Commitments and Contingencies

3 Months Ended

Mar. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 10 — Commitments and Contingencies

In the normal course of business, the Company may receive inquiries or become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material adverse effect on the Company’s consolidated financial statements.

Leases

The Company does not have any leases with an original term longer than 12 months as of March 31, 2024. The Company has short-term arrangements with immaterial rental obligations for office space.

Nasdaq Notifications of Noncompliance

On October 28, 2022, the Company received a letter from the Nasdaq’s Listing Qualifications Staff (the “Staff”) indicating that it no longer complied with the $50 million in market value of listed securities standard for continued listing on the Nasdaq Global Market under Nasdaq Listing Rule 5450(b)(2)(A) and that it also did not comply with either of the two alternative standards of Listing Rule 5450(b), the equity standard and the total assets and total revenue standard. On April 19, 2023, Nasdaq approved the Company’s application to transfer the listing of its common stock and warrants from the Nasdaq Global Market to the Nasdaq Capital Market (the “Capital Market”), effective April 21, 2023, on the basis that the Company complied with the Net Income standard for the Capital Market under Nasdaq Listing Rule 5550(b)(3) for the year ended December 31, 2022. The transfer of the listing resolved the October 28, 2022 noncompliance notification.

On November 2, 2022, the Company received a letter from the Staff indicating that it did not meet the requirement to maintain a minimum bid price of $1.00 per share, which is imposed by Nasdaq Listing Rule 5450(a)(1) for continued listing on the Nasdaq Global Market and by Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market (the “Bid Price Requirement”) and that the Company had until May 1, 2023 to regain compliance. On May 2, 2023, as a result of not regaining compliance with the Bid Price Requirement, the Company received a letter from Nasdaq notifying it that the Company’s common stock would be subject to delisting from Nasdaq unless it timely requested a hearing before a Nasdaq Hearings Panel (the “Panel”) and submitted a plan of compliance. The Company submitted a plan of compliance, which was approved by the Panel, giving Leafly until October 30, 2023 to regain compliance with the Bid Price Requirement. On September 12, 2023, the Company implemented a one-for-twenty reverse split of the Company’s common stock (Note 11), and on September 29, 2023, the Company received formal notice from Nasdaq confirming that the Company regained compliance with the Bid Price Requirement, would continue to be listed and traded on the Capital Market and the listing matter was closed.

From January 1, 2024 until March 25, 2024, Leafly was out of compliance with Nasdaq Listing Rule 5605(c)(2)(A) (the “Audit Committee Rule”), which requires our Board of Directors’ (the “Board”) Audit Committee to be composed of at least three independent members. On January 3, 2024, we received a letter from the Staff confirming Leafly’s noncompliance with the Audit Committee Rule and providing Leafly with a cure period to regain compliance (i) until the earlier of Leafly’s next annual meeting of stockholders or January 2, 2025; or (ii) if the next annual meeting of stockholders is held before July 1, 2024, no later than July 1, 2024. On March 25, 2024, the Board appointed two new independent directors, Jeffrey Monat and Andres Nannetti, to the Board and to the Board's Audit Committee. As a result, on April 1, 2024, the Company received written notice from the Staff confirming that the Company regained compliance with the Audit Committee Rule and this matter is now closed.

On April 9, 2024, the Company received a letter from the Staff (the “Notice”) notifying the Company that it no longer complies with Nasdaq's requirements contained in Nasdaq Listing Rule 5550 for companies traded on the Capital Market. Nasdaq Listing Rule 5550 requires a company listed on the Capital Market to continuously meet at least one of the following requirements set forth in Nasdaq Listing Rule 5550(b) (the “Continued Listing Standards”):

Continued Listing Standard	Requirement
“Stockholders’ Equity”	Minimum $2.5 million
“Market Value of Listed Securities”	Minimum $35 million
“Net Income”	Minimum $500 thousand from continuing operations – most recent fiscal year or in two of three of last three fiscal years

As confirmed by the Notice, the Company does not currently meet any of the Continued Listing Standards. As set forth in the Notice, within 45 calendar days from the date of the Notice, the Company will have the right to submit to Nasdaq a plan to regain compliance with Nasdaq's Stockholders' Equity and/or Market Value of Listed Securities standards, and the Staff may grant an extension of up to 180 calendar days from the date of the Notice to evidence compliance. As provided in Nasdaq Listing Rule 5810(c)(2)(D), the Staff will not accept a compliance plan for deficiencies in net income from continuing operations since compliance requires stated levels of net income during completed fiscal years and therefore it can only be demonstrated through audited financial statements. The Company can give no assurances that the Staff will grant an extension or, even if the Staff grants an extension, that the Company will be given the full 180 calendar days or that it will be able to comply with the Continued Listing Standards. The Company is in the process of reviewing and evaluating potential options to regain compliance with Nasdaq Listing Rule 5550. The Notice has no immediate effect on the listing of the Company's common stock or warrants, and its common stock and warrants will continue to trade on the Capital Market under the symbols "LFLY" and "LFLYW," respectively.

To comply with the Stockholders’ Equity standard, the value of Leafly’s stockholders’ equity must exceed $2.5 million on or before the end of any extension period the Company may receive from the Staff. To comply with the Market Value of Listed Securities standard, the total market value of Leafly’s listed securities, calculated as Leafly’s total shares outstanding multiplied by the daily closing bid price, must be $35.0 million or more for a minimum of ten consecutive business days at any time before the end of any extension the Company may receive from the Staff. If the Company does not comply with the Continued Listing Standards prior to the expiration of any extension that may be granted by the Staff, or if the Staff declines to grant an extension after reviewing the Company’s compliance plan submission, or if the Company does not submit a compliance plan after receiving the Staff’s notification, the Nasdaq Listing Rules require the Staff to provide written

notification to the Company that Leafly’s securities will be delisted, subject to the right to appeal any such delisting determination to a Hearings Panel.