Part I [Business](index=3&type=section&id=Item%201.%20Business) Leafly operates a content-first, multi-sided marketplace connecting cannabis consumers with brands and licensed retailers, primarily generating revenue from subscription-based listings and advertising - Leafly's business model is a content-first, community-driven, multi-sided marketplace connecting consumers to cannabis brands and licensed retailers through subscription-based listings[14](index=14&type=chunk) Key Operational Metrics (as of Dec 31, 2022) | Metric | Value | | :--- | :--- | | Average Monthly Active Users (2022) | 8.0 million | | Total Retail Listings | > 11,700 | | Paid Retail Listings | > 5,000 | | Total Brand Listings | > 9,800 | Revenue Breakdown by Partner Type (FY 2022 vs FY 2021) | Partner Type | FY 2022 Revenue % | FY 2021 Revenue % | | :--- | :--- | :--- | | Retail Partners | 77.6% | 78.1% | | Brand Partners | 22.4% | 21.9% | - The company's primary competitors include Weedmaps for marketplace services and e-commerce enablers like Dutchie and Jane Technologies. Leafly differentiates itself with a content-first strategy that builds a consumer audience even before a market is legalized[43](index=43&type=chunk)[44](index=44&type=chunk) - For the year ended December 31, 2022, revenue was concentrated in Arizona (**18%**), California (**12%**), and Oregon (**10%**). No single customer accounted for **10%** or more of revenue[56](index=56&type=chunk) - As of December 31, 2022, Leafly had **204 employees**, with **104** in sales and marketing, **63** in product development, and **37** in general and administration[63](index=63&type=chunk) [Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from operating losses, dependence on cannabis legalization, intense competition, federal illegality, regulatory challenges, and public company obligations [Risks Relating to Our Business and Industry](index=15&type=section&id=Risks%20Relating%20to%20Our%20Business%20and%20Industry) Leafly faces risks from its short operating history, recurring losses, dependence on cannabis legalization, intense competition, and reliance on search engine traffic - The company has a history of operating losses, with net income of **$5.1 million** in 2022 compared to a net loss of **$12.0 million** in 2021, and may not maintain profitability as it continues to invest in growth[109](index=109&type=chunk) - The company's ability to grow is dependent on the continued legislative authorization of cannabis in new jurisdictions and the absence of laws repealing existing legalization[95](index=95&type=chunk) - Leafly faces intense competition from direct competitors like Weedmaps, media companies, and major internet platforms like Google and Meta, should they enter the cannabis advertising space[97](index=97&type=chunk) - The company relies heavily on unpaid search engine traffic, with search engines accounting for approximately **73%** of platform sessions in 2022. Google alone accounted for over **97%** of this search-generated traffic[138](index=138&type=chunk)[139](index=139&type=chunk) [Regulatory Risks](index=30&type=section&id=Regulatory%20Risks) The business is highly dependent on varying state and Canadian laws, as cannabis remains a Schedule I controlled substance under U.S. federal law - Cannabis remains a Schedule I controlled substance under the U.S. federal Controlled Substances Act (CSA), making possession, distribution, or sale a federal crime, regardless of state laws. Strict federal enforcement would materially harm the business[163](index=163&type=chunk)[199](index=199&type=chunk) - The company is subject to numerous evolving privacy and data protection laws, such as the CCPA in California and PIPEDA in Canada, and failure to comply could result in significant fines and reputational damage[182](index=182&type=chunk)[185](index=185&type=chunk) - The company could be deemed responsible for collecting and remitting state sales taxes for suppliers using its order functionality, which could result in substantial tax liabilities for past sales[192](index=192&type=chunk) [Additional Risks Related to the Cannabis Industry](index=37&type=section&id=Additional%20Risks%20Related%20to%20the%20Cannabis%20Industry) The cannabis industry faces unique risks including federal illegality, banking difficulties, and unfavorable tax treatment under Section 280E for clients - Due to cannabis's federal status, most banks are reluctant to serve cannabis-related businesses, creating difficulties for Leafly and its clients in accessing banking and payment processing services[209](index=209&type=chunk)[210](index=210&type=chunk) - Cannabis businesses are subject to Section 280E of the U.S. tax code, which prohibits them from deducting ordinary business expenses, significantly reducing their profitability and potentially their budget for advertising services[221](index=221&type=chunk) - Obtaining necessary insurance, such as general liability and D&O insurance, is more difficult and expensive for companies involved in the cannabis industry, exposing Leafly to additional financial risk[224](index=224&type=chunk) [Risks Related to Our Intellectual Property](index=43&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Leafly faces risks of intellectual property disputes and the need to protect its brand, trademarks, and proprietary technology to maintain its competitive position - The company may be subject to costly intellectual property infringement claims from third parties, which could require it to stop using certain features, purchase licenses, or modify its services[229](index=229&type=chunk)[230](index=230&type=chunk) - Failure to protect and enforce its intellectual property rights, particularly the "Leafly" brand and trademarks, could harm the company's business, as these are critical to its success[234](index=234&type=chunk) [Public Company and Financial Reporting Risks](index=45&type=section&id=Public%20Company%20and%20Financial%20Reporting%20Risks) As a public company, Leafly incurs increased costs, faces Nasdaq non-compliance risks, and utilizes reduced disclosure requirements as an emerging growth company - In October and November 2022, Leafly received non-compliance notices from Nasdaq for failing to meet the **$50 million** minimum market value and **$1.00** minimum bid price requirements, creating a risk of delisting[240](index=240&type=chunk)[241](index=241&type=chunk) - The company qualifies as an "emerging growth company" and "smaller reporting company," allowing it to use certain exemptions from disclosure requirements, which could make its securities less attractive to investors[258](index=258&type=chunk)[262](index=262&type=chunk) [Risks Relating to Ownership of our Common Stock](index=49&type=section&id=Risks%20Relating%20to%20Ownership%20of%20our%20Common%20Stock) Ownership of Leafly's common stock involves risks such as price volatility, potential lack of an active trading market, and no foreseeable dividends - The market price of the company's common stock may be volatile and could decline regardless of operating performance[264](index=264&type=chunk) - The company does not intend to pay dividends for the foreseeable future, meaning investors must rely on stock price appreciation for returns[277](index=277&type=chunk) - The company's warrants, with an exercise price of **$11.50** per share, may expire worthless if the stock price does not appreciate significantly before their expiration on February 4, 2027[279](index=279&type=chunk) [Unresolved Staff Comments](index=59&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) None - The company reports no unresolved staff comments[306](index=306&type=chunk) [Properties](index=60&type=section&id=Item%202.%20Properties) Leafly's corporate headquarters is in Seattle, Washington, but the company operates with a fully remote workforce and has no material physical properties - The company does not own or lease any material physical properties and operates with a remote workforce, with its corporate headquarters address in Seattle, WA[308](index=308&type=chunk) [Legal Proceedings](index=60&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, not expected to result in material liability - The company is involved in ordinary course legal proceedings but has not recognized a material accrual and does not expect these matters to result in a material liability[309](index=309&type=chunk)[311](index=311&type=chunk) [Mine Safety Disclosures](index=60&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - This item is not applicable to the company[312](index=312&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=61&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock and warrants trade on Nasdaq, with **613** stockholders of record, and no cash dividends are expected in the foreseeable future - Common stock and warrants trade on the Nasdaq Global Market under symbols LFLY and LFLYW[315](index=315&type=chunk) - As of March 20, 2023, there were **613** stockholders of record[316](index=316&type=chunk) - The company has never paid cash dividends and does not anticipate paying them in the foreseeable future[317](index=317&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Leafly's 2022 revenue grew **10%** to **$47.4 million**, with a **$5.1 million** net income driven by a non-cash gain on derivatives, and cost-cutting measures alleviating going concern doubts [Results of Operations](index=64&type=section&id=Results%20of%20Operations) Total revenue increased **10%** to **$47.4 million** in 2022, but operating expenses rose **43%**, leading to a net income of **$5.1 million** primarily due to a non-cash gain on derivatives Key Operating Metrics (YoY Change) | Metric | 2022 | 2021 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Average MAUs (in thousands) | 7,962 | 10,005 | (2,043) | -20% | | Ending retail accounts | 5,806 | 5,265 | 541 | 10% | | Retailer ARPA | $566 | $636 | ($70) | -11% | Consolidated Statement of Operations Summary (in thousands) | Line Item | 2022 | 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $47,363 | $43,036 | $4,327 | 10% | | Gross Profit | $41,503 | $38,053 | $3,450 | 9% | | Total Operating Expenses | $69,508 | $48,678 | $20,830 | 43% | | Loss from Operations | ($28,005) | ($10,625) | ($17,380) | 164% | | Net Income (Loss) | $5,070 | ($12,024) | $17,094 | N/M | Non-GAAP Reconciliation: Adjusted EBITDA (in thousands) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Net income (loss) | $5,070 | ($12,024) | | EBITDA | $8,330 | ($10,422) | | Adjusted EBITDA | ($23,210) | ($9,400) | [Liquidity and Capital Resources](index=69&type=section&id=Liquidity%20and%20Capital%20Resources) Despite a history of operating losses, management's cost-cutting measures are expected to provide sufficient working capital for the next twelve months, alleviating going concern risk - The company's history of recurring operating losses raised substantial doubt about its ability to continue as a going concern[364](index=364&type=chunk) - Management implemented restructuring plans, including workforce reductions in Q4 2022 and Q1 2023, expected to result in combined annual cash savings of approximately **$24 million** (**$16 million** + **$8 million**)[324](index=324&type=chunk)[364](index=364&type=chunk) - Based on cost reduction measures, management believes its current working capital is sufficient to meet capital requirements for at least the next **12 months**, alleviating the substantial doubt about its ability to continue as a going concern[364](index=364&type=chunk)[366](index=366&type=chunk) - As of December 31, 2022, cash, cash equivalents, and restricted cash totaled **$25.2 million**[358](index=358&type=chunk) [Critical Accounting Estimates](index=70&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include derivative liability valuation, income taxes, stock-based compensation, and allowance for credit losses - Valuation of derivative liabilities, including private warrants and earn-out rights, is a critical estimate, measured at fair value using Monte Carlo or Black-Scholes models with significant assumptions[374](index=374&type=chunk) - The company maintains a full valuation allowance against its U.S. net deferred tax assets of **$35.8 million** due to a history of U.S. tax losses[376](index=376&type=chunk)[480](index=480&type=chunk) - Stock-based compensation is estimated using option-pricing models (Black-Scholes, Monte Carlo) that require significant assumptions about volatility, term, and interest rates[377](index=377&type=chunk)[457](index=457&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Leafly is not required to provide information regarding market risk - The company is a smaller reporting company and is not required to provide this information[382](index=382&type=chunk) [Financial Statements and Supplementary Data](index=74&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2022 and 2021, including balance sheets, income statements, cash flows, and notes, with the independent auditor's report [Consolidated Financial Statements](index=76&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of **$32.7 million**, total liabilities of **$39.1 million**, and a net income of **$5.1 million** in 2022, driven by a non-cash gain Key Balance Sheet Data (in thousands) | Account | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $24,594 | $28,565 | | Total Assets | $32,712 | $36,153 | | Total Liabilities | $39,119 | $44,725 | | Total Stockholders' Deficit | ($6,407) | ($8,572) | Key Income Statement Data (in thousands) | Account | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | $47,363 | $43,036 | | Gross Profit | $41,503 | $38,053 | | Loss from Operations | ($28,005) | ($10,625) | | Net Income (Loss) | $5,070 | ($12,024) | [Notes to Consolidated Financial Statements](index=83&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the reverse recapitalization merger, going concern evaluation, revenue recognition, convertible notes, and derivative liabilities - The business combination with Merida on February 4, 2022, was accounted for as a reverse recapitalization, with Legacy Leafly as the accounting acquirer[412](index=412&type=chunk) - In January 2022, the company entered into a **$30 million** convertible note purchase agreement. The notes bear **8%** interest, mature in 2025, and are convertible at a price of **$12.50** per share[486](index=486&type=chunk) - The company accounts for private warrants, escrow shares, and stockholder earn-out rights as derivative liabilities, which are remeasured to fair value each reporting period. This resulted in a non-cash gain of **$36.8 million** in 2022[351](index=351&type=chunk)[502](index=502&type=chunk)[505](index=505&type=chunk)[513](index=513&type=chunk) [Controls and Procedures](index=113&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[562](index=562&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2022, based on the COSO 2013 framework[566](index=566&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=115&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section provides information on the company's directors and executive officers, board structure, and adopted code of ethics and business conduct - The company's executive officers include Yoko Miyashita as Chief Executive Officer and Suresh Krishnaswamy as Chief Financial Officer[574](index=574&type=chunk) - The Board of Directors is classified into three classes with staggered three-year terms. Michael Blue serves as Board Chair[574](index=574&type=chunk)[575](index=575&type=chunk) - The company has adopted a code of ethics and business conduct that applies to all directors, officers, and employees[591](index=591&type=chunk) [Executive Compensation](index=118&type=section&id=Item%2011.%20Executive%20Compensation) Compensation for Named Executive Officers includes base salary, annual incentives, and equity awards, with non-employee directors receiving cash retainers and RSU grants - The Named Executive Officers for 2022 were Yoko Miyashita (CEO), Suresh Krishnaswamy (CFO), and Samuel Martin (former COO)[594](index=594&type=chunk) 2022 Summary Compensation | Name | Position | Total Compensation ($) | | :--- | :--- | :--- | | Yoko Miyashita | Chief Executive Officer | 2,766,497 | | Suresh Krishnaswamy | Chief Financial Officer | 799,727 | | Samuel Martin | Chief Operating Officer (former) | 1,030,627 | - The 2022 Annual Incentive Plan paid out at **50%** of target for eligible NEOs, as the company achieved its Adjusted EBITDA goal but missed its top-line revenue goal[606](index=606&type=chunk) - Non-employee directors receive annual compensation consisting of cash retainers (e.g., **$45,000** for board members, **$75,000** for chair) and RSU grants[646](index=646&type=chunk)[647](index=647&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=133&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Directors and executive officers beneficially owned **11.8%** of common stock, with Brendan Kennedy and Michael Blue as largest owners Principal Stockholders (as of March 3, 2023) | Name of Beneficial Owner | % of Outstanding Common Stock | | :--- | :--- | | Brendan Kennedy | 8.5% | | Michael Blue | 7.3% | | All directors and executive officers as a group (8 individuals) | 11.8% | - As of December 31, 2022, a total of **5,590,208** securities were to be issued upon exercise of outstanding options, warrants, and rights under equity compensation plans, with a weighted-average exercise price of **$1.75**[658](index=658&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=134&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company has a policy for related person transactions, and a majority of its directors are independent under Nasdaq rules - The Board has adopted a written policy for the review and approval of related person transactions, which is overseen by the Audit Committee[661](index=661&type=chunk) - A majority of the company's board of directors qualifies as independent under Nasdaq listing rules[677](index=677&type=chunk) [Principal Accountant Fees and Services](index=137&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Marcum LLP served as the independent auditor, with total fees of **$634,514** in 2022, all pre-approved by the Audit Committee Accountant Fees (Marcum LLP) | Fee Type | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $574,514 | $299,000 | | Audit-related fees | $60,000 | $176,739 | | **Total fees** | **$634,514** | **$475,739** | - All audit and non-audit services provided by Marcum LLP in 2022 were pre-approved by the Audit Committee[681](index=681&type=chunk) Part IV [Exhibits and Financial Statement Schedule](index=139&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule) This section lists the financial statements and exhibits filed as part of the Form 10-K report, including corporate governance documents and certifications - This section contains the index of all exhibits filed with the annual report, including material agreements and certifications[684](index=684&type=chunk) [Form 10-K Summary](index=142&type=section&id=Item%2016.%20Form%2010-K%20Summary) None - The company has not provided a summary for this item[687](index=687&type=chunk)

Financial Data and Key Metrics Changes - Revenue in Q4 2022 was $12.1 million, essentially flat year-over-year, with retail revenue at $9.5 million, up 4% year-over-year, and brand revenue at $2.7 million, down 12% year-over-year [2][22] - Full year revenue grew 10% over 2021, driven primarily by retail revenue, which was $36.7 million, up 9.3% year-over-year [22] - Adjusted EBITDA loss for 2022 was negative $23 million, an improvement due to cost-cutting initiatives [24] Business Line Data and Key Metrics Changes - Retail ARPA in Q4 was $554, a decline of 7% year-over-year [3] - Revenue from brands declined 3% sequentially compared to Q3, with brands pulling back on advertising spend [4] - Ending retail accounts grew nearly 10% in 2022, with significant growth in Montana and New Mexico [22][73] Market Data and Key Metrics Changes - Continued softness in markets like Oklahoma and parts of Canada [3] - Cannabis prices are down, impacting retailers and brands using the company's services [28] - Market penetration reached 75% in New Mexico and Montana by the end of 2022, with ARPA increasing by over 50% in both markets [27] Company Strategy and Development Direction - The company is focusing on cost management and aligning its cost structure with the current industry environment, including a 21% reduction in workforce [5][9] - Emphasis on building deeper relationships with customers and increasing customer spend across the full suite of products and services [25] - Plans for 2023 include improving operational efficiency, preserving cash, and targeting resources towards high-value opportunities [70] Management's Comments on Operating Environment and Future Outlook - The company expects continued pressure on ARPA and muted growth in 2023 due to a weak macroeconomic environment [28] - Management is optimistic about consumer interest in cannabis remaining high, despite economic challenges [30] - The operational plan for 2023 aims for considerable improvement in adjusted EBITDA and a path to profitability [29] Other Important Information - The company has diversified its cash balances across several banking relationships to mitigate risk [48] - For Q1 2023, the company expects revenue of $11 million to $11.3 million and an adjusted EBITDA loss of negative $4.3 million to negative $4 million [49] Q&A Session Summary Question: What is the impact of weaker demand on advertising spending? - Management noted that brand advertising spend has seen greater softness, particularly in top-of-funnel spending, as brands pull back due to economic pressures [52] Question: How does the company plan to generate more retail demand? - The company aims to deepen relationships with retailers and show them ROI on the platform, focusing on consultative approaches to drive shopping behavior [56] Question: Is the lack of enforcement around illegal dispensaries impacting the business? - Management acknowledged that structural issues exist, with a significant number of unlicensed dispensaries affecting the market, emphasizing the need for regulatory action [58] Question: Can you provide insights on customer stickiness amid the tough macro environment? - Retail accounts are about 78% of total revenue, with over 80% being subscription-like revenue, indicating strong stickiness despite some churn in specific markets [62]

Financial Performance - Revenue for Q3 2022 was $11,781,000, an increase of 8.1% compared to $10,896,000 in Q3 2021[18] - Gross profit for Q3 2022 reached $10,266,000, up from $9,635,000 in Q3 2021, reflecting a gross margin improvement[18] - Operating expenses for Q3 2022 totaled $16,298,000, compared to $13,470,000 in Q3 2021, representing a 20.9% increase[18] - The net income for Q3 2022 was $15,454,000, a significant turnaround from a net loss of $4,454,000 in Q3 2021[18] - Basic net income per share for Q3 2022 was $0.43, compared to a loss of $0.18 per share in Q3 2021[18] - For the nine months ended September 30, 2022, Leafly reported a net income of $10,837,000, compared to a net loss of $6,880,000 for the same period in 2021[26] - Total revenue for the nine months ended September 30, 2022, was $35,251, an increase from $30,959 in the same period of 2021[120] - Total gross profit for the three months ended September 30, 2022, was $10,266, compared to $9,635 in the same period of 2021, reflecting a gross profit margin improvement[120] Assets and Liabilities - Total assets as of September 30, 2022, were $36,828,000, slightly up from $36,153,000 at the end of 2021[16] - Total current liabilities decreased to $8,503,000 from $44,725,000 at the end of 2021, indicating improved financial health[16] - The company reported an accumulated deficit of $58,933,000 as of September 30, 2022, down from $69,770,000 at the end of 2021[16] - Cash and cash equivalents were $27,829,000 as of September 30, 2022, compared to $28,565,000 at the end of 2021[16] Cash Flow and Expenses - Net cash used in operating activities was $25,130,000 for the nine months ended September 30, 2022, compared to $3,101,000 for the same period in 2021[26] - Cash, cash equivalents, and restricted cash at the end of the period was $28,436,000, down from $33,246,000 at the end of September 2021[26] - Stock-based compensation expense increased significantly to $3,159,000 in 2022 from $729,000 in 2021[26] - The company reported a significant increase in bad debt expense to $1,023,000 in 2022 from $841,000 in 2021[26] Mergers and Acquisitions - The merger with Merida on February 4, 2022, resulted in Leafly becoming a wholly-owned subsidiary of Merida, with a total of 42,924,000 shares outstanding post-merger[30] - Cash received from escrow from the merger amounted to $8,089,000 from February 4, 2022, to September 30, 2022[32] - Leafly's total payment to Merida public redeeming stockholders was $49,466,000 at the closing of the merger[32] Stock and Equity - The Company repurchased 3,081 shares of its common stock at a weighted-average price of $10.28 per share for a total of $31,663[80] - The Public Warrants allow holders to purchase one share of common stock at an exercise price of $11.50, with 6,501 warrants outstanding as of September 30, 2022[86] - The Private Warrants, totaling 3,950, are non-redeemable as long as held by initial purchasers and are exercisable for cash or on a cashless basis[90] - The Company has the option to redeem the 2022 Notes at a cash redemption price equal to 100% of the principal amount plus accrued interest[62] Employee Compensation and Stock Options - The 2021 Equity Incentive Plan reserved 4,502 shares for issuance, with automatic increases starting January 1, 2023, based on the lesser of 10% of fully diluted shares or 4,502 shares[98] - In August 2022, the company granted stock options for 101 shares at an exercise price of $1.98 per share and 1,228 restricted stock units[99] - As of September 30, 2022, there was $114 of unrecognized compensation cost related to stock options, expected to be recognized over 3.36 years[100] - The company recorded a charge of $1,366 for modified stock options granted to the CEO, reflecting changes in vesting provisions[108] Market and Compliance - The Company received notifications from Nasdaq regarding noncompliance with the $50 million market value requirement and the $1.00 minimum bid price requirement for continued listing[133] - The Company has until April 26, 2023, to regain compliance with the minimum bid price requirement, needing a market value of $50 million for 10 consecutive business days[135] Restructuring and Future Plans - The estimated cash pre-tax restructuring charges due to the Restructuring Plan are approximately $500,000, primarily in Q4 2022[132] - The Company plans to decrease total headcount by approximately 56 employees as part of the restructuring efforts[131]

Leafly Holdings, Inc. (NASDAQ:LFLY) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET Company Participants Keenan Zopf – Investor Relations, The Blueshirt Group Yoko Miyashita – Chief Executive Officer Suresh Krishnaswamy – Chief Financial Officer Conference Call Participants Harrison Vivas – Cowen Jason Helfstein – Oppenheimer Eric Des Lauriers – Craig-Hallum Operator Hello, and welcome to today’s Leafly Third Quarter 2022 Earnings Call. My name is Jordan, and I’ll be coordinating your call tod ...

Financial Performance - Total revenue in Q3 2022 increased by 8.1% year-over-year to $11.8 million[8] - Revenue from retail accounts in Q3 2022 was $9.0 million, a 5.1% increase compared to Q3 2021[8] - Revenue from brands in Q3 2022 reached $2.7 million, up 19.6% from Q3 2021[8] - Gross margin remained consistently high at 87%[15] - Adjusted EBITDA was $(5.207) million[21] User Engagement - Average Monthly Active Users (MAU) increased by 4% over Q2 2022, reaching 8.2 million[8] Strategic Initiatives - Leafly announced a partnership with Uber Eats to introduce a third-party delivery platform for cannabis retailers and consumers in Toronto[8] - Launched new advertising products across Leafly, including on the Strain Page[9] Financial Details - Net loss was $15.454 million[21] - Operating expenses increased by 21% year-over-year[17]

Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $12 million, representing a 14% increase year-over-year and a 6% increase sequentially from Q1 2022 [6][31] - Total gross margin in Q2 was 88%, slightly down from 88.5% in Q2 2021 due to increased business platform expenses [37] - Total operating expenses were $19.5 million, an increase of 83.9% compared to $10.6 million in Q2 2021, primarily due to increased headcount and marketing costs [37][39] - Net income was reported at $14.8 million, benefiting from a $24.4 million change in the fair value of derivative liabilities [40] Business Line Data and Key Metrics Changes - Revenue from retail was $9.1 million, up 11.3% year-over-year, while revenue from brands was $3 million, up 22.2% year-over-year [31][32] - Retail ARPA (Average Revenue Per Account) in Q2 was $579, a 9.8% decline year-over-year, but showed slight improvement from the previous quarter [33] - Brand accounts grew by 6.4% over Q1, indicating a continued increase in the brand's subscriber and advertiser base [34] Market Data and Key Metrics Changes - The company reached 100% market penetration in New Jersey, with every dispensary having a menu on the Leafly platform [27] - In Arizona, ARPA increased by 25.9% quarter-over-quarter, showcasing strong market performance [34] - The company is experiencing higher churn rates in lower penetrated markets, such as Oklahoma, where marketplace dynamics have not developed sufficiently [54] Company Strategy and Development Direction - The overall strategy remains focused on maximizing efficiencies and prioritizing projects that yield the highest returns [9] - The company is implementing a hiring freeze and reducing operating expenses to navigate macroeconomic challenges [8][41] - Investments are being redirected to strengthen B2B integration and enhance the platform, while pausing additional product launches to focus on existing products [46] Management's Comments on Operating Environment and Future Outlook - Management acknowledges macroeconomic headwinds affecting advertising budgets and anticipates these factors will impact the second half of the year [7][8] - Despite current challenges, management remains bullish about the long-term prospects of the cannabis industry and believes in the company's growth potential [8][30] - The company expects revenue for the full year 2022 to be between $48 million and $51 million, reflecting a cautious outlook due to anticipated softening in ad spend [43][45] Other Important Information - The company ended the quarter with $35.4 million in cash and $31.9 million in restricted cash [42] - A new automated auction-based bidding tool for retailers has been rolled out in five states, leading to increased ad revenue in most of those markets [20][21] Q&A Session Summary Question: Can you discuss the churn levels and specific markets experiencing the greatest churn? - Management identified Oklahoma as a market with structural challenges leading to increased churn, particularly in lower ARPA markets [53][54] Question: What is the impact of the sales reorganization on new account additions? - The sales reorganization temporarily slowed down execution, impacting the rate of new account acquisitions, but there are signs of stabilization in Q3 [55][56] Question: What are the dynamics in Oklahoma regarding competitive marketplace conditions? - Management noted that Oklahoma has an oversaturation of licenses, which complicates the competitive dynamics and affects monetization [58][59] Question: Can you elaborate on the new retailer dashboard and its engagement? - The retailer dashboard is continuously evolving, and management emphasized the importance of driving adoption and usage among retailers to maximize benefits [68][72] Question: What are the expectations for ad spend in the current macroeconomic environment? - Management anticipates continued downward pressure on ad spend due to macroeconomic factors, particularly in discretionary spending [35][36]

[Part I - Financial Information](index=4&type=section&id=Part%20I%20Financial%20Information) This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the period [Condensed Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents Leafly's unaudited condensed consolidated financial statements, reflecting the business combination with Merida Merger Corp. I [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of June 30, 2022 shows a significant increase in total assets to $77.2 million from $36.2 million at year-end 2021, primarily driven by a rise in cash, cash equivalents, and restricted cash following the business combination and financing activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $35,398 | $28,565 | | Restricted cash | $31,868 | $130 | | Total current assets | $75,594 | $35,840 | | **Total assets** | **$77,155** | **$36,153** | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $29,027 | $44,725 | | Total non-current liabilities | $47,911 | $0 | | **Total liabilities** | **$76,938** | **$44,725** | | Total stockholders' deficit | $217 | $(8,572) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For the second quarter of 2022, Leafly reported revenue of $12.1 million, a 13.8% increase year-over-year, leading to a net income of $14.8 million Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Q2 2022 (in thousands) | Q2 2021 (in thousands) | Six Months 2022 (in thousands) | Six Months 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $12,050 | $10,588 | $23,470 | $20,063 | | Gross Profit | $10,609 | $9,375 | $20,574 | $17,760 | | Total operating expenses | $19,478 | $10,589 | $36,888 | $20,068 | | Loss from operations | $(8,869) | $(1,214) | $(16,314) | $(2,308) | | Change in fair value of derivatives | $24,397 | $0 | $14,000 | $0 | | **Net income (loss)** | **$14,759** | **$(1,317)** | **$(4,617)** | **$(2,426)** | | Diluted EPS | $0.37 | $(0.05) | $(0.13) | $(0.10) | [Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%20Equity%20(Deficit)) The statement details significant changes in stockholders' equity during the first six months of 2022, primarily driven by the reverse recapitalization from the merger with Merida - The merger and recapitalization transaction in Q1 2022 resulted in the conversion of **$33.0 million** in 2021 Notes and all preferred stock into common stock[20](index=20&type=chunk) - The company recorded significant non-cash charges to additional paid-in capital related to the initial valuation of **derivative liabilities**, including Escrow shares, Private warrants, Forward share purchase agreements, and Stockholder earnout rights[20](index=20&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities increased significantly to $18.4 million for the six months ended June 30, 2022, while financing activities provided $58.4 million Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,380) | $(601) | | Net cash used in investing activities | $(1,415) | $(19) | | Net cash provided by financing activities | $58,366 | $23,841 | | **Net increase in cash, cash equivalents, and restricted cash** | **$38,571** | **$23,221** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, the reverse recapitalization, revenue breakdowns, derivative liabilities, and equity incentive plans - The business combination with Merida on February 4, 2022, was accounted for as a "**reverse recapitalization**," with Legacy Leafly as the accounting acquirer[26](index=26&type=chunk) Revenue by Service Type (in thousands) | Service Type | Q2 2022 (in thousands) | Q2 2021 (in thousands) | Six Months 2022 (in thousands) | Six Months 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Advertising | $11,899 | $10,562 | $23,228 | $19,973 | | Other services | $151 | $26 | $242 | $90 | - In January 2022, the company entered into a **$30.0 million** convertible note purchase agreement (the "2022 Notes") bearing 8% interest and maturing in 2025[58](index=58&type=chunk)[63](index=63&type=chunk) - Following the merger, the company recognized several **derivative liabilities** measured at fair value, including Private Warrants, Forward Share Purchase Agreements (FPAs), Escrow Shares, and Stockholder Earn-Out Rights[115](index=115&type=chunk) - Subsequent to the quarter end, on August 1, 2022, holders of the Forward Share Purchase Agreements (FPAs) elected to have Leafly repurchase their remaining 3,081 shares for an aggregate price of **$31.7 million**[121](index=121&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, noting revenue growth, rising expenses, macroeconomic pressures, and a widened Adjusted EBITDA loss - The company is observing **macroeconomic impacts**, with customers scrutinizing advertising budgets, and is implementing plans to **reduce operating expenses**, including a hiring freeze[129](index=129&type=chunk) Key Metrics Comparison (Six Months Ended June 30) | Metric | 2022 | 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Average Monthly Active Users (MAUs) (in thousands) | 7,817 | 10,960 | (29)% | | Ending retail accounts | 5,251 | 4,419 | 19% | | Retailer average revenue per account (ARPA) | $577 | $663 | (13)% | - The **decrease in MAUs** is attributed to reduced online shopping compared to pandemic levels and a decline in organic search traffic[139](index=139&type=chunk) - The **decline in ARPA** is due to strategic expansion into lower-priced markets to grow the retailer base[139](index=139&type=chunk) Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | Line Item | Six Months 2022 (in thousands) | Six Months 2021 (in thousands) | | :--- | :--- | :--- | | Net loss | $(4,617) | $(2,426) | | Interest expense, net | 1,414 | 108 | | Depreciation and amortization expense | 149 | 138 | | **EBITDA** | **$(3,054)** | **$(2,180)** | | Stock-based compensation | 2,388 | 521 | | Transaction expenses allocated to derivatives | 874 | — | | Change in fair value of derivatives | (14,000) | — | | **Adjusted EBITDA** | **$(13,792)** | **$(1,659)** | - The company believes its capital resources are **sufficient to fund operations** for at least the next 12 months, supported by proceeds from the 2022 Notes issuance and cash from the business combination[165](index=165&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Leafly Holdings, Inc. is classified as a smaller reporting company and is not required to provide market risk disclosures - As a **smaller reporting company** defined by Rule 12b-2 of the Exchange Act, Leafly is **exempt from providing market risk disclosures**[167](index=167&type=chunk) [Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal controls - Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[170](index=170&type=chunk) - There were **no material changes** in the company's internal control over financial reporting during the six months ended June 30, 2022[172](index=172&type=chunk) [Part II - Other Information](index=35&type=section&id=Part%20II%20Other%20Information) This section covers legal proceedings, risk factors, equity sales, mine safety, and exhibits [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, with no expected material effect on its financial position - The company states that potential liabilities from ongoing legal proceedings are **not expected to have a material adverse effect** on its financial statements[173](index=173&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - **No material changes** to the company's risk factors were reported for the six months ended June 30, 2022[174](index=174&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reports **"None"** for this item[175](index=175&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This section is marked as **"Not applicable."**[175](index=175&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - The company reports **"None"** for this item[176](index=176&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements and officer certifications - A list of exhibits filed with the Form 10-Q is provided, including **CEO and CFO certifications** and **XBRL data files**[178](index=178&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number: 001-39119 Leafly Holdings, Inc. (Exact name of registrant as specified in its charter) __________________ ...

Leafly Holdings, Inc. (NASDAQ:LFLY) Q1 2022 Earnings Conference Call May 12, 2022 5:00 PM ET Company Participants Keenan Zopf - IR, The Blueshirt Group Yoko Miyashita - CEO Suresh Krishnaswamy - CFO Conference Call Participants Steve Lichtman - Oppenheimer Harrison Vivas - Cowen Eric Des Lauriers - Craig-Hallum Capital Group Operator Hello, and welcome to today's Leafly First Quarter 2022 Earnings Call. My name is Bailey, and I will be your moderator for today's call. All lines will be muted during the pres ...

| --- | --- | |------------------------|-------| | | | | | | | | | | | | | | | | Q1 2022 | | | Earnings Presentation | | | | | Disclaimer Forward-Looking Statements This document contains certain forward-looking statements within the meaning of the federal securities laws, including statements regarding the services offered by Leafly and the markets in which Leafly operates, business strategies, performance metrics, industry environment, potential growth opportunities, and Leafly's projected future results ...