Leafly(US:LFLY)2022-08-12 20:11Part I - Financial Information 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) This section presents Leafly's unaudited condensed consolidated financial statements, reflecting the business combination with Merida Merger Corp. I Condensed Consolidated Balance Sheets 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 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) 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 stock20 - 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 rights20 Condensed Consolidated Statements of Cash Flows 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 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 acquirer26 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 20255863 - 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 Rights115 - 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 million121 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 freeze129 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 traffic139 - The decline in ARPA is due to strategic expansion into lower-priced markets to grow the retailer base139 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 combination165 Quantitative and Qualitative Disclosures About Market Risk 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 disclosures167 Controls and Procedures 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 report170 - There were no material changes in the company's internal control over financial reporting during the six months ended June 30, 2022172 Part II - Other Information This section covers legal proceedings, risk factors, equity sales, mine safety, and exhibits Legal Proceedings 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 statements173 Risk Factors 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, 2022174 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - The company reports "None" for this item175 Mine Safety Disclosures This item is not applicable to the company - This section is marked as "Not applicable."175 Other Information The company reported no other information for this item - The company reports "None" for this item176 Exhibits 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 files178