to 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 our Weedmaps for Business solution as a monthly subscription package that includes (based on availability within any given market and state-level regulations): (i) a listing page with product menu on weedmaps.com, our iOS Weedmaps mobile application and our Android Weedmaps mobile application, which allows clients to disclose their license information, hours of operation, contact information, discount policies and other information that may be required under applicable state law, (ii) the ability to receive reservations of products for pickup by consumers or delivery to consumers (either on weedmaps.com, on a white labeled WM Store website or third-party websites through our orders and menu embed product), (iii) customizable menus for brands, retailers and delivery operators to embed on their website, (iv) access to our APIs, including real-time connectivity between Weedmaps for Business to a POS system to streamline workflows and promote compliance through accuracy and (v) analytics dashboards. We also offer add-on and a la carte products and services for additional fees, including advertising and customer relationship management (“CRM”) software, among other things (for a description of these services, see “Overview” above). Finally, we offer a growing set of offerings for brands to reach consumers and retailers as well as manage their brand catalog information.

### Net Income (Loss) to EBITDA and Adjusted EBITDA

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

Net income for the three months ended June 30, 2023 and 2022 was $2.0 million and $19.8 million, respectively. The decrease in net income was primarily due to a decrease in revenue of $7.4 million, a comparatively unfavorable change in fair value of warrant liability of $33.3 million, a comparatively unfavorable decrease in benefit from income taxes of $1.3 million and an increase in change in tax receivable agreement (“TRA”) liability of $0.5 million, offset by a decrease in operating expense of $24.2 million and a decrease in other expense, net of $0.4 million.

Net loss for the six months ended June 30, 2023 and 2022 was $2.0 million and $11.4 million, respectively. The decrease in net loss was primarily due to a decrease in operating expenses of $43.8 million and a decrease in other expense, net of $0.5 million, offset by a comparatively unfavorable change in fair value of warrant liability of $14.3 million, a decrease in revenue of $16.9 million, a comparatively unfavorable decrease in benefit from income taxes of $3.1 million and an increase in change in TRA liability of $0.6 million.

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, change in TRA liability, transaction related bonuses, transaction costs, legal settlements and other legal costs, reduction in force, impairment loss and other non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Below we have provided a reconciliation of net income (loss) (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.

Each of EBITDA and Adjusted EBITDA has limitations as an analytical tool, and you should not consider any of these non-GAAP financial measures 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 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 (loss) 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, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $1,983 | $19,848 | $(1,986) | $(11,385) |
| Benefit from income taxes | — | (1,310) | — | (3,058) |
| Depreciation and amortization expenses | 2,855 | 2,458 | 6,022 | 6,403 |
| Interest income | (12) | — | (12) | — |
| EBITDA | 4,826 | 20,996 | 4,024 | (8,040) |
| Stock-based compensation | 3,709 | 8,094 | 8,092 | 15,611 |
| Change in fair value of warrant liability | 1,045 | (32,234) | 320 | (14,015) |
| Transaction related bonus (recovery) expense | (275) | 1,073 | 2,567 | 3,030 |
| Legal settlements and other legal costs | 666 | 925 | 1,533 | 1,064 |
| Reduction in force (recovery) expense | (264) | — | 201 | — |
| Impairment loss | — | 551 | — | 551 |
| Transaction costs | — | — | — | 251 |
| Change in tax receivable agreement liability | 520 | — | 620 | — |
| Adjusted EBITDA | $10,227 | $(595) | $17,357 | $(1,548) |

### 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. The decline in our average monthly revenue per paying client was due to spend declines in established markets. We expected these pressures given the continued liquidity challenges that clients are facing.

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Average monthly revenue per paying client | $3,022 | $3,509 | $2,929 | $3,652 |

### 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 websites 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 websites or businesses.

Average monthly paying clients for the three months ended June 30, 2023 increased 1% to 5,609 average monthly paying clients from 5,537 average monthly paying clients in the same period in 2022. Average monthly paying clients for the six months ended June 30, 2023 increased 6% to 5,625 average monthly paying clients from 5,282 average monthly paying clients in the same period in 2022. The increase in average monthly paying clients compared to the same periods in 2022 was primarily due to new client acquisitions across existing and new states.

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Average monthly paying clients | 5,609 | 5,537 | 5,625 | 5,282 |

### 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, inflation and the military conflict between Russia and 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 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. Currently, thirty-nine states, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam have legalized some form of cannabis use for certain medical purposes. Twenty-three of those states, the District of Columbia, Guam, and Northern Mariana have legalized cannabis for adults for non-medical purposes as well (sometimes referred to as adult or recreational use). Eight additional states have legalized forms of low-potency cannabis, for select medical conditions. Only three states continue to prohibit cannabis entirely. 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. A change in U.S. federal regulations could also increase access to capital and remove limitations of Section 280E of the Internal Revenue Code of 1986, as amended, thus allowing deduction or credit for certain expenses of cannabis business to increase our cash flow and liquidity, as well as those of many industry participants.

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. Further, we have begun reinvesting in our own on-the-ground and field marketing presence and are increasing the types and cadence of client events. These events and in-store activations allow Weedmaps to engage with consumers at the point of purchase and also afford Weedmaps with the opportunity to engage directly with our clients, understand their needs and challenges and foster goodwill.

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.

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 our Weedmaps for Business solution as a monthly subscription package that includes (based on availability within any given market and state-level regulations): (i) a listing page with product menu on weedmaps.com, our iOS Weedmaps mobile application and our Android Weedmaps mobile application, which allows clients to disclose their license information, hours of operation, contact information, discount policies and other information that may be required under applicable state law, (ii) the ability to receive reservations of products for pickup by consumers or delivery to consumers (either on weedmaps.com, on a white labeled WM Store website or third-party websites through our orders and menu embed product), (iii) customizable menus for brands, retailers and delivery operators to embed on their website, (iv) access to our APIs, including real-time connectivity between Weedmaps for Business to a point-of-sale system (“POS”) to streamline workflows and promote compliance through accuracy and (v) analytics dashboards. We also offer add-on and a la carte products and services for additional fees, including advertising and customer relationship management (“CRM”) software, among other things. Finally, we offer a growing set of offerings for brands to reach consumers and retailers as well as manage their brand catalog information. Our subscriptions generally have one-month terms that automatically renew unless notice of cancellation is provided in advance. For clients that pay us in advance for listing and other services, we record deferred revenue and recognized revenue over the applicable subscription term.

### Cost of Revenues (Exclusive of Depreciation and Amortization)

Cost of revenues primarily consists of web hosting, internet service and credit card processing costs. Cost of sales is primarily driven by increases in revenue leading to increases in credit card processing and web hosting costs. We expect our cost of revenue to continue to increase on an absolute basis and remain relatively flat as a percentage of revenue as we scale our business and inventory costs related to multi-media offerings.

### Selling and Marketing Expenses

Selling and marketing expenses consist of salaries and benefits, stock-based compensation expense, 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 and stock-based compensation expense 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. 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, benefit costs and stock-based compensation expense 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. 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 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 intangibles.

### Other Income (Expense)

Other income (expense) consists primarily of change in fair value of warrant liability and TRA liability remeasurement. Other expense, net consists primarily of political contributions, interest income, interest expense, financing fees and other tax related expenses.

### Provision for (Benefit from) Income Taxes

We account for income taxes pursuant to the asset and liability method which requires the recognition of deferred income tax assets and liabilities related to the expected future tax consequences arising from temporary differences between the carrying amounts and tax bases of assets and liabilities based on enacted statutory tax rates applicable to the periods in which the temporary differences are expected to reverse. Any effects of changes in income tax rates or laws are included in income tax expense in the period of enactment. A valuation allowance is recognized if we determine it is more-likely-than-not that all or a portion of a deferred tax asset will not be recognized. In making such determination, we consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent and expected future results of operation. During the three months ended December 31, 2022, we recorded a full valuation allowance against our net deferred tax assets. See Note 2 to our condensed consolidated financial statements included herein.

### 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, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $50,852 | $58,294 | $98,859 | $115,746 |
| Operating expenses: |  |  |  |  |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 3,239 | 3,858 | 6,733 | 7,598 |
| Sales and marketing | 12,567 | 22,123 | 24,627 | 44,005 |
| Product development | 9,200 | 13,263 | 20,134 | 26,353 |
| General and administrative | 19,208 | 29,610 | 41,708 | 58,665 |
| Depreciation and amortization | 2,855 | 2,458 | 6,022 | 6,403 |
| Total operating expenses | 47,069 | 71,312 | 99,224 | 143,024 |
| Operating income (loss) | 3,783 | (13,018) | (365) | (27,278) |
| Other income (expense) |  |  |  |  |
| Change in fair value of warrant liability | (1,045) | 32,234 | (320) | 14,015 |
| Change in tax receivable agreement liability | (520) | — | (620) | — |
| Other expense, net | (235) | (678) | (681) | (1,180) |
| Income (loss) before income taxes | 1,983 | 18,538 | (1,986) | (14,443) |
| Benefit from income taxes | — | (1,310) | — | (3,058) |
| Net income (loss) | 1,983 | 19,848 | (1,986) | (11,385) |
| Net income (loss) attributable to noncontrolling interests | 757 | 8,156 | (737) | (9,184) |
| Net income (loss) attributable to WM Technology, Inc. | $1,226 | $11,692 | $(1,249) | $(2,201) |

38

|  | Three Months Ended June 30, 2023 | 2022 | Six Months Ended June 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Revenues | 100% | 100% | 100% | 100% |
| Operating expenses: |  |  |  |  |
| Cost of revenues (exclusive of depreciation and amortization shown separately below) | 6% | 7% | 7% | 7% |
| Sales and marketing | 25% | 38% | 25% | 38% |
| Product development | 18% | 23% | 20% | 23% |
| General and administrative | 38% | 51% | 42% | 51% |
| Depreciation and amortization | 6% | 4% | 6% | 6% |
| Total operating expenses | 93% | 122% | 100% | 124% |
| Operating income (loss) | 7% | (22)% | 0% | (24)% |
| Other income (expense) |  |  |  |  |
| Change in fair value of warrant liability | (2)% | 55% | 0% | 12% |
| Change in tax receivable agreement liability | (1)% | —% |  |  |
| Other expense, net | 0% | (1)% | (1)% | (1)% |
| Income (loss) before income taxes | 4% | 32% | (2)% | (12)% |
| Benefit from income taxes | 0% | (2)% | 0% | (3)% |
| Net income (loss) | 4% | 34% | (2)% | (10)% |
| Net income (loss) attributable to noncontrolling interests | 1% | 14% | (1)% | (8)% |
| Net income (loss) attributable to WM Technology, Inc. | 2% | 20% | (1)% | (2)% |

### Comparison of Three Months Ended June 30, 2023 and 2022

### Revenues

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $50,852 | $58,294 | $(7,442) | (13)% |

Total revenues decreased by $7.4 million or 13% for the three months ended June 30, 2023 compared to the same period in 2022. The decrease was driven by a decrease in average monthly revenue per paying client primarily as a result of a decrease in revenue from our featured listings and WM Deal products. Compared to the prior year period, revenue decreased approximately $5.2 million in our featured listings and WM Deal products, $1.7 million in our Weedmaps for Business and other SaaS subscriptions and $0.6 million in our other ad solutions. For the three months ended June 30, 2023, our featured listings and WM Deal products, Weedmaps for Business and other SaaS subscriptions and other ad solutions represented approximately 70%, 22% and 8% of our total revenues, respectively.

### Cost of Revenues

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $3,239 | $3,858 | $(619) | (16)% |
| Gross margin | 94% | 93% |  |  |

Cost of revenues was $3.2 million for the three months ended June 30, 2023 compared to $3.9 million for the same period in 2022. The decrease of $0.6 million was primarily related to a decrease of $0.9 million for cost of revenues associated with WM CRM and WM AdSuite, partially offset by an increase of $0.3 million in server costs.

### Sales and Marketing Expenses

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing expenses | $12,567 | $22,123 | $(9,556) | (43)% |
| Percentage of revenue | 25% | 38% |  |  |

Sales and marketing expenses decreased by $9.6 million, or 43%, for the three months ended June 30, 2023 compared to the same period in 2022. The decrease was primarily due to a decrease in personnel-related costs of $6.4 million, a decrease in website advertising expense of $1.7 million, a decrease in outside services of $1.0 million, a decrease in events expense of $0.5 million, a decrease in print and product expense of $0.3 million and a decrease in travel and entertainment expense of $0.2 million, partially offset by an increase in branding and advertising expense of $0.5 million. The decrease in personnel-related costs was primarily due to decreased headcount, including decreases in salaries and wages of $3.1 million, bonus expense of $1.7 million and stock-based compensation expense of $1.4 million.

### Product Development Expenses

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Product development expenses | $9,200 | $13,263 | $(4,063) | (31)% |
| Percentage of revenue | 18% | 23% |  |  |

Product development expenses decreased by $4.1 million, or 31%, for the three months ended June 30, 2023 compared to the same period in 2022. This decrease was primarily due to a decrease in personnel-related costs of $3.1 million and a decrease in outside services of $1.0 million. The decrease in personnel-related costs was primarily due to decreased headcount, including decreases in salaries and wages of $1.6 million, bonus expense of $0.9 million, and stock-based compensation expense of $0.4 million.

### General and Administrative Expenses

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $19,208 | $29,610 | $(10,402) | (35)% |
| Percentage of revenue | 38% | 51% |  |  |

General and administrative expenses decreased by $10.4 million, or 35%, for the three months ended June 30, 2023 compared to the same period in 2022. This decrease was primarily due to a decrease in personnel-related costs of $4.9 million, a decrease in insurance expense of $1.7 million, a decrease in professional services of $1.8 million, a decrease in impairment loss of $0.6 million, a decrease in software expense of $0.7 million, a decrease in provision for doubtful accounts of $0.3 million, a decrease in outside services of $0.2 million and a decrease in rent expense of $0.2 million. The decrease in personnel-related costs was primarily due to decreased headcount, including a decrease in salaries and wages of $1.8 million, a decrease in employee benefits expense of $0.9 million, a decrease in bonus expense of $0.2 million and a decrease in stock-based compensation expense of $2.6 million, partially offset by an increase in severance costs of $0.7 million.

### Depreciation and Amortization Expenses

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization expenses | $2,855 | $2,458 | $397 | 16% |
| Percentage of revenue | 6% | 4% |  |  |

Depreciation and amortization expenses increased $0.4 million, or 16%, for the three months ended June 30, 2023 compared to the same period in 2022. The increase was primarily due to an increase in capitalized software amortization of $0.8 million, partially offset by a decrease in depreciation and amortization on other assets of $0.4 million.

### Other (Expense) Income, net

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrant liability | $(1,045) | $32,234 | $(33,279) | (103)% |
| Change in tax receivable agreement liability | (520) | — | (520) | N/M |
| Other expense, net | (235) | (678) | 443 | 65% |
| Other (expense) income, net | $(1,800) | $31,556 | $(33,356) | (106)% |
| Percentage of revenue | (4)% | 54% |  |  |

N/M - Not meaningful

Other (expense) income, net decreased by $33.4 million during the three months ended June 30, 2023 compared to the same period in 2022. Other (expense) income, net was primarily impacted by comparatively unfavorable changes in fair value of warrant liability of $33.3 million. and an increase in change in tax receivable agreement liability of $0.5 million, partially offset by other expense, net, of $0.4 million .

### Benefit from Income Taxes

*(dollars in thousands)*

|  | Three Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | --- |
| Benefit from income taxes | $— | $(1,310) | $1,310 | N/M |
| Percentage of revenue | —% | (2)% |  |  |

N/M - Not meaningful

Benefit from income taxes decreased by $1.3 million for the three months ended June 30, 2023 compared to the same period in 2022. For the three months ended June 30, 2023, we recorded zero income tax provision due to the impact of the full valuation allowance on our net deferred assets. For the three months ended June 30, 2022, we recorded an income tax benefit of $1.3 million. The income tax benefit was as a result of the tax benefit of our pro rata share of losses and tax credits flowing through from WMH LLC. See Note 2 to our condensed consolidated financial statements included herein.

### Comparison of Six Months Ended June 30, 2023 and 2022

### Revenues

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $98,859 | $115,746 | $(16,887) | (15)% |

Total revenues decreased by $16.9 million, or 15%, for the six months ended June 30, 2023 compared to the same period in 2022. The decrease was driven by a decrease in average monthly revenue per paying client primarily as a result of a decrease in revenue from our featured listings and Deal products. Compared to the prior year period, revenue decreased $13.2 million in our featured listings and WM Deal products, $2.7 million in our Weedmaps for Business and other SaaS subscriptions and $1.0 million in our other ad solutions. For the six months ended June 30, 2023, our featured listings and WM Deal products, 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)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $6,733 | $7,598 | $(865) | (11)% |
| Gross margin | 93% | 93% |  |  |

Cost of revenues decreased by $0.9 million, or 11%, for the six months ended June 30, 2023 compared to the same period in 2022. The decrease was primarily related to a decrease of $1.7 million for cost of revenue associated with WM CRM and WM AdSuite, offset by an increase of $0.8 million in server costs.

### Sales and Marketing Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing expenses | $24,627 | $44,005 | $(19,378) | (44)% |
| Percentage of revenue | 25% | 38% |  |  |

Sales and marketing expenses decreased by $19.4 million, or 44%, for the six months ended June 30, 2023 compared to the same period in 2022. The decrease was primarily due to a decrease in personnel-related costs of $10.8 million, a decrease in outside services of $2.6 million, a decrease in branding and advertising expense of $0.4 million and a decrease in travel and entertainment of $0.3 million, a decrease in website advertising expense of $4.0 million, a decrease in event expense of $1.0 million and a decrease in print and products expense of $0.5 million. The decrease in personnel-related costs was primarily due to decreased headcount, including a decrease in salaries and wages of $5.3 million, a decrease in bonus expense of $2.8 million, a decrease in payroll taxes of $0.3 million and a decrease in stock-based compensation of $2.3 million.

### Product Development Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Product development expenses | $20,134 | $26,353 | $(6,219) | (24)% |
| Percentage of revenue | 20% | 23% |  |  |

Product development expenses decreased by $6.2 million, or 24%, for the six months ended June 30, 2023 compared to the same period in 2022. This decrease was due to a decrease in personnel-related costs of $4.4 million and a decrease in outside services expense of $1.8 million. The decrease in personnel-related costs was primarily due to decreased headcount, including a decrease in salaries and wages of $2.3 million, a decrease in bonus expense of $1.1 million and a decrease in stock-based compensation expense of $0.7 million.

### General and Administrative Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $41,708 | $58,665 | $(16,957) | (29)% |
| Percentage of revenue | 42% | 51% |  |  |

General and administrative expenses decreased by $17.0 million, or 29%, for the six months ended June 30, 2023 compared to the same period in 2022. This decrease was primarily due to a decrease in personnel-related costs of $7.9 million, a decrease in insurance expense of $3.7 million, a decrease in provision for doubtful accounts of $1.1 million, a decrease in outside services of $0.7 million, a decrease in software expense of $1.1 million, a decrease in rent expense of $0.4 million, a decrease in impairment loss of $0.6 million and a decrease in professional services of $1.2 million. The decrease in personnel-related costs was primarily due to decreased headcount, including a decrease in salaries and wages of $2.7 million, a decrease in bonus expense of $0.9 million, a decrease in employee benefits expense of $0.7 million and a decrease in stock-based compensation expense of $4.6 million, partially offset by an increase in severance costs of $1.3 million.

### Depreciation and Amortization Expenses

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization expenses | $6,022 | $6,403 | $(381) | (6)% |
| Percentage of revenue | 6% | 6% |  |  |

Depreciation and amortization expenses decreased $0.4 million for the six months ended June 30, 2023 compared to the same period in 2022. The decrease was primarily due to a decrease in depreciation and amortization on other assets of $0.9 million, partially offset by an increase in capitalized software amortization of $0.5 million.

### Other (Expense) Income, net

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | ---: |
| Change in fair value of warrant liability | $(320) | $14,015 | (14,335) | (102)% |
| Change in tax receivable agreement liability | (620) | — | (620) | N/M |
| Other expense, net | (681) | (1,180) | 499 | (42)% |
| Other (expense) income, net | $(1,621) | $12,835 | $(14,456) | (113)% |
| Percentage of revenue | (2)% | 11% |  |  |

N/M - Not meaningful

Other (expense) income, net decreased by $14.5 million for the six months ended June 30, 2023 compared to the same period in 2022. The decrease in other (expense) income, net was primarily due to comparatively unfavorable changes in fair value of warrant liability of $14.3 million and an increase in change in tax receivable agreement liability of $0.6 million, partially offset by other expense of $0.5 million.

### Benefit from Income Taxes

*(dollars in thousands)*

|  | Six Months Ended June 30, 2023 | 2022 | Change ($) | (%) |
| --- | ---: | ---: | ---: | --- |
| Benefit from income taxes | $— | $(3,058) | $3,058 | N/M |
| Percentage of revenue | —% | (3)% |  |  |

N/M - Not meaningful

Benefit from income taxes decreased by $3.1 million for the six months ended June 30, 2023 compared to the same period in 2022. For the six months ended June 30, 2023, we recorded zero income tax provision due to the impact of the full valuation allowance on our net deferred assets. For the six months ended June 30, 2022, we recorded an income tax benefit of $3.1 million resulting from the tax benefit of our pro rata share of losses and tax credits flowing through from WMH LLC. See Note 2 to our condensed consolidated financial statements included herein.

### Seasonality

Historically, our financial results have been driven by our ability to achieve rapid growth throughout the year and/or the impact of broader industry headwinds impacting our clients. The cannabis industry has certain industry holidays that in recent years have resulted in increased sales by cannabis users. Some such “holidays” include, but are not limited to, April 20th (“420”), July 10th and the Wednesday before Thanksgiving (“Green Wednesday”). Likewise, our clients will typically increase spend heading into these events. We will also invest in marketing spend around these holidays which can create some seasonality in our sales and market expenses from quarter to quarter. Therefore, 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, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Cash | $24,603 | $28,583 |
| Accounts receivable, net | 14,971 | 17,438 |
| Working capital | 14,667 | 8,660 |

As of June 30, 2023 and December 31, 2022, we had cash of $24.6 million and $28.6 million, respectively. 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 liquidity requirements from cash and working capital on hand at June 30, 2023, as well as 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, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $4,092 | $(3,814) |
| Net cash used in investing activities | $(5,806) | $(10,267) |
| Net cash used in financing activities | $(2,266) | $(6,092) |

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

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

Net cash provided by operating activities for the six months ended June 30, 2023 was $4.1 million, which resulted from a net loss of $2.0 million, together with net cash outflows of $12.6 million from changes in operating assets and liabilities, and non-cash items of $18.7 million, consisting of depreciation and amortization of $6.0 million, fair value of warrant liability of $0.3 million, stock-based compensation of $8.1 million, provision for doubtful accounts of $3.6 million and change in tax receivable agreement of $0.6 million. Net cash outflows from changes in operating assets and liabilities was primarily due to a decrease in accounts payable and accrued expenses of $13.5 million, which includes a payout of $8.5 million during the three months ended June 30, 2023 related to certain employment agreements entered into in connection with a prior acquisition, and an increase in accounts receivable of $1.1 million, partially offset by a decrease in prepaid expenses and other current assets of $1.6 million, and an increase in deferred revenue of $0.4 million. The changes in operating assets and liabilities are mostly due to fluctuations in timing of cash receipts and payments.

Net cash used by operating activities for the six months ended June 30, 2022 was $3.8 million, which resulted from 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 $0.6 million. Net cash outflows from changes in operating assets and liabilities were primarily due to an increase in accounts receivables of $13.6 million, partially offset by a decrease in prepaid expenses and other current assets of $2.9 million and an increase in accounts payables 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 Used in Investing Activities

Net cash used in investing activities for the six months ended June 30, 2023 was $5.8 million for the purchases of property and equipment, including certain capitalized software development costs.

Net 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 cost, net cash paid for acquisition of $0.7 million and cash paid for an acquisition holdback release of $1.0 million.

#### Net Cash Used in Financing Activities

Net cash outflows from financing activities for the six months ended June 30, 2023 was $2.3 million, including the repayment of insurance premium financing of $1.5 million and distributions of $1.0 million to the holders of WMH LLC’s Class A Units and Class P Units other than the Company, partially offset by $0.2 million cash inflow from note repayment proceeds.

Net cash outflows from financing activities for six months ended June 30, 2022 was $6.1 million, which primarily consists of repayments of insurance premium financing of $4.3 million and distribution of $1.8 million to the holders of WMH LLC’s Class A Units and Class P Units other than the Company.

### Critical Accounting Policies and Estimates

Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of these condensed 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 condensed 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 judgment 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. 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. 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, we entered into a 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, we have 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. 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, 2023, TRA liability was $1.1 million, of which $0.4 million is expected to be paid in 2023.

Based on the weight of all available evidence, both positive and negative, we determined during the three months ended December 31, 2022 that a full valuation allowance was required against our net deferred tax assets. See Note 2 to our condensed consolidated financial statements included herein.

### 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 months ended June 30, 2023 and 2022, we recognized stock-based compensation expense of $3.7 million and $8.1 million, respectively, and for the six months ended June 30, 2023 and 2022, we recognized stock-based compensation expense of $8.1 million and $15.6 million, respectively. See Note 10 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 had 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 judgment, assumptions and estimates related to the timing and amount of recognized capitalized software development costs. For the three months ended June 30, 2023 and 2022, we capitalized software development costs of $2.1 million and $4.5 million, respectively, and for the six months ended June 30, 2023 and 2022, we capitalized software development costs of $5.1 million and $8.6 million, respectively.

### Accounts Receivable

We measure credit losses on our trade accounts receivable using the current expected credit loss model under Accounting Standards Codification 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 trade receivables that have similar risk characteristics. For 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. The allowance for doubtful accounts were $9.2 million and $12.2 million as of June 30, 2023 and December 31, 2022, 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 judgment, 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 condensed 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, 2023, 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, 2023 and December 31, 2022, warrant liability was $2.4 million and $2.1 million, respectively. See Note 4 to our condensed consolidated financial statements included herein.

## Controls and procedures

As filed, 4,796 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 our Executive Chair and Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our Executive Chair and former Chief Financial Officer evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022, pursuant to Rule 13a-15(b) under the Exchange Act. Based on the evaluation, and in light of the material weakness in internal controls described below, our Executive Chair and Interim Chief Financial Officer have concluded that as of June 30, 2023, our disclosure controls and procedures were not effective due to the material weakness in internal control over financial reporting.

### Material Weaknesses

As previously disclosed in our management’s report on internal control over financial reporting within our Annual Report on Form 10-K for the year ended December 31, 2022, we identified a material weakness in internal control related to ineffective information technology general controls (ITGCs) in the areas of user access and program change-management over certain information technology systems that support our financial reporting processes. As a result, our business process automated and manual controls that were dependent on the affected ITGCs were ineffective because they could have been adversely impacted. These control deficiencies were a result of: IT controls lacked sufficient segregation of duties as developers were granted administrative rights; certain users including developers had accessed other users’ accounts; and our controls over logging and monitoring of system configuration and data changes made by these users were not effectively designed to detect erroneous or unauthorized changes. The material weakness did not result in any identified misstatements in our financial statements.

### Remediation

Management has implemented measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented and operating effectively. The remediation actions include: (i) removing the access from certain users to make changes directly in production systems; (ii) removing privileged access to other user accounts; and (iii) enhancing logging and monitoring of privileged user activities such as data updates in production systems. We believe that these actions will remediate the material weakness. The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. We expect that the remediation of this material weakness will be completed during the end of the year ending December 31, 2023.

### Changes in Internal Control Over Financial Reporting

Other than the significant changes associated with the material weaknesses and corresponding remediation procedures as described above, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the six months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on Effectiveness of Controls and Procedures

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.

## Risk factors

As filed, 7,156 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, 2022 (our “2022 Form 10-K”) 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 in our 2022 Form 10-K.

***We are dependent on our banking relations, and we may have difficulty accessing or consistently maintaining banking or other financial services due to our connection with the cannabis industry.***

Although we do not grow or sell cannabis products, our general connection with the cannabis industry may hamper our efforts to do business or establish collaborative relationships with others that may fear disruption or increased regulatory scrutiny of their own activities.

We are dependent on the banking industry to support the financial functions of our products and solutions. Our business operating functions including payroll for our employees and other expenses are handled which are reliant on traditional banking. Additionally, many of our clients pay us via wire transfer to our bank accounts, or via checks that we deposit into our banks. We require access to banking services for both us and our clients to receive payments in a timely manner. Lastly, to the extent we rely on any lines of credit, these could be affected by our relationships with financial institutions and could be jeopardized if we lose access to a bank account. Important components of our offerings depend on client accounts and relationships, which in turn depend on banking functions. Most federal and federally-insured state banks currently do not serve businesses that grow and sell cannabis products on the stated ground that growing and selling cannabis is illegal under federal law, even though the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), issued guidelines to banks in February 2014 that clarified how financial institutions can provide services to cannabis-related businesses, consistent with financial institutions’ obligations under the Bank Secrecy Act. While the federal government has generally not initiated financial crimes prosecutions against state-law compliant cannabis companies or their vendors, the government theoretically could, at least against companies in the adult-use markets. The continued uncertainty surrounding financial transactions related to cannabis activities and the subsequent risks this uncertainty presents to financial institutions may result in their discontinuing services to the cannabis industry or limit their ability to provide services to the cannabis industry or ancillary businesses providing services to the cannabis industry.

As a result of federal-level illegality and the risk that providing services to state-licensed cannabis businesses poses to banks, cannabis-related businesses face difficulties accessing banks that will provide services to them. When cannabis businesses are able to find a bank that will provide services, they face extensive client due diligence in light of complex state regulatory requirements and guidance from FinCEN, and these reviews may be time-consuming and costly, potentially creating additional barriers to financial services for, and imposing additional compliance requirements on, us and our clients. FinCEN requires a party in trade or business to file with the IRS, a Form 8300 report within 15 days of receiving a cash payment of over $10,000. While we receive very few cash payments for the products we sell, if we fail to comply with these laws and regulations, the imposition of a substantial penalty could have a material adverse effect on our business, results of operations and financial condition. We cannot assure that our strategies and techniques for designing our products and solutions for our clients will operate effectively and efficiently and not be adversely impacted by any refusal or reluctance of banks to serve businesses that grow and sell cannabis products. A change in banking regulations or a change in the position of the banking industry that permits banks to serve businesses that grow and sell cannabis products may increase competition for us, facilitate new entrants into the industry offering products or solutions similar to those that we offer, or otherwise adversely affect our results of operations. Also, the inability of potential clients in our target market to open accounts and otherwise use the services of banks or other financial institutions may make it difficult for us to conduct business, including receiving payments in a timely manner.

We do not sell cannabis, or products that contain cannabis; accordingly, our company is not part of the cannabis industry that generally has been restricted from using federal and federally insured banks. However, because of “weed” in our name and the fact that our revenue is generated largely from companies licensed as operators in the cannabis industry, banks have and may continue to consider us to be subject to banking restrictions related to cannabis. If we were to lose any of our banking relationships or fail to secure additional banking relationships in the future, we could experience difficulty and incur increased costs in the administration of our business, paying our employees, accepting payments from clients, each of which may adversely affect our reputation or results of operations. Additionally, the closure of many or one of our bank accounts due to a bank’s reluctance to provide services to a business working with state legal cannabis businesses would require significant management attention from us and could materially adversely affect our business and operations. In addition to banks and financial institutions, merchant processors may take a similar view of the risks of working with us since we provide services to cannabis businesses, and loss of any of our merchant processor relationships could have similar results. Moreover, Visa and Mastercard currently prohibit processing of transactions involving the sale of cannabis on their networks, and Mastercard has reportedly issued cease-and-desist letters to certain banks and payment processors to stop allowing such transactions on its debit cards. Although consumers cannot currently purchase products on the Weedmaps marketplace and we do not currently use, nor have we historically used, any of our merchant processing relationships to process payments for cannabis transactions, to the extent Visa or Mastercard extend these restrictions to cannabis-related businesses, our merchant processing relationships could be terminated, or we could be prevented from processing any Visa or Mastercard transactions, which could have a material adverse effect on our business and results of operations. Furthermore, our clients may be adversely impacted by Visa’s or Mastercard’s policies, which could in turn have a material adverse effect on our business and results of operations.

Filed Aug 9, 2023.
Source: SEC EDGAR, the filing index for accession 0001779474-23-000062. Last ingested by Listed: Nov 10, 2026, 04:18 ET. No prices; not investment advice.