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Stockholders' Equity (Deficit) and Mezzanine Equity
6 Months Ended
Jun. 30, 2023
Stockholders' Equity Note [Abstract]  
Stockholders' Equity (Deficit) and Mezzanine Equity Stockholders’ Equity (Deficit) and Mezzanine Equity
Accumulated Other Comprehensive Income
Changes to accumulated other comprehensive income for the three and six months ended June 30, 2023 and 2022 were not material.
Preferred Stock
On January 28, 2022, Legacy Wag! issued 1.1 million convertible preferred shares (“Series P”) in exchange for $11 million of cash. Series P was issued on substantially similar terms to Legacy Wag!’s other convertible preferred share issuances, except for the Series P convertible share agreement, which contained an adjustment provision that provided for additional shares to be issued based on a formula if the proposed Merger was not completed, as defined in the Company’s A Certificate of Incorporation. Upon consummation of the Merger, the Series P shares converted into the Company’s common stock on a one-for-one basis.
In connection with the Merger, all redeemable convertible preferred stock were converted to common stock of the Company. As such, all outstanding shares of Legacy Wag!’s preferred stock, except for Legacy Wag! Series P Shares (as described above), were converted into shares of the Company’s common stock, par value $0.0001 per share, at the then-effective conversion rate of approximately 0.97.
Pursuant to the Company’s Certificate of Incorporation, the Company is authorized to issue 1,000,000 shares of preferred stock having a par value of $0.0001 per share. The Company’s board of directors has the authority to issue preferred stock and to determine the rights, preferences, privileges, and restrictions, including voting rights, of those shares. As of June 30, 2023, no shares of preferred stock were issued and outstanding.
Common Stock
For periods prior to the Merger, the reported share and per share amounts have been retroactively converted by the applicable exchange ratio of approximately 0.97 with the exception of the authorized shares and shares reserved for issuance.
Stock Option Plan
Under the Company’s 2014 Stock Option Plan (the “2014 Plan”), options may be granted at fair value, generally vest over four years, and expire in ten years. The 2014 Plan was not modified as a result of the Merger; however as of the Merger closing, the Company no longer grants options under the 2014 Plan.
The following table summarizes the activities for all stock options under the Company’s stock-based compensation plans for the six months ended June 30, 2023:
Number of Options Outstanding
Weighted-Average Exercise Price
Weighted-Average Remaining Contractual LifeAggregate Intrinsic Value(1)
(in thousands)
(in thousands)
Outstanding as of December 31, 2022
7,194 $0.40 7.19 years$19,292 
Granted
— $— 
Exercised
(920)$0.10 
Forfeited or expired
(2)$0.18 
Outstanding as of June 30, 2023
6,272 $0.44 6.67 years$11,000 
(1)    The intrinsic value is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock awards.
Restricted Stock Units (“RSUs”)
Under the Company’s 2022 Omnibus Incentive Plan (the “Omnibus Incentive Plan”), The Company issues RSUs and accounts for them issued to employees at fair value, based on the market price of stock on the date of grant, net of estimated forfeitures and revised, if necessary, in subsequent periods if actual forfeitures differ from such estimates. The fair value of RSUs awarded are measured at the grant date. All RSUs were issued to directors or employees of the Company.
The following table summarizes the activities for all restricted stock units under the Company’s stock-based compensation plans for the six months ended June 30, 2023:
Number of Shares
Weighted-Average Grant Date Fair Value Per Share
(in thousands)
Outstanding and nonvested as of December 31, 2022
4,195 $2.44 
Granted
119 $2.14 
Vested
(958)$2.45 
Forfeited
(130)$2.36 
Outstanding and nonvested as of June 30, 2023
3,226 $2.42 
The following table provides information about stock-based compensation expense by financial statement line item:
Three Months Ended
Six Months Ended
June 30,
2023
June 30,
2022
June 30,
2023
June 30,
2022
(in thousands)
Operations and support
$269 $$606 $18 
Sales and marketing
163 359 
General and administrative
689 29 1,498 71 
Total stock-based compensation expense
$1,121 $40 $2,463 $94 
As of June 30, 2023, the total unrecognized compensation cost related to all nonvested restricted stock units was $7.3 million and the related weighted-average period over which it is expected to be recognized was approximately 2.22 years. The Company recognizes RSU compensation over a straight-line basis over the service period of the entire award, subject to the application of an estimate for forfeitures.
Common Stock Warrants
Legacy Wag! Common Warrants
Prior to January 2019, the Company granted 91,310 warrants to purchase common stock. The weighted average exercise price for the warrants were $1.54, and the term of the warrants were 10 years. The warrants were valued on the date of grant using the Black-Scholes Merton ("Black-Scholes") option pricing model. Upon consummation of the Merger, these warrants were unexercised at the date of the Merger and, as a result, were adjusted using an exchange ratio of 0.97 for Legacy Wag! Common Warrants. During the quarter ended September 30, 2022, the two Legacy Wag! holders net exercised their warrants on a cashless basis for 72,434 shares.
CHW Public and Private Placement Warrants
Prior to the Merger, CHW issued 12,500,000 of Public Warrants and 4,238,636 of Private Warrants (together, the “Warrants”) in connection with its initial public offering to CHW Acquisition Sponsor, LLC, the sponsor of CHW. After consummation of the Merger on August 9, 2022, the 4,238,636 Private Warrants held by the Sponsor were exchanged for 3,895,564 warrants to purchase shares of common stock of the Company issuable upon the exercise of Private Placement Warrants originally issued to CHW and the 12,500,000 shares of common stock that are issuable upon the exercise of Public Warrants remained outstanding. Each whole warrant entitles the registered holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment, at any time commencing on September 8, 2022, which was the later of 30 days after the completion of the CHW Business Combination or 12 months from CHW's IPO closing date. The Warrants will expire on the fifth anniversary of the CHW Business Combination, or earlier upon redemption or liquidation.
Management has concluded that the Warrants issued pursuant to the CHW's IPO qualify for equity accounting treatment. The Warrants were not subject to revaluation at the Merger Date, and as such, the original valuation performed by CHW in connection with its IPO in September 2021 still applies. The following table provides quantitative information regarding fair value measurements at issuance on September 1, 2021:
Share Price
Exercise Price
Dividend YieldVolatilityRisk-Free Interest Rate
Expected Term
CHW Warrants$10.00 $11.50 — %22.00 %1.31 %5 years
The fair value as of September 1, 2021 was $1.32 per share. As of June 30, 2023, the Company had 12,500,000 of Public Warrants and 3,895,564 of Private Warrants outstanding, respectively.
The Company may call the Warrants for redemption:
in whole or in part;
at a price of $0.01 per warrant;
upon a minimum of 20 days’ prior written notice of redemption; and
if, and only if, the reported last sale price of the Public Shares equals or exceeds $16.50 per share (as adjusted for share subdivisions, share consolidations, share capitalizations, rights issuances, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date the Company sends the notice of redemption to the warrant holders.
If the Company calls the Warrants for redemption, management will have the option to require all holders that wish to exercise the public warrants to do so on a “cashless basis,” as described in the warrant agreement.
The exercise price and number of shares of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a share dividend, recapitalization, reorganization, merger or consolidation. However, the Warrants will not be adjusted for issuance of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Warrants.