Convertible Promissory Notes

3 Months Ended

Mar. 31, 2024

Debt Disclosure [Abstract]

Convertible Promissory Notes

NOTE 9 — Convertible Promissory Notes

2022 Notes

Merida entered into a $30,000 convertible note purchase agreement (the “Note Purchase Agreement”) in January 2022, which Legacy Leafly subsequently guaranteed and joined as a party to the agreement on February 4, 2022 in connection with the Business Combination (the “2022 Notes”). Accordingly, post-Business Combination, the 2022 Notes are presented as a liability on Leafly's balance sheet, net of debt issuance costs and debt discount. The Company recognized debt issuance costs of $714 paid in cash, and a debt discount of $924 paid in shares transferred by Merida Holdings, LLC (the “Sponsor”) to the holders of the 2022 Notes upon issuance. The 2022 Notes bear interest at 8% annually (with an effective interest rate of 9.84%), paid in cash semi-annually in arrears on July 31 and January 31 of each year, and mature on January 31, 2025.

The 2022 Notes are unsecured convertible senior notes due 2025. They are convertible at the option of the holders at any time before maturity at an initial conversion share price of $250.00 per $1,000 principal amount of 2022 Notes and per $1,000 of accrued but unpaid interest on any converted 2022 Notes. In addition, the Company may, at its election, force the conversion of the 2022 Notes on or after January 31, 2024, if the volume-weighted average trading price of the Company’s common stock exceeds $360.00 for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days. The Company also has the option, on or after January 31, 2023 and prior to the 40th trading day immediately before the maturity date and subject to the holders’ ability to optionally convert, to redeem all or a portion of the 2022 Notes at a cash redemption price equal to 100% of the principal amount of the 2022 Notes, plus accrued and unpaid interest, if any. The holders of the 2022 Notes have the right to cause the Company to repurchase for cash all or a portion of the 2022 Notes held by such holder upon the occurrence of a “fundamental change” (as defined in the Note Purchase Agreement) or in connection with certain asset sales, in each case at a price equal to 100% of par plus accrued and unpaid interest, if any.

2023 Partial Conversion

On December 19, 2023, the Company and each of the 2022 Note holders executed a notice of conversion and consent (the “Conversion Notice”) to effect a temporary and limited adjustment to the conversion price under the Note. Pursuant to the Conversion Notice, the conversion price under the Note was equal to the dollar amount that was 5% less than the last reported sale price of the Company’s Common Stock on the trading day prior to the date of the Conversion Notice, or $4.978 (the “Conversion Price Adjustment”). The Conversion Price Adjustment was available for a period of five business days from the date of the Conversion Notice or until conversion requests for up to $300 were received, whichever was earlier. On December 19, 2023, one Holder tendered a conversion request for $300 at the Conversion Price Adjustment, resulting in the issuance of an aggregate of 60,265 shares of Common Stock and a corresponding reduction in the outstanding amount of the 2022 Notes of $300. The Company accounted for the transaction as a debt modification and recognized the change in the fair value of the conversion feature as additional debt discount and an increase to additional paid-in capital of $24. Following such tender and in accordance with the terms of the Conversion Notice, the Conversion Price Adjustment was terminated. The Company shall pay applicable accrued interest payable and owing on the converted amount through the effective date of the

conversion in accordance with the terms of the 2022 Notes in cash on the next interest payment date. Except as set forth above, the terms of the 2022 Notes remain the same.

Carrying Amount and Fair Value

As of March 31, 2024, the net carrying amount of the 2022 Notes was $29,221, which reflects the partial conversion noted above and includes unamortized issuance costs and debt discount of $479, which will be amortized over the remaining term. The estimated fair value of the convertible debt instruments was approximately $27,600 as of March 31, 2024. The fair value of the 2022 Notes was measured using the Bloomberg OVCV model and CNVI model which modifies the underlying OVCV program. These models incorporate inputs for volatility, Leafly’s stock price, time to maturity, the risk-free rate and Leafly’s credit spread, some of which are considered Level 3 inputs in the fair value hierarchy.

See Note 18 for subsequent events pertaining to the 2022 Notes.