WM Technology(MAPS) - 2024 Q2 - Quarterly Report

Part I - Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) The section presents unaudited condensed consolidated financial statements and notes for periods ended June 30, 2024, and December 31, 2023 Condensed Consolidated Balance Sheets The balance sheets show a slight increase in total assets and stockholders' equity, with a decrease in total liabilities Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :--------------------------- | :------------------------------- | | Total Assets | $167,963 | $167,021 | | Total Liabilities | $58,777 | $63,870 | | Total Stockholders' Equity | $109,186 | $103,151 | | Cash | $41,292 | $34,350 | | Accounts Receivable, net | $7,000 | $11,158 | Condensed Consolidated Statements of Operations Net revenues decreased, but net income improved for the six-month period, turning from a loss in 2023 to a profit in 2024 Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (Restated) (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (Restated) (in thousands) | | :----------------------------------------- | :---------------------------------------------- | :--------------------------------------------------------- | :-------------------------------------------- | :------------------------------------------------------- | | Net Revenues | $45,903 | $48,423 | $90,292 | $94,839 | | Total Costs and Expenses | $44,672 | $44,640 | $85,300 | $95,204 | | Operating Income (Loss) | $1,231 | $3,783 | $4,992 | $(365) | | Net Income (Loss) | $1,194 | $1,983 | $3,153 | $(1,986) | | Net Income (Loss) Attributable to WM Tech. | $716 | $1,226 | $1,956 | $(1,249) | | Basic Income (Loss) Per Share | $0.01 | $0.01 | $0.02 | $(0.01) | | Diluted Income (Loss) Per Share | $0.01 | $0.01 | $0.02 | $(0.01) | Condensed Consolidated Statements of Equity Total equity increased from $103.151 million at December 31, 2023, to $109.186 million at June 30, 2024 Condensed Consolidated Statements of Equity Highlights (in thousands) | Metric | As of December 31, 2023 (in thousands) | As of June 30, 2024 (in thousands) | | :----------------------------------------- | :------------------------------------- | :--------------------------------- | | Total Equity | $103,151 | $109,186 | | Stock-based compensation (6 months) | N/A | $6,065 | | Net income (6 months) | N/A | $3,153 | | Distributions (6 months) | N/A | $(3,299) | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased for the six months ended June 30, 2024, compared to the prior year Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (Restated) (in thousands) | | :---------------------------------- | :-------------------------------------------- | :------------------------------------------------------- | | Net cash provided by operating activities | $20,054 | $4,092 | | Net cash used in investing activities | $(7,140) | $(5,806) | | Net cash used in financing activities | $(5,972) | $(2,266) | | Net increase (decrease) in cash | $6,942 | $(3,980) | | Cash – end of period | $41,292 | $24,603 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures for the financial statements, covering business, accounting policies, and other financial items 1. Business and Organization WM Technology operates a leading online cannabis marketplace and provides eCommerce and compliance software solutions in legalized U.S. markets - WM Technology operates a two-sided marketplace (Weedmaps) and SaaS solutions (Weedmaps for Business) for the legalized cannabis market in the U.S.[19] - The company's offerings include product discovery, deals, order reservations for consumers, and eCommerce/compliance software for retailers and brands[19] - As of June 30, 2024, the Company had an accumulated deficit of $62.6 million and cash of $41.3 million, believing existing liquidity will cover needs for at least the next twelve months[19] 2. Summary of Significant Accounting Policies This section outlines accounting principles, including a restatement of 2023 quarterly revenue and credit losses due to an inadequate policy - The company restated previously reported 2023 quarterly revenue and credit losses due to an inadequate policy regarding revenue recognition for cash-basis customers with significant collection risk[23] - The restatement had no impact on operating income (loss), net income (loss), net income (loss) per share, net cash provided by operating activities, or adjusted EBITDA for any periods presented[23] - The cannabis industry operates in a complex regulatory environment, with federal prohibition still in place, posing risks to the company's business if laws change or are enforced[29][30] Restatement Impact on Net Revenues and General & Administrative Expenses (Six Months Ended June 30, 2023) (in thousands) | Metric | Previously Reported (in thousands) | Adjustment (in thousands) | As Restated (in thousands) | | :-------------------------------------- | :--------------------------------- | :------------------------ | :------------------------- | | Net revenues | $98,859 | $(4,020) | $94,839 | | General and administrative expenses | $41,708 | $(4,020) | $37,688 | | Total costs and expenses | $99,224 | $(4,020) | $95,204 | 3. Revenue from Contracts with Customers Revenue primarily stems from monthly subscriptions, featured/deal listings, and other ad solutions, mostly generated in the U.S - Revenue is primarily from monthly subscriptions (Weedmaps for Business), featured/deal listings, and other ad solutions, recognized over the subscription term[57][117] - The company sunset WM AdSuite, WM CRM, and WM Screens in December 2023 to focus on core Weedmaps for Business products[58] - Approximately 53% of net revenues for the three and six months ended June 30, 2024, originated in California[60] Disaggregated Net Revenues (Three and Six Months Ended June 30) (in thousands) | Revenue Category | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (Restated) (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (Restated) (in thousands) | | :------------------------------------- | :---------------------------------------------- | :--------------------------------------------------------- | :-------------------------------------------- | :------------------------------------------------------- | | Weedmaps for Business and other SaaS | $13,420 | $11,286 | $26,702 | $22,970 | | Featured and deal listings | $28,415 | $32,972 | $56,581 | $64,875 | | Other ad solutions | $4,068 | $4,165 | $7,009 | $6,994 | | Total Net Revenues | $45,903 | $48,423 | $90,292 | $94,839 | 4. Commitments and Contingencies The company is subject to various claims and litigation, including an agreement in principle with the SEC staff for a $1.5 million civil money penalty - The company reached an agreement in principle with the SEC staff to resolve an investigation regarding previously reported MAU metrics, agreeing to a $1.5 million civil money penalty[62][63] - As of June 30, 2024, a $1.5 million liability for the potential SEC settlement was recorded in general and administrative expenses[63] - The company has minimum outstanding purchase obligations of $3.6 million for the remainder of 2024, $7.3 million in 2025, and $7.5 million in 2026, primarily for software license agreements (AWS Enterprise)[64] 5. Fair Value Measurements This section details fair value measurements of warrant liabilities, categorized into Level 1 (Public Warrants) and Level 3 (Private Placement Warrants) inputs - Public Warrants are classified as Level 1 ($625k as of June 30, 2024), while Private Placement Warrants are Level 3 ($350k as of June 30, 2024), valued using the Black-Scholes model[66][69][70] Warrant Liabilities Fair Value (in thousands) | Liability | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------- | :------------ | :---------------- | | Warrant liability – Public Warrants | $625 | $375 | | Warrant liability – Private Placement Warrants | $350 | $210 | | Total warrant liability | $975 | $585 | 6. Intangible Assets Total net intangible assets, including trade names, software, and customer relationships, decreased from $2.507 million to $2.230 million Intangible Assets, Net (in thousands) | Intangible Asset | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :------------------------- | :------------ | :---------------- | | Trade and domain names | $2,007 | $2,248 | | Software technology | $112 | $137 | | Customer relationships | $111 | $122 | | Total intangible assets, net | $2,230 | $2,507 | - Amortization expense for intangible assets was $0.1 million for Q2 2024 and $0.3 million for H1 2024[74] 7. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets decreased from $5.978 million at December 31, 2023, to $5.547 million at June 30, 2024 Prepaid Expenses and Other Current Assets (in thousands) | Category | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------------- | :------------ | :---------------- | | Prepaid insurance | $422 | $1,530 | | Prepaid marketing | $354 | $387 | | Prepaid software | $2,233 | $2,406 | | Other prepaid expenses and other current assets | $2,538 | $1,655 | | Total | $5,547 | $5,978 | 8. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses decreased to $18.563 million, including a $1.5 million liability for the potential SEC settlement Accounts Payable and Accrued Expenses (in thousands) | Category | June 30, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------------- | :------------ | :---------------- | | Accounts payable and other accrued liabilities | $8,159 | $7,323 | | Accrued employee expenses | $10,404 | $13,859 | | Total | $18,563 | $21,182 | - Accounts payable and other accrued liabilities as of June 30, 2024, include $1.5 million for the potential SEC settlement[78] 9. Warrant Liability This section details Public and Private Placement Warrants outstanding, classified as derivative liabilities and remeasured at fair value each period - As of June 30, 2024, there were 12,499,973 Public Warrants and 7,000,000 Private Placement Warrants outstanding[79] - Warrants are classified as derivative liabilities and remeasured at fair value each balance sheet date[79] - A non-cash gain of $0.5 million was recognized for the three months ended June 30, 2024, and a non-cash loss of $0.4 million for the six months ended June 30, 2024, due to changes in fair value of warrant liability[79] 10. Equity This section describes Class A and Class V Common Stock, including voting and dividend rights, and noncontrolling interests in WMH LLC - Class A Common Stock holders have one vote per share and are entitled to dividends, while Class V Common Stock holders also have one vote per share but do not participate in dividends or assets upon liquidation[80][82][84] - Noncontrolling interests represent 37.3% of Units outstanding as of June 30, 2024[86] 11. Stock-based Compensation Total stock-based compensation expense was $2.752 million for Q2 2024 and $5.571 million for H1 2024, covering various compensation plans - Unrecognized stock-based compensation expense for non-vested RSUs was $11.9 million as of June 30, 2024, expected to be recognized over 1.4 years[90] - The company recorded $2.752 million in stock-based compensation expense for Q2 2024 and $5.571 million for H1 2024[92] Stock-based Compensation Expense by Category (in thousands) | Expense Category | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------- | :------------------------------- | :----------------------------- | | Sales and marketing | $385 | $765 | | Product development | $971 | $1,826 | | General and administrative | $1,396 | $2,980 | | Total stock-based compensation expense | $2,752 | $5,571 | 12. Earnings Per Share Diluted EPS for Class A Common Stock was $0.01 for Q2 2024 and $0.02 for H1 2024, with details on calculation and excluded securities Basic and Diluted EPS for Class A Common Stock | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :----------------------------- | | Net income (loss) attributable to WM Tech. | $716 | $1,956 | | Basic income (loss) per share | $0.01 | $0.02 | | Diluted income (loss) per share | $0.01 | $0.02 | | Weighted average basic shares outstanding | 95,342,596 | 95,023,380 | | Weighted average diluted shares outstanding | 97,275,700 | 96,647,173 | - Class V Common Stock and certain other securities were excluded from diluted EPS computation as their effect would have been anti-dilutive[95][97] 13. Related Party Transactions Transactions with related parties include a sublease agreement with an affiliate of the Executive Chair and a promissory note receivable - The company has a sublease agreement with an affiliate of the Executive Chair, generating $0.2 million in income for Q2 2024 and $0.4 million for H1 2024[98] - A promissory note receivable from an affiliate of Silver Spike Sponsor had a remaining balance of $0.6 million as of June 30, 2024[98] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results, including highlights, key metrics, and factors affecting performance for recent periods Second Quarter 2024 Financial Highlights This section provides a snapshot of key financial and operational results for Q2 2024, including net revenues, net income, and client metrics Q2 2024 Financial Highlights (in millions) | Metric | Q2 2024 (in millions) | Q2 2023 (in millions) | Change (%) | | :----------------------------------------- | :-------------------- | :-------------------- | :--------- | | Net revenues | $45.9 | $48.4 | (5)% | | Average monthly paying clients | 5,045 | 5,609 | (10)% | | Average monthly net revenues per paying client | $3,033 | $2,878 | 5.4% | | Net income | $1.2 | $2.0 | (40)% | | Adjusted EBITDA | $10.1 | $10.2 | (1)% | Overview WM Technology operates a leading online cannabis marketplace and SaaS solutions, aiming to expand its two-sided marketplace and offerings - WM Technology operates a two-sided marketplace (Weedmaps) and SaaS solutions (Weedmaps for Business) for cannabis businesses in over 35 U.S. states and territories[102] - The company had 5,045 average monthly paying clients in Q2 2024, purchasing approximately 8,000 listing pages[102] - Future growth strategy includes investments in brand awareness, market penetration, new market expansion, and developing new solutions to enhance platform functionality[102] Key Operating and Financial Metrics This section summarizes key financial and operational metrics for the three and six months ended June 30, 2024, and 2023 Key Operating and Financial Metrics (in thousands) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenues | $45,903 | $48,423 | $90,292 | $94,839 | | Net income (loss) | $1,194 | $1,983 | $3,153 | $(1,986) | | EBITDA | $4,383 | $4,826 | $9,277 | $4,024 | | Adjusted EBITDA | $10,090 | $10,227 | $19,689 | $17,357 | | Average monthly net revenues per paying client | $3,033 | $2,878 | $3,015 | $2,810 | | Average monthly paying clients | 5,045 | 5,609 | 4,991 | 5,625 | Non-GAAP Financial Measures EBITDA and Adjusted EBITDA are discussed as non-GAAP measures, with a reconciliation from net income (loss) and adjustments for various items - Net income for Q2 2024 was $1.2 million (down from $2.0 million in Q2 2023), primarily due to decreased revenue, partially offset by changes in warrant liability and TRA liability[105] - Net income for H1 2024 was $3.2 million (up from a $2.0 million net loss in H1 2023), driven by a $9.9 million decrease in total costs and expenses, partially offset by a $4.5 million revenue decrease[105] Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2024 (in thousands) | Three Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2023 (in thousands) | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $1,194 | $1,983 | $3,153 | $(1,986) | | EBITDA | $4,383 | $4,826 | $9,277 | $4,024 | | Stock-based compensation | $2,752 | $3,709 | $5,571 | $8,092 | | Change in fair value of warrant liability | $(460) | $1,045 | $390 | $320 | | Legal settlements and other legal costs | $3,020 | $666 | $3,513 | $1,533 | | Change in tax receivable agreement liability | $395 | $520 | $938 | $620 | | Adjusted EBITDA | $10,090 | $10,227 | $19,689 | $17,357 | Average Monthly Net Revenues Per Paying Client This metric increased to $3,033 for Q2 2024 (up 5.4% YoY) and $3,015 for H1 2024 (up 7.3% YoY), primarily due to product sunsetting Average Monthly Net Revenues Per Paying Client | Period | 2024 | 2023 | Change (%) | | :----------------------------------------- | :------ | :------ | :--------- | | Three Months Ended June 30 | $3,033 | $2,878 | 5.4% | | Six Months Ended June 30 | $3,015 | $2,810 | 7.3% | - The increase was primarily due to the sunset of certain products with lower average monthly spending clients in Q4 2023[107] Average Monthly Paying Clients Average monthly paying clients decreased by 10% to 5,045 in Q2 2024 and by 11% to 4,991 in H1 2024, attributed to client removal, product sunsetting, and industry challenges Average Monthly Paying Clients | Period | 2024 | 2023 | Change (%) | | :----------------------------------------- | :---- | :---- | :--------- | | Three Months Ended June 30 | 5,045 | 5,609 | (10)% | | Six Months Ended June 30 | 4,991 | 5,625 | (11)% | - The decrease was primarily due to the removal of delinquent clients, impact from product sunsetting in December 2023, and client churn due to industry challenges[109] Factors Affecting Our Performance Performance is influenced by marketplace growth, client acquisition, cannabis market regulation, brand recognition, and strategic investments - Growth is driven by expanding the two-sided marketplace, attracting more businesses and consumers, and increasing revenue per paying client[111][112] - The company's performance is significantly impacted by the continued legalization and regulation of cannabis, with opportunities for growth as more jurisdictions legalize[113] - Federal prohibition on plant-touching businesses currently prevents the company from monetizing transactions with take-rates or payment fees, but a change in regulations could enable such efforts[113] - Maintaining and enhancing brand recognition and reputation is critical, with plans to shift marketing spending towards more efficient digital channels and in-person events[115] - The company plans to make focused organic and inorganic investments to grow revenue, scale operations, enhance data assets, and evolve offerings for brand clients[116] Components of Our Results of Operations This section breaks down financial results into net revenues and various cost and expense categories, including sales, marketing, and product development - Net revenues are primarily from monthly subscriptions, featured/deal listings, and other ad solutions, recognized over the subscription period[117] - Cost of revenues consists mainly of web hosting, internet service, and credit card processing costs, expected to increase absolutely but remain flat as a percentage of revenue[119] - General and administrative expenses are driven by headcount, software, facilities, and professional services, including credit losses, and are expected to decline as a percentage of revenue[122] Results of Operations This section provides a detailed comparison of financial performance for the three and six months ended June 30, 2024, versus 2023 Comparison of Three Months Ended June 30, 2024 and 2023 Net revenues decreased by 5% to $45.9 million, while total costs and expenses remained relatively flat Net Revenues (Three Months Ended June 30) (in thousands) | Metric | 2024 (in thousands) | 2023 (Restated) (in thousands) | Change ($) (in thousands) | Change (%) | | :----------- | :------------------ | :----------------------------- | :------------------------ | :--------- | | Net revenues | $45,903 | $48,423 | $(2,520) | (5)% | - Decrease in net revenues was mainly from Featured Listing and WM Deal products ($4.6 million decrease), partially offset by Weedmaps for Business and other SaaS solutions ($2.1 million increase)[131] Total Costs and Expenses (Three Months Ended June 30) (in thousands) | Expense Category | 2024 (in thousands) | 2023 (Restated) (in thousands) | Change ($) (in thousands) | Change (%) | | :------------------------- | :------------------ | :----------------------------- | :------------------------ | :--------- | | Cost of revenues | $2,245 | $3,239 | $(994) | (31)% | | Sales and marketing | $11,069 | $12,567 | $(1,498) | (12)% | | Product development | $9,642 | $9,200 | $442 | 5% | | General and administrative | $18,529 | $16,779 | $1,750 | 10% | | Depreciation and amortization | $3,187 | $2,855 | $332 | 12% | | Total costs and expenses | $44,672 | $44,640 | $32 | (16)% | - General and administrative expenses increased by $1.75 million, primarily due to a $1.5 million charge for the potential SEC settlement[133] Comparison of Six Months Ended June 30, 2024 and 2023 Net revenues decreased by 5% to $90.3 million, driven by an $8.3 million decrease in Featured Listing and WM Deal products, partially offset by a $3.7 million increase in Weedmaps for Business and other SaaS solutions. Total costs and expenses decreased by $9.9 million Net Revenues (Six Months Ended June 30) (in thousands) | Metric | 2024 (in thousands) | 2023 (Restated) (in thousands) | Change ($) (in thousands) | Change (%) | | :----------- | :------------------ | :----------------------------- | :------------------------ | :--------- | | Net revenues | $90,292 | $94,839 | $(4,547) | (5)% | - Decrease in net revenues was primarily from Featured Listing and WM Deal products ($8.3 million decrease), partially offset by Weedmaps for Business and other SaaS solutions ($3.7 million increase)[137] Total Costs and Expenses (Six Months Ended June 30) (in thousands) | Expense Category | 2024 (in thousands) | 2023 (Restated) (in thousands) | Change ($) (in thousands) | Change (%) | | :------------------------- | :------------------ | :----------------------------- | :------------------------ | :--------- | | Cost of revenues | $4,547 | $6,733 | $(2,186) | (32)% | | Sales and marketing | $20,703 | $24,627 | $(3,924) | (16)% | | Product development | $18,871 | $20,134 | $(1,263) | (6)% | | General and administrative | $35,055 | $37,688 | $(2,633) | (7)% | | Depreciation and amortization | $6,124 | $6,022 | $102 | 2% | | Total costs and expenses | $85,300 | $95,204 | $(9,904) | (59)% | - Sales and marketing expenses decreased by $3.9 million, mainly due to lower personnel-related costs and branding/advertising, partially offset by increased web advertising[139] - General and administrative expenses decreased by $2.6 million, primarily due to lower personnel-related costs, facilities, and insurance, but partially offset by a $1.5 million SEC settlement charge[141] Seasonality Cannabis industry holidays like 420 and Green Wednesday lead to increased consumer purchases and client marketing spend, potentially introducing seasonality - Cannabis industry holidays like 420 and Green Wednesday lead to increased consumer purchases and client marketing spend, potentially introducing seasonality[144] Liquidity and Capital Resources The company's cash increased to $41.3 million, expecting existing liquidity to cover needs for at least the next 12 months Sources of Liquidity Operations are primarily funded by cash flows, with potential for additional equity, equity-linked, or debt financings for future activities - The company primarily finances operations and capital expenditures through cash flows generated by operations[147] - Additional funds may be raised through equity, equity-linked, or debt financings for future activities or acquisitions[147] Cash Flows This section provides a summary table of cash flows from operating, investing, and financing activities for the six months ended June 30, 2024, and 2023 Cash Flows Summary (Six Months Ended June 30) (in thousands) | Cash Flow Activity | 2024 (in thousands) | 2023 (in thousands) | | :---------------------------------- | :------------------ | :------------------ | | Net cash provided by operating activities | $20,054 | $4,092 | | Net cash used in investing activities | $(7,140) | $(5,806) | | Net cash used in financing activities | $(5,972) | $(2,266) | Net Cash Provided by Operating Activities Net cash provided by operating activities significantly increased to $20.1 million for H1 2024, compared to $4.1 million for H1 2023, driven by net income and non-cash adjustments, partially offset by changes in working capital - Net cash provided by operating activities was $20.1 million for H1 2024, a substantial increase from $4.1 million in H1 2023[148] - This increase was due to net income of $3.2 million, $14.7 million in non-cash items (depreciation, stock-based comp, etc.), and $2.2 million net cash inflows from changes in operating assets and liabilities[148] Net Cash Used in Investing Activities Net cash used in investing activities was $7.1 million for H1 2024, primarily for capital expenditures including capitalized software development costs - Net cash used in investing activities was $7.1 million for H1 2024, mainly for capital expenditures and capitalized software development[149] Net Cash Used in Financing Activities Net cash used in financing activities was $6.0 million for H1 2024, primarily due to distributions to WMH LLC members and TRA payments - Net cash used in financing activities was $6.0 million for H1 2024, mainly from $6.0 million in distributions to WMH LLC members and $0.1 million in TRA payments[149] Critical Accounting Policies and Estimates No significant changes to critical accounting policies and estimates were reported from those disclosed in the 2023 Annual Report on Form 10-K - No significant changes to critical accounting policies and estimates were reported as of June 30, 2024[150] Recent Accounting Pronouncements New accounting pronouncements effective for fiscal year 2024 had no material impact, and ASU 2023-09 is currently being evaluated - No material impact from recently adopted accounting pronouncements for fiscal year 2024[154] - The company is evaluating ASU 2023-09, "Income Taxes - Improvements to Income Tax Disclosures," effective for fiscal years beginning after December 15, 2024[155] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, WM Technology, Inc. is not required to provide detailed quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide detailed market risk disclosures[152] Item 4. Controls and Procedures This section addresses the effectiveness of disclosure controls and internal control over financial reporting, highlighting material weaknesses and remediation efforts Evaluation of Disclosure Controls and Procedures The executive chair and chief financial officer concluded that the company's disclosure controls and procedures were not effective as of June 30, 2024, due to identified material weaknesses in internal control over financial reporting - Disclosure controls and procedures were deemed not effective as of June 30, 2024, due to material weaknesses in internal control over financial reporting[154] Changes in Internal Control Over Financial Reporting No material changes in internal control over financial reporting occurred during the most recent fiscal quarter - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[155] Management's Report on Internal Control Over Financial Reporting Management identified entity-level and process-level material weaknesses, including IT general controls and the order-to-cash cycle, which led to prior restatements - Management identified entity-level material weaknesses in internal control over financial reporting, including deficiencies in general control activities over technology, risk identification, and control activity development[156] - Specific material weaknesses include ineffective IT general controls for change management and access controls, and ineffective process-level controls related to the order-to-cash cycle, procure-to-pay cycle, capitalized software, and long-term assets[156][157] - The material weakness in the order-to-cash cycle led to an inadequate revenue recognition policy and the restatement of unaudited condensed consolidated financial statements for prior 2023 quarters[157] Remediation The company has begun designing and implementing effective internal controls to remediate the identified material weaknesses, including personnel recruitment and ERP system implementation - Remediation efforts include recruiting personnel with GAAP knowledge, implementing a new ERP system, and strengthening IT governance and general controls[159] - The company cannot assure that these actions will adequately remediate the material weaknesses or prevent future ones until fully implemented and tested[159] Part II - Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings, including an agreement in principle with the SEC staff to resolve an investigation regarding MAU metrics, which includes a $1.5 million civil money penalty - The company reached an agreement in principle with the SEC staff to resolve an investigation regarding MAU metrics, agreeing to a $1.5 million civil money penalty[161] - The agreement is subject to mutual language agreement and SEC approval[161] Item 1A. Risk Factors Investment in the company's securities involves risks, including potential liabilities from litigation or legal proceedings like the SEC investigation - Litigation or legal proceedings, including the SEC investigation, could expose the company to significant liabilities, legal costs, and reputational harm[163] - The results of litigation are uncertain, and adverse judgments or settlements could negatively impact financial position, cash flows, or results of operations[163] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported - No unregistered sales of equity securities[164] Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported - No defaults upon senior securities[164] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[164] Item 5. Other Information No other information was reported - No other information[164] Item 6. Exhibits This section lists the exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q, including certifications and XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer, as well as Inline XBRL documents[166] Signatures Signatures The report was duly signed by Douglas Francis, Executive Chair (Principal Executive Officer), and Susan Echard, Interim Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer), on August 8, 2024 - The report was signed by Douglas Francis (Executive Chair) and Susan Echard (Interim Chief Financial Officer) on August 8, 2024[168]