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Equity Incentive and Other Plans

12 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

NOTE 14 — Equity Incentive and Other Plans

The Company currently has four equity plans: the New Leafly 2021 Equity Incentive Plan (the “2021 Plan”), the Legacy Leafly 2018 Equity Incentive Plan (the “2018 Plan”), the New Leafy Earn-Out Plan (the “Earn-Out Plan”), and the New Leafly 2021 Employee Stock Purchase Plan (the “ESPP”). Awards under the 2021 Plan are detailed below. There were no options or other equity awards granted under the 2018 Plan, the Earn-Out Plan or the ESPP during the year ended December 31, 2022.

Stock-Based Compensation

2021 Plan

The 2021 Plan became effective immediately upon closing of the Business Combination. Pursuant to the 2021 Plan, 4,502 shares of common stock were initially reserved for issuance. During the term of the 2021 Plan, the number of shares of common stock thereunder automatically increases on each January 1, commencing on January 1, 2023, and ending on (and including) January 1, 2031, by the lesser of (i) 10% of the fully diluted shares of common stock as of the last day of the preceding fiscal year and (ii) 4,502 shares (adjusted pursuant to the terms of the 2021 Plan).

In August 2022 and October 2022, the Company’s compensation committee of the board of directors and an authorized executive of the Company, as applicable, granted stock options to purchase an aggregate of approximately 102 shares of common stock at a weighted-average exercise price of $1.98 per share and granted an aggregate of 2,560 restricted stock units. Of the restricted stock units granted, 683 were market-based awards made to executives with a grant date fair value of $0.04 per share with vesting based on achievement of a $1.0 billion market cap by February 4, 2026, and 137 were performance awards made to executives with a grant date fair value of $0.81 per share with vesting based in part on achievement of a fiscal year 2022 Adjusted EBITDA target, which was achieved (Note 19). Prior to such grants, no grants had been made under the 2021 Plan. See Note 19 for awards subsequent to December 31, 2022.

Stock Options

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used as inputs to the pricing model for options granted during the year ended December 31, 2022:


Risk-free interest rate	4.1	%
Expected term in years	4.07
Expected volatility	74.6	%
Expected dividend yield	0.0	%

Stock option activity under the 2021 Plan for the year ended December 31, 2022 (there were no stock options granted previously under this plan) was as follows:


	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2022		—		$	—	$	—		—
Granted		102			1.98
Exercised		—			—
Forfeited or expired		(1	)		1.98
Outstanding at December 31, 2022		101		$	1.98	$	—		9.61

Vested and exercisable		1		$	1.83	$	—		6.15

As of December 31, 2022, there was $94 of total unrecognized compensation cost related to stock options granted under the 2021 Plan. That cost is expected to be recognized over a weighted-average period of 3.47 years. The weighted-average grant date fair value of options granted under the 2021 Plan for the year ended December 31, 2022 was $1.16 per share.

Restricted Stock Units

Restricted stock unit activity under the 2021 Plan for the year ended December 31, 2022 (there were no restricted stock units granted previously under this plan) was as follows:


	Number of Shares			Weighted Average Grant Date Fair Value		Total Fair Value
Unvested at January 1, 2022		—		$	—
Granted		2,560			1.17	$	2,988
Vested		(317	)		1.74	$	554
Forfeited		(185	)		1.59
Unvested at December 31, 2022		2,058		$	1.30

As of December 31, 2022, there was $2,001 of total unrecognized compensation cost related to unvested restricted stock units granted under the 2021 Plan of which $59 relates to performance awards and $12 relates to market-based awards. The total cost is expected to be recognized over a weighted-average period of 3.11 years.

2018 Plan

The 2018 Plan became effective on April 17, 2018. The 2018 Plan terminated upon closing of the Business Combination in 2022, but then-outstanding options under the 2018 Plan remain outstanding pursuant to their terms, with adjustments to the number of shares and exercise prices to reflect the terms of the Business Combination.

The fair value of each stock option award to employees is estimated on the date of grant using the Black-Scholes option pricing model. The following weighted-average assumptions were used as inputs to the pricing model for options granted during the year ended December 31, 2021 (there were no grants made in 2022):


Risk-free interest rate	1.15	%
Expected term in years	5.90
Expected volatility	61.0	%
Expected dividend yield	0.0	%

Stock option activity under the 2018 Plan for the periods presented was as follows:


	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Outstanding at January 1, 2021		1,893		$	1.01
Granted		2,567			2.13
Exercised		(334	)		1.07
Forfeited or expired		(275	)		1.13
Outstanding at December 31, 2021		3,851		$	1.77	$	24,018	8.85
Exercised		(148	)		1.09
Forfeited or expired		(272	)		3.95
Outstanding at December 31, 2022 1		3,431		$	1.60	$	75	6.83

Vested and exercisable		1,725		$	1.24	$	75		6.32

Includes 2,375, 0, and 1,056 awards accounted for as service-based, performance-based, and market-based options, respectively, that are vested, that the Company currently deems probable of vesting, or in the case of market-based options, that the Company is expensing so long as the respective service conditions are met. The market-based options will vest only if the price of the Company's common stock reaches a $1,000,000 market capitalization target for any 20 days during a 30-day period on or before the fourth anniversary of the closing of the Merger.

As of December 31, 2022, there was: (i) $930 of unrecognized compensation cost related to service-based 2018 Plan option awards, which is expected to be recognized over a weighted-average service period of approximately 2.00 years; and (ii) $1,406 of unrecognized compensation cost related to market-based 2018 Plan option awards, which is expected to be recognized over a weighted-average service period of approximately 0.85 years.

The following table presents the classification of stock-based compensation expense under the 2018 Plan and the 2021 Plan:


	Year Ended December 31,
	2022		2021

Sales and marketing	$	223	$	102
Product development		234		153
General and administrative		3,460		767
	$	3,917	$	1,022

Option Modification

Concurrent with the closing of the Business Combination, the vesting provisions of certain stock options previously granted in 2021 under the 2018 Plan to our Chief Executive Officer to purchase 2,917 shares of common stock were modified, and a corresponding charge of $1,366 was recorded for the three months ended March 31, 2022 to general and administrative expenses and additional paid-in capital. The original award included the following vesting provisions:

•

Liquidity Event Option: A stock option to purchase 1,458 shares of common stock will vest upon the earlier of (a) the closing of the Initial Public Offering of the Company's common stock or (b) a change in control, provided the recipient remains in continuous service.

•

Milestone Option: A stock option to purchase 1,458 shares of common stock will vest one-third each upon the achievement of the three annual revenue targets of $75,000, $150,000 and $300,000, provided the recipient remains in continuous service.

The modified vesting provisions are as follows:

•

Liquidity Event Option: A stock option to purchase 1,458 shares of common stock will vest as follows, provided the recipient remains in continuous service: 50% upon the closing of the Business Combination and 50% upon the earlier of (i) the Company's achievement of a $1,000,000 market capitalization for any 20 during a 30-day period on or before the fourth anniversary of the closing of the Business Combination (the “Market Cap Milestone”) or (ii) a change in control.

•

Milestone Option: A stock option to purchase 1,458 shares of common stock will vest upon the achievement of the following milestones, provided that the recipient remains in continuous service:

First Milestone: 50% of the total number of shares subject to the stock option will vest if the Company's gross revenue for the year ending December 31, 2022 equals or exceeds $65,000. A pro rata amount vests in the event that the Company's gross revenue equals or exceeds 90% of the revenue target.

Second Milestone: 50% of the total number of shares subject to the stock option will vest if the Company's gross revenue for the year ending December 31, 2023 equals or exceeds $101,000. A pro rata amount vests in the event that the Company's gross revenue equals or exceeds 90% of the revenue target.

In the event the Second Milestone is achieved, any unvested portion of the stock option subject to the First Milestone will fully vest.

In the event the Market Cap Milestone is achieved, any unvested portion of the Milestone Option will fully vest.

The date of vesting for the Milestone Option will be the earlier of (i) the date following the Company's filing with the SEC of its Form 10-K for the applicable fiscal year in which the applicable revenue target was attained or, (ii) the date the Market Cap Milestone is achieved.

All shares subject to the Milestone Option will vest immediately upon a change in control.

The Milestone Option will remain outstanding unless and until the last possible time that the Second Milestone can be achieved, the Market Cap Milestone can be achieved, or a change in control may occur during the term of the Milestone Option award, subject to the recipient's continued service.

Earn-Out Plan

The Earn-Out Plan became effective immediately upon closing of the Business Combination. Pursuant to the Earn-Out Plan, approximately 571 shares of common stock have been reserved for issuance to employees and certain other eligible parties in the form of restricted stock units (“RSUs”). These RSUs will vest if the Company achieves certain thresholds prior to the third anniversary of the Merger. No RSUs have been awarded under the Earn-Out Plan as of December 31, 2022.

Employee Stock Purchase Plan

The ESPP became effective immediately upon closing of the Merger. Pursuant to the ESPP, 1,126 shares of common stock are initially reserved for issuance. During the term of the ESPP, the number of shares of common stock thereunder automatically increases on each January 1, commencing on January 1, 2023 and ending on (and including) January 1, 2031, by the lesser of (i) 2.5% of the fully diluted shares of common stock as of the last day of the preceding fiscal year and (ii) 1,126 shares (as adjusted pursuant to the terms of the ESPP). The Company's current offering period runs from September 16, 2022 through March 15, 2023. Certain employees have enrolled in the ESPP, but no purchases had been made as of December 31, 2022.

Defined Contribution Plan

The Company recognized expense from matching contributions to the Company-sponsored defined contribution retirement (401k) plan as follows for the periods presented:


	Year Ended December 31,
	2022		2021

401(k) matching contributions	$	875	$	712