Wag! (US:PET)2025-05-12 20:59PART I. FINANCIAL INFORMATION Financial Statements This section presents Wag! Group Co.'s unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, operations, equity, and cash flows, highlighting management's substantial doubt about going concern due to liquidity and debt maturities Unaudited Condensed Consolidated Balance Sheets As of March 31, 2025, total assets were $28.8 million, liabilities increased to $32.3 million, and the stockholders' deficit widened to $3.5 million Condensed Consolidated Balance Sheets (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $14,658 | $15,065 | | Total assets | $28,840 | $29,438 | | Total current liabilities | $31,887 | $29,463 | | Total liabilities | $32,309 | $29,927 | | Total stockholders' deficit | $(3,469) | $(489) | Unaudited Condensed Consolidated Statements of Operations Q1 2025 revenues decreased to $15.2 million, and despite reduced expenses, the net loss widened to $4.9 million, resulting in a $(0.10) loss per share Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $15,165 | $23,219 | | Total costs and expenses | $18,941 | $25,002 | | Net loss | $(4,890) | $(4,241) | | Loss per share, basic and diluted | $(0.10) | $(0.11) | Unaudited Condensed Consolidated Statements of Stockholders' Equity (Deficit) The stockholders' deficit increased from $0.5 million at year-end 2024 to $3.5 million by March 31, 2025, primarily due to a $4.9 million net loss - The stockholders' deficit grew from $(489) thousand at the end of 2024 to $(3,469) thousand at the end of Q1 2025, mainly due to the net loss of $4.9 million18 Unaudited Condensed Consolidated Statements of Cash Flows Q1 2025 saw net cash provided by operating activities of $1.4 million, with cash and cash equivalents ending at $6.1 million, down from $12.6 million year-over-year Condensed Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,407 | $168 | | Net cash used in investing activities | $(396) | $(305) | | Net cash used in financing activities | $(518) | $(5,583) | | Net change in cash and cash equivalents | $493 | $(5,720) | | Cash and cash equivalents, end of period | $6,123 | $12,603 | Notes to Unaudited Condensed Consolidated Financial Statements Notes provide critical context, highlighting substantial doubt about going concern due to liquidity, history of losses, and $19.7 million debt maturing in August 2025, alongside ongoing legal proceedings - Management has determined there is substantial doubt regarding the Company's ability to continue as a going concern for at least one year from the issuance date of the financial statements due to projected cash needs, current liquidity levels, a history of net losses, and debt maturing in August 202528 - As of March 31, 2025, the company had $6.1 million in cash and cash equivalents against $19.7 million in debt obligations, with the majority maturing in August 202526 - In April 2025, Blue Torch assigned its rights and obligations under the Financing Agreement to Retriever LLC, with no terms modified by this assignment63 - The company is contesting assessments from California ($1.3 million) and New York ($1.8 million) related to alleged misclassification of pet caregivers and unpaid unemployment insurance contributions6971 Revenue by Offering (in thousands) | Offering | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Services revenue | $4,894 | $5,327 | | Wellness revenue | $9,168 | $15,769 | | Pet Food & Treats revenue | $1,103 | $2,123 | | Total revenues | $15,165 | $23,219 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, noting a 34.7% revenue decrease and widened net loss, reiterating substantial doubt about going concern due to critical liquidity and maturing debt Key Operating and Financial Metrics Key metrics for Q1 2025 show significant declines, with Platform Participants down 29.7%, revenues falling 34.7% to $15.2 million, and Adjusted EBITDA swinging to a $1.2 million loss Key Metrics Comparison (in thousands) | Metric | Q1 2025 | Q1 2024 | Change % | | :--- | :--- | :--- | :--- | | Platform Participants | 472 | 671 | (29.7)% | | Revenues | $15,165 | $23,219 | (34.7)% | | Net loss | $(4,890) | $(4,241) | 15.3% | | Adjusted EBITDA (loss) | $(1,235) | $168 | N/A | Comparison of the Three Months Ended March 31, 2025 and 2024 Q1 2025 revenues decreased by $8.1 million (34.7%) due to declines across segments and Platform Participants, leading to a widened net loss of $4.9 million despite cost reductions - Revenues decreased by 34.7% YoY, attributed to a $6.6 million decrease in Wellness revenue, a $1.0 million decrease in Pet Food & Treats revenue, and a $0.4 million decrease in Services revenue, driven by a 30% decrease in Platform Participants107 - Sales and marketing expenses decreased by $5.3 million (33.7%) YoY, mainly due to a $4.3 million reduction in spending on partnerships for Wellness offerings110 - Interest expense, net decreased by $0.5 million (33.4%) due to a lower outstanding balance on the Financing Agreement113 Liquidity and Capital Resources The company faces critical liquidity challenges with $6.1 million cash against $19.7 million debt maturing in August 2025, raising substantial doubt about going concern and prompting a review of strategic alternatives - As of March 31, 2025, the company had $6.1 million in cash and cash equivalents and $19.7 million in outstanding debt, with the majority maturing in August 2025117 - Due to projected cash needs, current liquidity, and a history of losses, there is substantial doubt about the company's ability to continue as a going concern119 - The Board is conducting a review of strategic alternatives, but negative covenants in the Financing Agreement restrict actions like incurring new debt or selling assets, and failure to find a solution before August 2025 could lead to the lender (Retriever LLC) seizing assets, rendering securities worthless118 Quantitative and Qualitative Disclosures About Market Risk The company is not required to provide market risk disclosures as it qualifies as a smaller reporting company - The company is not required to provide information for this item as it qualifies as a smaller reporting company134 Controls and Procedures Management concluded disclosure controls and procedures were ineffective as of March 31, 2025, due to persistent material weaknesses in financial reporting and IT general controls, with a remediation plan underway - Management concluded that as of March 31, 2025, the company's disclosure controls and procedures were not effective at a reasonable assurance level136 - Material weaknesses persist from year-end 2024, related to insufficient finance/accounting resources for risk assessment and technical accounting, and deficiencies in IT general controls (logical access, segregation of duties, change controls)137 - The company has implemented or is implementing a remediation plan, which includes hiring more finance and IT personnel, redesigning IT controls, and engaging third-party consultants139142 PART II. OTHER INFORMATION Legal Proceedings This section refers to Note 8 of the financial statements for details on ongoing legal proceedings, including tax assessments in California and New York - For details on legal proceedings, the report refers to Note 8, Commitments and Contingencies, in the financial statements144 Risk Factors This section highlights critical new risk factors, including potential lender foreclosure, the urgent need to refinance debt before August 2025 maturity, and pending Nasdaq delisting due to non-compliance - The Financing Agreement, now held by Retriever LLC, is secured by substantially all company assets, and a default could lead to foreclosure, which would materially harm the business and could render securities worthless146148 - The company must renegotiate or refinance its debt before the August 2025 maturity to continue as a going concern, but its ability to do so is limited by its outstanding debt, low market capitalization, and pending Nasdaq delisting150153 - The company received a delisting determination from Nasdaq on March 25, 2025, for failing to meet the Minimum Bid Price and Market Value of Listed Securities requirements, and while an appeal hearing was held on May 8, 2025, there is no assurance the appeal will be successful155156157 Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported for the period Defaults Upon Senior Securities The company reported no defaults upon senior securities - None158 Mine Safety Disclosures This item is not applicable to the company - Not applicable159 Other Information The company reported no other material information required to be disclosed under this item - None161162 Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, warrant agreements, incentive plans, the Financing Agreement amendment, and required CEO/CFO certifications - Key exhibits filed include certifications by the Principal Executive Officer and Principal Financial Officer, and Amendment No. 1 to the Financing Agreement, dated April 4, 2025163 Signatures Signatures The report was signed on May 12, 2025, by Garrett Smallwood (CEO) and Alec Davidian (CFO) - The report was signed on May 12, 2025, by Garrett Smallwood (CEO) and Alec Davidian (CFO)168169