Leafly(LFLY) - 2025 Q1 - Quarterly Report

Part I - Financial Information Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited statements reveal a deteriorating financial position, a net loss of $1.8 million, and substantial doubt about the company's ability to continue as a going concern - The financial statements assume the company will continue as a going concern, but management has identified substantial doubt due to its inability to repay $25.7 million in convertible notes maturing on July 1, 2025[34][35][37] Consolidated Balance Sheets As of March 31, 2025, total assets decreased to $14.0 million while the stockholders' deficit widened to $16.7 million Consolidated Balance Sheets (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $8,639 | $14,531 | | Total current assets | $11,244 | $16,803 | | Total assets | $14,007 | $19,638 | | Liabilities & Stockholders' Deficit | | | | Convertible promissory notes, net | $25,747 | $29,376 | | Total current liabilities | $30,628 | $34,676 | | Total liabilities | $30,690 | $34,747 | | Total stockholders' deficit | ($16,683) | ($15,109) | Consolidated Statements of Operations For Q1 2025, revenue decreased 12.9% to $7.9 million, but cost-cutting measures helped narrow the net loss to $1.8 million Consolidated Statements of Operations (in thousands, except per share data) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenue | $7,882 | $9,048 | | Gross profit | $7,080 | $8,072 | | Total operating expenses | $8,321 | $9,820 | | Loss from operations | ($1,241) | ($1,748) | | Net loss | ($1,781) | ($2,387) | | Net loss per share (Basic & Diluted) | ($0.59) | ($1.09) | Consolidated Statements of Cash Flows Net cash used in operating and financing activities increased significantly in Q1 2025, resulting in a $5.9 million net decrease in cash Consolidated Statements of Cash Flows (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($1,862) | ($873) | | Net cash used in investing activities | ($349) | ($209) | | Net cash used in financing activities | ($3,680) | ($114) | | Net decrease in cash, cash equivalents, and restricted cash | ($5,891) | ($1,196) | | Cash, cash equivalents, and restricted cash, end of period | $8,881 | $14,348 | Notes to Condensed Consolidated Financial Statements Key notes highlight the going concern doubt, terms of convertible notes, and a proposed reverse stock split to suspend SEC reporting - The company's primary revenue source is advertising, generating $7.7 million in Q1 2025, with the United States accounting for the vast majority[56] - On January 15, 2025, the company amended its convertible notes, extending the maturity date to July 1, 2025, and made a principal prepayment of $3.678 million[65] - The company's stock was delisted from Nasdaq on January 17, 2025, and now trades on the OTC Pink Open Market[73][74] - The company proposed a reverse stock split to reduce its number of record holders below 300, permitting it to suspend SEC reporting obligations[137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 13% revenue decline, improved Adjusted EBITDA from cost-cutting, and the company's precarious liquidity situation Key Metrics Key metrics show a 12% decline in ending retail accounts, attributed to customer budget issues and removal of non-paying clients Key Operating Metrics | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Ending retail accounts | 3,362 | 3,840 | (478) | -12% | | Retailer ARPA | $684 | $677 | $7 | 1% | Results of Operations Q1 2025 revenue fell 13% to $7.9 million, while a 15% reduction in operating expenses helped narrow the net loss Revenue by Segment (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Retail | $6,946 | $7,871 | ($925) | -12% | | Brands | $936 | $1,177 | ($241) | -20% | | Total revenue | $7,882 | $9,048 | ($1,166) | -13% | - Operating expenses declined by $1.5 million (15%) YoY, driven by decreases in Sales and Marketing, Product Development, and G&A expenses[160][161] Non-GAAP Financial Measures Adjusted EBITDA improved significantly to a positive $49,000 in Q1 2025 from a loss of $867,000 in Q1 2024 due to cost-cutting Reconciliation of Net Loss to Adjusted EBITDA (in thousands) | | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net loss | ($1,781) | ($2,387) | | Interest expense, net | 547 | 607 | | Depreciation and amortization expense | 421 | 329 | | EBITDA | ($813) | ($1,451) | | Stock-based compensation | 209 | 598 | | Transaction related expenses | 663 | — | | Change in fair value of derivatives | (10) | (14) | | Adjusted EBITDA | $49 | ($867) | Liquidity and Capital Resources The company's liquidity is severely constrained, with insufficient capital to fund operations or repay $25.7 million in notes due July 2025 - The company has $25.7 million of convertible notes maturing on July 1, 2025, and its current liquidity position is insufficient for repayment[182] - Management has concluded that substantial doubt exists about the company's ability to continue as a going concern within one year[182] - The company is pursuing a reverse stock split to 'go private' and suspend SEC reporting obligations to save costs[182][186][187] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide information regarding market risk - As a smaller reporting company, Leafly is not required to provide disclosures about market risk[193] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes identified - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[196] - There were no material changes in internal control over financial reporting during the quarter[197] Part II - Other Information Item 1. Legal Proceedings The company is involved in ordinary course legal proceedings not expected to have a material effect on its financial position - The company is not a party to any material pending legal proceedings[198] Item 1A. Risk Factors The risk related to the company's plan to terminate SEC registration and suspend public reporting has materially increased - The risk associated with the company's plan to 'go private' and suspend reporting obligations has increased due to recent actions[199] Item 5. Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the first quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[200] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including required CEO and CFO certifications and corporate documents - Exhibits filed with the report include corporate governance documents and CEO/CFO certifications under Sarbanes-Oxley[202]