10q10k10q10k.net

What changed in WM TECHNOLOGY, INC.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of WM TECHNOLOGY, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+561 added−585 removedSource: 10-K (2024-05-24) vs 10-K (2023-03-16)

Top changes in WM TECHNOLOGY, INC.'s 2023 10-K

561 paragraphs added · 585 removed · 387 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

81 edited+30 added−32 removed49 unchanged
Biggest changeChallenges in Our End-Markets Despite cannabis being a large and growing sector in the United States, we believe that cannabis is unlike many other consumer goods and retail categories for a number of reasons: • Cannabis as a regulated industry is still in a nascent stage of development. • Cannabis users (as defined as adults, ages 21 and above, who have consumed cannabis in the past year) are less than 19% of the U.S. adult, ages 21 and above, population today 3 (and less than 14% for those that consumed in the past month) 3 without a “typical” user profile 4 . • Regulations governing cannabis are complex and vary state-by-state and by city and county within states. • Cannabis has wide variance in characteristics that make it complex for consumers to make an informed purchase decision. • Cannabis is a perishable good with a lack of product homogeneity. • Brands are only in the early innings of establishing a consumer presence. • Competition with the illicit market is still an issue, particularly in states like California. • The industry has experienced periods of price deflation, including over the past year, impacting the financial performance of businesses across the value chain. • Limited access to capital (relative to other industries) and limitations under Section 280E of the Internal Revenue Code of 1986, as amended (the “Code”) on deduction or credit for certain expenses of cannabis business can reduce the cash flow and liquidity of many industry participants. 3 Numbers of users 21 and above are from the 2021 National Survey on Drug Use and Health, number of 21 and above adults in the United States are from a study conducted in 2019 by Statista. 4 Per 2021 National Survey of Drug Use and Health and U.S.
Biggest changeChallenges in Our End-Markets Despite cannabis being a large and growing sector in the United States, we believe that cannabis is unlike many other consumer goods and retail categories for a number of reasons: • Cannabis as a regulated industry is still in a nascent stage of development. 8 Table of Contents • Cannabis users (defined as adults, aged 21 and older, who have consumed cannabis in the past year) represent less than 22% of the total U.S. adult, aged 21 and older, population today 3 (and less than 16% for those that consumed in the past month) 3 without a “typical” user profile 4 . • Regulations governing cannabis are complex and vary state-by-state and by city and county within states. • Cannabis has wide variance in characteristics that make it complex for consumers to make an informed purchase decision. • Cannabis is a perishable good with a lack of product homogeneity. • Brands are only in the early stages of establishing a consumer presence. • Competition with the illicit market is still an issue, particularly in states like California. • The industry has experienced periods of price deflation, including over the past two years, impacting the financial performance of businesses across the value chain. • Limited access to capital (relative to other industries) and limitations under Section 280E of the Internal Revenue Code of 1986, as amended (the “Code”) on deduction or credit for certain expenses of cannabis business can reduce the cash flow and liquidity of many industry participants.
This creates business efficiencies and improves the accuracy and timeliness of information across Weedmaps, creating a more positive experience for consumers and businesses; and • WM Insights: An insights and analytics platform for clients leveraging data across the Weedmaps marketplace and software solutions. WM Insights provides data and analytics on user engagement and traffic trends to a client’s listing page.
This creates business efficiencies and improves the accuracy and timeliness of information across Weedmaps, creating a more positive experience for consumers and businesses. • WM Insights: An insights and analytics platform for clients leveraging data across the Weedmaps marketplace and software solutions. WM Insights provides data and analytics on user engagement and traffic trends to a client’s listing page.
We believe that the principal competitive factors in our market include the scale of our network, comprehensiveness of offerings, ease of adoption and use and ability to facilitate compliance with the complex, disparate regulations applicable to businesses operating in the cannabis industry, breadth and trustworthiness of information available to consumers and brand.
We believe that the principal competitive factors in our market include the scale of our network, comprehensiveness of offerings, ease of adoption and use, ability to facilitate compliance with the complex, disparate regulations applicable to businesses operating in the cannabis industry and the breadth and trustworthiness of information available to consumers and brand.
In 2022, President Biden signed into law the “Medical Marijuana and Cannabidiol Research Expansion Act,” a bill aimed at easing restrictions on cannabis research -- bipartisan legislation which is the first standalone cannabis reform bill to pass both the House and Senate.
First, in 2022, President Biden signed into law the “Medical Marijuana and Cannabidiol Research Expansion Act,” a bill aimed at easing restrictions on cannabis research -- bipartisan legislation which is the first standalone cannabis reform bill to pass both the House and Senate.
During the initial development phases, we test a proposed offering with relevant areas of our business such as sales, policy, compliance, legal, marketing and technology, and use the resulting cross-functional input to develop a clear business rationale and explicit articulation of the goals, client problems that need to be solved, compliance features that need to be incorporated, and potential product-market fit prior to the investment of developer time and company resources.
During the initial development phases, we test a proposed offering with relevant areas of our business such as sales, compliance, legal, marketing and technology, and use the resulting cross-functional input to develop a clear business rationale and explicit articulation of the goals, client problems that need to be solved, compliance features that need to be incorporated, and potential product-market fit prior to the investment of developer time and company resources.
The Weedmaps marketplace provides cannabis consumers with information regarding cannabis retailers and brands. In addition, the Weedmaps marketplace aggregates data from a variety of sources including retailer point-of-sale solutions to provide consumers with the ability to browse by strain, price, cannabinoids and other information regarding locally available cannabis products, through our website and mobile apps.
The Weedmaps marketplace provides cannabis consumers with information regarding cannabis retailers and brands. In addition, the Weedmaps marketplace aggregates data from a variety of sources, including retailer point-of-sale (“POS”) solutions, to provide consumers with the ability to browse by strain, price, cannabinoids and other information regarding locally available cannabis products, through our website and mobile apps.
We believe our Weedmaps for Business is the industry’s only comprehensive business-in-a-box solution and incorporates embedded compliance functionality so that our clients comply with state law through integrated software solutions ranging from live menus, logistics and fulfillment, CRM, POS integrations, inventory management and data and analytics.
We believe our Weedmaps for Business is the industry’s only comprehensive business-in-a-box solution and incorporates embedded compliance functionality so that our clients comply with state law through integrated software solutions ranging from live menus, logistics and fulfillment, POS integrations, inventory management and data and analytics.
Our platform also features self-service administrative functionality that enables clients to manage their listings page, including adding images, adjusting their menus, editing product information and responding to reviews as well as analyzing traffic trends. • Unique and Growing Data Asset.
Our platform features self-service administrative functionality that enables clients to manage their listings page, including adding images, adjusting their menus, editing product information and responding to reviews as well as analyzing traffic trends. • Unique and Growing Data Asset.
Since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ, which includes the Drug Enforcement Administration, from using appropriated funds to prevent states from implementing their medical-use cannabis laws.
Since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ, which includes the Drug Enforcement Administration (“DEA”), from using appropriated funds to prevent states from implementing their medical-use cannabis laws.
We do author and edit certain original content that appears in other sections of our website, such as WM News, WM Learn and WM Policy. All of these sections are general news and information, and none of these sections are advertisements for, or listing pages of, cannabis businesses.
We do author and edit certain original content that appears in other sections of our website, such as WM News and WM Learn. All of these sections are general news and information, and none of these sections are advertisements for, or listing pages of, cannabis businesses.
After a dispensary receives the order request from the consumer, the dispensary and the consumer can continue to communicate, adjust items in the request, and handle any stock issues, prior to and while the dispensary processes and fulfills the order; • WM Store: Customizable orders and menu embed, which allows retailers and brands to import their Weedmaps listing menu or product reservation functionality to their own white-labeled WM Store website or separately owned website.
After a dispensary receives the order request from the consumer, the dispensary and the consumer can continue to communicate, adjust items in the request, and handle any stock issues, prior to and while the dispensary processes and fulfills the order. • WM Store: Customizable order and menus embed which allows retailers and brands to import their Weedmaps listing menu or product reservation functionality to their own white-labeled WM Store website or separately owned website.
These investments serve to deepen the consumer experience with our platform and continue to provide a high level of support to our business clients. While the cannabis industry is still in the early innings of what could be decades of growth, we have established a leading position and a recognized brand given our 14-year operating history.
These investments serve to deepen the consumer experience with our platform and continue to provide a high level of support to our business clients. While the cannabis industry is still in the early innings of what could be decades of growth, we have established a leading position and a recognized brand given our 15-year operating history.
Our Growth Strategy As a leading marketplace and software platform, our goal is not only to grow our market share but to grow the entire market by influencing policy promoting wider access to licensed cannabis, educating consumers on how to shop for cannabis and providing licensed operators with the tools they need to access users and grow their businesses.
Our Growth Strategy As a leading marketplace and software platform, our goal is not only to grow our market share but to grow the entire market by promoting wider access to licensed cannabis, educating consumers on how to shop for cannabis and providing licensed operators with the tools they need to access users and grow their businesses.
These tools support cannabis businesses at every stage in the consumer funnel, enabling them to: • Strategically reach prospective cannabis consumers; • Manage pickup, delivery and inventory in compliance with local regulations; • Help improve the customer experience by creating online browsing and ordering functionality on a brand or retailer (including delivery) operator’s website and by extending that functionality in-store with kiosks; • Foster customer loyalty and re-engage with segments of consumers; • Leverage the Weedmaps for Business products in conjunction with any other preferred software solutions via integrations and application programming interfaces (“APIs”); and • Make informed marketing and merchandising decisions using performance analytics and consumer and brand insights to promote products to specific consumer groups.
These tools support cannabis businesses at every stage in the consumer funnel, enabling them to: • Strategically reach prospective cannabis consumers. • Manage pickup, delivery and inventory in compliance with local regulations. • Help improve the customer experience by creating online browsing and ordering functionality on a brand or retailer (including delivery) operator’s website. • Foster customer loyalty and re-engage with segments of consumers. • Leverage the Weedmaps for Business products in conjunction with any other preferred software solutions via integrations and application programming interfaces (“APIs”). • Make informed marketing and merchandising decisions using performance analytics and consumer and brand insights to promote products to specific consumer groups.
As we increase the number of users on our platform, we generate more engagements and can more easily persuade our business clients to consolidate their service providers by switching to our value-priced Weedmaps for Business bundled solution. As we continue to increase the number of businesses on our marketplace, we become a more compelling platform for users.
As we increase the number of users on our platform, we generate more engagements and can more easily persuade our business clients to consolidate their service providers by switching to our value-priced Weedmaps for Business bundled solution. As we continue to increase the number of businesses on our marketplace, we in turn become a more compelling platform for users.
Assuming no cap on the number of licenses issued or other restrictions on the number of licenses issued, if these same markets were to issue enough licenses to match a ratio of one license per 10,000 residents, over 22,000 new retail licenses would be issued.
Assuming no cap on the number of licenses issued or other restrictions on the number of licenses issued, if these same markets were to issue enough licenses to match a ratio of one retail license per 10,000 residents, approximately 22,000 new retail licenses would be issued.
The Weedmaps marketplace allows cannabis users to search for and browse cannabis products from retailers and brands, and ultimately reserve products from certain local retailers, in a manner similar to other technology platforms with breadth and depth of product, brand and retailer selection.
The Weedmaps marketplace allows cannabis consumers to search for and browse cannabis products from retailers and brands, and ultimately reserve products from certain local retailers, in a manner similar to other technology platforms with breadth and depth of product, brand and retailer selection.
We also offer other add-on products for additional fees, including: • WM Ads: Ad solutions on the Weedmaps marketplace designed for clients to amplify their businesses and reach more highly engaged cannabis consumers throughout their buying journey including: ◦ Featured Listings: Premium placement ad solutions on high visibility locations on the Weedmaps marketplace (desktop and mobile) to amplify our clients’ businesses and maximize clients’ listings and deal presence ◦ WM Deals: Discount and promotion pricing tools that let clients strategically reach prospective price-conscious cannabis customers with deals or discounts to drive conversion.
We also offer other add-on products for additional fees, including: 7 Table of Contents • WM Ads: Ad solutions on the Weedmaps marketplace designed for clients to amplify their businesses and reach more highly engaged cannabis consumers throughout their buying journey including: ◦ Featured Listings: Premium placement ad solutions on high visibility locations on the Weedmaps marketplace (desktop and mobile) to amplify our clients’ businesses and maximize clients’ listings and deal presence. ◦ WM Deals: Discount and promotion pricing tools that let clients strategically reach prospective price-conscious cannabis customers with deals or discounts to drive conversion.
BUSINESS Our Company Founded in 2008, and headquartered in Irvine, California, WM Technology, Inc. operates a leading online cannabis marketplace for consumers together with a comprehensive set of eCommerce and compliance software solutions for cannabis businesses, which are sold to both storefront locations and delivery operators (“retailers”) and brands in the United States, U.S. territories and Canadian legalized cannabis markets.
BUSINESS Our Company Founded in 2008, and headquartered in Irvine, California, WM Technology, Inc. operates a leading online cannabis marketplace for consumers together with a comprehensive set of eCommerce and compliance software solutions for cannabis businesses, which are sold to both storefront locations and delivery operators (“retailers”) and brands in the legalized cannabis markets in states and territories of the United States.
Social Impact To support the growth of an inclusive cannabis industry, we participate in policy panels and organize educational sessions to educate attendees about the importance of social equity programs and other policy initiatives that are designed to ensure the ability of people of color and those impacted by the war on drugs to participate in the legal cannabis markets that are opening (i.e. social equity licensing programs).
Social Impact 11 Table of Contents To support the growth of an inclusive cannabis industry, we participate in policy panels and organize educational sessions to educate attendees about the importance of social equity programs and other policy initiatives that are designed to ensure the ability of people of color and those impacted by the war on drugs to participate in the legal cannabis markets that are opening (i.e. social equity licensing programs).
We do not create or develop the information that appears on our clients’ listing pages and other advertising placements, although 13 Table of Contents our moderation teams may take down a client’s information if it breaches our listing restrictions or admonish consumers who post reviews that violate our community terms of use (which, for example, prohibit profanity and racism).
We do not create or develop the information that appears on our clients’ listing pages and other advertising placements, although our moderation teams may take down a client’s information if it breaches our listing restrictions or admonish consumers who post reviews that violate our community terms of use (which, for example, prohibit profanity and racism).
Given our established presence, scale and the breadth of product offerings that provide us with a high volume of retail-level information and user insights, we have a growing and unique first-party data asset. Currently, the cannabis industry has few reliable sources of fulsome datasets.
As a result our established presence, scale and the breadth of product offerings that provide us with a high volume of retail-level information and user insights, we have a growing and unique first-party data asset. Currently, the cannabis industry has few reliable sources of fulsome datasets.
We have drafted white papers and mock legislative provisions that were designed to support the enactment of social equity licensing programs and advocates for state and local governments to enact social equity licensing programs.
We have drafted white papers and mock legislative provisions that were designed to support the enactment of social equity licensing programs and have advocated for state and local governments to enact social equity licensing programs.
We offer this functionality through a packaged software solution that includes (based on availability within any given market and state-level regulations) (i) a listing page with product menu on weedmaps.com, our iOS Weedmaps mobile application and our Android Weedmaps mobile application, which allows clients to disclose their license information, hours of operation, contact information, discount policies and other information that may be required under applicable state law, (ii) the ability to receive reservations of products for pickup by consumers or delivery to consumers (either on weedmaps.com, on a white labeled WM Store website or third-party websites through our orders and menu embed product), (iii) a customizable menus for brands, retailers and delivery operators to embed on their website, (iv) access to our APIs, including real-time connectivity between Weedmaps for Business to a point-of-sale system (“POS”) to streamline workflows and promote compliance through accuracy and (v) analytics dashboards.
We offer this functionality through a packaged software solution that includes (based on availability within any given market and state-level regulations) (i) a listing page with product menu on weedmaps.com, our iOS Weedmaps mobile application and our Android Weedmaps mobile application, which allows clients to disclose their license information, hours of operation, contact information, discount policies and other information that may be required under applicable state law, (ii) the ability to reserve products for pickup by consumers or delivery to consumers (either through weedmaps.com, on a white labeled WM Store website or third-party websites through our orders and menu embed product), (iii) customizable menus for brands, retailers and delivery operators to embed on their website, (iv) access to our APIs, including real-time connectivity between Weedmaps for Business to a POS to streamline workflows and promote compliance through accuracy and (v) analytics dashboards.
Given our share of cannabis businesses, we believe we are well-positioned to capitalize on underlying growth across our end-markets by executing against our strategy as follows: • Grow Our Two-Sided Marketplace. Our goal is to be the center of commerce for consumers seeking cannabis.
We believe we are well-positioned to capitalize on underlying growth across our end-markets by executing against our strategy as follows: • Grow Our Two-Sided Marketplace. Our goal is to be the center of commerce for consumers seeking cannabis.
As of December 31, 2022, we have been issued trademark registrations in the United States, Canada, Japan, the European Union, the United Kingdom, Mexico and Australia.
As of December 31, 2023, we have been issued trademark registrations in the United States, Canada, Japan, the European Union, the United Kingdom, Mexico and Australia.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and our Proxy Statements and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC.
Our Annual Reports on Form 10-K , Quarterly Reports on Form 10-Q, Curre nt Reports on Form 8-K and our Proxy Statements and any amendments to these reports, are available through our investor relations website, free of charge, after we file them with the SEC.
We 9 Table of Contents believe our deep knowledge of our end-markets and broad-based operational expertise spanning several industry sectors provides a key competitive advantage in executing against our growth strategy.
We believe our deep knowledge of our end-markets and broad-based operational expertise spanning several industry sectors provides a key competitive advantage in executing against our growth strategy.
We intend to continue expanding our suite of valuable advertising and software solutions and the functionality of our Weedmaps for Business solutions through additional offerings of premium analytics, CRM and loyalty tools, among other solutions, which we intend to monetize through additional higher priced tiers within our subscription offering.
We intend to continue expanding our suite of valuable advertising and software solutions and the functionality of our Weedmaps for Business solutions through additional offerings of premium analytics and 10 Table of Contents loyalty tools, among other solutions, which we intend to monetize through additional higher priced tiers within our subscription offering.
In our efforts to safeguard our copyrights, trade secrets, trademarks and other intellectual property rights worldwide, we rely on a combination of federal, state, common law and international rights in the jurisdictions in which we operate.
In our efforts to safeguard our intellectual property, including copyrights, trade secrets, trademarks, patents and other forms of intellectual property rights, we rely on a combination of federal, state, common law and international rights in the jurisdictions in which we operate.
We do not yet regard these countries as viable marketplaces for our products, though we have ongoing tests of a small number of listings in several markets where that product is legally permissible. Available Information Our Internet address is www.weedmaps.com. Our investor relations website is located at https://ir.weedmaps.com.
We do not yet regard these countries as viable marketplaces for our products, though we have ongoing tests of a small number of listings in several markets where listings are legally permissible. 14 Table of Contents Available Information Our Internet address is www.weedmaps.com. Our investor relations website is located at https://ir.weedmaps.com.
Only three states continue to prohibit cannabis entirely. Despite expectations of growth, the regulated cannabis market in the United States is still nascent and fragmented, with significant challenges facing both consumers seeking to understand cannabis and find the right products for them and businesses seeking to operate compliantly and to effectively reach and market to cannabis consumers.
Despite expectations of growth, the regulated cannabis market in the United States is still nascent and fragmented, with significant challenges facing both consumers seeking to understand cannabis and find the right products for them and businesses seeking to operate compliantly and to effectively reach and market to cannabis consumers.
Senate, Judge Garland testified that prosecuting state-legal cannabis companies would not be a “useful use of limited resources.” In April, 2022, Attorney General Garland reiterated that prosecuting the possession of cannabis is “not an efficient use” of federal resources, especially “given the ongoing opioid and methamphetamine epidemic[s]” facing the nation.
Senate, Judge Garland testified that prosecuting state-legal cannabis companies would not be a “useful use of limited resources.” In April, 2022, Attorney General Garland reiterated that prosecuting the possession of cannabis is “not an efficient use” of federal resources, especially “given the ongoing opioid and methamphetamine epidemi c[s]” fa cing the nation.
Our position as a leading technology provider to the cannabis industry helps us attract high caliber employees who are technologically skilled and also passionate about our mission and products. We devote substantial resources to this task.
Our position as a leading technology provider to the cannabis industry helps us attract high caliber candidates who are technically skilled and passionate about our mission and products. We devote substantial resources to this task.
Members of our sales team are knowledgeable about the products and add-ons that we offer, such as our Deals platform or WM Orders, and assist new and existing clients with our platform. We generate many leads for new listing pages through the applicable state cannabis regulators’ lists of licensees.
Members of our sales team are knowledgeable about the products and add-ons that we offer and assist new and existing clients with our platform. We generate many leads for new listing pages through the applicable state cannabis regulators’ lists of licensees.
The capital-efficiency of our business model is evidenced by our historical robust margin profile and, prior to 2022, our track record of positive Adjusted EBITDA and cash flows (cash flows defined as operating cash flows less capital expenditures). • Operationally-Focused Management Team with Deep Experience.
The capital-efficiency of our business model is evidenced by our historical robust margin profile and, prior to 2022, our track record of positive Adjusted EBITDA and cash flows from operating activities, • Operationally-Focused Management Team with Deep Experience.
Our trademarks and domain names are material to our business and brand identity. We also rely on non-disclosure agreements, invention assignment agreements, intellectual property assignment agreements, or license agreements with employees, independent contractors, consumers, software providers and other third parties, which protect and limit access to and use of our proprietary intellectual property.
We also rely on non-disclosure agreements, invention assignment agreements, intellectual property assignment agreements, or license agreements with employees, independent contractors, consumers, software providers and other third parties, which protect and limit access to and use of our proprietary intellectual property.
With $215.5 million in revenue and 5,457 average monthly paying clients for the year ended December 31, 2022, we believe we are the largest two sided platform for cannabis businesses and consumers in the United States.
With $188.0 million in revenue and 5,419 average monthly paying clients for the year ended December 31, 2023, we believe we are the largest two-sided platform for cannabis businesses and consumers in the United States.
We have a significant opportunity to grow our client base both within existing markets that are continuing to grow and new markets as they become open to regulated cannabis. We are increasingly becoming a more nationally-recognized brand, and we are monetizing our platform in over 30 U.S. states and territories, as of December 31, 2022.
We have a significant opportunity to grow our client base both within existing markets that are continuing to grow and new markets as they become open to regulated cannabis. We believe we are a nationally-recognized brand in the cannabis industry, and we are monetizing our platform in over 35 U.S. states and territories, as of December 31, 2023.
The marketplace also provides education and learning information to help newer consumers learn about the types of products to purchase. We believe the size, loyalty and engagement of our user base and the frequency of consumption of cannabis of our user base is highly valuable to our clients and results in clients paying for our services.
The marketplace also provides education and learning information to help newer consumers learn about the types of products to purchase. We believe the size, loyalty and engagement of our user base and the frequency of consumption of cannabis by our user base makes the Weedmaps marketplace highly valuable to our clients.
On October 17, 2018, the Cannabis Act (Canada) came into force. The Cannabis Act governs both the medical and the regulated adult-use markets in Canada. Prior to October 17, 2018, legal access to and use of medical cannabis in Canada was regulated under the Controlled Drugs and Substances Act and the associated Access to Cannabis for Medical Purposes Regulations (“ACMPR”).
Prior to October 17, 2018, legal access to and use of medical cannabis in Canada was regulated under the Controlled Drugs and Substances Act and the associated Access to Cannabis for Medical Purposes Regulations (“ACMPR”).
Other leads are created from inbound requests by applicants for cannabis licenses to begin establishing their business’ presence on our platform pending an expected cannabis license. Marketing We believe the quality and strength of our platform is our most valuable marketing asset. Our marketing strategy, across both consumers and businesses, consists of user acquisition, brand marketing, communications and field marketing.
Other leads are created from inbound requests by applicants for cannabis licenses to begin establishing their business’ presence on our platform pending an expected cannabis license. Marketing We believe the quality and strength of our platform is our most valuable marketing asset.
Our dedicated, best-in-class Talent Acquisition team is focused on finding and attracting diverse and capable talent, and our People & Culture team is set on building a world class employer of choice for that talent once they get here.
Our dedicated, best-in-class Talent Acquisition team is focused on 12 Table of Contents finding and attracting diverse and capable talent, and our People & Workplace team is focused on making us a world class employer of choice for that talent once they get here.
Given the strength of our brand, we have seen strength in performance of our tactics in what is a crowded market, easing the acquisition or upsell process for our sales team.
Given the strength of our brand, we have continued to see strength in the performance of our marketing tactics in what can be a crowded market, easing the acquisition or upsell process for our sales team.
Federal courts have held that the provision prohibits the DOJ from spending funds to prosecute individuals who engage in conduct permitted by state medical-use cannabis laws and who strictly comply with such laws. During his campaign, President Biden promised federal reform on cannabis, including decriminalization generally.
Federal courts have held that the provision prohibits the DOJ from spending funds to prosecute individuals who engage in conduct permitted by state medical-use cannabis laws and who strictly comply with such laws.
On the client side, as of December 31, 2022, there were approximately 10,800 retail licenses across the United States with medical and/or adult-use regulations in place, which is an effective retail density of approximately one retail license per 22,470 residents across these markets in the aggregate, based on data available from individual governmental cannabis license databases and the U.S.
On the client side, as of December 31, 2023, there were approximately 11,900 retail licenses across the United States with medical and/or adult-use regulations in place, which is an effective retail density of approximately one retail license pe r 21,570 resid ents across these markets in the aggregate, based on data available from individual governmental cannabis license databases and the U.S.
Over the past 14 years, Weedmaps has become a premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products, permitting product discovery and order-ahead for pickup or delivery by participating retailers.
Since our founding in 2008, Weedmaps has become a premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products, permitting product discovery and order-ahead for pickup or delivery by participating retailers.
While we expect product development costs to increase as we continue to increase the functionality of our platform, we expect our product development costs to remain the same percentage of total revenues. 11 Table of Contents Intellectual Property Our intellectual property and proprietary rights are valuable assets that are important to our business.
While we expect product development costs to increase as we continue to increase the functionality of our platfo rm, we expect the percentage of total revenues represented by such costs to remain unchanged. Intellectual Property Our intellectual property and proprietary rights are valuable assets that are important to our business.
Of these employees, 573 are located in the United States and 10 are located in Canada. We believe that being able to attract and retain top talent is both a strategic advantage for us and necessary to realize our mission of powering a transparent and inclusive global cannabis economy.
We believe that being able to attract and retain top talent is both a strategic advantage for us and necessary to realize our mission of powering a transparent and inclusive global cannabis economy.
Cannabis users (as defined by adults who have consumed cannabis in the past year) within the United States represent less than 19% of the U.S. adult, ages 21 and above, population today 2 (and less than 14% for those that consumed in the past month) 2 .
Within the U.S., cannabis users (defined as adults, aged 21 and older, who have consumed cannabis in the past year) represent less than 22% of the total U.S. adult, aged 21 and older, population today (and less than 16% for those that consumed in the past month) 2 .
While the timing of federal reform remains unknown, it is expected that federal policy on cannabis will continue becoming more, rather than less, permissive and legislative efforts to legalize cannabis or cannabis banking at the national level are likely to continue in 2023.
While the timing of federal reform remains unknown, it is expected that federal policy on cannabis will continue becoming more, rather than less, permissive and legislative efforts to legalize cannabis or cannabis banking at the national level are likely to progress in 2024. Some of our retail clients sell products with hemp-derived cannabinoids, including CBD.
We sell a monthly subscription offering to storefront, delivery and brand clients as well as upsell and add-on offerings to licensed clients. Our current subscription package includes: • WM Listings: A listing page with product menu for a retailer or brand on the Weedmaps marketplace, enabling our clients to be discovered by the marketplace’s users.
Our current Weedmaps for Business monthly subscription package includes: • WM Listings: A listing page with product menu for a retailer or brand on the Weedmaps marketplace, enabling our clients to be discovered by the marketplace’s users.
As recently as March 1, 2023, Attorney General Garland confirmed that his Department is continuing work on a new cannabis enforcement guidance, which he states would be “very close to what was done in the Cole memorandum.” Therefore, the status quo of federal non-enforcement is likely to continue for the foreseeable future, though of course that is not certain.
On March 1, 2023, Attorney General Garland confirmed that his Department 13 Table of Contents is continuing work on a new cannabis enforcement guidance, which he states would be “very close to what was done in the Cole memorandum.” Although any such guidance issued would not have the force of law, and could not be enforced by the courts, such a guidance would likely mean that the status quo of federal non-enforcement is likely to continue for the foreseeable future.
Based on our internal research, we believe the minimum level of acceptable retail density to have a healthy and functioning licensed market is a minimum of one licensed retailer per 10,000 residents.
Based on our internal research, we believe the minimum level of acceptable retail density to have a healthy and functioning licensed market is one licensed retailer per 10,000 residents. Many of the U.S. states where we operate today are still under-penetrated with low levels of licensed retail density.
Assuming no other restrictions on the number of licenses issued, if the entire United States reached a minimum level of density of one license per 10,000 residents, we believe the total universe of retail licenses would reach approximately 33,000, which is approximately 3.1 times the current count of retail licenses in the United States and Canada.
A ssuming no other restrictions on the number of licenses issued, if the entire United States reached a minimum level of density of one retail license per 10,000 residents, the total universe of retail licenses would reach approximately 34,000, which is approximatel y 2.8 ti mes the current count of retail licenses in the United States.
Census data 8 Table of Contents Our Competitive Strengths Since our founding in 2008, we have grown to become a leading provider of technology solutions to the cannabis industry by leveraging our competitive strengths, including: • Long History as a Technology Leader Serving the Cannabis Industry.
Our Competitive Strengths Since our founding in 2008, we have grown to become a leading provider of technology solutions to the cannabis industry by leveraging our competitive strengths, including: • Long History as a Technology Leader Serving the Cannabis Industry. Founded in 2008, we have a long history and established relationships with cannabis businesses and consumers across the United States.
We believe we are the only platform servicing cannabis that combines both a scaled marketplace and software - most other technology providers offer software solutions without the marketplace or marketplace without software. We believe we offer the most comprehensive software platform that allows cannabis retailers to reach their target audience, quickly and cost effectively, addressing a wide range of needs.
We also believe we offer the most comprehensive software platform that allows cannabis retailers to reach their target audience, quickly and cost effectively, addressing a wide range of needs.
Our Product and Solution Ecosystem Our solutions are designed to address these challenges facing cannabis consumers and businesses.
Census data 6 Table of Contents Our Product and Solution Ecosystem Our solutions are designed to address the challenges facing cannabis consumers and businesses.
Attorneys (the “Sessions Memo”) rescinding certain past Department of Justice (“DOJ”) memoranda on cannabis law enforcement, including the Memorandum by former Deputy Attorney General James Michael Cole (the “Cole Memo”) issued on August 29, 2013, under the Obama administration. 12 Table of Contents Describing the criminal enforcement of federal cannabis prohibitions against those complying with state cannabis regulatory systems as an inefficient use of federal investigative and prosecutorial resources, the Cole Memo gave federal prosecutors discretion not to prosecute state law compliant cannabis companies in states that were regulating cannabis, unless one or more of eight federal priorities were implicated, including use of cannabis by minors, violence, or the use of federal lands for cultivation.
Describing the criminal enforcement of federal cannabis prohibitions against those complying with state cannabis regulatory systems as an inefficient use of federal investigative and prosecutorial resources, the Cole Memo gave federal prosecutors discretion not to prosecute state law compliant cannabis companies in states that were regulating cannabis, unless one or more of eight federal priorities were implicated, including use of cannabis by minors, violence, or the use of federal lands for cultivation.
Additionally, the Food & Drug Administration (“FDA”) claims that the Food, Drugs & Cosmetics Act significantly limits the legality of certain hemp-derived CBD products.
The states have implemented a patchwork of different laws on hemp and its extracts. Additionally, the Food & Drug Administration (“FDA”) claims that the Food, Drugs & Cosmetics Act significantly limits the legality of certain hemp-derived CBD products.
We define actively operated markets as those U.S. states or territories with greater than $1,000 monthly revenue. Our mission is to power a transparent and inclusive global cannabis economy. Our technology addresses the challenges facing both consumers seeking to understand cannabis products and businesses who serve cannabis users in a legally compliant fashion.
Our mission is to power a transparent and inclusive global cannabis economy. Our technology addresses the challenges facing both consumers seeking to understand cannabis products and businesses who serve cannabis users in a legally compliant fashion.
Many of the U.S. states where we operate today are still under-penetrated with low levels of licensed retail density. • We believe that there are tremendous growth opportunities for us within our existing markets as retail licenses continue to be issued, and states move towards, and eventually beyond, the one retail license per 10,000 people ratio.
We believe that there are tremendous growth opportunities for us within our existing markets as retail licenses continue to be issued, and states move towards, and eventually beyond, the one retail license per 10,000 people ratio. As of December 31, 2023, there were approximately 11,900 existing retail and delivery licenses across the United States.
This may require continued liberalization of license restrictions across cities and counties within certain of our states where we do business today. With continued state legalization (since 2020, states where recreational usage has been legalized include New Jersey, New York, Virginia, Missouri and Maryland), we believe that legalization by additional states and eventually the U.S. government is inevitable.
This may require continued liberalization of license restrictions across cities and counties within certain states where we do business today. In addition, we believe that legalization by additional states and eventually the U.S. government i s inevitable.
Currently, thirty-eight states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam and the Northern Mariana have legalized some form of cannabis use for certain medical purposes.
Currently , thirty-nine states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam and the Northern Mariana have legalized some form of cannabis use for certain medical purpose s. Twenty-four of those states, the District of Columbia, Guam and Northern Mariana have legalized cannabis for adults for non-medical purposes as well (sometimes referred to as adult or recreational use).
Founded in 2008, we have a long history and established relationships with cannabis businesses and consumers across the United States. This has given us several competitive strengths, such as scale, attractive operating margins and local insights into emerging consumer and business trends across many markets.
This long history has given us several competitive advantages, such as scale, attractive operating margins and local insights into emerging consumer and business trends across many markets.
Some of our retail clients sell products with CBD derived from hemp with and without THC from non-hemp cannabis. In December 2018, the U.S. government removed hemp and extracts of hemp, including CBD, from the CSA schedules through the Agriculture Improvement Act of 2018, Pub. L. 115-334 (the “2018 Farm Bill”).
In December 2018, the U.S. government removed hemp and extracts of hemp from the CSA schedules through the Agriculture Improvement Act of 2018, Pub. L. 115-334 (the “2018 Farm Bill”). Accordingly, the production, sale and possession of hemp or extracts of hemp, including certain CBD products, no longer violate the CSA.
The state-legal cannabis industry in the United States has grown consistently in recent years was estimated to be between approximately $25-$30 billion in 2022, according to Wall Street analyst estimates, and by some estimates is expected to be in excess of $70 billion by 2030, assuming a continued pace of new state legalization, with 68% 1 of U.S. adults since 2020 in support of having legal access to cannabis.
We also offer add-on and a la carte products and services for additional fees, as discussed below. 5 Table of Contents The state-legal cannabis industry in the United States has grown consistently in recent years and was estimated to be between approxima tely $27-$28 billion in 2023, according to Wall Street analyst estimates, and is expected by some estimates to grow to $40 billion by 2027, assuming a continued pace of new state legalization, with 70% 1 of U.S. adults since 2020 in support of having legal access to cannabis.
United States and Territories Notwithstanding the trend toward further state legalization, the U.S. government continues to categorize cannabis as an illegal Schedule I controlled substance, and accordingly the cultivation, processing, distribution, sale, advertisement of sale and possession by our customers violate federal law, as discussed further in the sections entitled “Risk Factors—Risks Related to our Business and Industry.” While the Obama and Trump administrations had different stated policies, including the latter’s less friendly position on the industry, the U.S. federal government has not prioritized the enforcement of the CSA’s prohibition on cannabis against cannabis companies complying with the state law and their vendors for over eight years.
United States and Territories Notwithstanding the trend toward further state legalization, the U.S. government continues to categorize cannabis as a prohibited controlled substance, and accordingly the cultivation, processing, distribution, sale, advertisement of sale and possession by our customers violate federal law, as discussed further in the sections entitled “Risk Factors—Risks Related to our Business and Industry.” On January 4, 2018, then U.S.
Attorney General, Merrick Garland, is expected to issue policy guidance to federal prosecutors that they should not interfere with cannabis businesses operating in compliance with states’ laws, any such guidance would not have the force of law, and could not be enforced by the courts. During his confirmation hearing before the U.S.
Attorney General, Merrick Garland, is expected to not interfere with cannabis businesses operating in compliance with states’ laws. During his confirmation hearing before the U.S.
We intend to continue selectively pursuing opportunities to invest in and acquire technology offerings that either complement our existing products and services or allow us to accelerate our growth. 10 Table of Contents Competition Our direct competitors for individual components or parts of our platform include cannabis-focused, technology companies like Leafly, Dutchie and Jane Technologies, SpringBig (CRM) and a variety of cannabis-focused marketing and advertising technology solutions.
Competition Our direct competitors for individual components or parts of our platform include cannabis-focused, technology companies like Leafly, Dutchie and Jane Technologies and a variety of cannabis-focused marketing and advertising technology solutions.
Our sales team frequently engages with our paid clients about the products they use, as well as their business objectives and performance. We constantly strive to generate product ideas through this deep engagement with our clients, as well as empirical research.
Census data 4 Per 2022 National Survey of Drug Use and Health and U.S. Census data 9 Table of Contents their business objectives and performance. We constantly strive to generate product ideas through this deep engagement with our clients, as well as empirical research.
Depending on the market, the other add-on products are available for additional fees. 7 Table of Contents We sell our Weedmaps for Business suite in the United States, currently offer some of our Weedmaps for Business solutions in Canada and have a limited number of non-monetized listings in several other countries including Austria, Germany, the Netherlands, Spain and Switzerland.
We sell our Weedmaps for Business suite in the United States and have a limited number of non-monetized listings in several other countries including Austria, Canada, Germany, the Netherlands, Spain and Switzerland. We operate in the United States, Canada and other foreign jurisdictions where medical and/or adult cannabis use is legal under state or national law.
We also have pending trademark applications in Canada covering “Weedmaps”. In addition to our numerous trademark applications and registrations, we have United States copyright registrations for our weedmaps.com website, “Grow One,” and two versions of our Lab API documentation. Further, we own several domain names, including: weedmaps.com, marijuana.com, cannabis.com, wmpolicy.com, themuseumofweed.com, wm-retail.com, wmforbusiness.com and WM.store.
We have also been issued an international trademark registration with designation in Australia and the European Union for “Weedmaps.” In addition to our numerous trademark applications and registrations, we have United States copyright registrations for our weedmaps.com website, “Grow One,” and two versions of our Lab API documentation.
Under the Cannabis Act, holders of licenses to cultivate and/or process cannabis are also permitted to supply cannabis under their existing licenses obtained pursuant to the ACMPR to the regulated adult-use market. The distribution and sale of cannabis for adult use is regulated separately by each provincial and territorial government, and as such, regulatory regimes vary from jurisdiction to jurisdiction.
Under the Cannabis Act, holders of licenses to cultivate and/or process cannabis are also permitted to supply cannabis under their existing licenses obtained pursuant to the ACMPR to the regulated adult-use market. Rest of the World Legalized cannabis is expanding in other parts of the world with countries adopting varying degrees of legalization or decriminalization.
Further, brands are limited in their ability to market and sell directly and need to find ways to communicate to consumers. At the same time, these businesses must comply with a rapidly evolving legal and regulatory landscape that differs by state and across cities and counties within each state, creating challenges in the ability to scale in a capital-efficient way.
At the same time, these businesses must comply with a rapidly evolving legal and regulatory landscape that differs by state and across cities and counties within each state, creating challenges in the ability to scale in a capital-efficient way. 1 news.gallup.com - Grassroots Support for Legalizing Marijuana Hits Record 70% 2 Numbers of users aged 21 and older are from the 2022 National Survey on Drug Use and Health, number of adults in the United States aged 21 and older are from U.S.
We operate in the United States, Canada and other foreign jurisdictions where medical and/or adult cannabis use is legal under state or national law. As of December 31, 2022, we actively operated in over 30 U.S. states and territories that have adult-use and/or medical-use regulations in place.
As of December 31, 2023, we actively operated in over 35 U .S. states and territories that have adult-use and/or medical-use regulations in place. We define actively operated markets as those U.S. states or territories with greater than $1,000 monthly revenue. Substantially all of our revenue was generated in the United States.
For more information, see the section entitled “Risk Factors—Risks Related to our Business and Industry.” People Operations and Human Capital Resources As of December 31, 2022, we had 580 full-time employees and 3 temporary employees, including 224 in engineering, product and design, 245 in sales and marketing and 114 in general and administrative.
People Operations and Human Capital Resources As of December 31, 2023, we had 440 full-time employees and 19 temporary employees, including 196 in engineering, product and design, 181 in sales and marketing and 82 in general and administrative. Of these employees, 450 are located in the United States and 9 are located in Canada.
The tools also allow for retargeting and re-engagement of cannabis consumers; • WM Dispatch: Compliant, automated and optimized logistics and fulfillment last-mile delivery software (including driver apps) that helps clients manage their delivery fleets.
These products provide clients with targeted ad solutions in highly visible slots across our digital surfaces. • WM Dispatch: Compliant, automated and optimized logistics and fulfillment last-mile delivery software (including driver apps) that helps clients manage their delivery fleets. This product streamlines the delivery experience from in-store to front-door.
Members of the U.S. Congress from both parties have introduced bills to end the federal cannabis prohibition, by de-scheduling cannabis completely and regulating it. In the 117th Congress, Senators Cory Booker (D-NJ), Ron Wyden (D-OR) and Chuck Schumer (D-NY) filed the Cannabis Administration And Opportunity Act, a bill that would regulate cannabis and expunge prior cannabis convictions; and Rep.
Members of the U.S. Congress from both parties have introduced bills to end the federal cannabis prohibition, by de-scheduling cannabis completely and regulating it. In addition to broader reforms, this session has seen additional incremental reform bills that aim to increase research, cement medical cannabis patients’ rights, or facilitate state-legal cannabis.
Our comprehensive business-to-consumer (“B2C”) and business-to-business (“B2B”) suite of products afford cannabis retailers and brands of all sizes integrated tools to compliantly run their businesses and to reach, convert, and retain consumers. Our business primarily consists of our commerce-driven marketplace (“Weedmaps”), and our fully integrated suite of end-to-end Software-as-a-Service (“SaaS”) solutions software offering (“Weedmaps for Business”).
Our comprehensive business-to-consumer and business-to-business suite of products afford cannabis retailers and brands of all sizes integrated tools to compliantly run their businesses and to reach, convert, and retain consumers. WM Technology, Inc. was initially incorporated in the Cayman Islands on June 7, 2019 under the name “Silver Spike Acquisition Corp” (“Silver Spike”).

… 63 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

196 edited+81 added−91 removed325 unchanged
Biggest changeAny failure or perceived failure by us or our contractors to comply with federal, state, provincial or foreign laws or regulations, industry standards, contractual obligations or other legal obligations, or any actual or suspected security incident, whether or not resulting in loss of, unauthorized access to, or acquisition, alteration, destruction, release or transfer of PII or other data, may result in governmental enforcement actions and prosecutions, private litigation, fines and penalties or adverse publicity and could cause employees, clients and consumers to lose trust in us, which could have an adverse effect on our reputation and business.
Biggest changeAny failure or perceived failure by us or the third parties upon whom we rely to comply with federal, state, provincial or foreign laws or regulations, industry standards, contractual obligations or other legal obligations may result in governmental enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar) and prosecutions, private litigation (including class actions) and mass arbitration demands, adverse publicity that could cause employees, clients and consumers to lose trust in us, additional reporting requirements and/or oversight, bans on processing personal data, and orders to destroy or not use personal data.
Wayfair that a U.S. state may require an online retailer with no in-state property or personnel to collect and remit sales tax on sales to the state’s residents and may permit wider enforcement of sales tax collection requirements, which may increase the jurisdictions in which we may be required to collect and/or remit taxes.
Wayfair that a U.S. state may require an online retailer with no in-state property or personnel to collect and remit sales tax on sales to the state’s residents may permit wider enforcement of sales tax collection requirements, which may increase the jurisdictions in which we may be required to collect and/or remit taxes.
A successful assertion that we should be collecting additional sales, use or other taxes or remitting such taxes directly to states or other jurisdictions could result in substantial tax liabilities for past sales and additional administrative expenses and increase the cost of our products and solutions, which could harm our business and operating results.
A successful assertion that we should be collecting sales, use or other taxes or remitting such taxes directly to states or other jurisdictions could result in substantial tax liabilities for past sales and additional administrative expenses and increase the cost of our products and solutions, which could harm our business and operating results.
Our future effective tax rate may be affected by such factors as changing interpretation of existing laws or regulations, the impact of accounting for equity-based compensation, the impact of accounting for business combinations, changes in our international organization and changes in overall levels of income before tax.
Our future effective tax rate may be affected by such factors as changes in tax laws, changing interpretation of existing laws or regulations, the impact of accounting for equity-based compensation, the impact of accounting for business combinations, changes in our international organization and changes in overall levels of income before tax.
Any such issuances would dilute the interest of our stockholders and likely present other risks. We may issue a substantial number of additional shares of Class A Common Stock or preferred stock, including under our equity incentive plan.
We may issue additional shares of Class A Common Stock or preferred stock, including under our equity incentive plan. Any such issuances would dilute the interest of our stockholders and likely present other risks. We may issue a substantial number of additional shares of Class A Common Stock or preferred stock, including under our equity incentive plan.
Acquisitions involve many risks, including the following: • an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us, and potentially across different cultures and languages in the event of a foreign acquisition; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; • an acquisition may result in a delay or reduction of sales for both us and the company we acquired due to uncertainty about continuity and effectiveness of products or support from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • potential strain on our financial and managerial controls and reporting systems and procedures; • potential known and unknown liabilities associated with an acquired company; • if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; • the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; 33 Table of Contents • to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing equity holders may be diluted and earnings per share may decrease; and • managing the varying intellectual property protection strategies and other activities of an acquired company.
Acquisitions involve many risks, including the following: • an acquisition may negatively affect our operating results, financial condition or cash flows because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us, and potentially across different cultures and languages in the event of a foreign acquisition; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; • an acquisition may result in a delay or reduction of sales for both us and the company we acquired due to uncertainty about continuity and effectiveness of products or support from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired products; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • potential strain on our financial and managerial controls and reporting systems and procedures; • potential known and unknown liabilities associated with an acquired company; • if we incur debt to fund such acquisitions, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants; • the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions; • to the extent that we issue a significant amount of equity or convertible debt securities in connection with future acquisitions, existing equity holders may be diluted and earnings per share may decrease; and • managing the varying intellectual property protection strategies and other activities of an acquired company.
A number of factors have affected and could potentially negatively affect our reported user engagement and/or traffic and our overall user engagement with our clients, including if: • we do not provide a compelling consumer experience to entice consumers to use our products and services, or our consumers don’t have the ability to maximize the consumer experience; • we are unable to convince consumers and clients of the value and usefulness of our platform and services; 25 Table of Contents • we are unable to find cost-effective marketing channels or other strategies to drive traffic to our website, including replacing any pop-under advertisements that we have decreased our usage of or discontinued; • our products fail to operate effectively on the iOS or Android mobile operating systems; • we are unable to continue to develop products that work with a variety of mobile operating systems, networks and smartphones; • we do not provide a compelling consumer experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products; • consumers engage more with competing platforms or products at the expense of ours or those of our clients; • if the manner in which we promote engagement or traffic is seen by consumers or clients as unappealing or harm our brand image or reputation; • there are concerns about the privacy implications, safety, or security of our products; • our products are subject to increased regulatory scrutiny or approvals, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the consumer experience; • technical or other problems frustrate the consumer experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner; • we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; or • our current or future products reduce consumer activity on our website or our applications by making it easier for our consumers to interact directly with our clients.
A number of factors have affected and could potentially negatively affect our reported user engagement and/or traffic and our overall user engagement with our clients, including if: • we do not provide a compelling consumer experience to entice consumers to use our products and services, or our consumers don’t have the ability to maximize the consumer experience; • we are unable to convince consumers and clients of the value and usefulness of our platform and services; • we are unable to find cost-effective marketing channels or other strategies to drive traffic to our website, including replacing any pop-under advertisements that we have decreased our usage of or discontinued; • our products fail to operate effectively on the iOS or Android mobile operating systems; • we are unable to continue to develop products that work with a variety of mobile operating systems, networks and smartphones; • we do not provide a compelling consumer experience because of the decisions we make regarding the type and frequency of advertisements that we display or the structure and design of our products; • consumers engage more with competing platforms or products at the expense of ours or those of our clients; • if the manner in which we promote engagement or traffic is seen by consumers or clients as unappealing or harm our brand image or reputation; • there are concerns about the privacy implications, safety, or security of our products; • our products are subject to increased regulatory scrutiny or approvals, or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the consumer experience; • technical or other problems frustrate the consumer experience, including by providers that host our platforms, particularly if those problems prevent us from delivering our product experience in a fast and reliable manner; • we, our partners, or other companies in our industry segment are the subject of adverse media reports or other negative publicity, some of which may be inaccurate or include confidential information that we are unable to correct or retract; or • our current or future products reduce consumer activity on our website or our applications by making it easier for our consumers to interact directly with our clients.
Additionally, on October 6, 2022, President Biden issued a presidential proclamation pardoning federal convictions for simple marijuana possession offenses, encouraging state governors to do the same on the state level where permissible, and requesting that the Secretary of Health and Human Services and the Attorney General initiate an administrative process to review cannabis’s Schedule I classification under the CSA.
Additionally, on October 6, 2022, President Biden issued a presidential proclamation pardoning federal convictions for simple marijuana possession offenses, encouraging state governors to do the same on the state level where permissible, and requesting that the Secretary of Health and Human Services (“HHS”) and the Attorney General initiate an administrative process to review cannabis’s Schedule I classification under the CSA.
It is possible that one or more states could seek to impose sales, use or other tax obligations on us with regard to the ordering functionality that we offer our clients. These taxes may be applicable to past sales. In addition, the U.S. Supreme Court’s ruling in South Dakota v.
It is possible that one or more states or other jurisdictions could seek to impose sales, use or other tax obligations on us with regard to the ordering functionality that we offer our clients. These taxes may be applicable to past sales. In addition, the U.S. Supreme Court’s ruling in South Dakota v.
To execute on our growth strategy, we will need to continue to increase the productivity of our current employees as well as hire, train and manage new employee, as well as improve existing, and implement new, transaction processing, operational and financial systems, procedures and controls. We intend to continue making substantial investments in our technology, sales and data infrastructure.
To execute on our growth strategy, we will need to continue to increase the productivity of our current employees as well as hire, train and manage new employees, as well as improve existing, and implement new, transaction processing, operational and financial systems, procedures and controls. We intend to continue making substantial investments in our technology, sales and data infrastructure.
The market price of our Class A Common Stock and the Public Warrants have been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in projected operational and financial results; • the development, effects and enforcement of and changes to laws and regulations, including with respect to the cannabis industry; • the commencement or conclusion of legal proceedings that involve us; • actual or anticipated changes in our growth rate relative to our competitors; • announcements of new products or services by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, or joint ventures; • capital-raising activities or commitments; • issuance of new or updated research or reports by securities analysts; • the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • sales of our securities, including short selling of our securities; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • general economic and market conditions; and • other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises, or responses to such events.
The market price of our Class A Common Stock and the Public Warrants have been and may continue to be subject to wide fluctuations in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in projected operational and financial results; • the development, effects and enforcement of and changes to laws and regulations, including with respect to the cannabis industry; • the commencement or conclusion of legal proceedings that involve us; • actual or anticipated changes in our growth rate relative to our competitors; • announcements of new products or services by us or our competitors; • announcements by us or our competitors of significant acquisitions, strategic partnerships, or joint ventures; • capital-raising activities or commitments; • issuance of new or updated research or reports by securities analysts; • the use by investors or analysts of third-party data regarding our business that may not reflect our financial performance; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • sales of our securities, including short selling of our securities; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; • general economic and market conditions; and 45 Table of Contents • other events or factors, including those resulting from civil unrest, war, foreign invasions, terrorism, or public health crises, or responses to such events.
In addition, as our foreign operations continue to grow, we are subject to a variety of risks inherent in doing business internationally, including: • political, social and economic instability; • risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy and data protection, and unexpected changes in laws, regulatory requirements and enforcement; • fluctuations in currency exchange rates; • higher levels of credit risk and payment fraud; • complying with tax requirements of multiple jurisdictions; • enhanced difficulties of integrating any foreign acquisitions; • the ability to present our content effectively in foreign languages; • complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions and termination requirements; • reduced protection for intellectual property rights in some countries; • difficulties in staffing and managing global operations and the increased travel, infrastructure and compliance costs associated with multiple foreign locations; • regulations that might add difficulties in repatriating cash earned outside the United States and otherwise preventing us from freely moving cash; • import and export restrictions and changes in trade regulation; • complying with statutory equity requirements; 30 Table of Contents • complying with the U.S.
In addition, as our foreign operations continue to grow, we are subject to a variety of risks inherent in doing business internationally, including: • political, social and economic instability; • risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy and data protection, and unexpected changes in laws, regulatory requirements and enforcement; • fluctuations in currency exchange rates; • higher levels of credit risk and payment fraud; • complying with tax requirements of multiple jurisdictions; • enhanced difficulties of integrating any foreign acquisitions; • the ability to present our content effectively in foreign languages; • complying with a variety of foreign laws, including certain employment laws requiring national collective bargaining agreements that set minimum salaries, benefits, working conditions and termination requirements; • reduced protection for intellectual property rights in some countries; • difficulties in staffing and managing global operations and the increased travel, infrastructure and compliance costs associated with multiple foreign locations; • regulations that might add difficulties in repatriating cash earned outside the United States and otherwise preventing us from freely moving cash; • import and export restrictions and changes in trade regulation; • complying with statutory equity requirements; • complying with the U.S.
As new markets develop and our current markets expand, we anticipate that there will be a reduction in the percentage of our revenue generated in California, but we do not know with any certainty when and to what degree, if ever, this would occur.
As new markets develop and our current markets expand, we anticipate that there will be a further reduction in the percentage of our revenue generated in California, but we do not know with any certainty when and to what degree, if ever, this would occur.
We evaluate these claims and proceedings to assess the likelihood of unfavorable outcomes and to estimate, if probable and estimable, the amount of potential losses. Based on these assessments and estimates, we may establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment.
We evaluate all claims and proceedings to assess the likelihood of unfavorable outcomes and to estimate, if probable and estimable, the amount of potential losses. Based on these assessments and estimates, we may establish reserves, as appropriate. These assessments and estimates are based on the information available to management at the time and involve a significant amount of management judgment.
If the demand for our software solutions does not develop as we expect, or if we fail to address the needs of our clients or consumers, our business will be harmed. We may not be able to successfully address these risks and difficulties, which could harm our business and operating results.
If the demand for our platform and software solutions does not develop as we expect, or if we fail to address the needs of our clients or consumers, our business will be harmed. We may not be able to successfully address these risks and difficulties, which could harm our business and operating results.
If we fail to expand effectively into new markets, our revenue and business will be adversely affected. While a key part of our business strategy is to add clients and consumers in our existing geographic markets, we intend to expand our operations into new markets if and as cannabis continues to be legalized.
If we fail to expand effectively into new markets, our revenue and business will be adversely affected. While a key part of our business strategy is to add clients and consumers in our existing geographic markets, we also intend to expand our operations into new markets if and as cannabis continues to be legalized.
The laws and regulations related to payments are complex and are potentially impacted by tensions between federal and state treatment of the vaporization, tobacco, nicotine, cannabis, CBD and hemp and cannabis accessories industries. These laws and regulations also vary across different jurisdictions in the United States, Canada and globally.
The laws and regulations related to payments are complex and are potentially impacted by tensions between federal and state treatment of the vaporization, tobacco, nicotine, cannabis, hemp and cannabis accessories industries. These laws and regulations also vary across different jurisdictions in the United States, Canada and globally.
Additionally, the cannabis industry faced price deflation in 2022 further pressuring many of our paying clients. This resulted in financial hardship for certain cannabis companies, including some of our paying clients which caused elevated churn and bad debt expense in 2022.
Additionally, the cannabis industry faced price deflation in 2023 and 2022 further pressuring many of our paying clients. This resulted in financial hardship for certain cannabis companies, including some of our paying clients which caused elevated churn and bad debt expense in 2023 and 2022.
In certain cases, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement. Payments under the tax receivable agreement will be based on the tax reporting positions we determine, and the U.S.
In certain cases, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the tax receivable agreement. Payments under the TRA will be based on the tax reporting positions we determine, and the U.S.
In addition, the tax receivable agreement provides that if (1) we breach any of our material obligations under the tax receivable agreement (including in the event that we are more than three months late making a payment that is due under the tax receivable agreement, except in the case of certain liquidity exceptions) (2) we are subject to certain bankruptcy, insolvency or similar proceedings, or (3) at any time, we elect an early termination of the tax receivable agreement, our obligations under the tax receivable agreement (with respect to all Class A Units, whether or not such units have been exchanged or redeemed before or after such transaction) would accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits calculated based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the tax deductions, tax basis and other tax attributes subject to the tax receivable agreement.
In addition, the TRA provides that if (1) we breach any of our material obligations under the TRA (including in the event that we are more than three months late making a payment that is due under the TRA, except in the case of certain liquidity exceptions) (2) we are subject to certain bankruptcy, insolvency or similar proceedings, or (3) at any time, we elect an early termination of the TRA, our obligations under the TRA (with respect to all Class A Units, whether or not such units have been exchanged or redeemed before or after such transaction) would accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits calculated based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the tax deductions, tax basis and other tax attributes subject to the TRA.
Our ability to pay taxes, make payments under the tax receivable agreement and pay dividends will depend on the financial results and cash flows of WMH LLC and its subsidiaries and the distributions we receive from WMH LLC.
Our ability to pay taxes, make payments under the tax receivable agreement (the “TRA”) and pay dividends will depend on the financial results and cash flows of WMH LLC and its subsidiaries and the distributions we receive from WMH LLC.
Given the concentration of our revenue from the sale of listing products, any increase in the stringency of any applicable laws, including U.S. state, or Canadian federal, provincial or territorial, laws and regulations relating to cannabis, or any escalation in the enforcement of such existing laws and regulations against the current or putative cannabis industry within any jurisdiction, could negatively impact the profitability or viability of cannabis businesses in such affected jurisdictions, which in turn could materially adversely affect our business and operating results.
Given the concentration of our revenue from the sale of listing products, any increase in the stringency of any applicable laws, including U.S. state, or Canadian federal laws and regulations relating to cannabis, or any escalation in the enforcement of such existing laws and regulations against the current or putative cannabis industry within any jurisdiction, could negatively impact the profitability or viability of cannabis businesses in such affected jurisdictions, which in turn could materially adversely affect our business and operating results.
The factors affecting our brand recognition and reputation that are within our control include the following: • the efficacy of our marketing efforts; • our ability to maintain a high-quality, innovative and error- and bug-free platform; • our ability to maintain high satisfaction among clients and consumers; • the quality and perceived value of our platform; • successfully implementing and developing new features, including alternative revenue streams; • our ability to obtain, maintain and enforce trademarks and other indicia of origin that are valuable to our brand; • our ability to successfully differentiate our platform from competitors’ products; • our compliance with laws and regulations, including those applicable to any political action committees affiliated with us and to our registered lobbying activities; • our ability to provide client support; and • any actual or perceived data breach or data loss, or misuse or perceived misuse of our platform.
The factors affecting our brand recognition and reputation that are within our control include the following: • the efficacy of our marketing efforts; • our ability to maintain a high-quality, innovative and error- and bug-free platform; • our ability to maintain high satisfaction among clients and consumers; • the quality and perceived value of our platform; • successfully implementing and developing new features, including alternative revenue streams; • our ability to obtain, maintain and enforce trademarks and other indicia of origin that are valuable to our brand; • our ability to successfully differentiate our platform from competitors’ products; 20 Table of Contents • our compliance with laws and regulations, including those applicable to any political action committees affiliated with us and to our registered lobbying activities; • our ability to provide client support; and • any actual or perceived data breach or data loss, or misuse or perceived misuse of our platform.
Any such expansion places us in competitive markets with which we may be unfamiliar, requires us to analyze the potential applicability of new and potentially complicated regulations regarding the usage, sale and marketing of cannabis, and involves various risks, including the need to invest significant time and resources and the possibility that returns on such investments will not be achieved for several years, if at all.
Any such expansion places us in competitive markets with which we may be unfamiliar, requires us to invest significant time and resources, including to analyze the potential applicability of new and complicated regulations regarding the usage, sale and marketing of cannabis in such markets, and involves various risks, including the possibility that returns on such investments will not be achieved for several years, if at all.
Potential payments will depend on the future tax savings that we will be realize (or, in certain circumstances, are deemed to realize), and the tax receivable agreement payments made by us will be calculated based in part on the market value of the Class A Common Stock at the time of each redemption or exchange under the exchange agreement and the prevailing applicable tax rates applicable to us over the life of the tax receivable agreement and will depend on us generating sufficient taxable income to realize the tax benefits that are subject to the tax receivable agreement.
Potential payments will depend on the future tax savings that we will be realize (or, in certain circumstances, are deemed to realize), and the TRA payments made by us will be calculated based in part on the market value of the Class A Common Stock at the time of each redemption or exchange under the exchange agreement and the prevailing applicable tax rates applicable to us over the life of the TRA and will depend on us generating sufficient taxable income to realize the tax benefits that are subject to the TRA.
To the extent that we do not distribute such excess cash as dividends on Class A Common Stock and instead, for example, hold such cash balances or lend them to WMH LLC, WMH LLC equity holders would benefit from any value attributable to such cash balances as a result of their ownership of Class A Common Stock following a redemption or exchange of their WMH Units.
To the extent that we do not distribute such excess cash as dividends on Class A Common Stock and instead, for example, hold such cash balances or lend them to WMH LLC, other holders of WMH Units would benefit from any value attributable to such cash balances as a result of their ownership of Class A Common Stock following a redemption or exchange of their WMH Units.
U.S. and Canadian federal, state, provincial, local and other non-U.S. jurisdictions’ cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan.
U.S. state, or Canadian federal and other non-U.S. jurisdictions’ cannabis laws and regulations are broad in scope and subject to evolving interpretations, which could require us to incur substantial costs associated with compliance or alter our business plan.
Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).
Under the supervision of and with the participation of our management, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).
If our clients are found to be violating U.S. federal law relating to cannabis, they may be subject not only to criminal charges and convictions, but also to forfeiture of property, significant fines and penalties, 17 Table of Contents disgorgement of profits, administrative sanctions, cessation of business activities, or civil liabilities arising from proceedings initiated by either the U.S. government or private citizens.
If our clients are found to be violating U.S. federal law relating to cannabis, they may be subject not only to criminal charges and convictions, but also to forfeiture of property, significant fines and penalties, disgorgement of profits, administrative sanctions, cessation of business activities, or civil liabilities arising from proceedings initiated by either the U.S. government or private citizens.
As a result of (i) potential differences in the amount of net taxable income allocable to us and the other holders of WMH Units, (ii) the lower tax rate applicable to corporations than individuals and (iii) the use of an assumed tax rate (based on the tax rate applicable to individuals) in calculating WMH LLC’s distribution obligations, we may receive tax distributions significantly in excess of our tax liabilities and obligations to make payments under the tax receivable agreement.
As a result of (i) potential differences in the amount of net taxable income allocable to us and the other holders of WMH Units, (ii) the lower tax rate applicable to corporations than individuals and (iii) the use of an assumed tax rate (based on the tax rate applicable to individuals) in calculating WMH LLC’s distribution obligations, we may receive tax distributions significantly in excess of our tax liabilities and obligations to make payments under the TRA.
Our domestic and foreign tax liabilities are subject to various jurisdictional rules regarding the timing and allocation of revenue and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we file and to changes in tax laws.
Our domestic and foreign tax liabilities are subject to various jurisdictional rules regarding the timing and allocation of revenue and expenses. Additionally, the amount of income taxes paid is subject to our interpretation of applicable tax laws in the jurisdictions in which we operate and to changes in tax laws.
However, because of “weed” in our name and the fact that our revenue is generated largely from companies licensed as operators in the cannabis industry, banks have and may continue to consider us to be part of the cannabis industry that is subject to banking restrictions.
However, because of “weed” in our name and the fact that our revenue is generated largely from companies licensed as operators in the cannabis industry, banks have and may continue to consider us to be subject to banking restrictions related to cannabis.
We rely on our clients’ contractual representations, and generally do not verify them, other than with respect to the licensing information of our clients operating cannabis retail businesses, where we currently require such clients to provide evidence of a valid state or provincial cannabis license prior to their initial access and from time to time during the term of their use of such products.
We rely on our clients’ contractual representations, and generally do not verify them, other than with respect to the licensing information of our clients operating cannabis retail businesses, where we currently require such clients to provide evidence of a valid state or provincial cannabis license prior to their initial access and from time to time 17 Table of Contents during the term of their use of such products.
A majority of our clients are small and medium-sized businesses that operate one or two retail locations, and their access to capital, liquidity and other financial resources is constrained due to the 46 Table of Contents regulatory restrictions applicable to cannabis businesses. As a result, these clients have been and may be further disproportionately affected by economic downturns.
A majority of our clients are small and medium-sized businesses that operate one or two retail locations, and their access to capital, liquidity and other financial resources is constrained due to the regulatory restrictions applicable to cannabis businesses. As a result, these clients have been and may be further disproportionately affected by economic downturns.
Any disclosures of security breaches, pursuant to these laws or regulations or otherwise, could lead to regulatory investigations and enforcement and negative publicity, and may cause our clients and consumers to lose confidence in the effectiveness of our data security measures.
Any disclosures of security incidents, pursuant to these laws or regulations or otherwise, could lead to regulatory investigations and enforcement and negative publicity, and may cause our clients and consumers to lose confidence in the effectiveness of our data security measures.
As discussed above, WMH LLC will generally be required from time to time to make pro rata distributions in cash to us and the other holders of WMH Units at certain assumed tax rates in amounts that are intended to be sufficient to cover the taxes on our and the other WMH equity holders’ respective allocable shares of the taxable income of WMH LLC.
As discussed above, WMH LLC will generally be required from time to time to make pro rata distributions in cash to us and the other holders of WMH Units at certain assumed tax rates in amounts that are intended to be sufficient to cover the taxes on our 35 Table of Contents and the other WMH equity holders’ respective allocable shares of the taxable income of WMH LLC.
We do not create or develop the information that appears on our clients’ listing pages and advertising placements, although our moderation teams may take down a client’s information if it breaches our listing restrictions or admonish consumers who post 42 Table of Contents reviews that violate our community terms of use (which, for example, prohibit profanity and racism).
We do not create or develop the information that appears on our clients’ listing pages and advertising placements, although our moderation teams may take down a client’s information if it breaches our listing restrictions or admonish consumers who post reviews that violate our community terms of use (which, for example, prohibit profanity and racism).
Additionally, proceeds from our clients’ business activities, if found to be in violation of anti-money laundering laws, could subject payments we have received from those clients to seizure or forfeiture, if 41 Table of Contents they are found to be illegal proceeds of a crime committed by a client, which could have a material adverse effect on our business and our investors.
Additionally, proceeds from our clients’ business activities, if found to be in violation of anti-money laundering laws, could subject payments we have received from those clients to seizure or forfeiture, if they are found to be illegal proceeds of a crime committed by a client, which could have a material adverse effect on our business and our investors.
Our direct competitors for individual components or parts of our platform include cannabis-focused, two-sided networks like Leafly (for retailer listing pages), SpringBig (CRM) and Dutchie and Jane Technologies (for menu embed and orders functionality).
Our direct competitors for individual components or parts of our platform include cannabis-focused, two-sided networks like Leafly (for retailer listing pages) and Dutchie and Jane Technologies (for menu embed and orders functionality).
Although we do not grow or sell cannabis products, our general connection with the cannabis industry may hamper our efforts to do business or establish collaborative relationships with others that may fear disruption or increased regulatory scrutiny of their own activities. We are dependent on the banking industry to support the financial functions of our products and solutions.
Although we do not grow or sell cannabis products, our general connection with the cannabis industry may hamper our efforts to do business or establish collaborative relationships with others that may fear disruption or increased regulatory scrutiny of their own activities. 39 Table of Contents We are dependent on the banking industry to support the financial functions of our products and solutions.
If these service providers do not perform adequately or if our relationships, or the relationships of our clients, with these service providers were to terminate, our ability or the ability of our clients to process payments could be adversely affected and our business could be harmed.
If these service providers do not perform adequately or if our relationships, or the relationships of our clients, with these current or future service providers were to terminate, our ability or the ability of our clients to process payments could be adversely affected and our business could be harmed.
Under the tax receivable agreement, we generally will be required to pay to the WMH LLC Class A equity holders, in the aggregate, 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) increases to the tax basis of WMH LLC’s assets resulting from acquisitions by us of Legacy WMH common units for cash in the Business Combination and taxable redemptions or exchanges of Class A Units for shares of Class A Common Stock or cash pursuant to the exchange agreement, (ii) tax benefits related to imputed interest or (iii) tax attributes resulting from payments made under the tax receivable agreement.
Under the TRA, we generally are required to pay to the WMH LLC Class A equity holders, in the aggregate, 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize as a result of (i) increases to the tax basis of WMH LLC’s assets resulting from acquisitions by us of Legacy WMH common units for cash in the Business Combination and taxable redemptions or exchanges of Class A Units for shares of Class A Common Stock or cash pursuant to the exchange agreement, (ii) tax benefits related to imputed interest or (iii) tax attributes resulting from payments made under the TRA.
Most federal and federally-insured state banks currently do not serve businesses that grow and sell cannabis products on the stated ground that growing and selling cannabis is illegal under federal law, even though the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), issued guidelines to banks in February 2014 that clarified how financial institutions can provide services to cannabis-related businesses, consistent with 40 Table of Contents financial institutions’ obligations under the Bank Secrecy Act.
Most federal and federally-insured state banks currently do not serve businesses that grow and sell cannabis products on the stated ground that growing and selling cannabis is illegal under federal law, even though the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), issued guidelines to banks in February 2014 that clarified how financial institutions can provide services to cannabis-related businesses, consistent with financial institutions’ obligations under the Bank Secrecy Act.
In the event that any of our investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues were found to be in violation of anti-money laundering legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of statutes of the United States or any other applicable jurisdiction.
In the event that any of our investments, or any proceeds thereof, any dividends or distributions therefrom, or any profits or revenues were found to be in violation of anti-money laundering 40 Table of Contents legislation or otherwise, such transactions may be viewed as proceeds of crime under one or more of statutes of the United States or any other applicable jurisdiction.
In addition to tax expenses, we will also incur expenses related to our operations, including payment obligations under the tax receivable agreement (and the cost of administering such payment obligations), which could be significant.
In addition to tax expenses, we will also incur expenses related to our operations, including payment obligations under the TRA agreement (and the cost of administering such payment obligations), which could be significant.
Because expenditures on our platform can represent a significant financial investment for our clients, our ability to retain clients depends in part on our ability to create and maintain high levels of client and consumer satisfaction, which we may not always be capable of providing, including for reasons outside of our control.
Because expenditures on our platform can represent a significant financial investment for our clients, our ability to retain clients depends 15 Table of Contents in part on our ability to create and maintain high levels of client and consumer satisfaction, which we may not always be capable of providing, including for reasons outside of our control.
While our solutions provide features to support our clients’ compliance with certain regulations and other legal requirements applicable to the cannabis industry, we generally do not, and cannot, ensure that our clients will conduct their business activities in a manner compliant with such regulations and requirements, in whole or in part.
We generally do not, and cannot, ensure that our clients will conduct their business activities in a manner compliant with certain regulations and other legal requirements applicable to the cannabis industry, in whole or in part, even if our solutions provide features to support our clients’ compliance with such regulations and requirements.
However, Section 280E and related IRS enforcement activity have had a significant impact on the operations of all cannabis companies. While the Section does not directly affect our Company, it lowers our clients’ profitability, and could result in decreased demand for our listing and marketing services.
However, 42 Table of Contents Section 280E and related IRS enforcement activity have had a significant impact on the operations of all cannabis companies. While the Section does not directly affect our Company, it lowers our clients’ profitability, and could result in decreased demand for our listing and marketing services.
Moreover, any attempts to rebuild our reputation and restore the value of our brand may be costly and time-consuming, and such efforts may not ultimately be successful. 21 Table of Contents We currently face intense competition in the cannabis information market, and we expect competition to further intensify as the cannabis industry continues to evolve.
Moreover, any attempts to rebuild our reputation and restore the value of our brand may be costly and time-consuming, and such efforts may not ultimately be successful. We currently face intense competition in the cannabis information market, and we expect competition to further intensify as the cannabis industry continues to evolve.
Debt financings may contain provisions, which, if breached, may entitle lenders to accelerate repayment of loans, and there is no assurance that we would be able to repay such loans in such an event or prevent the foreclosure of security interests granted pursuant to such debt financing.
Debt financings may contain provisions, which, if breached, may entitle 32 Table of Contents lenders to accelerate repayment of loans, and there is no assurance that we would be able to repay such loans in such an event or prevent the foreclosure of security interests granted pursuant to such debt financing.
As a public company, we are subject to the requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the rules and regulations promulgated and to be promulgated thereunder, Public Company Accounting Oversight Board (the “PCAOB”), as well as rules adopted, and to be adopted, by the SEC and Nasdaq.
As a public company, we are subject to the requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the rules and regulations promulgated and to be promulgated thereunder, Public Company Accounting Oversight Board (the “PCAOB”), as well as rules adopted, and to be adopted, by the SEC and the Nasdaq Stock Market (“Nasdaq”).
Although the U.S. Attorney General is expected to issue policy guidance to federal prosecutors that they should not interfere with cannabis businesses operating in compliance with states’ laws, any such guidance would not have the force of law, and could not be enforced by the courts.
Attorney General is expected to issue policy guidance to federal prosecutors that they should not interfere with cannabis businesses operating in compliance with states’ laws, any such guidance would not have the force of law, and could not be enforced by the courts.
We intend to cause WMH LLC to make distributions to holders of WMH Units in amounts sufficient to cover all applicable taxes (calculated at assumed tax rates), relevant operating expenses, payments under the tax receivable agreement and dividends, if any, declared by us.
We intend to cause WMH LLC to make distributions to holders of WMH Units in amounts sufficient to cover all applicable taxes (calculated at assumed tax rates), relevant operating expenses, payments under the TRA and dividends, if any, declared by us.
The parties to the tax receivable agreement will not reimburse us for any payments previously made if such tax basis, or other tax benefits are subsequently disallowed, except that any excess payments made to a party under the tax receivable agreement will be netted against future payments otherwise to be made under the tax receivable agreement, if any, after the determination of such excess.
The parties to the TRA will not reimburse us for any payments previously made if such tax basis, or other tax benefits are subsequently disallowed, except that any excess payments made to a party under the TRA will be netted against future payments otherwise to be made under the TRA, if any, after the determination of such excess.
Consequently, certain of our retailers currently (and may in the future) sell adult-use cannabis, if permitted by such state and local laws now or in the future, and therefore may be outside any protections extended to medical-use cannabis under the spending bill provision.
Consequently, certain of our retailers currently 37 Table of Contents (and may in the future) sell adult-use cannabis, if permitted by such state and local laws now or in the future, and therefore may be outside any protections extended to medical-use cannabis under the spending bill provision.
It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from 47 Table of Contents governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
Export controls and trade sanctions laws and regulations may restrict or prohibit altogether the provision, sale, or supply of our products to certain governments, persons, entities, countries, and territories, including those that are the target of comprehensive sanctions or an embargo.
Export controls and trade sanctions laws and regulations may restrict or 28 Table of Contents prohibit altogether the provision, sale, or supply of our products to certain governments, persons, entities, countries, and territories, including those that are the target of comprehensive sanctions or an embargo.
And, in March 2023, Attorney General Garland testified that the Department of Justice was continuing its progress on a new cannabis enforcement guidance, which he described as "very close to what was done in the Cole memorandum.
And, in March 2023, Attorney General Garland testified that the Department of Justice was continuing its progress on a new cannabis enforcement 38 Table of Contents guidance, which he described as "very close to what was done in the Cole memorandum.
These risks and difficulties include: • managing complex, disparate and rapidly evolving regulatory regimes imposed by U.S. and Canadian federal, state and provincial, local and other non-U.S. governments around the world applicable to cannabis and cannabis-related businesses; 19 Table of Contents • adapting to rapidly evolving trends in the cannabis industry and the way consumers and cannabis industry businesses interact with technology; • maintaining and increasing our base of clients and consumers; • continuing to preserve and build our brand while upgrading our existing offerings; • successfully attracting, hiring and retaining qualified personnel to manage operations; • adapting to changes in the cannabis industry if sales of cannabis expands significantly beyond a regulated model, and commodification of the cannabis industry; • successfully implementing and executing our business and marketing strategies; and • successfully expanding our business into new and existing cannabis markets.
These risks and difficulties include: • managing complex, disparate and rapidly evolving regulatory regimes imposed by U.S. federal, state and local and other non-U.S. governments around the world applicable to cannabis and cannabis-related businesses; • adapting to rapidly evolving trends in the cannabis industry and the way consumers and cannabis industry businesses interact with technology; • maintaining and increasing our base of clients and consumers; • continuing to preserve and build our brand while upgrading our existing offerings; • successfully attracting, hiring and retaining qualified personnel to manage operations; • adapting to changes in the cannabis industry if sales of cannabis expand significantly beyond a regulated model; • commodification of the cannabis industry; • successfully implementing and executing our business and marketing strategies; and • successfully expanding our business into new and existing cannabis markets.
If our clients are unable to comply with any new rules, regulations or registration as prescribed by the FDA, or are unable to do so in a cost-effective manner, our clients may be unable to continue to operate their respective business in its current form, or at all, which may also result in our clients being unable to continue engaging our technology services.
If our clients are 41 Table of Contents unable to comply with any new rules, regulations or registration as prescribed by the FDA, or are unable to do so in a cost-effective manner, our clients may be unable to continue to operate their respective business in its current form, or at all, which may also result in our clients being unable to continue engaging our technology services.
In addition, to the extent that such activity creates confusion among clients or consumers, decreases the likelihood that consumers use our platform to access information, or reduces the distinctiveness of our products in the marketplace, our brand and business could be harmed.
In addition, to the extent 25 Table of Contents that such activity creates confusion among clients or consumers, decreases the likelihood that consumers use our platform to access information, or reduces the distinctiveness of our products in the marketplace, our brand and business could be harmed.
Although our 32 Table of Contents website and mobile applications contain terms and conditions, including disclaimers of liability, that are intended to reduce or eliminate our liability, the law governing the validity and enforceability of online agreements and other electronic transactions is evolving.
Although our website and mobile applications contain terms and conditions, including disclaimers of liability, that are intended to reduce or eliminate our liability, the law governing the validity and enforceability of online agreements and other electronic transactions is evolving.
Furthermore, if any issues in complying with those requirements are identified (for example, our recent identification in a material weakness over our internal controls over financial reporting and any additional material weaknesses or significant deficiency in the internal control over financial reporting that we or our independent registered public accounting firm may identify in the future), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Furthermore, if any issues in complying with those requirements are identified (for example, our recent identification of material weaknesses in our internal controls over 46 Table of Contents financial reporting and any additional material weaknesses or significant deficiency in the internal control over financial reporting that we or our independent registered public accounting firm may identify in the future), we could incur additional costs rectifying those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of it.
Cannabis, other than hemp (defined by the U.S. government as Cannabis sativa L. with a THC concentration of not more than 0.3% on a dry weight basis), is a Schedule I controlled substance under the CSA.
Cannabis, other than hemp (defined by the U.S. government as Cannabis sativa L. with a THC concentration of not more than 0.3% on a dry weight basis), is a prohibited controlled substance under the CSA.
If our cash resources are insufficient to meet our obligations under the tax receivable agreement and to fund our obligations, we may be required to incur additional indebtedness to provide the liquidity needed to make such payments, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders.
If our cash resources are insufficient to meet our obligations under the TRA and to fund our obligations, we may be required to incur additional indebtedness to provide the liquidity needed to make such payments, which could materially adversely affect our liquidity and financial condition and subject us to various restrictions imposed by any such lenders.
For example, in August 2021, Jane announced the closing of a $100 million Series C round of funding; in October 2021, Dutchie announced the closing of a $350 million Series D round of funding at a valuation of $3.75 billion; and in February and June of 2022, Leafly and SpringBig became public companies and began trading on Nasdaq via SPAC business combination.
For example, in August 2021, Jane announced the closing of a $100 million Series C round of funding; in October 2021, Dutchie announced the closing of a $350 million Series D round of funding at a valuation of $3.75 billion; and in February of 2022, Leafly became a public company and began trading on Nasdaq via SPAC business combination.
Since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ, which includes the Drug Enforcement Administration, from using appropriated funds to prevent states from implementing their medical-use cannabis laws (formerly known as the Rohrabacher-Bluemnauer Amendment, and now known as the Joyce Amendment).
Since 2014, versions of the U.S. omnibus spending bill have included a provision prohibiting the DOJ, which includes the DEA, from using appropriated funds to prevent states from implementing their medical-use cannabis laws (formerly known as the Rohrabacher-Bluemnauer Amendment, and now known as the Joyce Amendment).
If the regulatory regime for cannabis becomes more settled and the legal market for cannabis becomes more accepted, competition may further intensify as new participants may be encouraged to enter the cannabis information market, including established companies, such as tobacco and alcohol companies, with substantially greater financial, technical and other resources than existing market participants.
If the regulatory regime for cannabis becomes more settled and the legal market for cannabis becomes more accepted, competition may further intensify as new participants may be encouraged to enter the cannabis information market, including established companies, such as tobacco and alcohol companies. Such companies may have substantially greater financial, technical and other resources than us or existing market participants.
We sell our Weedmaps for Business offering in the United States, currently offer some of our Weedmaps for Business solutions in Canada and have a limited number of non-monetized listings in several other countries including Austria, Germany, the Netherlands, Spain and Switzerland. We anticipate growing our business, in part, by continuing to expand our foreign operations.
We sell our Weedmaps for Business offering in the United States and have a limited number of non-monetized listings in several other countries including Austria, Canada, Germany, the Netherlands, Spain and Switzerland. We anticipate growing our business, in part, by continuing to expand our foreign operations.
Additionally, in some jurisdictions we may be required to seek and obtain a blanket approval of our platform in order to enable potential clients to access our services, and such approval may be subject to significant regulatory discretion.
Additionally, in some jurisdictions we may be required to seek and obtain a blanket approval of our platform in order to enable potential clients to access our services, and such approval may be subject 18 Table of Contents to significant regulatory discretion.
A platform provider may also 23 Table of Contents change its fee structure, add fees associated with access to and use of its platform, or restrict how users can access the platform, which would similarly be unfavorable.
A platform provider may also change its fee structure, add fees associated with access to and use of its platform, or restrict how users can access the platform, which would similarly be unfavorable.
Then-Attorney General Sessions’s rescission of the DOJ’s guidance on the state cannabis programs in early 2018 increased uncertainty and heighted the risk that federal law enforcement authorities could seek to pursue money laundering charges against entities, or individuals, engaged in supporting the cannabis industry.
Then-Attorney General Sessions’ rescission of the DOJ’s guidance on the state cannabis programs in early 2018 increased uncertainty and heightened the risk that federal law enforcement authorities could seek to pursue money laundering charges against entities, or individuals, engaged in supporting the cannabis industry.
Visits to our website could also decline if our accounts on Facebook, Instagram, Twitter, LinkedIn are shut down or restricted. We work across these social networks to increase brand awareness of our company by consumers and clients, and to promote client acquisition.
Visits to our website could also decline if our accounts on Facebook, Instagram, X, formerly known as Twitter or LinkedIn are shut down or restricted. We work across these social networks to increase brand awareness of our company by consumers and clients, and to promote client acquisition.
For more information, see “—We are subject to industry standards, governmental laws, 24 Table of Contents regulations and other legal obligations, particularly related to privacy, data protection and information security and any actual or perceived failure to comply with such obligations could harm our business” below.
For more information, see “—We are subject to industry standards, governmental laws, regulations and other legal obligations, particularly related to privacy, data protection and information security and any actual or perceived failure to comply with such obligations could harm our business” below.
To the extent that we are unable to make payments under the tax receivable agreement for any reason, such payments will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the tax receivable agreement and therefore accelerate payments due under the tax receivable agreement.
To the extent that we are unable to make payments under the TRA for any reason, such payments will be deferred and will accrue interest until paid; provided, however, that nonpayment for a specified period may constitute a material breach of a material obligation under the TRA and therefore accelerate payments due under the TRA.
If we were to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on our business, results of operations and financial condition. We have identified a material weakness in our internal control over financial reporting as of December 31, 2022.
If we were to inadvertently fail to comply with applicable tax laws, this could have a material adverse effect on our business, results of operations and financial condition. We have identified a material weaknesses in our internal control over financial reporting as of December 31, 2023.
Deterioration in the financial condition, earnings or cash flow of WMH LLC and its subsidiaries, for any reason could limit or impair WMH LLC’s 35 Table of Contents ability to pay such distributions.
Deterioration in the financial condition, earnings or cash flow of WMH LLC and its subsidiaries for any reason could limit or impair WMH LLC’s ability to pay such distributions.
Internal Revenue Service (“IRS”) or another tax authority may challenge all or a part of the existing tax basis, tax basis increases, or other tax attributes subject to the tax receivable agreement, and a court could sustain such challenge.
Internal Revenue Service (“IRS”) or another tax authority may challenge all or a part of the existing tax basis, tax basis increases, or other tax attributes subject to the TRA, and a court could sustain such challenge.
In March 2020, the Delaware Supreme Court issued a decision in Salzburg et al. v. Sciabacucchi, which found that an exclusive forum provision providing for claims under the Securities Act to be brought in federal court is facially valid under Delaware law.
In March 2020, the 44 Table of Contents Delaware Supreme Court issued a decision in Salzburg et al. v. Sciabacucchi , which found that an exclusive forum provision providing for claims under the Securities Act to be brought in federal court is facially valid under Delaware law.
Allowing unlicensed or noncompliant businesses to access our products, or allowing businesses to use our solutions in a noncompliant manner, may subject us to legal or regulatory 18 Table of Contents enforcement and negative publicity, which could adversely impact our business, operating results, financial condition, brand and reputation.
Allowing unlicensed or noncompliant businesses to access our products, or allowing businesses to use our solutions in a noncompliant manner, may subject us to legal or regulatory enforcement and negative publicity, which could adversely impact our business, operating results, financial condition, brand and reputation.

… 288 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeITEM 2. PROPERTIES We currently maintain our executive offices at 41 Discovery, Irvine, California 92618, pursuant to an operating lease that expires in 2025. We have built out a second headquarter space in Los Angeles, California, pursuant to an operating lease that expires in 2031. We lease or license additional offices in Denver, Colorado.
Biggest changeITEM 2. PROPERTIES We currently maintain our executive offices at 41 Discovery, Irvine, California 92618, pursuant to an operating lease that expires in 2025. We have a second headquarter space in Los Angeles, California, pursuant to an operating lease that expires in 2031. We also lease additional offices in Denver, Colorado.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

6 edited+1 added−0 removed3 unchanged
Biggest changeWe have been fully cooperating with the SEC’s investigation. Such investigations are inherently uncertain and their results cannot be predicted with certainty, but could result in penalties or other sanctions against the company, as well as negative publicity and reputational harm.
Biggest changeSuch investigations are inherently uncertain and their results cannot be predicted with certainty, but could result in penalties or other sanctions against us, as well as negative publicity and reputational harm. Regardless of the outcome, such proceedings can have an adverse impact on us because of legal costs, diversion of management resources and other factors.
As previously reported, in the second quarter of 2022, our board of directors received an internal complaint regarding the calculation, definition and reporting of our monthly active users (“MAUs”) metric. In response, the board of directors formed a special committee (the “Special Committee”) of independent directors to conduct an internal investigation with the assistance of outside counsel.
As previously disclosed, in the second quarter of 2022, our board of directors received an internal complaint regarding the calculation, definition and reporting of our monthly active users (“MAUs”) metric. In response, the board of directors formed a special committee (the “Special Committee”) of independent directors to conduct an internal investigation with the assistance of outside counsel.
ITEM 3. LEGAL PROCEEDINGS The information set forth under "Commitment and Contingencies—Litigation" in Note 4 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this Item 3.
ITEM 3. LEGAL PROCEEDINGS The information set forth under "Commitment and Contingencies—Litigation" in Note 5 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K is incorporated by reference into this Item 3.
This investigation found no impact on our financial results under GAAP or the reporting or disclosure of any currently disclosed non-GAAP financial metric. As also previously reported, in the third quarter of 2022, we determined not to report MAUs going forward.
This investigation found no impact on our financial results under accounting principles generally accepted in the United States of America (“GAAP”) or the reporting or disclosure of any currently disclosed non-GAAP financial metric. As also previously reported, in the third quarter of 2022, we determined not to report MAUs going forward.
In August 2022, our board of directors determined to voluntarily report the internal complaint and subsequent internal investigation to the SEC. Since that date, we have received two subpoenas from the SEC’s Division of Enforcement requesting additional information and documents. In addition, the SEC has issued subpoenas to several of our current and former employees seeking their testimony.
In August 2022, our board of directors determined to voluntarily report the internal complaint and subsequent internal investigation to the SEC. Since that date, we have received two subpoenas from the SEC’s Division of Enforcement requesting additional information and documents.
Regardless of the 48 Table of Contents outcome, such proceedings can have an adverse impact on us because of legal costs, diversion of management resources and other factors. Additionally, from time to time, we are involved in legal proceedings and subject to claims that arise in the ordinary course of business.
Additionally, from time to time, we are involved in legal proceedings and subject to claims that arise in the ordinary course of business.
Added
In addition, the SEC issued subpoenas to several of our current and former employees seeking their testimony, and their testimony occurred in July and August of 2023. We have been fully cooperating with the SEC’s investigation.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+2 added−9 removed5 unchanged
Biggest changeHolders of Record As of March 10, 2023, there were 145 holders of record of our Class A Common Stock, 12 holders of record of our Class V Common Stock and 2 holders of record of our Public Warrants.
Biggest changeHolders of Record As of May 13, 2024, there were 115 holders of record of our Class A Common Stock, 12 holders of record of our Class V Common Stock and 2 holders of record of our Public Warrants.
As of March 10, 2023, there were 92,573,466 shares of Class A Common Stock issued and outstanding and 55,486,361 shares of our Class V common stock (the “Class V Common Stock”) issued and outstanding. No market exists for the Class V Common Stock.
As of May 13, 2024, there were 95,051,735 shares of Class A Common Stock issued and outstanding and 55,486,361 shares of our Class V common stock (the “Class V Common Stock”) issued and outstanding. No market exists for the Class V Common Stock.
Removed
Stock Performance Graph The following graph compares the cumulative return to stockholders for $100 invested in our common stock relative to the cumulative total return of the Russell 2000 Index and S&P 500 Information Technology Index since October 2019. In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only.
Added
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings There have been no recent sales of unregistered securities for the fiscal year ended December 31, 2023 that would be required to be disclosed pursuant to Item 701 of Regulation S-K.
Removed
This graph is not “soliciting material,” is not deemed filed with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act, as amended, or the Exchange Act, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. 50 Table of Contents Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings Since January 1, 2020, we have made sales of the following unregistered securities: In June 2021, the PIPE Investors purchased from the Company an aggregate of 32,500,000 shares of Class A Common Stock, for a purchase price of $10.00 per share and an aggregate purchase price of $325.0 million, pursuant to Subscription Agreements entered into effective as of December 2020.
Added
All unregistered sales of our securities for the fiscal years ended December 31, 2022 and 2021 were previously disclosed in our Annual Report on Form 10-K, which was filed with the SEC on March 16, 2023. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [Reserved]
Removed
The sale of the PIPE Shares was made in reliance on the exemption from registration in Section 4(a)(2) under the Securities Act.
Removed
On September 3, 2021, the Company entered into the Asset Purchase Agreement with Sprout, Text Ripple, WM Loyalty, LLC, certain equityholders of Sprout and Text Ripple and Jaret Christopher, as sellers’ representative pursuant to which the Company acquired certain assets of Sprout for a total consideration of approximately $31.2 million, including the issuance by the Company of 1,244,258 shares of Class A Common Stock.
Removed
The shares were issued in reliance on the exemption from registration in Section 4(a)(2) under the Securities Act.
Removed
On September 28, 2021, Ghost Management Group, LLC, a subsidiary of the Company, entered into the Equity Interest Purchase Agreement with TLHC, certain securityholders of TLHC and Justin Morris, as sellers’ representative, pursuant to which the Company acquired all of the equity interests of TLHC for total consideration of approximately $15.1 million, including the issuance by the Company of 694,540 shares of Class A Common Stock.
Removed
The shares were issued in reliance on the exemption from registration in Section 4(a)(2) under the Securities Act.
Removed
On January 14, 2022, Ghost Management Group, LLC, a subsidiary of the Company, entered into the Equity Interest Purchase Agreement with Eyechronic LLC, pursuant to which the Company acquired all of the equity interests of Eyechronic LLC for total consideration of approximately $29.4 million, including the issuance by the Company of 5,399,553 shares of Class A Common Stock.
Removed
The shares were issued in reliance on the exemption from registration in Section 4(a)(2) under the Securities Act. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. ITEM 6. [Reserved] 51 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

97 edited+58 added−66 removed43 unchanged
Biggest changeYears Ended December 31, 2022 2021 2020 (in thousands) Revenues $ 215,531 $ 193,146 $ 161,791 Operating expenses: Cost of revenues (exclusive of depreciation and amortization shown separately below) 15,407 7,938 7,630 Sales and marketing 82,624 56,119 30,716 Product development 50,520 35,395 27,142 General and administrative 125,104 97,447 51,127 Depreciation and amortization 11,498 4,425 3,978 Total operating expenses 285,153 201,324 120,593 Operating (loss) income (69,622) (8,178) 41,198 Other income (expense) Change in fair value of warrant liability 25,370 166,518 — Change in tax receivable agreement liability 142,352 — — Other expense, net (1,674) (6,723) (2,368) Income before income taxes 96,426 151,617 38,830 Provision for (benefit from) income taxes 179,077 (601) — Net (loss) income (82,651) 152,218 38,830 Net income attributable to noncontrolling interests 33,338 91,835 — Net (loss) income attributable to WM Technology, Inc. $ (115,989) $ 60,383 $ 38,830 61 Table of Contents Years Ended December 31, 2022 2021 2020 Revenues 100 % 100 % 100 % Operating expenses: Cost of revenues (exclusive of depreciation and amortization shown separately below) 7 % 4 % 5 % Sales and marketing 38 % 29 % 19 % Product development 23 % 18 % 17 % General and administrative 58 % 50 % 32 % Depreciation and amortization 5 % 2 % 2 % Total operating expenses 132 % 104 % 75 % Operating (loss) income (32) % (4) % 25 % Other income (expense) Change in fair value of warrant liability 12 % 86 % 0 % Change in tax receivable agreement liability 66 % 0 % 0 % Other expense, net (1) % (3) % (1) % Income before income taxes 45 % 78 % 24 % Provision for (benefit from) income taxes 83 % 0 % 0 % Net (loss) income (38) % 79 % 24 % Net income attributable to noncontrolling interests 15 % 48 % 0 % Net (loss) income attributable to WM Technology, Inc.
Biggest changeYears Ended December 31, 2023 2022 Amount % Revenue Amount % Revenue (in thousands, except percentages) Net revenues $ 187,993 100.0 % $ 215,531 100.0 % Costs and expenses: Cost of revenues (exclusive of depreciation and amortization) 12,527 6.7 % 15,407 7.1 % Sales and marketing 47,073 25.0 % 82,624 38.3 % Product development 36,001 19.2 % 50,520 23.4 % General and administrative 74,313 39.5 % 120,787 56.0 % Depreciation and amortization 12,133 6.5 % 11,498 5.3 % Asset impairment charges 24,403 13.0 % 4,317 2.0 % Total costs and expenses 206,450 109.8 % 285,153 132.3 % Operating loss (18,457) (9.8) % (69,622) (32.3) % Other income (expense), net: Change in fair value of warrant liability 1,505 0.8 % 25,370 11.8 % Change in tax receivable agreement liability (1,256) (0.7) % 142,352 66.0 % Other income (expense) 2,574 1.4 % (1,674) (0.8) % Income (loss) before income taxes (15,634) (8.3) % 96,426 44.7 % Provision for (benefit from) income taxes 93 — % 179,077 83.1 % Net loss (15,727) (8.4) % (82,651) (38.3) % Net (loss) income attributable to noncontrolling interests (5,829) (3.1) % 33,338 15.5 % Net loss attributable to WM Technology, Inc. $ (9,898) (5.3) % $ (115,989) (53.8) % Comparison of Years Ended December 31, 2023 and 2022 Net Revenues The following table summarizes our disaggregated net revenue information: Years Ended December 31, Change 2023 2022 ($) (%) (dollars in thousands) Net Revenues $ 187,993 $ 215,531 $ (27,538) (13) % Net revenues decreased by $27.5 million, or 13%, for the year ended December 31, 2023 compared to the same period in 2022.
The actual amounts we will be required to pay may materially differ from these hypothetical amounts, because potential future tax savings that we will be deemed to realize, and the tax receivable agreement payments made by us, will be calculated based in part on the market value of the Class A Common Stock at the time of each redemption or exchange under the Exchange Agreement and the prevailing applicable tax rates applicable to us over the life of the tax receivable agreement and will depend on us generating sufficient taxable income to realize the tax benefits that are subject to the tax receivable agreement.
The actual amounts we will be required to pay may materially differ from these hypothetical amounts, because potential future tax savings that we will be deemed to realize, and the TRA payments made by us, will be calculated based in part on the market value of the Class A Common Stock at the time of each redemption or exchange under the Exchange Agreement and the prevailing applicable tax rates applicable to us over the life of the TRA and will depend on us generating sufficient taxable income to realize the tax benefits that are subject to the TRA.
Accounts Receivable We measure credit losses on our trade accounts receivable using the current expected credit loss model under Accounting Standards Codification (“ASC”) 326 Financial Instruments – Credit Losses , which is based on the expected losses rather than incurred losses.
Accounts Receivable We measure credit losses on our trade accounts receivable using the current expected credit loss model under Accounting Standards Codification 326 Financial Instruments – Credit Losses , which is based on the expected losses rather than incurred losses.
Our comprehensive business-to-consumer (“B2C”) and business-to-business (“B2B”) suite of products afford cannabis retailers and brands of all sizes integrated tools to compliantly run their businesses and to reach, convert, and retain consumers. Our business primarily consists of our commerce-driven marketplace (“Weedmaps”), and our fully integrated suite of end-to-end Software-as-a-Service (“SaaS”) solutions software offering (“Weedmaps for Business”).
Our comprehensive business-to-consumer and business-to-business suite of products afford cannabis retailers and brands of all sizes integrated tools to compliantly run their businesses and to reach, convert, and retain consumers. Our business primarily consists of our commerce-driven marketplace (“Weedmaps”), and our fully integrated suite of end-to-end Software-as-a-Service (“SaaS”) solutions software offering (“Weedmaps for Business”).
Costs incurred for enhancements that were expected to result in additional features or functionality are capitalized and expensed over the estimated useful life of the enhancements, generally three years. The accounting for website and internal-use software costs requires us to make significant judgement, assumptions and estimates related to the timing and amount of recognized capitalized software development costs.
Costs incurred for enhancements that were expected to result in additional features or functionality are capitalized and expensed over the estimated useful life of the enhancements, generally three years. The accounting for website and internal-use software costs requires us to make significant judgment, assumptions and estimates related to the timing and amount of recognized capitalized software development costs.
Under this scenario, we would be required to pay to the Class A Unit holders approximately 85% of such amount, or $141.3 million, as of December 31, 2022, over the 15-year period from the Closing Date.
Under this scenario, we would be required to pay to the Class A Unit holders approximately 85% of such amount, or $141.3 million, as of December 31, 2023, over the 15-year period from the Closing Date.
Rapid and significant changes in commodity prices, such as fuel, may negatively affect our revenue if our clients are unable to mitigate inflationary increases through various customer pricing actions and cost reduction initiatives. This could also negatively impact our net dollar retention and our collections on accounts receivable.
Rapid and significant changes in commodity prices may negatively affect our revenue if our clients are unable to mitigate inflationary increases through various customer pricing actions and cost reduction initiatives. This could also negatively impact our net dollar retention and our collections on accounts receivable.
Income Taxes As a result of the Business Combination, WM Technology, Inc. became the sole managing member of WMH LLC, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, WMH LLC is not subject to U.S. federal and certain state and local income taxes.
Critical Accounting Estimates Income Taxes As a result of the Business Combination, WM Technology, Inc. became the sole managing member of WMH LLC, which is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, WMH LLC is not subject to U.S. federal and certain state and local income taxes.
Founded in 2008, and headquartered in Irvine, California, WM Technology, Inc. operates a leading online cannabis marketplace for consumers together with a comprehensive set of eCommerce and compliance software solutions for cannabis businesses, which are sold to both storefront locations and delivery operators (“retailers”) and brands in the United States, U.S. territories and Canadian legalized cannabis markets.
Overview Founded in 2008, and headquartered in Irvine, California, WM Technology, Inc. operates a leading online cannabis marketplace for consumers together with a comprehensive set of eCommerce and compliance software solutions for cannabis businesses, which are sold to both storefront locations and delivery operators (“retailers”) and brands in the legalized cannabis markets in states and territories of the United States.
Tax laws and regulations are complex and periodically changing and the determination of our provision for income taxes, including our taxable income, deferred tax assets and tax receivable agreement liability, requires us to make significant judgment, assumptions and estimates.
Tax laws and regulations are complex and periodically changing and the determination of our provision for income taxes, including our taxable income, deferred tax assets and TRA liability, requires us to make significant judgment, assumptions and estimates.
We expect competition to intensify in the future as the regulatory regime for cannabis becomes more settled and the legal market for cannabis becomes more accepted, which may encourage new participants to enter the market, including established companies with substantially greater 58 Table of Contents financial, technical and other resources than existing market participants.
We expect competition to intensify in the future as the regulatory regime for cannabis becomes more settled and the legal market for cannabis becomes more accepted, which may encourage new participants to enter the market, including established companies with substantially greater financial, technical and other resources than existing market participants.
In connection with the Business Combination, we entered into a tax receivable agreement (“TRA”) with continuing members that provides for a payment to the continuing members of 85% of the amount of tax benefits, if any, that WM Technology, Inc. realizes, or is deemed to realize, as a result of redemptions or exchanges of WMH Units.
In connection with the Business Combination, we entered into a TRA with continuing members that provides for a payment to the continuing members of 85% of the amount of tax benefits, if any, that WM Technology, Inc. realizes, or is deemed to realize, as a result of redemptions or exchanges of WMH Units.
We operate in the United States, Canada and other foreign jurisdictions where medical and/or adult cannabis use is legal under state or national law. As of December 31, 2022, we actively operated in over 30 U.S. states and territories that have adult-use and/or medical-use regulations in place.
We operate in the United States, Canada and other foreign jurisdictions where medical and/or adult cannabis use is legal under state or national law. As of December 31, 2023, we actively operated in over 35 U.S. states and territories that have adult-use and/or medical-use regulations in place.
In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere herein.
Risk Factors.” In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” and elsewhere herein.
Assuming a reinstatement of the TRA liability, there are several assumptions that would be relevant such as, no material changes in relevant tax law, that there are no future redemptions or exchanges of Class A Units and that we earn sufficient taxable income to realize all tax benefits that are subject to the tax receivable agreement, the tax savings associated with acquisitions of common units in the 66 Table of Contents Business Combination would aggregate to approximately $166.3 million, as of December 31, 2022, over 15 years from Closing Date.
Assuming a reinstatement of the TRA liability, there are several assumptions that would be relevant such as, no material changes in relevant tax law, that there are no future redemptions or exchanges of Class A Units and that we earn sufficient taxable income to realize all tax benefits that are subject to the TRA, the tax savings associated with acquisitions of common units in the Business Combination would aggregate to approximately $166.3 million, as of December 31, 2023, over 15 years from Closing Date.
Each of EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts has limitations as an analytical tool, and you should not consider any of these non-GAAP financial measures in isolation or as a substitute for analysis of our results as reported under GAAP.
Each of EBITDA and Adjusted EBITDA has limitations as an analytical tool, and you should not consider any of these non-GAAP financial measures in isolation or as a substitute for analysis of our results as reported under GAAP.
If our brand promotion activities are not successful, our operating results and growth may be adversely impacted. Investments in Growth We intend to continue to make focused organic and inorganic investments to grow our revenue and scale operations to support that growth.
If our brand promotion activities are not successful, our operating results and growth may be adversely impacted. 53 Table of Contents Investments in Growth We intend to continue to make focused organic and inorganic investments to grow our revenue and scale operations to support that growth.
Some of these limitations are as follows: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts do not reflect changes in, or cash requirements for, our working capital needs; and • EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts do not reflect tax payments that may represent a reduction in cash available to us.
Some of these limitations are as follows: 58 Table of Contents • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; and • EBITDA and Adjusted EBITDA do not reflect tax payments that may represent a reduction in cash available to us.
Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value, and such changes could materially impact our results of operations in future periods. As of December 31, 2022 and December 31, 2021, warrant liability was $2.1 million and $27.5 million, respectively.
Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value, and such changes could materially impact our results of operations in future periods. As of December 31, 2023 and December 31, 2022, warrant liability was $0.6 million and $2.1 million, respectively.
General and administrative expenses also include provision for doubtful accounts and professional and outside services related to legal and other consulting services. General and administrative expenses are primarily driven by increases in headcount required to support business growth and meeting our obligations as a public company.
General and administrative expenses also include provision for doubtful accounts and professional and outside services related to legal and other consulting services. General and administrative expenses are primarily driven by headcount required to support our business and meet our obligations as a public company.
For the years ended December 31, 2022 and 2021, we recognized stock-based compensation expense of $23.5 million and $29.3 million, respectively. See Note 13 to our consolidated financial statements included herein. Capitalized Software Development Costs We capitalize certain costs related to the development and enhancement of the Weedmaps platform and SaaS solutions.
For the years ended December 31, 2023 and 2022, we recognized stock-based compensation expense of $13.5 million and $23.5 million, respectively. See Note 14, “Stock-based Compensation,” to our consolidated financial statements included herein. Capitalized Software Development Costs We capitalize certain costs related to the development and enhancement of the Weedmaps platform and SaaS solutions.
The net cash inflows from changes in operating assets and liabilities were primarily due to an increase in accounts receivable of $16.3 million, a decrease in deferred revenue of $1.9 million, partially offset by a decrease in prepaid expenses and other assets of $7.2 million and an increase in accounts payable and accrued expenses of $14.1 million.
The net cash outflows from changes in operating assets and liabilities were primarily due to an increase in accounts receivables of $16.3 million, a decrease in deferred revenue of $1.9 million, a decrease in operating lease liabilities of $5.5 million, partially offset by a decrease in prepaid expenses and other current assets of $7.2 million and an increase in accounts payable and accrued expenses of $14.9 million.
We recognize revenue by applying the following steps: the contract with the customer is identified; the performance obligations in the contract are identified; the transaction price is determined; the transaction price is allocated to the performance obligations in the contract; and revenue is recognized when (or as) we satisfy these performance obligations in an amount that reflects the consideration we expect to be entitled to in exchange for those services.
We recognize revenue by applying the following five steps: the contract with the customer is identified; the performance obligations in the contract are identified; the 61 Table of Contents transaction price is determined; the transaction price is allocated to the performance obligations in the contract; and revenue is recognized when (or as) we satisfy these performance obligations in an amount that reflects the consideration it expects to be entitled to in exchange for those services.
Accordingly, we believe that EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.
Accordingly, we believe that EBITDA and Adjusted EBITDA provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.
We expect that the payments we will be required to make under the tax receivable agreement will not be substantial, and therefore, in conjunction with the recording of a full valuation allowance on the related TRA deferred tax assets, we have also written off the remainder of the TRA liabilities as of December 31, 2022.
We expect that the payments we will be required to make under the TRA will not be substantial, and therefore, in conjunction with the recording of a full valuation allowance on the related TRA deferred tax assets, we have also adjusted the TRA liabilities as of December 31, 2023.
Net cash used in operating activities for the year ended December 31, 2022 was $11.6 million, which resulted from net loss of $82.7 million, together with a net cash inflows of $3.2 million from changes in operating assets and liabilities and non-cash items of $67.9 million, consisting of depreciation and amortization of $11.5 million, fair value of warrant liability of $25.4 million, impairment loss of $4.3 million, stock-based compensation expense of $23.5 million, tax receivable agreement remeasurement of $142.4 million, changes in deferred tax assets of $179.1 million and provision for doubtful accounts of $17.2 million.
Net cash used in operating activities for the year ended December 31, 2022 was $11.6 million , which resulted from net loss of $82.7 million, together with net cash outflows of $1.5 million from changes in operating assets and liabilities and non-cash items of $72.5 million, consisting of depreciation and amortization of $11.5 million, fair value of warrant liability of $25.4 million, asset impairment charges of $4.3 million, stock-based compensation expense of $23.5 million, TRA remeasurement of $142.4 million, amortization of right of use lease assets of $4.7 million, changes in deferred tax assets of $179.1 million and provision for doubtful accounts of $17.2 million.
We have grown the Weedmaps marketplace to become the premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products with 5,457 average monthly paying business clients during the year ended December 31, 2022, on the supply-side of our marketplace. These paying clients include retailers, brands and other client types (such as doctors).
The Weedmaps marketplace is a premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products with 5,419 average monthly paying business clients during the year ended December 31, 2023, on the supply-side of our marketplace. These paying clients include retailers, brands and other client types (such as doctors).
Cost of Revenues (Exclusive of Depreciation and Amortization) Cost of revenues primarily consists of web hosting, internet service and credit card processing costs. Cost of sales is primarily driven by increases in revenue leading to increases in credit card processing and web hosting cost.
Cost of Revenues (Exclusive of Depreciation and Amortization) Cost of revenues excludes depreciation and amortization expense and primarily consists of web hosting, internet service and credit card processing costs. Cost of revenues is primarily driven by fluctuations in revenue leading to increases or decreases in credit card processing and web hosting cost.
The increase was primarily due to a full valuation allowance that was recorded against our deferred tax assets during the year ended December 31, 2022. See Note 15 to our consolidated financial statements included herein.
The decrease was primarily due to a full valuation allowance that was recorded against our deferred tax assets during the year ended December 31, 2022. See Note 16, “Income Taxes,” to our consolidated financial statements included herein.
In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange.
The fair value of the Private Placement Warrants may change significantly as additional data is obtained. In evaluating this information, considerable judgment is required to interpret the data used to develop the assumptions and estimates. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange.
Payments under the tax receivable agreement are not conditioned on the Class A Unit holders’ continued ownership of us. See Note 15 to our consolidated financial statements included herein. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Payments under the TRA are not conditioned on the Class A Unit holders’ continued ownership of us. See Note 16, “Income Taxes,” to our consolidated financial statements included herein. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Cash Flows Years Ended December 31, 2022 2021 2020 (in thousands) Net cash (used in) provided by operating activities $ (11,621) $ 30,190 $ 39,236 Net cash used in investing activities $ (17,768) $ (30,435) $ (1,311) Net cash (used in) provided by financing activities $ (9,805) $ 48,103 $ (22,974) Net Cash (Used in) Provided by Operating Activities Cash from operating activities consists primarily of net (loss) income adjusted for certain non-cash items, including depreciation and amortization, change in fair value of warrant liability, change in tax receivable agreement liability, impairment loss, stock-based compensation, provision for doubtful accounts, deferred taxes and the effect of changes in working capital.
Cash Flows Years Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 22,928 $ (11,621) $ 30,190 Net cash used in investing activities $ (11,871) $ (17,768) $ (30,435) Net cash provided by (used in) financing activities $ (5,290) $ (9,805) $ 48,103 Net Cash Provided by (Used In) Operating Activities Cash from operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation, amortization and asset impairments, change in fair value of warrant liability, change in TRA liability, stock-based compensation, deferred taxes, impairment loss, provision for doubtful accounts and the effect of changes in working capital.
As we continue to expand the presence and increase the number of consumers on the Weedmaps marketplace and broaden our offerings, we generate more value for our business clients. As we continue to expand the presence and increase the number of cannabis businesses listed on weedmaps.com, we become a more compelling marketplace for consumers.
As we continue to expand the presence and increase the number of cannabis businesses listed on weedmaps.com, we become a more compelling marketplace for consumers.
For the years ended December 31, 2022 and 2021, we capitalized $15.5 million and $7.4 million of costs related to the development of software applications.
For the years ended December 31, 2023 and 2022, we capitalized $13.1 million and $15.5 million of costs related to the development of software applications.
Significant estimates and assumptions in valuing acquired intangible assets and liabilities include projected cash flows attributable to the assets or liabilities, asset useful lives and discount rates.
The accounting for goodwill and intangible assets requires us to make significant judgement, estimates and assumptions. Significant estimates and assumptions in valuing acquired intangible assets and liabilities include projected cash flows attributable to the assets or liabilities, asset useful lives and discount rates.
In addition, any client may choose to purchase multiple listing solutions for each of their retail websites or businesses. Average monthly paying clients for the year ended December 31, 2022 increased 26% to 5,457 average monthly paying clients from 4,337 average monthly paying clients in the same period in 2021.
In addition, any client may choose to purchase multiple listing solutions for each of their retail websites or businesses. Average monthly paying clients for the year ended December 31, 2023 decreased by approximately 1% to 5,419 average monthly paying clients from 5,457 average monthly paying clients in the same period in 2022.
To provide investors with additional information regarding our financial results, we have disclosed EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts, all of which are non-GAAP financial measures that we calculate as net income (loss) before interest, taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude stock-based compensation, change in fair value of warrant liability, change in tax receivable agreement liability, impairment charges, transaction related bonuses, transaction costs, legal settlements and other legal costs, reduction in force and executive departures and other non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA.
To provide investors with additional information regarding our financial results, we have disclosed EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures that we calculate as net income (loss) before interest, taxes and depreciation and amortization expense in the case of EBITDA and further adjusted to exclude stock-based compensation, change in fair value of warrant liability, transaction related bonus, legal settlements and other legal costs, discharge of holdback obligation related to prior acquisition, reduction in force, asset impairment charges, transaction costs, change in TRA liability and other non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA.
Prices of certain commodity products, including gas prices, are historically volatile and subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs, inflation and the military conflict between Russia and Ukraine.
Prices of certain commodity products, including gas prices, are historically volatile and subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs, inflation, the military conflict between Russia and Ukraine and the recent state of war 52 Table of Contents between Israel and Hamas and the related risk of a larger regional conflict.
For those trade receivables that do not share similar risk characteristics, the allowance for expected credit losses is calculated on an individual basis. Risk characteristics relevant to our accounts receivable include balance of customer account and aging status.
For those trade receivables that do not share similar risk characteristics, the allowance for expected credit losses is calculated on an individual basis. Risk characteristics relevant to our accounts receivable include balance of customer account and aging status. The allowance for credit losses was $8.7 million and $12.2 million as of December 31, 2023 and December 31, 2022, respectively.
In connection with such potential future tax benefits resulting from the Business Combination, we have established a deferred tax asset for the additional tax basis and a corresponding TRA liability of 85% of the expected benefit. The remaining 15% is recorded within paid-in capital. To date, no payments have been made with respect to the TRA.
In connection with such potential future tax benefits resulting from the Business Combination and subsequent redemptions or exchanges of WHM Units, we have established a deferred tax asset for the additional tax basis and a corresponding TRA liability of 85% of the expected benefit. The remaining 15% is recorded within paid-in capital.
Liquidity and Capital Resources The following tables show our cash, accounts receivable and working capital as of the dates indicated: As of December 31, 2022 2021 (in thousands) Cash $ 28,583 $ 67,777 Accounts receivable, net $ 17,438 $ 17,550 Working capital $ 8,660 $ 61,134 As of December 31, 2022 and December 31, 2021, we had cash of $28.6 million and $67.8 million, respectively.
Liquidity and Capital Resources The following tables show our cash, accounts receivable and working capital as of the dates indicated: As of December 31, 2023 2022 (in thousands) Cash $ 34,350 $ 28,583 Accounts receivable, net $ 11,158 $ 17,438 Working capital $ 17,771 $ 8,660 As of December 31, 2023 and December 31, 2022, we had cash of $34.4 million and $28.6 million, respectively.
The fair value of the Public Warrants is classified as Level 1 financial instruments and is based on the publicly listed trading price of our Public Warrants. The fair value of the Private Warrants is determined with Level 3 inputs using the Black-Scholes model. The fair value of the Private Placement Warrants may change significantly as additional data is obtained.
The warrants are measured at fair value under ASC 820 - Fair Value Measurements . The fair value of the Public Warrants is classified as Level 1 financial instruments and is based on the publicly listed trading price of our Public Warrants. The fair value of the Private Warrants is determined with Level 3 inputs using the Black-Scholes model.
Regulation and Maturation of Cannabis Markets We believe that we will have significant opportunities for greater growth as more jurisdictions legalize cannabis for medical and/or adult-use and the regulatory environment continues to develop. Thirty-eight states, the District of Columbia, Puerto Rico, the Virgin Islands and Guam have legalized some form of cannabis use for certain medical purposes.
Regulation and Maturation of Cannabis Markets We believe that we will have significant opportunities for greater growth as more jurisdictions legalize cannabis for medical and/or adult-use and the regulatory environment continues to develop.
Net Cash (Used in) Provided by Financing Activities Net Cash used in financing activities for the year ended December 31, 2022 was $9.8 million, which resulted from $2.4 million of distribution payments to members of WMH LLC and $7.3 million for repayment of insurance premium financing.
Net cash from financing activities for the year ended December 31, 2022 was $9.8 million, which resulted from $7.3 million for repayment of insurance premium financing and $2.4 million of distribution payments to members of WMH LLC. Contractual Obligations and Commitments We have non-cancellable contractual agreements primarily related to leases and other purchase obligations.
For the year ended December 31, 2022, featured and deal listings, Weedmaps for Business and other SaaS subscriptions and other ad solutions represented 69%, 24% and 7% of our total revenues, respectively.
For the year ended December 31, 2023, featured and deal listings, Weedmaps for Business and other ad solutions represented 67%, 25% and 8% of our total net revenues, respectively.
We present EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of investment capacity.
Below we have provided a reconciliation of net loss (the most directly comparable GAAP financial measure) to EBITDA; and from EBITDA to Adjusted EBITDA. We present EBITDA and Adjusted EBITDA because these metrics are a key measure used by our management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of investment capacity.
The net cash outflows from changes in operating assets and liabilities were primarily due to an increase in accounts receivables of $6.8 million, a decrease in accounts payable and accrued expenses of $0.3 million and an increase in prepaid expenses and other current assets of $3.0 million.
The net cash outflows from changes in operating assets and liabilities were primarily due to a decrease in accounts payable and accrued expenses of $15.3 million, a decrease in operating lease liabilities of $6.3 million and a decrease in deferred revenue of $0.3 million, partially offset by a decrease in accounts receivable of $4.5 million and a decrease in prepaid expenses and other assets of $3.3 million.
We expect to fund our near-term capital expenditures from cash provided by operating activities. We believe that our existing cash and cash generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.
We expect to fund our liquidity requirements from cash and working capital on hand at December 31, 2023, as well as from cash provided by operating activities. We believe 59 Table of Contents that our existing cash and cash generated from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months.
The increase was primarily related to an increase in personnel-related costs of $25.4 million, an increase in outside service of $3.5 million and an increase in travel expense of $0.9 million, offset by decreases in web advertising expense of $2.9 million and events expense of $0.8 million.
Sales and Marketing Expenses The decrease in sales and marketing expenses was primarily related to a decrease in personnel-related costs of $27.0 million, a decrease in outside service of $5.7 million, a decrease in web advertising expense of $2.3 million, a decrease in travel expense of $0.4 million, a decrease in print and products expense of $0.4 million and a decrease in events expense of $0.4 million, partially offset by an increase in branding and advertising expense of $0.4 million.
During the second quarter of fiscal year 2021, we completed the Business Combination, resulting in proceeds of approximately $80.0 million. Our funds are being used for funding our current operations and potential strategic acquisitions in the future. We also intend to increase our capital expenditures to support the organic growth in our business and operations.
Our funds are being used for funding our current operations and potential strategic acquisitions in the future. We also intend to increase our capital expenditures to support the organic growth in our business and operations.
General and Administrative Expenses General and administrative expenses consist primarily of payroll, benefit costs and stock-based compensation expense for our employees involved in general corporate functions including our senior leadership team as well as costs associated with the use by these functions of software and facilities and equipment, such as rent, insurance and other occupancy expenses.
We believe that continued investment in our platform is important for our growth and expect our product development expenses will increase in a manner consistent with revenue growth as our operations grow. 54 Table of Contents General and Administrative Expenses General and administrative expenses consist primarily of payroll, benefit costs and stock-based compensation expense for our employees involved in general corporate functions including our senior leadership team as well as costs associated with the use by these functions of software and facilities and equipment, such as rent, insurance and other occupancy expenses.
Years Ended December 31, 2022 2021 2020 (dollars in thousands, except for revenue per paying client) Revenues $ 215,531 $ 193,146 $ 161,791 Net (loss) income $ (82,651) $ 152,218 $ 38,830 EBITDA (1) $ 107,924 $ 156,042 $ 42,808 Adjusted EBITDA (1) $ (9,633) $ 31,698 $ 42,808 Average monthly revenue per paying client (2) $ 3,291 $ 3,711 $ 3,256 Average monthly paying clients (3) 5,457 4,337 4,140 ___________________________ (1) For further information about how we calculate EBITDA and Adjusted EBITDA as well as limitations of its use and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), see “Net Income (Loss) to EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts” below.
For a detailed discussion of our results of operations, see “Results of Operations” below. 51 Table of Contents Years Ended December 31, 2023 2022 2021 (dollars in thousands, except for revenue per paying client) Net revenues $ 187,993 $ 215,531 $ 193,146 Net income (loss) $ (15,727) $ (82,651) $ 152,218 EBITDA (1) $ (3,534) $ 107,924 $ 156,042 Adjusted EBITDA (1) $ 36,907 $ (9,633) $ 31,698 Average monthly revenue per paying client (2) $ 2,891 $ 3,291 $ 3,711 Average monthly paying clients (3) 5,419 5,457 4,337 ___________________________ (1) For further information about how we calculate EBITDA and Adjusted EBITDA as well as limitations of its use and a reconciliation of EBITDA and Adjusted EBITDA to net income (loss), see “Net Income (Loss) to EBITDA and Adjusted EBITDA” in Non-GAAP Financial Measurements below.
We intend to explore new expansion opportunities as additional jurisdictions legalize cannabis for medical or adult use and leverage our business model informed by our 14-year operating history to enter new markets.
Eight additional states have legalized forms of low-potency cannabis, for select medical conditions. Only three states continue to prohibit cannabis entirely. We intend to explore new expansion opportunities as additional jurisdictions legalize cannabis for medical or adult use and leverage our business model informed by our 15-year operating history to enter new markets.
A change in U.S. federal regulations could result in our ability to engage in such monetization efforts without adverse consequences to our business. Our long-term growth depends on our ability to successfully capitalize on new and existing cannabis markets.
A change in U.S. federal regulations could result in our ability to engage in such monetization efforts without adverse consequences to our business.
We expect our cost of revenue to continue to increase on an absolute basis and remain relatively flat as a percentage of revenue as we scale our business and inventory costs related to multi-media offerings Selling and Marketing Expenses Selling and marketing expenses consist of salaries and benefits, stock-based compensation expense, travel expense and incentive compensation for our sales and marketing employees.
We expect our cost of revenue to continue to increase on an a bsolute basis and remain relatively flat as a percentage of revenue as we scale our business and inventory costs related to multi-media offerings.
Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see Note 2 to our consolidated financial statements included herein. Revenue Recognition Our revenues are derived primarily from monthly subscriptions and additional offerings for access to the Weedmaps marketplace and SaaS solutions.
Therefore, we consider these to be our critical accounting policies and estimates. For further information on all of our significant accounting policies, see Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements included herein. Critical Accounting Policies Revenue Recognition We recognize revenue when the fundamental criteria for revenue recognition are met.
In accordance with authoritative guidance, we began to capitalize these costs when preliminary development efforts were successfully completed, management has authorized and committed project funding, and it was probable that the project would be completed and the software would be used as intended.
In accordance with authoritative guidance, we capitalize these costs when the preliminary development project stage is completed, management has authorized further funding for the completion of the project, and it is probable that the project will be completed and performed as intended.
See Note 15 to our consolidated financial statements included herein. 60 Table of Contents Results of Operations The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.
See Note 16, “Income Taxes,” to our consolidated financial statements included herein. 55 Table of Contents Results of Operations The following table sets forth our results of operations for the periods presented and expresses the relationship of certain line items as a percentage of net revenues for those periods.
Seasonality Our rapid growth and recent changes in legislation have historically offset seasonal trends in our business. While seasonality has not had a significant impact on our results in the past, our clients may experience seasonality in their businesses 64 Table of Contents which in turn can impact the revenue generated from them.
While seasonality has not had a significant impact on our results in the past, our clients may experience seasonality in their businesses which in turn can impact the revenue generated from them. Our business may become more seasonal in the future and historical patterns in our business may not be a reliable indicator of future performance.
We define actively operated markets as those U.S. states or territories with greater than $1,000 monthly revenue. Our mission is to power a transparent and inclusive global cannabis economy. Our technology addresses the challenges facing both consumers seeking to understand cannabis products and businesses who serve cannabis users in a legally compliant fashion.
Substantially all of our revenue was generated in the United States during the periods presented. We define actively operated markets as those U.S. states or territories with greater than $1,000 monthly revenue. Our mission is to power a transparent and inclusive global cannabis economy.
We calculate this metric by dividing the average monthly revenue for any particular period by the average monthly number of paying clients in the same respective period.
We calculate this metric by dividing the average monthly revenue for any particular period by the average monthly number of paying clients in the same respective period. The decline in our average monthly revenue per paying client for the years ended December 31, 2023 was due to spend declines in established markets.
We sell our Weedmaps for Business suite in the United States, currently offer some of our Weedmaps for Business solutions in Canada and have a limited number of non-monetized listings in several other countries including Austria, Germany, the Netherlands, Spain and Switzerland.
Further, these clients, who can choose to purchase multiple listings solutions for each business, had purchased over 7,800 listing pages as of December 31, 2023. We sell our Weedmaps for Business suite in the United States and have a limited number of non-monetized listings in several other countries including Austria, Canada, Germany, the Netherlands, Spain and Switzerland.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes to those statements included herein.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the financial condition and results of operations of WM Technology, Inc. should be read in conjunction with our consolidated financial statements and related notes included in this Form 10-K, as well as the discussion under “Item 1A.
Net Cash Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $17.8 million, which resulted from $0.7 million net cash paid for acquisitions, $16.1 million cash paid for purchases of property and equipment, including certain capitalized software development cost, and $1.0 million cash paid for an acquisition holdback release.
Net cash used in investing activities for the year ended December 31, 2022 was $17.8 million, which resulted from $16.1 million cash paid for purchases of property and equipment, including certain capitalized software development cost, $1.0 million cash paid for other investments and $0.7 million net cash paid for acquisitions, Net Cash Provided by (Used in) Financing Activities Net Cash used in financing activities for the year ended December 31, 2023 was $5.3 million, which resulted from $7.2 million of distribution payments to members of WMH LLC, $1.5 million for repayment of insurance premium financing and $0.4 million in proceeds from collection of related party note receivable.
These investments serve to deepen the consumer experience with our platform and continue to provide a high level of support to our business clients. 54 Table of Contents Key Operating and Financial Metrics We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Key Operating and Financial Metrics We monitor the following key financial and operational metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions.
Provision for (Benefit from) Income Taxes Years Ended December 31, Change 2022 2021 ($) (%) (dollars in thousands) Provision for (benefit from) income taxes $ 179,077 $ (601) $ 179,678 N/M Percentage of revenue 83 % — % ________________________________ N/M - Not meaningful Provision for income taxes increased by $179.7 million for the year ended December 31, 2022 compared to the same period in 2021.
Provision for (Benefit from) Income Taxes Years Ended December 31, Change 2023 2022 ($) (%) (dollars in thousands) Provision for (benefit from) income taxes $ 93 $ 179,077 $ (178,984) (100) % Provision for income taxes decreased by $179.0 million for the year ended December 31, 2023 compared to the same period in 2022.
The decrease in net income of $234.9 million was primarily due to an increase in operating expense of $83.8 million, which includes severance costs of $8.1 million related to the reduction in force and executive departures that occurred in the second half of 2022, a comparatively unfavorable change in fair value of warrant liability of $141.1 million and an increase in provision from income taxes of $179.7 million resulting from the full valuation recorded against our deferred tax assets, offset by an increase in revenue of $22.4 million, an income from the change in tax receivables agreement liability of $142.4 million resulting from the remeasurement of the Tax Receivable Agreement liability and a decrease in other expense of $5.0 million, which primarily relates to the transaction costs incurred in the year ended December 31, 2021, related to the warrant liability.
The decrease in net loss of $66.9 million was primarily due to a decrease in revenue of $27.5 million, a decrease in comparatively favorable change in fair value of warrant liability of $23.9 million, a decrease in income from the change in tax receivables agreement liability of $143.6 million resulting from the remeasurement of the TRA liability, a decrease in total costs and expenses of $78.7 million, a decrease in provision from income taxes of $179.0 million resulting from the full valuation recorded against our deferred tax assets during the year ended December 31, 2022 and an increase in other expense of $4.2 million.
Over the past 14 years, Weedmaps has become a premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products, permitting product discovery and order-ahead for pickup or delivery by participating retailers.
Our technology addresses the challenges facing both consumers seeking to understand cannabis products and businesses who serve cannabis users in a legally compliant fashion. Since our founding in 2008, Weedmaps has become a premier destination for cannabis consumers to discover and browse information regarding cannabis and cannabis products, permitting product discovery and order-ahead for pickup or delivery by participating retailers.
Twenty-one of those states, the District of Columbia, Guam and Northern Mariana have legalized cannabis for adults for non-medical purposes as well (sometimes referred to as adult or recreational use). Nine additional states have legalized forms of low-potency cannabis, for select medical conditions. Only three states continue to prohibit cannabis entirely.
Currently , thirty-nine states, the District of Columbia, Puerto Rico, the Virgin Islands, Guam and the Northern Mariana have legalized some form of cannabis use for certain medical purpose s. Twenty-four of those states, the District of Columbia, Guam and Northern Mariana have legalized cannabis for adults for non-medical purposes as well (sometimes referred to as adult or recreational use).
Weedmaps for Business is a set of eCommerce-enablement tools designed to help retailers and brands get the best out of the Weedmaps’ consumer experience, create labor efficiencies and manage compliance needs. We hold a strong belief in the importance of enabling safe, legal access to cannabis for consumers worldwide.
Weedmaps for Business is a set of eCommerce-enablement tools designed to help retailers and brands get the best out of the Weedmaps’ consumer experience, create labor efficiencies and manage compliance needs. As we continue to expand the presence and increase the number of consumers on the Weedmaps marketplace and broaden our offerings, we generate more value for our business clients.
The increase was primarily driven by a 26% increase in average monthly paying clients. Our growth in average monthly paying clients primarily reflects growth in our featured and deal listings of $11.1 million, Weedmaps for Business and other SaaS subscriptions of $8.1 million and other ad solutions of $3.2 million.
The decrease was primarily driven by a decrease in average monthly revenue per paying client primarily as a result of a decrease in revenue from our Featured Listings and WM Deal products of $23.1 million, Weedmaps for Business of $3.9 million and other WM Ad solutions of $0.5 million.
Net cash used in investing activities for the year ended December 31, 2021 was $30.4 million, which resulted from $16.0 million net cash paid for acquisitions, $7.9 million cash paid for purchases of property and equipment, including certain capitalized software development cost, and $6.5 million cash paid for other investments.
The changes in operating assets and liabilities are mostly due to fluctuations in timing of cash receipts and payments. 60 Table of Contents Net Cash Used in Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $11.9 million, which resulted from $11.9 million cash paid for purchases of property and equipment, including certain capitalized software development cost.
Our calculation of the TRA asset and liability requires estimates of its future qualified taxable income over the term of the TRA as a basis to determine if the related tax benefits are expected to be realized. 67 Table of Contents Based on the weight of all available evidence, both positive and negative, we determined during the fourth quarter of 2022 that a full valuation allowance is required against our net deferred tax assets.
Our calculation of the TRA asset and liability requires estimates of its future qualified taxable income over the term of the TRA as a basis to determine if the related tax benefits are expected to be realized.
Furthermore, we compete with cannabis-focused and general two-sided marketplaces, internet search engines and various other newspaper, television and media companies and other software providers.
As regulated markets mature and as we incur expenses to attract paying clients and convert non-paying clients to paying clients, we may generate losses in new markets for an extended period. Furthermore, we compete with cannabis-focused and general two-sided marketplaces, internet search engines and various other newspaper, television and media companies and other software providers.
As operating expenses and capital expenditures fluctuate over time, we may accordingly experience short-term, negative impacts to our operating results and cash flows.
As operating expenses and capital expenditures fluctuate over time, we may accordingly experience short-term, negative impacts to our operating results and cash flows. Components of Our Results of Operations Revenues Our revenues are derived primarily from monthly subscriptions to Weedmaps for Bu siness, featured and deal listings and other WM Ad solutions.
Each market must reach a critical mass of both cannabis businesses and consumers for listing subscriptions, advertising placements and other solutions to have meaningful appeal to potential clients. As regulated markets mature and as we incur expenses to attract paying clients and convert non-paying clients to paying clients, we may generate losses in new markets for an extended period.
Our long-term growth depends on our ability to successfully capitalize on new and existing cannabis markets. Each market must reach a critical mass of both cannabis businesses and consumers for listing subscriptions, advertising placements and other solutions to have meaningful appeal to potential clients.
Contractual Obligations and Commitments We have non-cancellable contractual agreements primarily related to leases. As of December 31, 2022, future payments on our operating leases were $54.9 million. See Note 3 to our consolidated financial statements included herein.
As of December 31, 2023, future payments on our operating leases were $45.0 million. See Note 4, “Leases,” to our consolidated financial statements included herein.
Because of these limitations, you should consider EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts alongside other financial performance measures, including net income (loss) and our other GAAP results. 56 Table of Contents A reconciliation of net (loss) income to non-GAAP EBITDA, Adjusted EBITDA and Adjusted EBITDA before Provision for Doubtful Accounts is as follows: Years Ended December 31, 2022 2021 2020 (in thousands) Net (loss) income $ (82,651) $ 152,218 $ 38,830 Provision for (benefit from) income taxes 179,077 (601) — Depreciation and amortization expenses 11,498 4,425 3,978 EBITDA 107,924 156,042 42,808 Stock-based compensation 23,493 29,324 — Change in fair value of warrant liability (25,370) (166,518) — Warrant transaction costs — 5,547 — Impairment 4,317 2,372 — Transaction related bonus expense 10,119 2,200 — Transaction costs 251 2,583 — Legal settlements and other legal costs 3,909 148 — Change in tax receivable agreement liability (142,352) — — Reduction in force and executive departures 8,076 — — Adjusted EBITDA $ (9,633) $ 31,698 $ 42,808 Provision for doubtful accounts 17,216 5,487 1,271 Adjusted EBITDA before provision for doubtful accounts $ 7,583 $ 37,185 $ 44,079 Average Monthly Revenue Per Paying Client Average monthly revenue per paying client measures how much clients, for the period of measurement, are willing to pay us for our subscription and additional offerings and the efficiency of the bid-auction process for our featured listings placements.
A reconciliation of net loss to non-GAAP EBITDA and Adjusted EBITDA is as follows: Years Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) $ (15,727) $ (82,651) $ 152,218 Provision for (benefit from) income taxes 93 179,077 (601) Depreciation and amortization expenses 12,133 11,498 4,425 Interest income (33) — — EBITDA (3,534) 107,924 156,042 Stock-based compensation 13,515 23,493 29,324 Change in fair value of warrant liability (1,505) (25,370) (166,518) Warrant transaction costs — — 5,547 Asset impairment charges 24,403 4,317 2,372 Transaction related bonus expense 3,089 10,119 2,200 Transaction costs — 251 2,583 Legal settlements and other legal costs 3,194 3,909 148 Discharge of holdback obligation related to prior acquisition (3,705) — — Change in tax receivable agreement liability 1,256 (142,352) — Reduction in force (recovery) expense 194 8,076 — Adjusted EBITDA $ 36,907 $ (9,633) $ 31,698 Seasonality The cannabis industry has certain industry holidays that in recent years have resulted in increased purchases by cannabis consumers.
We had an allowance for doubtful accounts of $12.2 million and $5.2 million as of December 31, 2022 and December 31, 2021, respectively. See Note 2 to our consolidated financial statements included herein. Goodwill and Intangible Assets Assets and liabilities acquired from acquisitions are recorded at their estimated fair values.
See Note 2, “Summary of Significant Accounting Policies,” to our consolidated financial statements included herein. Goodwill and Intangible Assets Assets and liabilities acquired from acquisitions are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill.
The $25.4 million personnel-related costs include increases in salaries and wages of $15.1 million and payroll tax of $1.0 million, as a result of increased headcount in 2022, bonus expense of $8.9 million and stock-based compensation expense of $0.4 million.
The decrease in personnel-related costs was primarily due to a decline in headcount of approximately 13% in 2023 compared to prior year and includes decreases in salaries and wages of $6.4 million, bonus expense of $3.8 million, stock-based compensation expense of $1.1 million and payroll tax expense of $0.4 million.

… 141 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+2 added−0 removed4 unchanged
Biggest changeWe do not believe that inflation has had a material effect on our business, financial condition or results of operations during the years ended December 31, 2022, 2021 and 2020. 69 Table of Contents
Biggest changeWe do not believe that inflation has had a material effect on our business, financial condition or results of operations during the years ended December 31, 2023, 2022 and 2021.
Because we only hold cash and, our portfolio’s fair value is insensitive to interest rate changes. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on our financial results.
Because we only hold cash, our portfolio’s fair value is insensitive to interest rate changes. In future periods, we will continue to evaluate our investment policy in order to ensure that we continue to meet our overall objectives. A hypothetical 100 basis point increase or decrease in interest rates would not have a material effect on our financial results.
Interest Rate Fluctuation Risk We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2022, we did not have any cash equivalents. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk.
Interest Rate Fluctuation Risk We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of December 31, 2023, we did not have any cash equivalents. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk.
The impact of exchange rate fluctuations from translation of assets and liabilities is insignificant for the years ended December 31, 2022, 2021 and 2020. For all periods presented, we believe the exposure to foreign currency fluctuation from operating expenses is immaterial as the related costs do not constitute a significant portion of our total expenses.
The impact of exchange rate fluctuations from translation of assets and liabilities is insignificant for the years ended December 31, 2023, 2022 and 2021. For all periods presented, we believe the exposure to foreign currency fluctuation from operating expenses is immaterial as the related costs do not constitute a significant portion of our total expenses.
Added
Concentrations of Credit Risk Our financial instruments are potentially subject to concentrations of credit risk. We place our cash with high quality credit institutions. From time to time, we maintain cash balances at certain institutions in excess of the Federal Deposit Insurance Corporation limit.
Added
As of December 31, 2023, we had cash balances that exceeded the deposit insurance limit with five financial institutions. Management believes that the risk of loss is not significant and has not experienced any losses in such accounts.

Other MAPSW 10-K year-over-year comparisons