~~Risk Factors — Risks Related to Privacy and Technology — Any error, bug, vulnerability or systems defect or failure and resulting interruptions in the availability~~Tab l e of ~~our website, mobile applications, or platform could adversely affect our business, financial condition, and operating results.”~~Contents

If we fail to invest adequate resources into the payment processing infrastructure on our platform, or if our investment efforts are unsuccessful or unreliable, our payments activities may not function properly or keep pace with competitive offerings, which could adversely impact their usage. Further, our ability to expand out payments activities into additional countries is dependent upon the third-party providers we use to support these activities. As we expand the availability of our platform to additional geographies or offer new payment methods to our Pet Caregivers and Pet Parents in the future, we may become subject to additional regulations and compliance requirements and exposed to heightened fraud risk, which could lead to an increase in our operating expenses.

For certain payment methods, including credit and debit cards, we pay interchange and other fees and such fees result in significant costs. Payment card network costs have increased and may continue to increase in the future, the interchange fees and assessments that they charge for each transaction that accesses their networks may increase, and payment card networks may impose special fees or assessments on any such transaction. Our payment card processors have the right to pass any increases in interchange fees and assessments on to us. Credit card transactions result in higher fees than transactions made through debit cards. WeIf we or our service providers fail to comply with payment card industry security standards, we also face a risk of increased transaction fees and other fines and penalties, ~~if we~~including restrictions or expulsion from card acceptance programs, which could materially and adversely affect our ~~service providers fail to comply with payment card industry security standards.~~business. Any material increase in interchange fees in the United States or other geographies, including as a result of changes in interchange fee limitations imposed by law in some geographies, or other network fees or assessments, or a shift from payment with debit cards to credit cards could increase our operating costs and materially adversely affect our business, operating results, and financial condition.

We rely on third parties to provide some of the software or features for our platform and depend on the interoperability of our platform across third-party applications and services. If such third parties were to interfere with the distribution of our platform or with our use of such software, our business would be materially adversely affected.

We rely upon certain third parties to provide software or features for our platform. If the third parties we rely upon cease to provide access to the third-party software that us, Pet Parents, and Pet Caregivers use, cease providing access to such software on terms that we believe to be attractive or reasonable, or stop providing the most current version of such software, We may be required to seek comparable software from other sources, which may be more expensive or inferior, or may not be available at all, any of which would adversely affect our business. For example, we rely on Google Maps and Apple Maps for maps and location data for functionality on our platform and we integrate applications, content, and data from third parties to deliver our platform and services.

Third-party applications, products, and services are constantly evolving and we may not be able to maintain or modify our platform to ensure compatibility with third-party offerings following development changes. If we lose such compatibility, experience difficulties, or increased costs in integrating our offerings into alternative devices or systems, or manufacturers or operating systems elect not to include our offerings, make changes that degrade the functionality of our offerings, or give preferential treatment to competitive products, the growth of our community and business, results of operations, and financial condition could be materially adversely affected.

~~We rely on~~ mobile operating systems and application marketplaces to make our applications available to Pet Parents and Pet Caregivers and if we do not effectively operate with or receive favorable placements within such application marketplaces and maintain high user reviews, our usage or brand

~~Table of Contents~~

recognition could decline and our business, financial results, and operating results could be materially adversely affected.

We largely depend on mobile operating systems, such as Android and iOS and their respective application marketplaces to make our applications available to Pet Parents and Pet Caregivers that use our platform on mobile devices. Any changes in such systems or application marketplaces that degrade the functionality of our applications or give preferential treatment to our competitors’ applications could adversely affect our platform’s usage on mobile devices. If such mobile operating systems or application marketplaces limit or prohibit us from making our applications available to Pet Parents and Pet Caregivers, make changes that degrade the functionality of our applications, increase the cost to users or to us of using such mobile operating systems or application marketplaces or our applications, impose terms of use unsatisfactory to us, or modify their search or ratings algorithms in ways that are detrimental to us, or if our competitors’ placement in such mobile operating systems’ application marketplace is more prominent than the placement of our applications, user growth could slow, pause, or decline. Our applications have experienced fluctuations in the past and ~~it anticipates~~we could experience similar fluctuations in the future. Any of the foregoing risks could adversely affect our business, financial condition, and operating results.

As new mobile devices and mobile platforms, as well as entirely new technology platforms are developed and released, there is no guarantee that certain devices will support our platform or effectively roll out updates to our applications. Additionally, in order to deliver high-quality applications, we need to ensure that our platform is designed to work effectively with a range of mobile technologies, systems, networks, and standards, which can require cooperation from participants in the mobile device industry. We may not be successful in developing or maintaining relationships with key participants in the mobile device industry that enhance users’ experience. If Pet Parents or Pet Caregivers that use our platform encounter any difficulty accessing or using applications on their mobile devices or if we are unable to adapt to changes in popular mobile operating systems, we expect that our user growth and user engagement would be materially adversely affected.

Our platform ~~may contain~~contains third-party open source software components, the use of which could expose us to information security vulnerabilities ~~result in failures, errors and defects,~~ or subject us ~~to possible litigation or~~ to certain unfavorable conditions, including requirements that we offer our products that incorporate the open source software for no cost or that we make publicly available our confidential, proprietary source code; any such failure to comply with the terms of the underlying open source software licenses could restrict our ability to provide our platform.

~~Though we generally avoid “open source” software, our~~We use open source software. Our platform contains software modules licensed to it by third-party authors under “open source” licenses. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification, or other contractual protections regarding infringement claims or the quality of the code. Accordingly, we cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not abandon further development and ~~maintenance. In addition, the public availability of~~maintenance, nor can we ensure that malicious code is not embedded in such ~~software may make it easier for others to compromise our platform. Many of the risks associated with the use of~~ open source software cannot be eliminated, and could, if not properly addressed, negatively affect our business. To the extent that our systems depend upon the successful operation of the open source software we use, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our systems or applications, delay the introduction of new solutions, result in a failure of our systems, products or services, and injure our reputation. For example, undetected errors or defects in open source software could render it vulnerable to breaches or security attacks and make our systems more vulnerable to data breaches. We have processes in place to help alleviate these risks, but we cannot be sure that all open source software is identified or submitted for approval prior to use in our solutions, products and services. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could adversely affect our ownership of proprietary intellectual property, the security of our systems, products and services, or our business, results of operations, and financial condition.

Some open source licenses contain unfavorable requirements that may, depending on how the licensed software is used or modified, require that we make available source code for modifications or derivative works we create based upon the licensed open source software, authorize further modification and redistribution of that source code, make our software available at little or no cost, or grants other licenses to our intellectual property. This could enable our competitors to create similar offerings with lower development effort and timesoftware.

4533

~~Table~~Tab l e of Contents

and ultimately could result in a loss of our competitive advantages. Alternatively, to avoid the release of the affected portions of our source code, we could be required to purchase additional licenses, expend substantial time and resources to re-engineer some or all of our software or cease use or distribution of some or all of our software until it can adequately address the concerns.

We also release certain of our proprietary software modules to the public under open source licenses. Although we have certain policies and procedures in place to monitor the use of open source software that are designed to avoid subjecting our platform to conditions it does not intend, those policies and procedures may not be effective to detect or address all such conditions. In addition, the terms of many open source licenses have not been interpreted by U.S. or foreign courts and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our platform. From time to time, there have been claims challenging the ownership of open source software against companies that incorporate open source software into their solutions. As a result, we could be subject to lawsuits by parties claiming ownership of what we believe to be open source software. If we are held to have breached or failed to fully comply with ~~all~~ the terms and conditions of an open source software license, we could face infringement or other liability, or be required to seek costly licenses from third parties to continue providing our platform on terms that are not economically feasible, to re-engineer our platform, to discontinue or delay the provision of our platform if re-engineering could not be accomplished on a timely basis, or to make generally available, in source code form, its proprietary code, any of which could adversely affect our business, financial condition, and operating results. Some open source licenses contain unfavorable requirements that may, depending on how the licensed software is used or modified, require that we make available source code for modifications or derivative works we create based upon the licensed open source software, authorize further modification and redistribution of that source code, make our software available at little or no cost, or grants other licenses to our intellectual property. This could enable our competitors to create similar offerings with lower development effort and time and ultimately could result in a loss of our competitive advantages. Alternatively, to avoid the release of the affected portions of our source code, we could be required to purchase additional licenses, expend substantial time and resources to re-engineer some or all of our software or cease use or distribution of some or all of our software until it can adequately address the concerns. We have processes in place to help alleviate risks associated with our use of open source software, but any of these risks could be difficult to eliminate or manage, and, if not addressed, could adversely affect our ownership of proprietary intellectual property, the security of our systems, products and services, or our business, results of operations, and financial condition.

Risks Related to Our Intellectual Property

~~Failure~~We may fail to adequately protect our intellectual property and we may be subject to intellectual property infringement claims by third parties, each of which could adversely affect our business, financial condition, and operating results.

Our business depends on ~~its~~our intellectual property and proprietary technology, the protection of which is crucial to the success of our business. We rely on a combination of trademark, copyright, and trade secret laws, license agreements, intellectual property assignment agreements, and confidentiality agreements and procedures and technology measures to protect ~~its~~our intellectual property. Additionally, we rely on proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable, or that we believes is best protected by means that do not require public disclosure. We generally attempt to protect our intellectual property, technology, and confidential information by requiring our employees and consultants who develop intellectual property on our behalf to enter into confidentiality and invention assignment agreements and third parties we share information with to enter into nondisclosure agreements. These agreements may not, however, effectively prevent unauthorized use or disclosure of our confidential information, intellectual property, or technology and may not provide an adequate remedy in the event of unauthorized use or disclosure of our confidential information or technology, or infringement of our intellectual property. For example, we may fail to enter into the necessary agreements, and even if entered into, these agreements may be willfully breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of our proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information.

In addition, our proprietary information may otherwise become known or be independently developed by our competitors or other third parties. To the extent that our employees, consultants, contractors, and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our intellectual property rights and other proprietary rights, and failure to obtain or maintain protection for ~~its~~our proprietary information could adversely affect our competitive business position.

~~Despite our efforts to protect our proprietary rights, other~~Other parties may unintentionally or willfully disclose, obtain or use our technologies or systems, which may allow unauthorized parties to copy aspects of our platform or other software, technology, and functionality or obtain and use information that we ~~considers~~consider proprietary. ~~In addition, unauthorized~~Unauthorized parties may also attempt to or successfully ~~endeavor, to~~ obtain our intellectual property, confidential information and trade secrets through various methods, including through scraping of public data or other content from our website or mobile applications, cybersecurity attacks, and legal or other methods of protecting this data may be inadequate. Monitoring unauthorized use and disclosures of our intellectual property, proprietary technology, or confidential information can be difficult and expensive and despite our efforts to protect our intellectual property rights, we

~~Table of Contents~~

cannot be sure that the steps ~~it has~~ taken will prevent misappropriation or infringement of our intellectual property ~~or proprietary~~ rights.

~~As of December 2022, we held 7 registered U.S. trademarks. In addition, we have registered domain names for websites that we use in our business, such as www.wagwalking.com~~Our platform also relies upon content and ~~other variations. The inclusion of the website address in herein does not include or incorporate by reference the information on our website into this annual report on Form 10-K.~~

Competitors have and may continue to adopt service names similar to ours, thereby harming our ability to build brand identity and possibly leading to user confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks that are similar to our trademarks. See “Risk Factors — Risks Related to our Intellectual Property — Intellectual property infringement assertions by third parties could result in significant costs and adversely affect our business, financial condition, operating results, and reputation.” Further, litigation or proceedings before the U.S. Patent and Trademark Office or other governmental authorities and administrative bodies in the United States and abroad may be necessary in the future to enforce our intellectual property rights and to determine the validity and scope of the proprietary rights of others. Any litigation initiated by us concerning the violation by third parties of its intellectual property rights is likely to be expensive and time-consuming and could lead to the invalidation of, or render unenforceable, our intellectual property, or could otherwise have negative consequences for us. Even when we sue other parties for such infringement, that suit may have adverse consequences for our business. In addition, we may not timely or successfully apply for a patent or register its trademarks or otherwise secure its intellectual property, which could result in negative effects to our market share, financial condition and results of operations. Our efforts to protect, maintain, or enforce our proprietary rights may not be respected in the future or may be invalidated, circumvented, or challenged. and could result in substantial costs and diversion of resources, which could adversely affect our business, financial condition, and operating results.

~~We are subject to claims and lawsuits relating to intellectual property and other related matters, which could materially adversely affect our reputation, business, and financial condition.~~

~~We face potential liability and expense for claims relating to the~~ information that we publish on our website and mobile applications ~~including claims for trademark~~ and ~~copyright infringement, defamation, libel and negligence, among others. Our platform also relies upon content~~ that is created and posted by Pet Caregivers, Pet Parents, or other third parties. ~~Claims of~~We face potential liability and expense for claims for trademark and copyright infringement, defamation, ~~disparagement,~~libel and negligence, ~~warranty, personal harm, intellectual property infringement, or other alleged damages~~among others, that could be asserted against us, in addition to our Pet Caregivers and Pet Parents. While we rely on a variety of statutory and common-law frameworks and defenses, including those provided by the Digital Millennium Copyright Act (“DMCA”), the Communications Decency Act (“CDA”), and the fair-use doctrine in the United States, differences between statutes, limitations on immunity, requirements to maintain immunity, and moderation efforts in the many jurisdictions in which we operate may affect our ability to rely on these frameworks and defenses, or create uncertainty regarding liability for information or content uploaded by Pet Caregivers and Pet Parents or otherwise contributed by third-parties to our platform. Moreover, regulators in the United States and in other countries may introduce new regulatory regimes, such as a potential repeal of CDA Section 230, that increase potential liability for information or content available on our platform. Failure to identify and prevent illegal or inappropriate content from being uploaded to our platform ~~or an inability to rely on legal defenses available under applicable law to operators of platforms such as ours,~~ may subject us to negative publicity, private enforcement or liability, such as payment of damages, limiting the dissemination of content, and suspension or removal of our platform from app distribution channels.

In addition, we have been and may become subject to claims and litigation alleging infringement of third-party intellectual property which, if resolved adversely to us, could subject us to significant liability for damages, impose temporary or permanent injunctions against our business operations, or invalidate or render unenforceable our intellectual property. See “~~Risk Factors — Risks Related to our Intellectual Property — Failure to adequately protect our intellectual property could adversely affect our business, financial condition, and operating results~~; ~~Intellectual property infringement assertions by third parties could result in significant costs and adversely affect our business, financial condition, operating results, and reputation~~”. In connection with any such claims or litigation, we may decide to settle such lawsuits and disputes on terms that are unfavorable to us or if any litigation to which we are a party is resolved adversely to us, we may be subject to an unfavorable judgment that may not be reversed upon appeal. The terms of such a settlement or judgment may

4734

~~Table~~Tab l e of Contents

Any intellectual property claims, lawsuits, arbitration proceedings, or other legal or regulatory proceedings against us cannot be predicted with any degree of certainty. Any claims, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to our reputation and brand, require significant management attention, and divert significant resources. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines, and penalties. These proceedings could also result in sanctions, consent decrees, injunctions, or other orders requiring a change in our business practices or could require us ~~to cease some or all of our operations or pay substantial amounts to the other party. In addition, we may have~~ to seek a license to continue practices found to be in violation of a third party’s rights, which license may not be available on reasonable terms, or at ~~all, and may significantly increase our operating costs and expenses.~~

The results of any such claims, lawsuits, arbitration proceedings, or other legal or regulatory proceedings cannot be predicted with any degree of certainty. Any claims against us, whether meritorious or not, could be time-consuming, result in costly litigation, be harmful to our reputation, require significant management attention, and divert significant resources. Determining reserves for our pending litigation is a complex and fact-intensive process that requires significant subjective judgment and speculation. It is possible that a resolution of one or more such proceedings could result in substantial damages, settlement costs, fines, and penalties that could adversely affect our business, financial condition, and operating results. These proceedings could also result in harm to our reputation and brand, sanctions, consent decrees, injunctions, or other orders requiring a change in our business practices.all. Any of these consequences could adversely affect our business, financial condition, and operating results. Further, under certain circumstances, we have contractual and other legal obligations to indemnify and to incur legal expenses on behalf of our business and commercial partners and current and former directors and officers.

~~Intellectual property infringement assertions by third parties could result in significant costs and adversely affect our business, financial condition, operating results, and reputation.~~

We operate in an industry with frequent intellectual property litigation. Other parties have asserted and in the future may assert, that we have infringed their intellectual property rights. For example, we are presently involved in a lawsuit in the Northern District of California in which a third-party trademark owner is alleging, amongst other claims, that our “WAG!” trademark infringes the third party’s trademarks and that its use breaches the terms of a 2016 settlement agreement entered into between us and the third party. The third-party trademark owner is seeking cancellation of certain of our registered trademarks as well as damages (including punitive and/or treble damages), attorneys’ fees and a preliminary injunction prohibiting use of our logos and other branding materials which, if successful, may result in material liability and may force us to take costly remediation actions, such as redesigning aspects of our brand or even carrying out complete and costly rebranding. In any event, any such litigation may be time-consuming and expensive to resolve and may divert management’s time and attention from our business. Furthermore, we could be required to pay substantial damages.

We cannot predict whether other assertions of third-party intellectual property rights or claims arising from such assertions would substantially adversely affect our business, financial condition, and operating results. The defense of these claims and any future infringement claims, whether they are with or without merit or are determined in our favor, may result in costly litigation and diversion of technical and management personnel. Further, an adverse outcome of a dispute may require us to pay damages, potentially including treble damages and attorneys’ fees if we are found to have willfully infringed a party’s patent, trademark, or copyright rights, cease making, licensing, or using products that are alleged to incorporate the intellectual property of others, expend additional development resources to redesign our offerings, and enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. In any event, we may need to license intellectual property which would require us to pay royalties or make one-time payments. Even if these matters do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could adversely affect our business, reputation, financial condition, and operating results.

We may be unable to continue to use the domain names that we use in our business or prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand, trademarks, or service marks.

We have registered domain names that we use in, or are related to, our business, most importantly www.wagwalking.com. If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market its offerings under a new domain name, which could cause us substantial harm, or to incur significant expense in order to purchase rights to the domain name in question. We may not be able to obtain preferred domain names outside the United

~~Table of Contents~~

States due to a variety of reasons, including because they are already held by others. In addition, our competitors and others could attempt to capitalize on our brand recognition by using domain names similar to our domain names. We may be unable to prevent third parties from acquiring and using domain names that infringe on, are similar to, or otherwise decrease the value of our brand or our trademarks or service marks. Protecting, maintaining, and enforcing our rights in our domain names may require litigation, which could result in substantial costs and diversion of resources, which could in turn adversely affect our business, financial condition, and operating results.

Risk Related to our Operations

We depend on our highly skilled employees to grow and operate our business and if we are unable to hire, retain, manage, and motivate our employees, or if our new employees do not perform as anticipated, we may not be able to grow effectively and our business, financial condition, and operating results could be materially adversely affected.

Our future success will depend in part on the continued service of our senior management team, key technical employees, and other highly skilled employees. We may not be able to retain the services of any of ~~its~~our employees or other members of senior management in the future. Also, our employees, including our senior management team, work for us on an at-will basis and there is no assurance that any such employee will remain with Wag!.

Our competitors may be successful in recruiting and hiring members of our management team or other key employees and it may be difficult for us to find suitable replacements on a timely basis, on competitive terms, or at all. If we are unable to attract and retain ~~the necessary~~key employees and senior management, particularly in critical areas of our business, we may not achieve our strategic goals. In addition, from time to time, there may be changes in our senior management team that may be disruptive to our business. If our senior management team fails to work together effectively and to execute our plans and strategies, our business, financial condition, and operating results could be materially adversely affected.

~~We face intense competition for highly skilled employees. For example, competition for engineering talent is particularly intense and engineering support is particularly important for our business.~~ To attract and retain top talent, we have offered, and we believe we will need to continue to offer, competitive compensation and benefits packages. Job candidates and existing employees often consider the value of the equity awards they receive in connection with their employment. If the perceived value of our equity awards declines, it may adversely affect our ability to attract and retain highly qualified employees. We may need to invest significant amounts of cash and equity to attract and retain new employees and expend significant time and resources to identify, recruit, train, and integrate such employees and we may never realize returns on these investments. If we are unable to effectively manage our hiring needs or successfully integrate new hires, our efficiency, ability to meet forecasts and employee morale, productivity, and engagement could suffer, which could adversely affect business, financial conditions, and operating results.

Our ~~company culture has contributed to our success and if we cannot maintain and evolve our culture as we grow, our business could be materially adversely affected.~~

~~We believe that our company culture has been critical to our success. We face many challenges that may affect our ability to sustain our corporate culture, including:~~

•~~failure to identify, attract, reward, and retain people in leadership positions in our organization who share and further our culture, values, and mission;~~

•~~the potential growth in size and geographic diversity of our workforce;~~

•competitive pressures to move in directions that may divert us from our mission, vision, and values (including, for example, pressure exerted by large technology companies adopting permanent remote work frameworks);

•~~the impact on employee morale created by geopolitical events, public stock market volatility, and general public company criticism;~~

•~~the continued challenges of a rapidly evolving industry;~~

~~Table of Contents~~

•~~the increasing need to develop expertise in new areas of business that affect Wag!;~~

•~~negative perception of our treatment of employees, Pet Parents, Pet Caregivers, or our response to employee sentiment related to political or social causes or actions of management; and~~

•~~the integration of new personnel and businesses from acquisitions.~~

~~If we are not able to maintain and evolve our culture, our business, financial condition, and operating results could be materially adversely affected.~~

~~Our~~ support function ~~is critical~~contributes to the success of our platform and any failure to provide high-quality service could affect our ability to retain our existing Pet Caregivers and Pet Parents and attract new ones.

Our ability to provide high-quality support to our community of Pet Caregivers and Pet Parents is important for the growth of our business and any failure to maintain such standards of support, or any perception that we do not provide high-quality service, could affect our ability to retain and attract Pet Caregivers and Pet Parents. Meeting the support expectations of our Pet Caregivers and Pet Parents requires significant time and resources from our support team and significant investment in staffing, technology (including automation and machine learning to improve efficiency), infrastructure, policies, and support tools. The failure to develop the appropriate technology, infrastructure, policies and support tools, or to manage or properly train our support team, could compromise our ability to resolve questions and complaints quickly and effectively. Any changes in our workforce composition or number of employees, ~~including as a result of the COVID-19 pandemic,~~ has in the past led to, and may in the future lead to, backlog incidents that lead to substantial delays or other issues in responding to requests for customer support, which may reduce our ability to effectively retain Pet Caregivers and Pet Parents.

Tab l e of Contents

The majority of our user contact volume typically is serviced by a limited number of third-party service providers. weWe rely on our internal team and these third parties to provide timely and appropriate responses to the inquiries of Pet Caregivers and Pet Parents that come to us via telephone, email, social media, and chat. Reliance on these third parties requires that we provide proper guidance and training for our employees, ~~maintains~~maintain proper controls and procedures for interacting with our community, and ~~ensures~~ensure acceptable levels of quality and user satisfaction are achieved. Failure to appropriately allocate functions to these third-party service providers or to maintain suitable training, controls, and procedures could materially adversely impact our business. We provide support to Pet Caregivers and Pet Parents and help to mediate disputes between Pet Caregivers and Pet Parents. We rely on information provided by Pet Caregivers and Pet Parents and are at times limited in our ability to provide adequate support or help Pet Caregivers and Pet Parents resolve disputes due to our lack of information or control. To the extent that Pet Caregivers and Pet Parents are not satisfied with the quality or timeliness of our support or third-party support, we may not be able to retain Pet Caregivers or Pet Parents and our reputation as well our business, operating results, and financial condition could be materially adversely affected.

When a Pet Caregiver or Pet Parent has a poor experience on our platform, we may issue refunds or coupons for future bookings, or other customer service gestures of monetary value. These refunds and coupons are generally treated as a reduction to revenues. A robust support effort is costly and we expect such costs to continue to rise in the future as we grow our business and implement new product offerings. We have historically seen a significant number of support inquiries from Pet Caregivers and Pet Parents. Our efforts to reduce the number of support requests may not be effective and we could incur increased costs without corresponding revenues, which would materially adversely affect our business, operating results, and financial condition.

We rely on a third-party background check provider and a third-party identification provider to screen potential Pet Caregivers and if such providers fail to provide accurate information or we do not maintain business relationships with them, our business, financial condition, and operating results could be materially adversely affected.

We rely on a single third-party background check and identity verification provider to provide or confirm the criminal and other records of potential Pet Caregivers to help identify those that are not eligible to use our platform pursuant to our internal standards and applicable law. Our business may be materially adversely affected to the extent such

~~Table of Contents~~

providers do not meet their contractual obligations, our expectations, or the requirements of applicable laws or regulations. If our third-party background check provider terminates its relationship with us or refuses to renew its agreement with us on commercially reasonable terms, we may need to find an alternate provider and may not be able to secure similar terms or replace such partners in an acceptable timeframe. If we cannot find an alternate provider on terms acceptable to us, we may not be able to timely onboard potential Pet Caregivers and as a result, our platform may be less attractive to potential Pet Caregivers and we may have difficulty finding enough Pet Caregivers to meet Pet Parent demand. Further, if the background checks or identity verification checks conducted by our third-party provider or the third-party databases they check are, or are perceived to be, inaccurate, insufficiently inclusive of relevant records, or otherwise inadequate or below expectations, Pet Caregivers who otherwise would be barred from using our platform may be approved to offer services via our platform and some Pet Caregivers may be inadvertently excluded from our platform. As a result of inaccurate or incomplete background or verification checks, we may be unable to adequately provide a safe environment for pets and Pet Parents and our reputation and brand could be materially adversely affected and we could be subject to increased regulatory or litigation exposure. In addition, we do not generally run additional background checks on Pet Caregivers after they have been approved to use our platform.

If a Pet Caregiver engages in criminal activity after the third-party background check has been conducted, we may not be informed of such criminal activity and this Pet Caregiver may be permitted to continue offering services through our platform. If we choose to engage in more frequent background checks in the future, we may experience a decrease in Pet Caregiver retention, which may adversely impact our platform. We are also subject to a number of laws and regulations applicable to background and identity verification checks for potential and existing Pet Caregivers that use our platform. If we or our third-party background check provider or identity verification provider fail to comply with applicable laws and regulations in the handling of background or identity verification checks or the use of background check or identity verification information, our reputation, business, financial condition, and operating results could be materially adversely affected and we could face legal action, including class, collective, or other representative actions.

Any negative publicity related to ~~any of~~ our third-party background check ~~providers~~ or third-party identity verification provider, including publicity related to safety incidents or actual or perceived privacy or ~~data security~~cybersecurity breaches or other security incidents, could adversely affect our reputation and brand and could potentially lead to increased regulatory or litigation exposure. Any of the foregoing risks could adversely affect our business, financial condition, and operating results.

Tab l e of Contents

We rely primarily on ~~third-party~~ insurance ~~policies~~coverage to insure ~~our~~ operations-related ~~risks.~~risks, including risks related to pet services. If our insurance ~~coverage~~providers change the terms or cost of insurance that is ~~insufficient for the needs of our business or our insurance providers are unable~~not favorable to ~~meet their obligations, we may not be able to mitigate the risks facing our business, which~~us, such changes could adversely affect our business, financial condition, and operating results.

We procure third-party insurance policies to cover various operations-related risks, including general ~~liability, auto~~ liability, excess liability, employment practices liability, workers’ compensation, property, cybersecurity and technology errors and omissions, fiduciary liability, and directors’ and officers’ liability. For certain types of operations-related risks or future risks related to our new and evolving services, we may not be able to, or may choose not to, acquire insurance. In addition, we may not obtain enough insurance to adequately mitigate such operations-related risks or risks related to our new and evolving services and we may have to pay high premiums, self-insured retentions, or deductibles for the coverage we do obtain. Additionally, if any of our insurance providers become insolvent, such a provider would be unable to pay any operations-related claims that we make. Further, some of our agreements with merchants require that we procure certain types of insurance and if we are unable to obtain and maintain such insurance, we would be in violation of the terms of these merchant agreements.

If the amount of one or more operations-related claims were to exceed our applicable aggregate coverage limits, we would bear the excess, in addition to amounts already incurred in connection with deductibles, self-insured retentions, or otherwise paid by our insurance subsidiary. Insurance providers have raised premiums and deductibles for many businesses and may do so in the future. As a result, our insurance and claims expense could increase, or we may decide to raise our deductibles or self-insured retentions when our policies are renewed or replaced. Our business, financial condition, and operating results could be materially adversely affected if: ~~(1)~~(i) the cost per claim, premiums, or the number of claims significantly exceeds our historical experience or coverage limits; ~~(2)~~(ii) we experience a claim in excess of our coverage limits; ~~(3)~~(iii) our insurance

~~Table of Contents~~

providers fail to pay on our insurance claims; ~~(4)~~(iv) we experience a claim for which coverage is not provided; or ~~(5)~~(v) the number of claims under our deductibles or self-insured retentions differs from historical averages.

We may have insufficient or no coverage for certain events, including reclassification of Pet Caregivers under applicable law and certain business interruption losses, such as those resulting from the COVID-19 pandemic. Additionally, certain policies may not be available to us and the policies we have and obtain in the future may be insufficient to cover all of our business exposure.

We rely on our general liability insurance policy to provide coverage to us for claims and losses. Increased claim frequency and severity and increased fraudulent claims could result in greater payouts, premium increases, or difficulty securing coverage.

~~We may face difficulties as we expand our operations into new local markets and international markets in which we have limited or no prior operating experience.~~

Our capacity for continued growth depends in part on our ability to expand our operations into, and compete effectively in, new local and international markets. It may be difficult for us to accurately predict Pet Parent preferences and purchasing habits in these new markets. In addition, each market has unique regulatory dynamics. These include laws and regulations that can directly or indirectly affect our ability to operate, the pool of Pet Caregivers that are available and our costs associated with insurance, support, fraud and onboarding new Pet Caregivers. In addition, each market is subject to distinct competitive and operational dynamics. These include our ability to offer more attractive services than alternative options, to provide effective user support and to efficiently attract and retain Pet Parents and Pet Caregivers, all of which affect our sales, operating results, and key business metrics. As a result, we may experience fluctuations in our operating results due to changing dynamics in the local and international markets where we operate. If we invest substantial time and resources to expand our operations and are unable to manage these risks effectively, our business, financial condition, and operating results could be materially adversely affected.

The failure to successfully execute and integrate acquisitions could materially adversely affect our business, operating results, and financial condition.

As part of our business strategy, we ~~will continue to~~have in the past and may in the future consider a wide array of potential strategic transactions, including acquisitions of businesses, new technologies, services, and other assets and strategic investments that complement our business. ~~For example, in January 2023, we acquired the Dog Food Advisor assets from Clicks and Traffic LLC (“Dog Food Advisor”) for cash consideration of $9 million.~~

Acquisitions involve numerous ~~risks,~~risks. For example any ~~of which could harm our~~ business ~~and negatively affect our financial condition and operating results, including:~~

•~~intense competition for suitable acquisition targets, which could increase prices and adversely affect our ability to consummate deals on favorable~~we acquire may not perform as well as we expect or ~~acceptable terms;~~

•~~failure to close or material delay in closing a transaction;~~

•~~transaction-related lawsuits or claims;~~

•we may encounter difficulties in integrating the ~~technologies,~~technology, operations, ~~existing contracts, and~~or personnel of anany acquired ~~company;~~

•~~difficulties in retaining key employees or business partners of an acquired company;~~

•~~difficulties in retaining merchants, consumers, and service providers, as applicable, of an acquired company;~~

•~~challenges with integrating the brand identity of an acquired company with our own;~~

•~~diversion of financial and management resources from existing operations or alternative acquisition opportunities;~~

•~~failure to realize the anticipated benefits or synergies of a transaction;~~

~~Table of Contents~~

•failure to identify the problems, liabilities, or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, litigation, revenue recognition or other accounting practices, or employee or user issues;

•~~risks that regulatory bodies may enact new laws or promulgate new regulations that are adverse to an acquired company or business;~~

•~~risks that regulatory bodies do not approve our acquisitions or business combinations or delay such approvals;~~

•~~theft of our trade secrets or confidential information that it shares with potential acquisition candidates;~~

•~~risk that an acquired company or investment in new services cannibalizes a portion of our existing business; and~~

•~~adverse market reaction to an acquisition.~~

company. If we fail to address the foregoing risks or other problems encountered in connection with past or future acquisitions of businesses, new technologies, services, and other assets and strategic investments, or if we fail to successfully integrate such acquisitions or investments, our business, financial condition, and operating results could be materially adversely affected.

We may require additional capital to support business growth and this capital might not be available on acceptable terms, or at all.

To support our growing business and to effectively compete, we must have sufficient capital to continue to make significant investments in our platform. We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new platform features and services or enhance our existing platform, improve our operating infrastructure, or acquire complementary businesses and technologies. Although we currently anticipate that our existing cash, cash equivalents, and marketable securities and cash flow from operations will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months, we may require additional financing. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity, equity-linked securities, or convertible debt securities, our existing stockholders could suffer significant dilution and any new securities we issue could have rights, preferences, and privileges superior to those of current equity investors. If we raise additional funds through the incurrence of indebtedness, then we may be subject to increased fixed payment obligations and could be subject to restrictive covenants, such as limitations on ~~its~~our ability to incur additional debt and other operating restrictions that could adversely impact our ability to conduct our business. Any additional future indebtedness we may incur may result in terms that could be unfavorable to our equity investors.

We evaluate financing opportunities from time to time and our ability to obtain financing will depend, among other things, on our development efforts, business plans, and operating performance and the condition of the capital markets at the time we seek financing. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired and our business, financial condition, and operating results may be materially adversely affected.

~~Our application for the Paycheck Protection Program Loan could in the future be determined to have been impermissible or could result in damage to our reputation.~~

In August 2020, we received loan proceeds of approximately $5.1 million from a financial institution pursuant to the Paycheck Protection Program, or the PPP Loan. The PPP Loan is subject to the terms and conditions of the Paycheck Protection Program, which was established under the CARES Act and is administered by the U.S. Small Business Administration, or the SBA. The application for these funds required us to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of Wag!. This certification further required us to take into account our then current business activity and our ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. Following this analysis, we believed that we satisfied all eligibility criteria for the PPP Loans and that our receipt of the PPP Loans was consistent with the broad

5337

~~Table~~Tab l e of Contents

~~objectives of the CARES Act. The certification described above did not contain any objective criteria and is subject to interpretation.~~

In accordance with the requirements of the PPP, we used the PPP Loan to cover certain qualified expenses. The PPP Loan contains customary events of default, including, among others, those relating to breaches of obligations under the PPP Loan (including a failure to make payments), any bankruptcy or similar proceedings, and certain material effects on our ability to repay the PPP Loan. The term of the PPP Loan is five years with a maturity date of August 2025 and contains a fixed annual interest rate of 1.00%. No payments of principal or interest were due until the conclusion of the deferral period, which ended in November 2021. Under the terms of the PPP loans, all or a portion of the principal could be forgiven if the loan proceeds were used for qualifying expenses, adjusted for any headcount reduction, as described in the CARES Act.

In August 2021, we applied for forgiveness of $3.5 million of the PPP Loan. Subsequently, in September 2021, the SBA approved our loan forgiveness application in the amount of $3.5 million. The remaining loan balance of $1.7 million is being paid starting in November 2021 in monthly principal installments of $38,000 through the loan’s maturity date of August 2025.

If, despite our good-faith belief that given its circumstances we satisfied all eligible requirements for the PPP Loan, we are later determined to have violated any applicable laws or regulations that may apply to us in connection with the PPP Loans or it is otherwise determined that we were ineligible to receive the PPP Loan, we may be required to repay the PPP Loan in its entirety or be subject to additional penalties, which could also result in adverse publicity and damage to our reputation. Additionally, the proposed Business Combination may subject us to additional scrutiny for our decision to receive the PPP Loan. Should we be audited or reviewed by federal or state regulatory authorities, such audit or review could result in the diversion of management’s time and attention and legal and reputational costs. Any of these events could have a material adverse effect on our business, results of operations, and financial condition.

Risks Related to our Financial Reporting and Disclosure

We track certain operational metrics with internal systems and tools and do not independently verify such metrics. Certain of our operational metrics are subject to inherent challenges in measurement and any real or perceived inaccuracies in such metrics may adversely affect our business and reputation.

We track certain operational and business metrics with internal systems and tools that are not independently verified by any third party and which may differ from estimates or similar metrics published by third parties due to differences in sources, methodologies, or the assumptions on which we rely. Our internal systems and tools have a number of limitations and our methodologies for tracking these metrics may change over time, which could result in unexpected changes to our metrics, including the metrics we publicly discloses. If the internal systems and tools we use to track these metrics under count or over count performance or contain algorithmic or other technical errors, the data we reports may not be accurate. While these numbers are based on what we believe to be reasonable estimates of our metrics for the applicable period of measurement, there are inherent challenges in measuring how our platform is used across large populations. For example, the accuracy of our operating metrics could be impacted by fraudulent users of our platform and further, we believe that there are consumers who have multiple accounts, even though this is prohibited in our Terms of Service and we implement measures to detect and prevent this behavior. In addition, limitations or errors with respect to how we measure data or with respect to the data that we measure may affect our understanding of certain details of our business, which could affect our long-term strategies. If our operating metrics are not accurate representations of our business, if investors do not perceive our operating metrics to be accurate, or if we discover material inaccuracies with respect to these figures, we expect that our business, reputation, financial condition, and operating results would be materially adversely affected.

~~Certain estimates~~Failure to achieve and ~~information contained in this herein are based on information from third-party sources~~maintain effective disclosure controls and we do not independently verify the accuracy or completeness of the data contained in such sources or the methodologies for collecting such data and any real or perceived inaccuracies in such estimates and information may harm our reputation and adversely affect our business.

Certain estimates and information contained in this herein, including general expectations concerning our industry and the market in which we operate, category share, market opportunity, and market size, are based to

~~Table of Contents~~

some extent on information provided by third-party providers. This information depends on a number of assumptions and limitations and although we believe the information from such third-party sources is reliable, we have not independently verified the accuracy or completeness of the data contained in such third-party sources or the methodologies for collecting such data. If there are any limitations or errors with respect to such data or methodologies, or if investors do not perceive such data or methodologies to be accurate, or if we discover material inaccuracies with respect to such data or methodologies, our reputation, financial condition, and operating results could be materially adversely affected.

~~We identified material weaknesses in our~~ internal control over financial reporting ~~and we may experience additional material weaknesses in the future, which may~~could result in our failure to accurately or timely report our financial condition or results of operations which could have a material ~~misstatements of~~adverse effect on our ~~consolidated financial statements or cause us to fail to meet our periodic reporting obligations.~~

business and stock price.

In connection with the preparation of our consolidated financial statements as of and for the fiscal year ended December 31, 2022, we identified material weaknesses in our internal control over financial ~~reporting.~~reporting, which still existed as of December 31, 2023. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We identified a material weakness in our internal control over financial reporting related to insufficient resources needed to fully implement our internal control risk assessment process, evaluate the technical accounting aspects of certain material transactions and effectively design and implement certain process level controls. We also identified a material weakness regarding the risk assessment process related to information technology general controls and activities of service organizations, the design and implementation of logical access, segregation of duties and program change controls and certain process level controls related to information used in the execution of those controls that impact our financial reporting processes.

We have begun implementing remedial measures, and while there can be no assurance that our efforts will be successful, we plan to remediate the material ~~weaknesses.~~weaknesses as soon as practical in a future period. These plans include implementing technology, hiring personnel, and other related activities, including engaging external resources. If we are unable to remediate the material weaknesses or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process, and report financial information accurately, and to prepare financial statements within the required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.

We cannot assure you that the measures we have taken to date, and actions we may take in the future, will prevent or avoid control deficiencies that could lead to material weaknesses in our internal control over financial reporting in the future. Our current controls, and any new controls that we develop, may become inadequate because of changes in conditions in our business. Further, deficiencies in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results, or cause us to fail to meet our reporting obligations, or cause investors to lose confidence in the accuracy and completeness of our financial statements and reports, which would likely adversely affect our business and the market price of our common stock and may result in a restatement of our financial statements for prior periods. In addition, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC, and other regulatory authorities.

Tab l e of Contents

Once we are no longer an “emerging growth company”, and our independent registered public accounting firm ~~will be~~is required to attest to the effectiveness of our internal control over financial reporting for our Annual Report on Form 10-K. Failure to comply with the Sarbanes-Oxley Act could potentially subject us to sanctions or investigations by the SEC, the applicable stock exchange or other regulatory authorities, which would require additional financial and management resources. We have begun compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404 in the future, but may not be able to complete our evaluation, testing and any required remediation in a timely fashion.

If we fail to continue to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired, which may adversely affect investor confidence in us and, as a result, the market price of our common stock.

As a public company, we are required to comply with the requirements of the Sarbanes-Oxley Act, or the Sarbanes-Oxley Act, including, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In connection with the preparation of our consolidated

~~Table of Contents~~

financial statements as of and for the fiscal year ended December 31, 2022, we identified a material weakness in our internal control over financial reporting related to insufficient resources needed to fully implement our internal control risk assessment process, evaluate the technical accounting aspects of certain material transactions and effectively design and implement certain process level controls. We also identified a material weakness regarding the risk assessment process related to information technology general controls and activities of service organizations, the design and implementation of logical access, segregation of duties and program change controls and certain process level controls related to information used in the execution of those controls that impact our financial reporting processes.. We continue to develop and refine our disclosure controls and other procedures that are designed to ensure that the information we are required to disclose in the reports that we file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is accumulated and communicated to our management, including our principal executive and financial officers.

Once we cease to be an emerging growth company, we will be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm. In this regard,10-K, we will need to continue to dedicate internal resources, potentially engage outside consultants and adopt a detailed work plan to assess and document the adequacy of our internal control over financial reporting, validate through testing that controls are functioning as documented and implement a continuous reporting and improvement process for internal control over financial reporting. Moreover, our testing, or the subsequent testing by our independent registered public accounting firm, may reveal additional deficiencies in our internal control over financial reporting that are deemed to be material weaknesses.

~~Any failure~~ Failure to ~~implement and maintain effective disclosure controls and procedures and internal control over financial reporting, including~~comply with the ~~identification of one or more material weaknesses,~~Sarbanes-Oxley Act could cause investors to lose confidence in the accuracy and completeness of our financial statements and reports, which would likely adversely affect the market price of our common stock. In addition, we could bepotentially subject us to sanctions or investigations by the SEC, the applicable stock exchange ~~on which our common stock is listed, the SEC, and~~or other regulatory ~~authorities.~~

authorities, which would require additional financial and management resources.

Risks Related to Ownership of Our Common Stock and Warrants

We are an emerging growth and smaller reporting company and any decision to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth and smaller reporting companies could make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we have chosen and may continue to choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to ~~“emerging~~emerging growth companies,~~” including:~~

• including, but not limited to, not being required to ~~have independent registered public accounting firm audit our internal control over financial reporting under~~comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley ~~Act;~~

•Act, reduced disclosure obligations regarding executive compensation in our periodic reports, ~~and annual report~~Annual Reports on Form ~~10-K;~~10-K, and

• proxy statements, and exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.

As a result, the stockholders may not have access to certain information that they may deem important. ~~Our status as an emerging growth company will end as soon as any of the following takes place:~~

•~~the last day of the fiscal year in which Wag! has at least $1.235 billion in annual revenues;~~

•~~the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates;~~

•~~the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; or~~

~~Table of Contents~~

•~~the last day of the fiscal year ending after the fifth anniversary of CHW Acquisition Corporation's ("CHW"), initial public offering ("IPO") consummated on September 21, 2021.~~

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We ~~may elect~~have elected to take advantage of this extended transition period and as a result, ~~its~~our financial statements may not be comparable with similarly situated public companies.

Our status as an emerging growth company will end as soon as any of the following occurs: the last day of the fiscal year in which Wag! has at least $1.235 billion in annual revenues; the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates; the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; or the last day of the fiscal year ending after the fifth anniversary of CHW Acquisition Corporation's (“CHW”) initial public offering (“IPO”) consummated on September 21, 2021.

Additionally, we qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K under the Securities Act. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements in their periodic reports. We will remain a smaller reporting company until the last day of the fiscal year in which we fail to meet the following criteria: (i) the market value of our common stock held by nonaffiliates does not exceed $250 million as of the end of that fiscal year’s second fiscal quarter; or (ii) our annual revenues do not exceed $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates does not exceed $700 million as of the end of that fiscal year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

We cannot predict if investors will find our common stock less attractive if we choose to rely on any of the exemptions afforded emerging growth and smaller reporting companies. If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile and may decline.

~~Our quarterly operating results have~~The price of our common stock has fluctuated significantly and may continue to fluctuate significantly and could ~~fall below~~decline regardless of operating performance. You may not be able to resell your shares at or above the ~~expectations~~price you paid and you may lose part or all of ~~securities analysts and investors due to seasonality and other factors, some~~your investment.

The price of ~~which are beyond our control, resulting in a decline in~~ our stock ~~price.~~

has and may continue to substantially fluctuate. This is especially true with companies like ours with a small public float. Fluctuations in the price of our securities could contribute to the loss of all or part of your investment. ~~Any of the factors listed below could have a material adverse effect on your investment in our securities and our~~Our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

~~Factors affecting the trading price of our securities may include:~~

•~~general economic and political conditions;~~

•actual or anticipated changes or fluctuations in our operating results, changes in the market’s expectations about our operating results; or failure to meet the expectation of securities analysts or investors in a particular period;

•~~announcements by us or our competitors of new technology, features, or services;~~

•~~competitors’ performance;~~

•~~developments or disputes concerning our intellectual property or other proprietary rights;~~

•~~actual or perceived data security breaches or other data security incidents;~~

•~~announced or completed acquisitions of businesses by us or our competitors;~~

•~~actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to it;~~

•~~any actual or anticipated changes in the financial projections we may provide to the public or our failure to meet those projections~~

•~~any major change in the our Board or management;~~

•changes in laws and regulations affecting our business actual or anticipated developments in our business, its competitors’ businesses, or the competitive landscape generally and any related market speculation;

•~~litigation involving us, our industry or both;~~

•~~governmental or regulatory actions or audits;~~

•~~regulatory or legal developments in the United States;~~

•~~announcement or expectation of additional financing efforts;~~

•~~changes in accounting standards, policies, guidelines, interpretations, or principles;~~

•~~our ability to meet compliance requirements;~~

•~~the public’s reaction to our press releases, other public announcements, and filings with the SEC;~~

•~~operating and share price performance of other companies that investors deem comparable to us;~~

5739

~~Table~~Tab l e of Contents

•~~price and volume fluctuations in the overall stock market from time to time;~~

•~~changes in operating performance and stock market trading volumes and trading prices of other technology companies generally, or those in the pet care industry in particular;~~

•~~changes in financial estimates and recommendations by securities analysts concerning us or the pet care industry in general;~~

•~~changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;~~

•~~the volume of shares of our common stock available for public sale;~~

•~~sales of shares of our common stock by us or our stockholders;~~

•~~sales of substantial amounts of shares of our common stock by our directors, executive officers, or significant stockholders or the perception that such sales could occur;~~

•~~failure of securities analysts to maintain coverage of us;~~

•~~the impact of the ongoing COVID-19 pandemic on our business; and~~

•~~the other risk factors under “Risk Factors~~”.

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock markets in general, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks and of our securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to usours could depress our share price regardless of our business, prospects, financial conditions, or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

Insiders have substantial influence over us which could limit your ability to affect the outcome of key transactions, including a change of control.

Our executive officers, directors, and their affiliates beneficially own approximately ~~21.2%~~23.8% of our common stock outstanding representing ~~21.2%~~23.8% of the vote.

As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors, amendments of our organizational documents, and approval of significant corporate transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing, or deterring a change in control of us or changes in our management. Further, this control will make the approval of certain transactions difficult or impossible without the support of these stockholders and their votes and might affect the market price of our common stock.

If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business or our market, or if they adversely change their recommendations regarding our common stock, the trading price or trading volume of our common stock could decline.

The trading market for our common stock will be influenced in part by the research and reports that securities or industry analysts may publish about us, our business, our market, or our competitors. If one or more securities analysts initiate research with an unfavorable rating or downgrade our Common Stock, provide a more favorable recommendation about our competitors or publish inaccurate or unfavorable research about our business, our Common Stock price would likely decline. If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us, or fail to publish reports on us regularly, we could lose visibility in the financial markets and demand for our securities could decrease, which in turn could cause the price and trading volume of our common stock to decline.

~~Table of Contents~~

A significant portion of our total outstanding shares was restricted under lock-up from immediate resale and now may be sold into the market, which could cause the market price of our common stock to decline significantly, even if our business is doing well.

Shares of our common stock that were restricted from immediate resale under Lockup and now may be sold into the market pursuant to the registration statement of which this annual report on Form 10-K forms a part so long as it is available for use. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of common stock. We are unable to predict the effect that sales may have on the prevailing market price of our Common

~~Stock and Warrants.~~

To the extent our Warrants are exercised, additional shares of common stock will be issued, which will result in dilution to the holders of common stock and increase the number of shares eligible for resale in the public market. Sales, or the potential sales, of substantial numbers of shares in the public market by the selling securityholders, subject to certain restrictions on transfer until the termination of applicable lock-up periods, could increase the volatility of the market price of common stock or adversely affect the market price of common stock.

~~Certain securityholders obtained Wag! securities at a discount and public security holders may not experience a similar rate of return.~~

Certain selling securityholders purchased the securities at different prices, some significantly below the current trading price of such securities: (i) CHW Acquisition Sponsor, LLC (the "Sponsor") purchased 2,385,000 Founder Shares at $0.01 and 3,895,564 Private Placement Warrants at $1.00 per warrant in connection with the IPO; (ii) the investor that signed the PIPE and Backstop Subscription Agreement ("PIPE and Backstop Investor") purchased 500,000 shares of our common stock at a purchase price of $10.00 per share; (iii) 72,323 shares of common stock were issued to two lenders due to the net exercise of the Wag! Common Warrants with a converted weighted average exercise price of $1.54; (iv) 50,000 shares were issued to Craig-Hallum Capital Group LLC at a price of $4.83 per share; and (v) 732,500 Registration Rights Shares were purchased at a price of $0.01 per share. Certain selling securityholders may therefore have an incentive to sell because they could earn substantial profits due to the lower price at which they purchased their shares compared to public investors. Based on a closing price of the common stock on March 24, 2023 of $2.30, the Sponsor could potentially earn approximately $5.5 million of profit upon resale. Additionally, the two lenders, Craig-Hallum Capital Group LLC and the Representative Shareholders could also potentially profit on sales due to the lower price at which they acquired their shares. Public securityholders may not experience a similar rate of return on the securities they have purchased or may purchase in the future due to differences in the purchase prices and the current trading price.

Our Warrants may never be in-the-money and they may expire worthless.

The exercise price for our ~~Warrants~~warrants is $11.50 ~~per-share~~per share (subject to adjustment as described herein), which exceeds the market price of our common stock, which was ~~$2.30~~$2.10 per share based on the closing price on the Nasdaq on March ~~24, 2023.~~13, 2024. If all of our Warrants were exercised in full for cash, we would receive an aggregate of approximately ~~$188.5~~$210.4 million. We believe it is unlikely that the warrantholders will exercise their Warrants and, therefore, we do not expect to receive cash proceeds from any such exercise, for so long as the Warrants remain out-of-the money. There can be no assurance that the Warrants will ever be in the money prior to their expiration in 2027 and, as such, may expire worthless.

Because there are no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your Wag! common stock at a price greater than what you paid for it.

We intend to retain future earnings, if any, for future operations, expansion, and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of our common stock will be at the sole discretion of our Board. Our Board may take into account general and economic conditions, our financial condition and results of operations, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as the Board may deem relevant. As a result, youYou may not receive any return on

~~Table of Contents~~

an investment in our common stock unless you sell your Wag! common stock for a price greater than that which you paid for it.

Our stockholders may experience dilution in the future.

The percentage of shares of our common stock owned by current stockholders may be diluted in the future because of equity issuances for acquisitions, capital market transactions, or otherwise, including, without limitation, equity awards that we may grant to its directors, officers, and employees, exercise of our warrants or meeting the conditions under the Earnout Shares and the Management Earnout ~~Shares.~~Shares (See Note 3, Business Combination with CHW, to the Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K). In connection with the Business Combination, we granted to the lender of the ~~Credit Facility~~Financing Agreement a certain ~~amount~~number of warrants to acquire common stock. Such issuances may have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock.

~~The Charter~~

Tab l e of Contents

Our Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery in the State of Delaware is the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a chosen judicial forum for disputes with us or our directors, officers, employees or stockholders.

~~The Charter~~Our Certificate of Incorporation requires, to the fullest extent permitted by law, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions, any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”), the Certificate of Incorporation or the bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the amended and restated bylaws, or any action asserting a claim governed by the internal affairs doctrine may be brought in the Court of Chancery in the State of Delaware or, if that court lacks subject matter jurisdiction, another federal or state court situated in the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in the ~~Charter.~~Certificate of Incorporation. In addition, the ~~Charter~~Certificate of Incorporation and ~~amended and restated~~ bylaws provide that the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act and the Exchange Act.

~~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. It is unclear whether this decision will be appealed, or what the final outcome of this case will be. We intend to enforce this provision, but we do not know whether courts in other jurisdictions will agree with this decision or enforce it.

This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision contained in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Additionally, it is uncertain whether this choice of forum provision is enforceable. Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. In light of this uncertainty, investors bringing a claim may face certain additional risks, including increased costs and uncertainty of litigation outcomes.

~~Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.~~

The Organizational Documents provide that we indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the DGCL, the amended and restated bylaws and its indemnification agreements that we have entered into with our directors and officers provide that:

•we indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

~~Table of Contents~~

•~~we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;~~

•we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;

•we are not obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnities, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification;

•the rights conferred in the amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons; and

•~~we may not retroactively amend our bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.~~

Risks Related to Being a Public Company

~~Our~~We incur significant costs operating as a public company. In addition, our management team has limited experience managing a public ~~company and may not successfully manage our transition to public company status.~~

Most members of our management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage the transition to being a public company that is subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, results of operations and financial condition.

~~We will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on our business, financial condition, and operating results.~~company.

We face increased legal, accounting, administrative, and other costs and expenses as a public company that we do not incur as a private company and these expenses may increase even more after we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the ~~PCAOB~~Public Company Accounting Oversight Board (United States) (“PCAOB”) and the securities exchanges and the listing standards of ~~the~~ Nasdaq, impose additional reporting and other obligations on public companies. Compliance with public company requirements ~~increase~~increases costs, ~~and make~~makes certain activities more ~~time-consuming. A number of those requirements will require us to carry out activities we have not done previously. For example, we created new board committees, entered into new insurance policies,~~time-consuming, and ~~adopted new internal controls~~increases demands on our systems and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be and have been incurred. Furthermore, if any issues in complying with those requirements are identified (for example, if management or our independent registered public accounting firm identifies material weaknesses in the internal control over financial reporting), we could incur additional costs rectifying those issues, the existence of those issues could adversely affect our reputation or investor perceptions of us and it may be more expensive to obtain director and officer liability insurance.resources. Risks associated with our status as a public company may make it more difficult to attract and retain qualified independent persons to serve on ~~the~~ our Board or as executive officers. In addition, as a public company, we may be subject to stockholder activism, which can lead to substantial costs, distract management, and impact the manner in which we operate our business in ways we do not currently anticipate. As a result of disclosure of information herein and in filings required of a public company, our business and financial condition ~~will become~~are more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be materially adversely affected and even if the claims do not result in litigation or are resolved in our favor, these claims and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations. The ~~additional reporting and other obligations imposed by these rules and regulations~~

~~Table of Contents~~

will increase legal and financial compliance costs and the costs of related legal, accounting, and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

~~The requirements of being a public company may strain our resources, divert management’s attention and affect its ability to attract and retain qualified board members.~~

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Sarbanes-Oxley Act and any rules promulgated thereunder, as well as the rules of Nasdaq. The requirements of these rules and regulations increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight will be required and, as a result, management’s attention may be diverted from other business concerns. These rules and regulations can also make it more difficult for us to attract and retain qualified independent members of our board of directors. Additionally, these rules and regulations make it more difficult and more expensive for us to obtain director and officer liability insurance. We may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. The increased costs of compliance with public company reporting requirements and our potential failure to satisfy these requirements can have a material adverse effect on our operations, business, financial condition or results of operations.

In ~~order~~addition, most members of our management team have limited experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to ~~satisfy our~~public companies. The obligations asof being a public company ~~we will need to hire qualified accounting~~require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could harm our business, results of operations and financial ~~personnel with appropriate public company experience.~~condition.

As a newly public company, we have established and maintained effective disclosure and financial controls and made changes in our corporate governance practices. We may need to hire additional accounting and financial personnel with appropriate public company experience and technical accounting knowledge, and it may be difficult to recruit and retain such personnel. Even if we are able to hire appropriate personnel, our existing operating expenses and operations will be impacted by the direct costs

Tab l e of ~~their employment and the indirect consequences related to the diversion of management resources from research and development efforts.~~Contents

We may be subject to securities litigation, which is expensive, could divert management attention, hinder execution of business and growth strategy and impact our stock price.

The per share price of ~~the~~our common stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities litigation, including class action litigation. Due to the inherent uncertainties of litigation, the ultimate outcome of any such proceedings cannot be accurately predicted. Litigation of this type could result in substantial legal fees, settlements, or judgment costs and diversion of management’s attention and resources, which could have a material adverse effect on our business, financial condition, and results of operations. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of our common stock or other reasons may in the future cause it to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and the board of directors’ attention and resources from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism. Any adverse determination in litigation could also subject us to significant liabilities.

~~Table of Contents~~

~~Because we became a publicly traded company by means other than a traditional underwritten initial public offering, our stockholders may face additional risks and uncertainties.~~

Because we became a publicly traded company by means of consummating the Business Combination rather than by means of a traditional underwritten initial public offering, there is no independent third-party underwriter selling the shares of our common stock, and, accordingly, our stockholders will not have the benefit of an independent review and investigation of the type normally performed by an unaffiliated, independent underwriter in a public securities offering. Due diligence reviews typically include an independent investigation of the background of the company, any advisors and their respective affiliates, review of the offering documents and independent analysis of the plan of business and any underlying financial assumptions. Although CHW performed a due diligence review and investigation of Wag! in connection with the Business Combination, the lack of an independent due diligence review and investigation increases the risk of investment in us because CHW’s due diligence review and investigation may not have uncovered facts that would be important to a potential investor.

In addition, because we did not become a publicly traded company by means of an traditional underwritten initial public offering, security or industry analysts may not provide, or be less likely to provide, coverage of us. Investment banks may also be less likely to agree to underwrite secondary offerings on behalf of us than they might otherwise be if we became a publicly traded company by means of a traditional underwritten initial public offering because they may be less familiar with us as a result of more limited coverage by analysts and the media. The failure to receive research coverage or support in the market for our common stock could have an adverse effect on our ability to develop a liquid market for our common stock.

There can be no assurance that we will be able to comply with the continued listing ~~standards~~requirements of ~~Nasdaq.~~the Nasdaq Global Market and failure to do so may result in our securities being delisted.

IfOur common stock is listed on the Nasdaq Global Market. We cannot assure you that our common stock will continue to be listed on the Nasdaq Global Market. For example, if we fail to satisfy the continued listing requirements of Nasdaq, such as the corporate governance requirements or the minimum share price requirement, Nasdaq may take steps to delist our securities. Such a delisting would likely have a negative effect on the price of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our securities from dropping below the Nasdaq minimum share price requirement or prevent future non-compliance with Nasdaq’s listing requirements. Additionally, if our securities are not listed on, or become delisted from, Nasdaq for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if we were quoted or listed on Nasdaq or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

If we cannot continue to satisfy listing requirements and other rules of Nasdaq Global Market, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.

~~Our Common Stock is listed on the Nasdaq Global Market. We cannot assure you that our Ordinary Shares will continue to be listed on the Nasdaq Global Market.~~

In order to maintain our listing on the Nasdaq Global Market, we are required to comply with certain rules of Nasdaq Global Market, including those regarding minimum shareholder’s equity, minimum share price, and certain corporate governance requirements. We may not be able to continue to satisfy continuing listing requirements and other applicable rules of the Nasdaq Global Market. If we are unable to satisfy the Nasdaq Global Market criteria for maintaining our listing, our securities could be subject to delisting.

~~If the Nasdaq Global Market subsequently delists our securities from trading, we could face significant consequences, including:~~

•~~a limited availability for market quotations for our securities;~~

•~~reduced liquidity with respect to our securities;~~

•~~the number of institutional and general investors that will consider investing in our Common Stock;~~

~~Table of Contents~~

•~~the number of investors in general that will consider investing in our Common Stock;~~

•~~the number of market makers in our Common Stock;~~

•~~limited amount of news and analyst coverage; and~~

•~~a decreased ability to issue additional securities or obtain additional financing in the future.~~

You may only be able to exercise your public warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer common stock from such exercise than if you were to exercise such warrants for cash.

The warrant agreement provides that in the following circumstances holders of warrants who seek to exercise their warrants will not be permitted to do so for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the common stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the warrant agreement; (ii) if we have so elected and the common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the public warrants for redemption. If you exercise your public warrants on a cashless basis, you would pay the warrant exercise price by surrendering all of the warrants for that number of common stock equal to the quotient obtained by dividing (x) the product of the number of common stock underlying the warrants, multiplied by the excess of the “fair market value” of our common stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” is the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, you would receive fewer shares of common stock from such exercise than if you were to exercise such warrants for cash.

We have no current plans to pay cash dividends on our common stock; as a result, stockholders may not receive any return on investment unless they sell their common stock for a price greater than the purchase price.

We have no current plans to pay dividends on our common stock. Any future determination to pay dividends will be made at the discretion of our board of directors, subject to applicable laws. It will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual, legal, tax and regulatory restrictions, general business conditions, and other factors that the board of directors may deem relevant. In addition, the ability to pay cash dividends may be restricted by the terms of debt financing arrangements, as any future debt financing arrangement likely will contain terms restricting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, stockholders may not receive any return on an investment in our common stock unless they sell their shares for a price greater than that which they paid for them.

Provisions in our organizational documents and certain rules imposed by regulatory authorities may delay or prevent an acquisition by a third party that could otherwise be in the interests of stockholders.

Our certificate of incorporation and amended and restated bylaws contain several provisions that may make it more difficult or expensive for a third party to acquire control of us without the approval of the board of directors. These provisions, which may delay, prevent or deter a merger, acquisition, tender offer, proxy contest, or other transaction that stockholders may consider favorable, include the following:

•~~a classified board;~~

•~~advance notice for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings;~~

•~~certain limitations on convening special stockholder meetings;~~

•~~limiting the persons who may call special meetings of stockholders;~~

•~~limiting the ability of stockholders to act by written consent;~~

•~~restrictions on business combinations with interested stockholder;~~

~~Table of Contents~~

•~~in certain cases, the approval of holders representing at least 662/3~~% of the total voting power of the shares entitled to vote generally in the election of directors will be required for stockholders to adopt, amend or repeal the bylaws, or amend or repeal certain provisions of the certificate of incorporation;

•~~no cumulative voting;~~

•~~the required approval of holders representing at least 662/3% of the total voting power of the shares entitled to vote at an election of the directors to remove directors; and~~

•the ability of the board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used, among other things, to institute a rights plan that would have the effect of significantly diluting the stock ownership of a potential hostile acquirer, likely preventing acquisitions.

These provisions of our certificate of incorporation and amended and restated bylaws could discourage potential takeover attempts and reduce the price that investors might be willing to pay for shares of our common stock in the future, which could reduce the market price of our common stock.

The provision of our certificate of incorporation requiring exclusive venue in the Court of Chancery in the State of Delaware and the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against directors and officers.

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for:

•~~any derivative action or proceeding brought on behalf of us;~~

•~~any action asserting a claim of breach of fiduciary duty owed by any director, officer, agent or other employee or stockholder to us or our stockholders;~~

•any action asserting a claim arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the amended and restated bylaws or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware;

•~~any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the amended and restated bylaws; or~~

•any action asserting a claim governed by the internal affairs doctrine, in each case subject to such Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. It further provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolutions of any complaint asserting a cause of action arising under the Securities Act. The exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Exchange Act, or any other claim for which the federal courts have exclusive jurisdiction. Although these provisions are expected to benefit us by providing increased consistency in the application of applicable law in the types of lawsuits to which they apply, the provisions may have the effect of discouraging lawsuits against directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings and there is uncertainty as to whether a court would enforce such provisions. In addition, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. It is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in the our certificate of incorporation to be inapplicable or unenforceable in such action. If so, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, financial condition or results of operations.

Item 1B. Unresolved Staff Comments

~~None.~~Not applicable.

Item 1C. Cybersecurity

We have developed and implemented a cybersecurity risk management program intended to protect the confidentiality, integrity, and availability of our critical systems and information.

Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal, compliance, strategic, operational, and financial risk areas.

Key elements of our cybersecurity risk management program include, but are not limited to the following:

•risk assessments designed to help identify material cybersecurity risks to our critical systems and information;

•a Security team responsible for managing our (1) cybersecurity risk assessment processes, (2) security controls, and (3) response to cybersecurity incidents;

•the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security processes, and to provide support during incident response efforts;

•cybersecurity awareness training of our employees, incident response personnel, and senior management;

•a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and

•a third-party risk management process for service providers, suppliers, and vendors based on their criticality and risk profile.

•There can be no assurance that our cybersecurity risk management program and processes, including our policies, controls, or procedures, will be fully implemented, complied with or effective in protecting our systems and information.

Tab l e of Contents

We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations, or financial condition. We face certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our operations, business strategy, results of operations, or financial condition. For additional information, see “Risk Factors — Risks Related to Privacy and Technology — Changes in laws, regulations, or industry standards relating to privacy, data protection, or the transfer or processing of data relating to individuals, or any actual or perceived failure by us to comply with such laws and regulations or any other obligations, including contractual obligations, relating to privacy, data protection, or the transfer or processing of data relating to individuals, could adversely affect our business, results of operations and financial condition.”

Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to the Audit Committee (“Committee”) oversight of cybersecurity and other information technology risks. The Committee oversees management’s implementation of our cybersecurity risk management program.

The Committee receives reports regularly from management on our cybersecurity risks. In addition, management updates the Committee, as necessary, regarding any cybersecurity incidents.

The Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives briefings from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from our Chief Technology Officer (“CTO”), internal staff or external experts as part of the Board’s continuing education on topics that impact public companies.

Our management team, including our CTO, is responsible for assessing and managing our material risks from cybersecurity threats. Our CTO leads a team that has primary responsibility for our overall cybersecurity risk management program and supervises both our internal cybersecurity personnel and any retained external cybersecurity consultants. Our CTO has more than 12 years of experience in cybersecurity, software, and IT in various technology-related businesses, including some oversight over security and integrity of systems and operations. In addition, our CTO leads our Security team, who have more than 16 years of experience in these fields.

Our management team stays informed about and monitors efforts to prevent, detect, mitigate, and remediate cybersecurity risks and incidents through various means, which may include briefings from internal security personnel; threat intelligence and other information obtained from governmental, public or private sources; any retained external cybersecurity consultants; and alerts and reports produced by security tools deployed in the IT environment. Our management team reports information about cybersecurity risks to the Committee.

Item 2. Properties

~~Table of Contents~~

~~The Company does not own any real property.~~ Our corporate headquarters is located in San Francisco, California, where we currently lease approximately 3,900 square feet ~~of office space under~~pursuant to a lease agreement that expires in February 2026. We also lease additional office space in Phoenix, Arizona ~~and El Dorado Hills, California for office space and warehouse space; both locations~~pursuant to a lease ~~agreements expire~~agreement that expires in ~~2023.~~ November 2028.

We believe that ~~these~~our facilities are ~~generally~~ suitable to meet our current ~~needs. From time to time,~~needs, and we ~~have subleased portions of the spaces~~believe that ~~we are not currently using.~~suitable alternative space will be available as needed.

Item 3. Legal Proceedings

~~For a discussion regarding the Company’s legal proceedings, see the~~The information ~~contained in~~ set forth under Note 9, - Commitments and Contingencies, to the Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of ~~the Notes to consolidated financial statements.~~this Annual Report on Form 10-K is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Not applicable.

6643

~~Table~~Tab l e of Contents

~~Part~~PART II

Item 5. Market for ~~Registrant's~~Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

~~Share Repurchases~~

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs     Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs [1]
October 1, 2022 - October 31, 2022     — $ — — $ 24,651,793
November 1, 2022 - November 30, 2022     1,438,378 $ 10.30 1,438,378 $ —
December 1, 2022 - December 31, 2022     — $ — — $ —
Total 1,438,378 $ 10.30 1,438,378 $ —

[1] During the three months ended December 31, 2022, the Company settled the derivative liability associated with the Forward Share Purchase Agreements ("FPAs") previously disclosed by repurchasing 1,438,378 shares of common stock at the investors’ request on November 9, 2022. As a result,1,438,378 shares were repurchased at $10.30 on the settlement date. The remaining 955,000 were not repurchased by the Company on the amended extended settlement date of November 23, 2022. Following that date, no obligation to repurchase FPA shares pursuant to previously disclosed FPAs remained outstanding.

Market Information

Our common stock and public warrants ~~are~~have been listed on ~~The~~the Nasdaq ~~Global Market (“Nasdaq”)~~ under the symbols “PET” and “PETWW,” respectively, since August 10, 2022. Prior to August 10, 2022 and before the completion of the ~~business combination with CHW Acquisition Corporation,~~Business Combination, the common stock and public warrants of CHW ~~Acquisition Corporation~~ traded on Nasdaq under the ticker symbols “CHWA” and ~~"CHWAW,"~~“CHWAW,” respectively, and there was no public trading market for the common stock of Wag Labs, Inc. (“Legacy Wag!”) ~~equity.~~

Holders

As of the close of business on March ~~24, 2023,~~13, 2024, there were ~~153~~126 holders of record of our common stock and 6 holders of record of our ~~Public Warrants.~~public warrants. The actual number of stockholders is greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street name by brokers or other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

~~Dividend Policy~~

Dividends

We have never declared or paid any dividends on shares of our common stock. We anticipate that we will retain all of our future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying cash dividends in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the sole discretion of our ~~board of directors~~Board and will depend on, among other things, our results of operations, cash requirements, financial condition, contractual restrictions and other factors that our ~~board of directors~~Board may deem relevant.

Performance Graph

~~Securities Authorized for Issuance Under Equity Compensation Plans~~As a smaller reporting company, we are not required to provide the information required by this Item.

Recent Sales of Unregistered Securities

On December 1, 2022, we filed a registration statements on Form S-8 under the Securities Act to register the shares of Common Stock issued or issuable under the 2022 Omnibus Incentive Plan. See Part III, Item 12 of this Annual Report for the required information.None.

~~Unregistered Sales~~Purchases of Equity Securities by the Issuer and ~~Use of Proceeds~~Affiliated Purchasers

As previously disclosed on October 24, 2022, the Company completed a 100% acquisition of Furmacy, Inc. (“Furmacy”) for approximately 90,000 shares of stock consideration. The securities were issued prior to the effective date, November 4, 2022, of the Company's registration statement.None.

Item 6. ~~[Reserved]~~

[Reserved]

~~Table of Contents~~

Item 7. ~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations

As a result of the closing of the Merger, which was accounted for as a reverse recapitalization in accordance with U.S. GAAP as discussed in Note 3—Business Combinations, the financial statements of Wag Labs, Inc. (“Legacy Wag!”), a Delaware corporation and our wholly owned subsidiary, are now the financial statements of Wag! Group Co. ("Wag!"). A discussion of the year ended December 31, 2021 compared to the year ended December 31, 2020 has been reported previously under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our final prospectus/offer to exchange pursuant to Rule 424(b)(3) dated July 12, 2022.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans, estimates and strategy for our business, includes forward-looking statements based upon current expectations that involve risks and uncertainties. You should read the sections titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Unless the context requires otherwise, references to “Wag!,” “the Company,” “we,” “us” and “our” refer to Wag! Group, Co., a Delaware corporation, together with its consolidated subsidiaries.

Overview

~~Our mission is to be the #1 partner to busy Pet Parents~~. We believe that being busy shouldn’t stop Pet Parents from owning or taking care of their pets. We are dedicated to building a future in which every pet has access to safe, high-quality care, wellness options, and pet food and treat options. Wag! exists to make pet ownership possible and to bring joy to pets and those who love them.

Wag! was founded in 2015 to solve the guilt and stress of owning a pet. There are over 90.5 million US households with a pet, and for many Pet Parents, leaving their pet alone creates stress and guilt, as the existing solutions are limited. We launched the Wag! platform to solve these problems because lonely pets deserve healthier and happier lives. Wag! enabled on-demand pet services, allowing us to provide a mobile first experience for 98% of Pet Parents on the app. With numerous on-demand or scheduled service options provided by Pet Caregivers to Pet Parents through the platform, we have created a trusted pet service platform for Pet Parents. This has led to approximately 75% of Pet Parents not being physically at home while services are being delivered and high-frequency service utilization where Pet Parents use Wag! an average of four to five times a month. We have built a compelling and trusted consumer brand with a high level of customer engagement, effectively creating a solid platform to leverage as we rapidly expand our business to new product lines.

Our proprietary marketplace technology, which is available as a mobile app and website (“platform” or “marketplace”), enables independent Pet Caregivers to connect with Pet Parents. Through our cutting-edge technologies and multi-faceted platforms, Wag! connects Pet Parents with Pet Caregivers who provide excellent pet care services. Our marketplace enables Pet Parents to find a wide array of pet services provided by Pet Caregivers and third-party service partners, such as walking, pet sitting and boarding, advice from licensed pet experts, home visits, training services, and pet insurance comparison tools.

We are one of the largest online marketplaces for pet care and strive to be the #1 platform for busy Pet Parents, offering access to 5-star dog walking and pet sitting, expert pet advice, wellness plans, and one-on-one training from our community of ~~450,000~~more than 500,000 local pet caregivers nationwide, in addition to pet insurance options from the leading pet insurance companies. ~~Making~~

Our proprietary marketplace technology, which is available as a mobile app and website, enables independent Pet Caregivers to connect with Pet Parents. Through our cutting-edge technologies and multi-faceted platforms, Wag! connects Pet Parents ~~happy is what we do best.~~ with Pet Caregivers who provide pet care services. Our marketplace enables Pet Parents to find a wide array of pet services provided by PCGs and third-party service partners, such as walking, pet sitting and boarding, advice from licensed pet experts, home visits, training services, and pet insurance comparison tools.

Tab l e of Contents

Beyond providing unrivaled services to premium Pet Parents, Wag! has expanded its reach to become the button on the phone for the paw. Wag!, once purely synonymous ~~purely for~~with pet services, is now a key player in the wellness space via the management and operation of Petted.com, a pet insurance comparison service, as well as the acquisition of Furmacy, which ~~delivers~~creates prescription management software to simplify pet ~~health products directly to the door of loving Pet Parents. We have experienced consistent strong growth year over year, increasing annual revenue by over 170% from 2021 to 2022.~~prescriptions. Additionally, in 2023, Wag! has expanded into the ~~$50 billion~~ Pet Food & Treats market ~~in an inimitable manner~~

~~Table of Contents~~

by acquiring one of the most visited and trusted dog food marketplaces: Dog Food Advisor. Wag! is confident that the addition of Dog Food Advisor will unlock tremendous value and insights for recurring and new customers alike; those who we already provide an unparalleled marketplace experience to in the wellness space and longtime customers who rely on Dog Food Advisor as a subject matter expert. ~~It's simple, Wag! exists to make~~In April 2023, we acquired Maxbone, Inc., a top-tier digital platform for modern pet ~~ownership possible and bring joy to pets and those who love them.~~

Since the beginning of 2021, quarterly revenues have generally been steadily increasing leading to our highest quarterly revenues in 2022 since the Company was founded, reaching over $17 million a quarter in the fourth quarter. From 2020 to the fourth quarter of 2022 Cohorts, Pet Parent activity for Pet Parents who joined the platform through December 31, 2022 is significantly outperforming the 2017, 2018, and 2019 Cohorts on a year-to-date basis. We are still in the early stages of company growth, but have made significant progress in extending the services and reach of our platform since our inception in 2015 and our debut on the Nasdaq in August 2022.

~~Principal Factors Affecting Our Results of Operations and Material Trends~~

Our results are impacted by the general economic environment, conditions and trends relating to pet ownership and demand for services, competition with other pet service providers, and other factors including promotions, seasonality, and the effectiveness of our marketing and advertising campaigns. The primary factors that impact our results and present significant opportunities, as well as pose risks and challenges, are described below. We believe that our performance and future success depend on the factors discussed below, those mentioned in the section titled “Risk Factors” and elsewhere in this document.

~~Investment in New Services~~

~~Founded in 2015, we were one of the first on-demand pet services platforms. Since then, we have remained committed to~~essentials, expanding our ~~offerings and the~~ reach of our platform. For example, in the past 24 months, we have launched new features in an effort to increase engagement by both Pet Parents and Pet Caregivers on our platform. For Pet Parents we have innovated the platform by launching features such as the Premium Benefits Center to offer exclusive discounts on pet care products, as well as multi-day rebooking functionality and, improving the Browse and Book experience to simplify how Pet Parents discover and book with more than 450,000 highly-rated local overnight sitters, boarders, walkers, and trainers. In the fourth quarter of 2022, we released Wag! Neighborhood Network, which enables Pet Parents to not only filter across more than 21 unique specialties but also discover a great local Pet Caregiver right in their neighborhood. Functionality such as this demonstrates our commitment to the strategy element of accelerating growth in existing markets through a best in class experience. For Pet Caregivers, we optimized the sign-up experience and Notes from Pet Caregivers allowing them to make a more informed decision before requesting a service, added features to provide them with the opportunity to fulfill highest priority requests, the ability to set their own prices, take and share Notes between Pet Caregivers allowing them to be more informed decisions prior to a service, and the ability to expand their reach to new customers and grow their business with social media links to their profile, in-app viral sharing and custom HTML Craigslist links, as well as the opportunity to access advice from seasoned veterans on the platform and tips to help them grow a successful pet care business.

~~Extending Offerings and Platform Reach~~

Since our founding in 2015, we have striven to be the #1 platform for premium pet services, including on-demand walking, sitting, boarding, training, vet services, wellness plans, and insurance comparison tools. Our ability to establish trust via our traditional on-demand services across North America is a key way for Pet Parents to start experiencing the platform. We are becoming the button on the phone for the paw, a place Pet Parents trust with their pets’ health and well-being. We are extremely excited about the growth in all lines of our business, including the Wellness category ("Wellness"), which is a major propulsion for year over year revenue increase. Pet Parents are appreciating the option to chat with a licensed pet expert 24/7, pet wellness plans, and the ability to compare pet insurance through our one-stop-shop platform as opposed to performing their own in depth research. We are a key player in the wellness space via the management and operation of Petted.com, a pet insurance comparison service, as well as through the acquisition of Furmacy, which delivers pet health products directly to the door of loving Pet Parents. By simplifying what it takes to be a Pet Parent through our digital edge, we're giving back valuable time that pets and their parents can spend together. This is

~~Table of Contents~~

~~only a fraction of the TAM in the pet care industry. For example, in 2023 we have expanded~~ into the ~~$50 billion~~ Pet ~~Food & Treats market by acquiring Dog Food Advisor.~~

In 2020, we also launched our Wag! Premium subscription service, a monthly or annual subscription that offers Pet Parents 10% off all services, including waived booking fees, free advice from pet experts, priority access to top-rated Pet Caregivers, and VIP pet support. Wag! Premium accounts for over 50% of our monthly active users.

~~Investment in Innovation and Technology~~

The continued development of our platform capabilities and digital ecosystem requires substantial ongoing investment in resources and technology infrastructure, which can impact EBITDA. Our ability to continue to incorporate or develop innovative tools in line with our growth is crucial to ensuring the success of our strategy. As discussed above in “— Investment in New Services”, we are committed to innovating new products and features. In addition, we are continuously integrating and evaluating acquisitions to enhance our technology platforms and launch features that are most beneficial to Pet Caregivers, Pet Parents, and third-party service partners.

~~Investment in New Markets~~

We plan to invest in existing and new markets, as well as new offerings. We believe that we can further expand in existing markets, to new markets within North America, and internationally by carefully targeting locations with a high expected demand for pet services. We believe there is an opportunity to expand our platform reach outside of our existing geographic locations into other countries and regions where there is an attractive spend per pet to address. As we invest in new markets and create new offerings, we may increase our marketing strategies in a manner that could extend our marketing payback target in order to accelerate growth in each newSupplies market.

~~Pet Ownership Trends~~

We believe the demand for high-quality, personalized pet care far exceeds the existing market due to the increases in pet adoption and return to office policies being implemented. As of the end of December 2022, although we saw a steady rise throughout the year, less than 50% of people were back in-office according to Kastle data. According to a study performed by Adzuna research in November 2022, this number is expected to rise as employers openly state firmer in-office policies in 2023. Additionally, the proportion of open roles specifying an “office-based” requirement has risen to a 19-month high of 4.2%. Beyond the pet service sector of the addressable market, untapped potential coupled with the continued trend of the humanization of pets may lead to a spike in the pet insurance space. According to an industry report released by the North American Pet

~~Table of Contents~~

Health Insurance Association, there was an increase of approximately 30% from 2020 to 2021 of in-force insured pets in North America. While this growth is exciting for Wag!, over 155 million pets in the United States still remain uninsured; leaving approximately 97% of pets in the United States as potential entrants into the market. We are focused on taking advantage of this significant opportunity to expand the base of Pet Parents using the Wag! platform given the increased size of the market in which we operate. We believe that the high volume of new Pet Parents, as well as return to office policies, may continue to have a positive effect on the number of bookings for pet services, and other pet related services over the longer term.

~~Pet Parent Preferences and Demand~~

As approximately 95% of the U.S. population has access to the Wag! platform through an iPhone or Android device, our objective for long-term sustained growth is to create a platform that results in existing Pet Parents becoming repeat bookers, together with attracting new Pet Parents to our platform and to successfully convert them into repeat bookers. We attract Pet Parents to our platform through word-of-mouth and a variety of channels, such as social media, video, and other online and offline channels. Increase in Pet Parent awareness and growth drives our revenue, expands brand recognition, deepens our market penetration, creates additional upsell and cross-sell opportunities and generates additional data to continue to improve the functioning of our platform.

Our proprietary on-demand platform allows Pet Parents to easily and conveniently find top rated Pet Caregivers to serve their pet service needs either on-demand or scheduled at their convenience. Our primary mobile app allows Pet Parents to access Pet Caregivers from anywhere, at any time. With approximately 75% of Pet Parents not physically at home when their pet service is being performed, our platform allows Pet Caregivers and Pet Parents to avoid in-person contact if necessary or preferred by the Pet Parent. We believe this positions us well for ongoing growth as our platform allows both Pet Parents and Pet Caregivers the ability to mitigate COVID-19 related concerns.

We attract Pet Caregivers to the platform primarily based on viral and word-of-mouth marketing strategies. Being a Pet Caregiver allows dog lovers to spend time with dogs and other animals, enabling them to lead a healthy lifestyle by getting exercise through dog walking while simultaneously participating in an activity that delights them.

To serve Pet Parents in any given market, a critical density of caregivers must be present so that Pet Parents have options and availability for on-demand services. During certain peak periods, such as holidays, we have observed high Pet Parent demand that has resulted in Pet Caregiver constraints in some markets. Our platform provides a technology feature that allows Pet Caregivers to set their own prices, encouraging Pet Caregivers to be more engaged during peak periods.

~~Effects of the COVID-19 Pandemic~~

The re-opening of the economy, despite the continuation of the pandemic and the emergence of new variants had resulted in meaningful revenue recovery for Wag! in 2021 relative to the prior year. The continued back to work trends and elevated levels of travel in 2022 contributed in part to our continued revenue increase in 2022.

The impact of the COVID-19 pandemic, including the resulting changes in travel and work behaviors, may continue to affect results in 2023 and beyond. The extent to which the pandemic will continue to impact the Company’s business, operating results and financial position will depend on future developments, which are highly uncertain, difficult to predict and beyond our knowledge and control. These may include but are not limited to the duration and spread of the pandemic (including new outbreaks), its severity, new variants and sub-variants, actions to contain the virus or treat its impact, the extent of the business disruption and financial impacts, and the magnitude and timing of such factors as economic and operating conditions. Uncertainties in the global economy may adversely impact our operations, brand partners, customers, and other business partners, which may impact future revenues, and require other changes to our operations.

~~Table of Contents~~

~~Effectiveness of our word-of-mouth, marketing and advertising activities~~

Our objective for long-term, sustained growth is to create a platform that results in existing Pet Parents becoming repeat bookers, together with attracting new Pet Parents to the platform and converting them into repeat bookers, thus generating a lifetime of bookings from the Pet Parent. We attract Pet Parents and Pet Caregivers to the platform through word-of-mouth and a variety of other channels, such as social media, video, and other online and offline channels. The easy to use and convenient platform organically drives word-of-mouth marketing and references amongst Pet Parent. Additionally, our brand awareness advertising activities, including social media and television advertisements, allow us to reach new Pet Parents and Pet Caregivers.

~~When assessing the efficiency and effectiveness of our marketing spend, we monitor, amongst other things, new sign ups and first-time booking activity on the platform.~~

~~Our ability to attract Pet Parents to the platform is very efficient as we benefit from the network effects associated with our platform.~~

~~Seasonality~~

Wag! experiences seasonality in the booking volume, which Wag! expects to continue and may become more substantial. Historically, Wag! has experienced lower walking service requests on the platform during holidays periods, offset by higher sitting and boarding requests during these periods.

~~Public Company Costs~~

As we grow as a public company, we have incurred, and expect to continue to incur, increased one-time and recurring expenses as a public company for, among other things, directors’ and officers’ liability insurance premiums, director fees, additional internal and external accounting, legal, and administrative resources, and increased personnel and stock-based compensation expenses.

~~The Business Combination Agreement and Public Company Costs~~

On February 2, 2022, Wag!, CHW and the Merger Sub entered into the Business Combination Agreement. Pursuant to the Business Combination Agreement, at the Closing, Merger Sub was merged with and into Wag!, with Wag! continuing as the surviving corporation following the Merger, being a wholly owned subsidiary of CHW and the separate corporate existence of Merger Sub ceased. Upon the completion of the Business Combination, Wag! became the successor registrant with the SEC, meaning that Wag!’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

While the legal acquirer in the Business Combination Agreement is CHW, for financial accounting and reporting purposes under U.S. GAAP, Wag! is the accounting acquirer and the Merger is accounted for as a “reverse recapitalization.” A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined company represent the continuation of the financial statements of Wag! in many respects. Under this method of accounting, CHW is treated as the “acquired” company for financial reporting purposes. For accounting purposes, Wag! is deemed to be the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of Wag! (i.e., a capital transaction involving the issuance of stock by CHW for the stock of Wag!).

Upon the Closing of the Business Combination and the PIPE and Backstop Investment, the most significant change in our reported financial position and results of operations was an increase in cash (as compared to our balance sheet at June 30, 2022) including $29.3 million of which $24.7 million is held in escrow, $5.0 million in gross proceeds from the PIPE and Backstop Investment by the PIPE and Backstop Investor, and financing arrangement proceeds of $29.4 million. Subsequently, in November 2022, upon settlement and expiration of the derivative liability associated with the Forward Share Purchase Agreements ("FPAs"), the Company released $14.8 million from restricted cash to settle the obligation to investors and retained $9.8 million which is reflected on the Consolidated Balance Sheets as of December 31, 2022. Total direct and incremental transaction costs of CHW and Wag! through December 31, 2022 were approximately $23.6 million, substantially all of which were offset to additional-paid-in-capital as costs related to the reverse recapitalization. Transaction costs were

~~Table of Contents~~

~~approximately $12.0 million, for Wag! and $11.6 million for CHW for legal, financial advisory, and other professional fees incurred in consummating the Business Combination.~~

As a result of the Business Combination, Wag! is the successor to an SEC registrant and is listed on the Nasdaq, which will require Wag! to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We expect to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.

Components of Our Results of Operations

The following is a summary of the principal line items comprising our operating results.

Revenues

We provide an online marketplace that enables Pet Parents to connect with Pet Caregivers for various pet services. We recognize ~~revenues~~revenue in accordance with ASC 606, Revenue from Contracts with ~~its~~ Customers, from ~~four~~the following distinct streams: (1) service fees charged to Pet Caregivers, (2) subscription fees for Wag! Premium and other fees paid by Pet Parents, ~~for Wag! Premium,~~ (3) joining fees paid by Pet Caregivers to join and be listed on our platform, ~~and~~ (4) wellness revenue through affiliate fees, ~~prescription~~ and over-the-counter sales. For some of the Company’s arrangements with third-party service providers, the transaction price is considered variable and an estimate of the transaction price is recorded when the action occurs. The estimated transaction price used in the variable consideration is based on historical data with the respective third-party service partner and the consideration is measured and settled monthly.(5) Pet Food & Treat revenue also through affiliate fees.

Cost of Revenues, Excluding Depreciation and Amortization

Cost of revenues consists of costs directly related to ~~revenue generating~~revenue-generating transactions, which primarily includes fees paid to payment processors, ~~for payment processing fees,~~ hosting and platform-related infrastructure costs, product costs, third-party costs for background checks for Pet Caregivers, and other costs arising as a result of revenue transactions that take place on our platform, excluding depreciation and amortization.

Platform Operations and Support

Platform operations and support expenses include personnel-related compensation costs of technology and operations teams, and third-party operations support costs.

Sales and Marketing

Sales and marketing expenses include personnel-related compensation costs of the marketing team and advertising ~~expenses, and Pet Parent incentives.~~expenses. Sales and marketing expenses are expensed as incurred.

Royalty

Royalty expenses represent fees paid by us to be the exclusive marketer of certain pet insurance products.

General and Administrative

General and administrative expense includes personnel-related compensation costs for employees on corporate functions, such as management, accounting, and legal as well as insurance and other expenses used to run the business, together with outside party service costs of related items such as auditors and lawyers.

Depreciation and Amortization

Depreciation and amortization expenses primarily consist of depreciation and amortization expenses associated with our property and equipment. Amortization includes expenses associated with our capitalized software and website development.

7345

~~Table~~Tab l e of Contents

~~Interest Income~~

~~Interest income consists primarily of interest earned on our cash, cash equivalents, and short-term investments.~~

~~Change in Fair Value of Derivatives~~Other Expense (Income), Net

Other expense (income), net consists of non-operating income and expenses such as gains or losses due to changes in the fair value of the derivative liability related to the Forward Share Purchase Agreement. See Note 3, Business Combination with CHW, to the Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information regarding the Forward Share Purchase Agreements.

~~The~~

Key Operating and Financial Metrics

We regularly review several metrics, including the following key financial metrics and non-GAAP financial measures, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions. These key financial metrics and non-GAAP financial measures are set forth below for the periods presented:


	Year Ended December 31,						Change
	2023			2022			$	%
	(in thousands, except percentages)
Platform Participants (as of period end)	600			434			166	38.2	%
Revenues	$	83,916		$	54,865		29,051	52.9	%
Net loss	$	(13,317)		$	(38,567)		25,250	(65.5)	%
Net loss margin	(15.9)		%	(70.3)		%
Net cash provided by (used in) operating activities	$	(6,465)		$	(2,803)		(3,662)	130.6	%
Adjusted EBITDA (loss)(1)	$	722		$	(3,872)		4,594	*
Adjusted EBITDA (loss) margin(1)	0.9		%	(7.1)		%

* Comparisons between positive and negative numbers are not meaningful.

(1) Adjusted EBITDA (loss) and Adjusted EBITDA (loss) margin are non-GAAP measures which may not be comparable to similarly-titled measures used by other companies. See below for a reconciliation of Adjusted EBITDA (loss) to net ~~decrease~~loss.

Platform Participants

A Platform Participant is defined as a Pet Parent or Pet Caregiver who transacted on the Wag! platform for a service in the quarter. Services include dog walking, sitting, boarding, drop-ins, training, premium telehealth services, wellness plans, and pet insurance plan comparison.

Non-GAAP Financial Measures

Adjusted EBITDA (Loss) and Adjusted EBITDA (Loss) Margin

Adjusted EBITDA (loss) means net loss adjusted to exclude, where applicable in a given period, interest expense, net; income taxes; depreciation and amortization; stock-based compensation; integration and transaction costs associated with acquired businesses; severance costs; legal settlements; change in fair value of ~~derivatives consists~~derivative liability; and issuance of ~~fair value remeasurements~~Community Shares. Adjusted EBITDA (loss) margin represents Adjusted EBITDA (loss) divided by revenues. We use Adjusted EBITDA (loss) and Adjusted EBITDA (loss) margin, which are both non-GAAP metrics, to evaluate and assess our operating performance and the operating leverage in our business, and for internal planning and forecasting purposes. We believe that Adjusted EBITDA (loss) and Adjusted EBITDA (loss) margin, when taken collectively with our U.S. GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. GAAP results.

Tab l e of Contents

Non-GAAP financial measures are presented for supplemental informational purposes only. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as substitutes for financial information presented in accordance with U.S. GAAP. There are a number of limitations related to the ~~Company's liability classified Forward Purchase Agreements. As~~use of ~~December 31, 2022, all Forward Purchase Agreements have been settled.~~non-GAAP financial measures versus comparable financial measures determined under U.S. GAAP. For example, other companies in our industry may calculate these non-GAAP financial measures differently or may use other measures to evaluate their performance. All of these limitations could reduce the usefulness of these non-GAAP financial measures as analytical tools. Investors are encouraged to review the related non-GAAP financial measures and the reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP financial measures and to not rely on any single financial measure to evaluate our business.

The following table provides a reconciliation of net loss to Adjusted EBITDA (loss):


	Year Ended December 31,
	2023			2022
	(in thousands, except percentages)
Net loss	$	(13,317)		$	(38,567)
Interest expense, net	6,510			2,470
Income taxes	93			13
Depreciation and amortization	1,673			571
Stock-based compensation	4,712			24,492
Integration and transaction costs associated with acquired business	189			220
Severance costs	199			—
Legal settlements	663			—
Change in fair value of derivative liability	—			4,958
Issuance of Community Shares	—			1,971
Adjusted EBITDA (loss)	$	722		$	(3,872)
Revenues	$	83,916		$	54,865
Adjusted EBITDA (loss) margin	0.9		%	(7.1)		%

Tab l e of Contents

Comparison of the ~~years ended~~Year Ended December 31, ~~2022~~2023 and ~~December 31, 2021:~~2022

The following table sets forth our consolidated operations data for the years ended December 31, 2022 and 2021. The information has been prepared on the same basis as our consolidated financial statements, included elsewhere in this Annual Report, and includes, in our opinion, all adjustments, necessary to state fairly our results ~~of operations for these periods. This data should be read in conjunction with our audited consolidated statements~~ of operations for the years ended December 31, ~~2022~~2023 and ~~2021, included elsewhere herein.~~2022. These results of operations are not necessarily indicative of the future results of operations that may be expected for any future period.

Years Ended December 31,
($ in thousands, except percentages) 2022 2021 $
Change %
Change
Revenues $ 54,865 $ 20,082 $ 34,783 173 %
Costs and expenses:
Cost of revenues, excluding depreciation and amortization 4,024 2,777 1,247 45 %
Platform operations and support 13,825 10,265 3,560 35 %
Sales and marketing 35,156 10,221 24,935 244 %
General and administrative 32,415 6,956 25,459 366 %
Depreciation and amortization 571 388 183 47 %
Total costs and expenses 85,991 30,607 55,384 181 %
Change in fair value of derivatives (4,958) — (4,958) NM
Gain on forgiveness of PPP loan — 3,482 (3,482) NM
Interest expense, net (2,470) (61) (2,409) 3949 %
Loss before income taxes (38,554) (7,104) (31,450) 443 %
Income tax benefit (expense) (13) 793 (806) NM
Net income (loss) $ (38,567) $ (6,311) $ (32,256) 511 %

~~_________________________~~

*~~Comparisons between positive and negative numbers and with a zero are not meaningful.~~

** Percentage figures included in the below section have been calculated on the basis of rounded figures as presented and not on the basis of such amounts prior to rounding. For this reason, percentage amounts in this section may vary slightly from those obtained by performing the same calculations using the figures in the table above or the consolidated financial statements.


	Year Ended December 31,				Change
	2023		2022		$	%
	(in thousands, except percentages)
Revenues	$	83,916	$	54,865	29,051	52.9	%
Costs and expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below)	5,477		4,024		1,453	36.1	%
Platform operations and support	12,475		13,825		(1,350)	(9.8)	%
Sales and marketing	50,523		35,156		15,367	43.7	%
Royalty	1,791		—		1,791	100.0	%
General and administrative	19,223		32,415		(13,192)	(40.7)	%
Depreciation and amortization	1,673		571		1,102	193.0	%
Total costs and expenses	91,162		85,991		5,171	6.0	%
Interest expense	7,417		2,886		4,531	157.0	%
Interest income	(907)		(416)		(491)	118.0	%
Other expense, net	21		4,958		(4,937)	(99.6)	%
Loss before income taxes and equity in net earnings of affiliate	(13,777)		(38,554)		24,777	(64.3)	%
Income taxes	93		13		80	615.4	%
Equity in net earnings of equity method investment	553		—		553	100.0	%
Net loss	$	(13,317)	$	(38,567)	25,250	(65.5)	%

Revenues

Revenues increased by ~~$34.8~~$29.1 million, or approximately ~~173%~~52.9%, from ~~$20.1 million in the year ended December 31, 2021 to~~ $54.9 million for the year ended December 31, ~~2022.~~2022 to $83.9 million for the year ended December 31, 2023. The increase was primarily attributable to a ~~$27.9~~$19.9 million increase in Wellness revenue ~~from Wellness, which was launched during~~as a result of increased activity and a $6.6 million increase in Pet Food & Treats revenue as a result of our acquisition of Dog Food Advisor in the first quarter of 2023 and launch of Cat Food Advisor in the third quarter of ~~2021.~~2023. The increase also includes a ~~$6.9~~$2.6 million increase in ~~Service~~Services revenue ~~due to an increase in service fees stemming~~ from increased Pet ~~Parents~~Parents’ engagement of Pet Caregivers to provide pet care services as a result of increased return-to-office, and ~~travel trends,~~ growth ofin ancillary services such as Wag! Premium ~~subscription revenues,~~subscriptions and ~~PCG services. The increase in wellness revenue is additionally attributed to the inclusion $0.1 million from Furmacy for the last two months of 2022 following the acquisition.~~Wag! products.

~~Table of Contents~~

Cost of Revenues, ~~Excluding~~Exclusive of Depreciation and Amortization

Cost of revenues, ~~excluding~~exclusive of depreciation and amortization, increased by ~~$1.2~~$1.5 million, or approximately ~~43%~~36.1%, from ~~$2.8~~$4.0 million infor the year ended December 31, ~~2021~~2022 to ~~$4.0~~$5.5 million infor the year ended December 31, ~~2022.~~2023. The increase was primarily attributable to ~~a $0.6 million increase in background check costs driven by~~ an increase in ~~new Pet Caregivers and a $0.5 million increase in payment processing fees driven by higher transaction volume and other related software~~product costs. ~~Additionally, the inclusion of inventory cost of goods sold related to the Furmacy business contributed to the remaining increase.~~

Platform Operations and Support

Platform operations and support expenses ~~increased~~decreased by ~~$3.6~~$1.4 million, or approximately ~~35%~~9.8%, from ~~$10.3~~$13.8 million infor the year ended December 31, ~~2021~~2022 to ~~$13.8~~$12.5 million infor the year ended December 31, ~~2022.~~2023. The ~~increase~~decrease was primarily attributable to a ~~$1.3~~$2.0 million ~~increase~~decrease in ~~personnel-related~~stock-based compensation ~~costs, excluding stock based compensation, for our technology and operations teams~~due to the impact of the Earnout Shares in 2022, partially offset by a ~~decrease of~~ $0.7 million increase in ~~professional service costs. Additionally, there was an increase of $3.0 million in stock compensation expense, in part due~~personnel costs related to ~~a $2.8 million charge~~our expansion initiatives in the ~~third quarter~~operations and technology areas.

Tab l e of ~~2022 related to Earnout Shares upon closing of the Business Combination.~~Contents

Sales and Marketing

Sales and marketing expenses increased by ~~$24.9~~$15.4 million, or approximately ~~245%~~43.7%, from ~~$10.2 million in the year ended December 31, 2021 to~~ $35.2 million for the year ended December 31, ~~2022.~~2022 to $50.5 million for the year ended December 31, 2023. The increase was primarily attributable to a ~~$14.9~~$15.2 million increase in investing in new and expanding existing partnerships ~~as we invest in launching with new partners,~~related to our Wellness offerings, a ~~$1.9~~$0.8 million increase in ~~advertising expense, $5.7~~professional services, and a $0.6 million increase in ~~personnel-related~~employee personnel costs, partially offset by a $1.4 million decrease in stock-based compensation ~~costs, excluding stock based compensation, for our marketing team, consultants, and advertising agency costs. Additionally, there was a $2.1 million increase in stock compensation expense, primarily~~ due to ~~a $2.1 million charge in~~ the ~~third quarter~~impact of ~~2022 related to~~the Earnout Shares ~~upon closing~~in 2022 and a $0.6 million decrease in advertising costs.

Royalty

Royalty expenses were $1.8 million for the year ended December 31, 2023. These expenses represent fees paid by us to be the exclusive marketer of ~~the Business Combination.~~certain pet insurance products.

General and Administrative

General and administrative expenses ~~increased~~decreased by ~~$25.5~~$13.2 million, or approximately ~~366%~~40.7%, from ~~$7.0~~$32.4 million infor the year ended December 31, ~~2021~~2022 to ~~$32.4~~$19.2 million for the year ~~months~~ ended December 31, ~~2022.~~2023. The ~~increase~~decrease was primarily ~~as a result of an increase in stock compensation expense of $19.2 million, in part due~~attributable to a ~~one-time expense incurred~~$16.4 million decrease in ~~connection with Earnout Shares of $19.0 million. Additionally, there was $1.8 million in~~stock-based compensation expense due to the ~~issuance~~impact of ~~Community~~the Earnout Shares in ~~connection with the Business Combination. For further information, see~~ ~~Note 3 - Business Combinations~~2022, partially offset by a $1.7 million increase in business licenses, fees, and permits and a $1.4 million increase in legal and accounting fees to meet our growth needs and requirements of ~~Notes to the Consolidated Financial Statements.~~

The remainder of the increase is due to $0.2 million in transaction and integration costs related to the acquisition of Furmacy in Q4 2022 as well as $4.3 million in other administrative expenses incurred in order to operate asbeing a public company, including expenses related to compliance with the rules and regulations of the SEC and the listing standards of the Nasdaq, increased legal, audit and consulting fees, and employee related expenses to attract and retain top talent.company.

Depreciation and Amortization

Depreciation and amortization expenses increased by $1.1 million, or approximately 193.0%, from ~~$0.4~~$0.6 million infor the year ended December 31, ~~2021~~2022 to ~~$0.6~~$1.7 million infor the year ended December 31, ~~2022.~~2023. The increase ~~of $0.2 million, or approximately 50%,~~ was primarily attributable to ~~a $0.3 million increase~~the acquisitions of Dog Food Advisor and Maxbone in 2023 and the related amortization ~~expense arising from the acquisition~~ of ~~CPI, partially offset by a $0.1 million reduction in depreciation expense of property and equipment as a result of decreased leased office space with depreciating leasehold improvements.~~acquired intangible assets.

Interest ~~Income (Expense),~~Expense, Net

Interest expense, net was as follows:


	Year Ended December 31,				Change
	2023		2022		$	%
	(in thousands, except percentages)
Interest expense	$	7,417	$	2,886	4,531	157.0	%
Interest income	(907)		(416)		(491)	118.0	%
Interest expense, net	$	6,510	$	2,470	4,040	163.6	%

Interest expense, net increased by $4.0 million, or approximately 163.6%, from ~~$61 thousand in~~$2.5 million for the year ended December 31, ~~2021~~2022 to ~~$2.5~~$6.5 million infor the year ended December 31, ~~2022.~~2023. The increase ~~in expense~~ was primarily attributable to an increase in interest expense related to the Blue Torch Financing and Warrant Agreement entered into in connection with the closing of the Business

~~Table of Contents~~

Combination with ~~CHW.~~ CHW, partially offset by an increase in interest income on our cash and cash equivalents due to a higher interest rate environment.

For further information on the debt and warrant agreement, refer to Note 8, ~~Note 10 -~~Long-Term Debt ~~of Notes~~, to the Consolidated Financial ~~Statements.~~Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Other Expense, Net

The $5.0 million of other expense, net for the year ended December 31, 2022 was primarily due to changes in the fair value of our Forward Share Purchase Agreements. See Note 3, Business Combination with CHW, to the Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for further information regarding the Forward Share Purchase Agreements.

Tab l e of Contents

Liquidity and Capital Resources

~~Since inception,~~We have historically generated negative cash flows from operations and ~~in line with~~have primarily financed our ~~growth strategy,~~operations through private and public sales of equity securities and debt. As of December 31, 2023, we ~~have incurred~~had cash and cash equivalents of $18.3 million.

We expect operating losses and negative cash ~~operating cash~~ flows ~~and have financed our~~from operations through the sale of equity securities. For the years ended December 31, 2022, and 2021, we had a net loss of $38.6 million and $6.3 million, respectively. We expect that operating losses and negative operating cash flows couldto continue ~~into~~in the foreseeable future as we continue to invest in growing our business. ~~Based upon~~Our primary uses of cash include operating costs such as product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support our ~~current operating plans,~~operations and our growth. Although we ~~believe~~currently anticipate that our existing cash and cash equivalents ~~and short-term investments~~ will be sufficient to ~~fund~~meet our ~~operations~~working capital, capital expenditure, and debt obligation needs for at least the next 12 months, ~~from~~we may seek additional financing over the ~~date of this Annual report on Form 10-K. However, these forecasts involve risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions~~long term, including to refinance or repay amounts due under the Financing Agreement that matures in August 2025. Accordingly, we may ~~prove~~need to ~~be wrong, and we could deplete our capital resources earlier than we expect.~~

engage in equity or debt financings to secure additional funds. Our future capital requirements and the adequacy of available funds will depend on many factors, including, but not limited to, our ability to grow our revenue and the impact of the ~~COVID-19 pandemic and other~~ factors described in ~~the section titled~~ ~~Risk Factors~~ ~~included within~~Part I, Item 1A, ~~of Part I~~Risk Factors, of this Annual Report on Form 10-K. We may seek additional equity or debt financing. IfSee the section titled “Risk Factors — Risk Related to our Operations — We may require additional ~~financing is required from outside sources, we may~~capital to support business growth and this capital might not be ~~able to raise it~~available on ~~terms~~ acceptable ~~to us,~~terms, or at all. ~~If we are unable~~” within Part I, Item 1A, Risk Factors, of this Annual Report on Form 10-K. Our forecast of the period of time through which our financial resources will be adequate to ~~raise additional capital when desired,~~support our ~~business, financial condition,~~operations is a forward-looking statement that involves risks and uncertainties, and actual results ~~of operations~~ could ~~be adversely affected.~~vary materially.

For proceeds, payments and additional financing arrangements arising from the CHW Business Combination, please see Note 3, ~~- Business Combinations~~ ~~for additional detail.~~

~~Off-Balance Sheet Arrangements and Contractual Obligations~~

We enter into long-term contractual obligations and commitments in the normal course of business, primarily debt obligations and real-estate leases for our office locations. In connection with the closing of the Business Combination ~~in August 2022, we entered into a credit agreement~~ with ~~Blue Torch Capital LP that provides us with up to $32 million of credit. Refer to~~ ~~Note 10 - Debt~~ ~~and~~ ~~Note 8 - Leases, included in Item 8 of Part II of this 10-K, for further details, including interest and future principal payments and lease commitment details.~~

The Company does not have any off-balance sheet arrangements that are reasonably likely to have a material effect on the financial condition, results of operations, liquidity, or capital resources of the Company, except for an agreement to invest in a new limited liability company for an investment of $1.47 million. The Company funded this investment in the first quarter of 2023. See ~~Note 1~~ - ~~Description of~~ B ~~usiness~~ ~~of Notes~~CHW, to the Consolidated Financial Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K for ~~more~~additional detail.

Cash Flows

The following table summarizes our cash flows for the periods ~~indicated.~~indicated:

Years Ended December 31,
($ in thousands) 2022 2021
Net cash flows used in operating activities $ (2,803) $ (12,256)
Net cash flows (used in) provided by investing activities 1,835 8,087
Net cash flows provided by financing activities 37,089 (51)
Net change in cash, cash equivalents, and restricted cash $ 36,121 $ (4,220)


	Year Ended December 31,				Change
	2023		2022		$	%
	(in thousands, except percentages)
Net cash provided by (used in):
Operating activities	$	(6,465)	$	(2,803)	(3,662)	130.6	%
Investing activities	(12,261)		1,835		(14,096)	(768.2)	%
Financing activities	(1,917)		37,089		(39,006)	(105.2)	%
Net change in cash and cash equivalents	$	(20,643)	$	36,121	(56,764)	(157.1)	%

Changes in Cash Flows From Operating Activities

Net cash used in operating activities for the year ended December 31, ~~2022~~2023 was ~~$2.8~~$6.5 million, ~~a decrease~~an increase of ~~$9.5~~$3.7 million from ~~$12.3~~$2.8 million for the year ended December 31, ~~2021.~~2022. The ~~decrease~~increase in net cash used in operating activities was primarily due to ~~an increase~~$4.1 million of ~~$4.5~~unfavorable changes in operating assets and liabilities, partially offset by a $0.4 million decrease in net loss excluding non-cash and reconciling items disclosed within our consolidated statement of cash flows. The $4.1 million of unfavorable changes in operating assets and liabilities was primarily driven by unfavorable changes in accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities, and deferred revenue, partially offset by favorable changes in operating lease liabilities ~~deferred revenue~~ and other ~~non- current liabilities, partially offset by a $0.5 million increase~~non-current liabilities.

Changes in ~~accounts receivable, and current and other assets. Additionally, there was a $4.5 million~~

~~Table of Contents~~

~~improvement in net loss, excluding the impact of depreciation and stock-based compensation, and other non-cash items.~~

~~Operating cash flows for the year ended December 31, 2022 have been adequate to meet liquidity requirements.~~

Cash Flows from Investing Activities

The Company’s investments are classified as available for sale and we invest in a diversified portfolio of investments, primarily short-term U.S. government and agency securities, money market funds, commercial paper, and corporate bonds. In addition, we limit the concentration of our investment in any particular security.

Net cash ~~from~~provided by (used in) investing activities for the year ended December 31, ~~2022~~2023 was ~~$1.8~~an outflow of $12.3 million, a decrease of ~~$6.3~~$14.1 million from ~~$8.1~~an inflow of $1.8 million ~~provided~~ for the year ended December 31, ~~2021.~~2022. The decrease was primarily due to ~~$24.9~~a $10.5 million ~~less~~increase in cash paid for acquisitions, net of cash acquired, a $2.6 million decrease in proceeds ~~received~~ from the sale and maturities of short-term investments, and a $1.5 million increase in cash paid for equity method investments, partially offset by ~~$17.7~~a $0.7 million ~~of reduced purchases of investments as a direct reflection of a~~ decrease in ~~the Company’s consolidated total investments at December 31, 2022.~~other investing activities.

Tab l e of Contents

Changes in Cash Flows from Financing Activities

Net cash provided by (used in) financing activities for the year ended December 31, 2023 was an outflow of $1.9 million, a decrease of $39.0 million from an inflow of $37.1 million provided by financing activities for the year ended December 31, ~~2022 was $37 million, an increase of $37 million from $51 thousand for the year ended December 31, 2021.~~2022. The ~~increase in cash provided by financing activities~~decrease is primarily due to ~~cash received~~a $24.1 million decrease in proceeds from debt, net of discount, a $10.9 million decrease in proceeds from the ~~Forward Share Purchase Agreement expiration, release~~issuance of ~~cash remaining~~Series P preferred stock, net of issuance costs, a $2.6 million decrease in proceeds from the ~~trust account established in connection~~Business Combination with CHW's initial public offering (the “Trust Account”), PIPE and Backstop Investors and the financing agreement with Blue Torch Capital LP (“Blue Torch”) for a senior secured Credit Facility, partially offset by paymentCHW, net of transaction costs, ~~incurred by Wag!~~ and ~~CHW~~a $0.7 million increase in ~~connection with the Business Combination.~~repayment of debt.

~~Debt~~

~~PPP~~Paycheck Protection Program Loan

InOn August 5, 2020, the Company received loan proceeds of approximately $5.1 million from a financial institution pursuant to the Paycheck Protection Program ~~(the “PPP Loan”) as administered~~established by ~~the U.S. Small Business Administration (the “SBA”) under~~ the Coronavirus Aid, Relief, and Economic Security Act, ~~(“CARES Act”).~~

~~In August 2021, the Company applied for forgiveness~~ of which $3.5 million ~~of the~~was subsequently forgiven. The PPP Loan ~~and in September 2021, the SBA approved the Company’s loan forgiveness application in the amount of $3.5 million. The term of the PPP Loan is five years with a maturity date of~~matures on August 5, 2025 and ~~contains~~bears interest at a fixed ~~annual interest~~ rate of 1.00%. Principal and interest payments ~~began in November 2021.~~are payable monthly, and as of December 31, 2023, the amount outstanding under the PPP Loan was $0.8 million.

For additional information regarding the PPP Loan, refer to Note 8, ~~Note 10 -~~Long-Term Debt ~~of Notes~~, to the Consolidated Financial ~~Statements.~~Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Blue Torch Financing and Warrant Agreement

On August 9, 2022, Legacy Wag! entered into a financing agreement and warrant agreement with Blue Torch ~~Finance, LLC~~ (together with its affiliated funds and any other parties providing a commitment thereunder, including any additional lenders, agents, arrangers or other parties joined thereto after the date thereof, collectively, the “Debt Financing Sources”), pursuant to which, among other things, the Debt Financing Sources agreed to extend an approximately $32.2 million senior secured term loan ~~credit facility~~ (the ~~“Credit Facility”~~“Financing Agreement”). Legacy Wag! is the primary borrower under the ~~Credit Facility,~~Financing Agreement, the Company is a parent guarantor and substantially all of the Company’s existing and future subsidiaries are subsidiary guarantors. The ~~Credit Facility~~Financing Agreement is secured by a first priority security interest in substantially all assets of the Company and the guarantors.

For additional information regarding the Blue Torch financing arrangements, refer to Note 8, ~~Note 10 -~~Long-Term Debt ~~of Notes~~, to the Consolidated Financial ~~Statements.~~Statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, as defined by applicable rules and regulations of the SEC, that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

~~Table of Contents~~

~~Non-GAAP Measures~~

~~We regularly review several metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.~~

~~Adjusted EBITDA and Adjusted EBITDA Margin~~

~~Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP measures and the comparable GAAP measure is net income (loss).~~ Please refer to the “— Non-GAAP Measures” section below for further discussion with respect to how we define these measures, as well as for reconciliations to the most comparable U.S. GAAP measures. Adjusted EBITDA and Adjusted EBITDA margin provide a basis for comparison of our business operations between current, past, and future periods by excluding items from net income (loss) that we do not believe are indicative of our core operating performance. These non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with U.S. GAAP, and may not be comparable to similarly titled amounts used by other companies or persons, because they may not calculate these non-GAAP measures in the same manner.

~~The~~ ~~following tables present our non-GAAP measures and key performance indicators for the periods presented (in thousands except for percentages).~~

Years Ended December 31,
($ in thousands, except percentages) 2022 2021
U.S. GAAP Measures:
Revenues $ 54,865 $ 20,082
Net income (loss) $ (38,567) $ (6,311)
Net income (loss) % (70.3) % (31.4) %
Net cash flows provided by (used in) operating activities $ (2,803) $ (12,256)
Non-GAAP measures:
Adjusted EBITDA $ (3,872) $ (9,915)
Adjusted EBITDA Margin (7.1) % (49.4) %

~~Adjusted EBITDA and Adjusted EBITDA Margin~~

In addition to revenues and net loss, which are measures presented in accordance with U.S. GAAP, management believes that Adjusted EBITDA and Adjusted EBITDA Margin provide relevant and useful information that is widely used by analysts, investors, and competitors in our industry to assess performance. We define Adjusted EBITDA as net income (loss), adjusted for interest expense, depreciation and amortization, share-based compensation, income taxes, as well as other items to be consistent with definitions typically used by lenders, including transaction costs. Additionally, we exclude the impact certain non-recurring items which are not indicative of our operating performance, including but not limited to, business combination transaction and integration costs and PPP Loan Forgiveness. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by revenues. However, you should be aware that when evaluating Adjusted EBITDA and Adjusted EBITDA Margin, Wag! may incur future expenses similar to those excluded when calculating these measures. Wag!’s presentation of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. Further, these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. Wag! compensates for these limitations by relying primarily on its U.S. GAAP results and using Adjusted EBITDA and Adjusted EBITDA Margin on a supplemental basis. Wag!’s computation of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to other similarly titled measures computed by other companies because not all companies calculate this measure in the same fashion. You should review the reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA Margin below and not rely on any single financial measure to evaluate Wag!’s business.

~~Table of Contents~~

~~Adjusted EBITDA and Adjusted EBITDA Margin are useful to an investor in evaluating our performance because these measures:~~

•~~are widely used by analysts, investors, and competitors to measure a company’s operating performance;~~

•~~are used by our lenders and/or prospective lenders to measure our performance; and~~

•~~are used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting.~~

~~The reconciliations of net loss, which is the most comparable U.S. GAAP measure, to non-GAAP Adjusted EBITDA for the three and nine months ended December 31, 2022 and 2021 are as follows:~~

Years Ended December 31,
($ in thousands) 2022 2021
Revenues $ 54,865 $ 20,082
Adjusted EBITDA reconciliation:
Net income (loss) (38,567) (6,311)
Add (deduct):
Interest expense (income) 2,470 61
Depreciation and amortization 571 388
Share based compensation [1] 24,492 222
Issuance of Community Shares [2] 1,971 —
Integration and transaction costs associated with acquired business [3] 220 —
Change in fair value of derivatives [4] 4,958 —
Gain on forgiveness of PPP loan — (3,482)
Tax (benefit) expense 13 (793)
Adjusted EBITDA $ (3,872) $ (9,915)

[1] Includes stock-based compensation expense in 2022 incurred in connection with the Business Combination of $23.9 million. Of the $23.9 million, $2.8 million is included in Platform operations and support, $2.1 million in Sales and marketing, and $19.0 million in General and administrative expenses on the consolidated statement of operations.

~~[2] Of this amount, $1.8 million is included General and administrative expenses and the remainder as contra revenue on the consolidated statement of operations.~~

[3] Related to the acquisition of Furmacy, Inc. These costs, including transaction costs incurred in connection with an acquired business, are incurred over a short period of time and do not represent an ongoing operating expense of the business.

[4] Relates to the changes in the fair value of previously disclosed Forward Purchase Agreements that were entered into prior to the closing of the Business Combination and subsequently settled in the fourth quarter of 2022. See ~~Note 3 - Business Combinations~~ ~~and~~ ~~Note 5 - Fair Value Measurements~~ ~~for more details.~~

Critical Accounting Policies and Estimates

~~The preparation of financial statements in conformity with~~ U.S. GAAP requires ~~management~~us to make estimates and assumptions that affect the reported amounts of assets and liabilities and ~~disclosure~~disclosures of contingent assets and liabilities atas of the date of the financial statements and the reported amounts of revenues and expenses during the ~~reporting period.~~year. We base our estimates and assumptions on current facts, historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenues and expenses. Actual results could differ ~~and in the past have differed,~~ from those estimates.

~~While all of our significant~~We believe that the accounting policies discussed below are ~~described in more detail in~~ ~~Note 2 — Summary of Significant Accounting Policies~~critical to understanding our ~~consolidated financial statements in the notes~~historical and future performance, as these policies relate to the ~~consolidated financial statements, the Company has identified the following estimates as critical in that they involve a higher degree of judgment~~more significant areas involving management’s judgments and ~~are subject to a significant degree of variability:~~estimates.

7951

~~Table~~Tab l e of Contents

Revenue Recognition

~~The Company recognizes~~We recognize revenue in accordance with ASC 606, Revenue from Contracts with ~~its~~ Customers. Through ~~its~~our Services offerings, ~~the Company~~we principally ~~generates Service~~generate Services revenue from service fees charged to PCGs for use of the platform to discover pet service opportunities and to successfully complete a pet care service to a ~~pet parent. The Company~~Pet Parent. We also ~~generates~~generate revenue from subscription fees paid by Pet Parents for Wag! Premium, and fees paid by PCGs to join the platform. Additionally, through ~~its~~our Wellness offerings, ~~the Company generates~~we generate revenue through commission fees paid by third party service partners in the form of ‘revenue-per-action’ or conversion activity defined in our agreements with the third party service partner. For some of ~~the Company’s~~our arrangements with third party service partners, the transaction price is considered variable, and an estimate of the transaction price is recorded when the action occurs. The ~~estimated~~estimate of variable consideration, which is not material, included in the transaction price ~~used in the variable consideration~~ is based on historical data with the respective third-party service partner and the consideration is measured and settled monthly.

Business Combinations

~~The Company accounts~~We account for our business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, ~~management makes~~we make significant estimates and assumptions, especially with respect to ~~the valuation of~~ intangible assets. ~~Management’s~~Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. ~~During~~Once the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new informationpurchase accounting is obtained related to facts and circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first,finalized, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.

Acquired Intangible Assets

When we acquire a business, a portion of the purchase price is typically allocated to identifiable intangible assets, such as trademarks, acquired technology and customer relationships. Fair value of these assets is determined primarily using the income approach, which requires us to project future cash flows and apply an appropriate discount rate. We amortize intangible assets with finite lives over their expected useful lives. Our estimates are based upon assumptions believed to be reasonable but which are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur. Incorrect estimates could result in future impairment charges, and those charges could be material to our results of operations.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Goodwill is not subject to amortization but will be reviewed for impairment on an annual basis or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable.

Stock-Based Compensation

~~The Company has an equity incentive plan under which it grants equity awards, including stock options. The Company determines compensation expense associated with~~We estimate the fair value of stock options ~~based on~~at the ~~estimated~~ grant date ~~fair value method~~ using the Black-Scholes ~~valuation model.~~ option-pricing model (the “Black-Scholes Model”). The fair values of restricted stock units (“RSU”) are determined based on our stock price on the date of grant. The fair values of equity awards are recognized as compensation expense over the requisite service period or over the period in which the related services are received (generally the vesting period) using the straight-line method. We account for forfeitures as they occur.

The Black-Scholes ~~model~~Model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include per share fair value of the underlying common stock, ~~exercise price,~~ expected term, risk-free interest rate, expected annual dividend yield and expected stock price volatility over the expected ~~term, and expected annual dividend yield.~~

term. For all stock options granted ~~the Company calculates~~to date, we calculated the expected term using the simplified method ~~as it has limited historical exercise data to provide a reasonable basis upon which to otherwise estimate expected term,~~(based on the mid-point between the vesting date and the ~~options have characteristics~~end of ~~“plain-vanilla” options.~~the contractual term). We determine volatility using the historical volatility of the stock price of similar publicly traded peer companies. The risk-free interest rate is based on the yield available on ~~U.S.~~United States Treasury zero-coupon issues similar in duration to the expected term of the ~~stock-based~~equity-settled award. Due to the limited trading history of the Company’s common stock, the expected volatility assumption is generally based on volatilities of a peer group of similar companies whose share prices are publicly available. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own common stock price becomes available. The Company utilizes a dividend yield of zero, as it has no history or plan of declaring dividends on its common stock.

As of August 9, 2022, the Company stopped issuing stock options under the 2014 Stock Plan and only issues RSUs on a go-forward basis under the Omnibus Incentive Plan. As of December 31, 2022, the Company has granted RSUs with service conditions. Service conditions that affect whether or not an award vests or becomes exercisable are not directly incorporated into the estimate of fair value at the grant date. Based on the change in valuation methods, as there had been no public market for Legacy Wag!’s common stock prior to the Merger, as well as the satisfaction of conditions for certain awards to be granted, stock compensation expense increased from $0.2 million to $24.5 million in December 31, 2021 and 2022, respectively. For further detail, see ~~Note 11 - S~~t ~~ockholders Equi~~ty ~~of the notes to the consolidated financial statements.~~

8052

~~Table~~Tab l e of Contents

Income Taxes

The Company accounts for income taxes using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting basis and the tax basis of assets and liabilities result in a deferred tax asset, the Company evaluates the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that either some portion or the entire deferred tax asset will not be realized. The Company records a valuation allowance to reduce the deferred tax assets to the amount of future tax benefit that is more likely than not to be realized. We regularly review the deferred tax assets for recoverability based on historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and tax planning strategies. Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute the business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, our income tax provision would increase or decrease in the period in which the assessment is changed.

The Company recognizes a tax benefit from uncertain tax positions only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authorities’ administrative practices and precedents. The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being recognized upon settlement. The Company did not recognize any tax benefits from uncertain tax positions during the years ended December 31, ~~2022~~2023 and ~~2021.~~2022.

JOBS Act Accounting ~~for Warrants~~Election

~~The Company accounts for warrants~~We are an “emerging growth company,” as ~~either equity-classified~~defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or ~~liability-classified instruments based on~~revised accounting standards until such time as those standards apply to private companies. We have elected to use this extended transition period until we are no longer an ~~assessment~~emerging growth company or until we affirmatively and irrevocably opt out of the ~~instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the instruments are free standing~~extended transition period. Accordingly, our consolidated financial ~~instruments pursuant~~statements may not be comparable to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance andcompanies that comply with new or revised accounting pronouncements as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the Business Combination qualify for equity accounting treatment. Additionally, the Company considers its warrants ("Lender Warrants") issued in conjunction with the Blue Torch Financing Arrangement (see ~~Note 10 - Debt~~ ~~for additional detail) to be equity classified since they do not meet the liability classification criteria. For further detail on the Company's Warrants (Public, Private and Lender), refer to~~ ~~Note 11 - Stockholders’ Deficit and Mezzanine Equity~~.public company effective dates.

New Accounting Pronouncements

See discussion under Note 2, ~~— Summary of~~ Significant Accounting Policies ~~in the notes~~, to the ~~consolidated financial statements~~Consolidated Financial Statements included ~~elsewhere~~ in Part II, Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form ~~10-K.~~10-K for information on new accounting pronouncements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

~~Interest Rate and Market Price Risk~~

We are exposed to market risks related to interest rates and market price sensitivity on certain financial obligations. Exposure to market risks primarily arise from the Blue Torch Credit Facility,, Earnout Shares and Management Earnout Shares. The aforementioned financial obligations are included as they either bear a variable interest rate or are subject to equity price sensitivity. Please see ~~Note 3 - Business Combinations~~ ~~and~~ ~~Note 10 - Debt~~ ~~of Notes to Consolidated Financial Statements included in Part II, Item 8, of this Annual Report on Form 10-K, for further detail.~~

As a smaller reporting company, we are not required to provide the information required by this Item.

~~Table of Contents~~

Item 8. Financial Statements and Supplementary Data

~~Index to Consolidated Financial Statements~~


			Page Number
WAG! GROUP CO.
~~Page~~Report of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LL P (PCAOB ID: 238)			54
Report of Independent Registered Public Accounting Firm – BDO USA, LLP ~~(BDO USA, LLP, Chicago, Illinois, PCAOB ID #~~(PCAOB ID: 243)			8355
Consolidated Balance Sheets			8456
Consolidated Statements of Operations			8557
Consolidated Statements of Redeemable Preferred Stock and ~~Stockholders' Deficit~~Stockholders’ Equity (Deficit)			8658
Consolidated Statements of Cash Flows			8759
Notes to Consolidated Financial Statements			8760

8253

~~Table~~Tab l e of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~Stockholders and~~To the Board of Directors

and Stockholders of Wag! Group Co.

~~San Francisco, CA~~

Opinion on the ~~Consolidated~~ Financial Statements

We have audited the accompanying consolidated balance ~~sheets~~sheet of Wag! Group Co. and its subsidiaries (the “Company”) as of December 31, ~~2022~~2023, and ~~2021,~~ the related consolidated statements of operations, ~~statements~~ of redeemable preferred stock and stockholders’ ~~deficit,~~equity (deficit) and of cash flows for ~~each of~~ the ~~years in the period~~year then ended, ~~and~~including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company atas of December 31, ~~2022 and 2021,~~2023, and the results of its operations and its cash flows for ~~each of~~ the ~~years~~year then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our ~~audits.~~audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ~~(“PCAOB”)~~(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our ~~audits~~audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our ~~audits,~~audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the ~~Company’s~~Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our ~~audits~~audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our ~~audits~~audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our ~~audits provide~~audit provides a reasonable basis for our opinion.

/s/ ~~BDO USA,~~PricewaterhouseCoopers LLP

Seattle, Washington

March 18, 2024

We have served as the Company’s auditor since ~~2021.~~2023.

Tab l e of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors

Wag! Group Co.

San Francisco, CA

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Wag! Group Co. (the “Company”) as of December 31, 2022, the related consolidated statement of operations, statement of redeemable preferred stock and stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

We served as the Company’s auditor from 2021 to 2023.

Chicago, Illinois

March 30, 2023

8355

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~WAG! GROUP CO.

~~Consolidated Balance Sheets~~CONSOLIDATED BALANCE SHEETS

~~(in thousands, except for share amounts and per share data)~~


		As of December 31,
		2022		2021
Assets
			December 31,					December 31,
			2023				2023		2022
			(in thousands, except par value amounts)					(in thousands, except par value amounts)
ASSETS						ASSETS
Current assets:	Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	38,966	$	2,845

Short-term investments available for sale		—		2,554
Cash and cash equivalents
Cash and cash equivalents
Accounts receivable, net	Accounts receivable, net	5,872		2,638
Prepaid expenses and other current assets	Prepaid expenses and other current assets	2,585		3,043
Deferred offering costs		—		930
Total current assets	Total current assets	$	47,423	$	12,010
Property and equipment, net	Property and equipment, net	88		90
Operating lease, right of use assets, net		695		—
Operating lease right-of-use assets
Intangible assets, net	Intangible assets, net	2,590		2,888
Goodwill	Goodwill	1,451		1,427
Other assets	Other assets	64		47
Total assets	Total assets	$	52,311	$	16,462
Liabilities, mezzanine equity and stockholders’ equity
LIABILITIES AND STOCKHOLDERS’ EQUITY						LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	7,174	$	2,299
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	4,765		4,601
Deferred revenue	Deferred revenue	2,232		1,888
Deferred purchase consideration – current portion	Deferred purchase consideration – current portion	750		750
Operating lease liabilities		306		—
Notes Payable – current portion		1,264		442

Operating lease liabilities – current portion
Notes payable – current portion
Total current liabilities	Total current liabilities	16,491		9,980
Operating lease liabilities – non-current portion	Operating lease liabilities – non-current portion	435		—
Notes Payable – non-current portion, net of debt discount of $7.0 million		24,970		1,200
Notes payable – non-current portion, net of debt discount and warrant allocation of $4,563 and $7,008 as of December 31, 2023 and December 31, 2022, respectively
Deferred purchase consideration – non-current portion	Deferred purchase consideration – non-current portion	493		1,130
Other non-current liabilities
Total liabilities	Total liabilities	$	42,389	$	12,310
Commitments and contingencies (Note 9)
Mezzanine equity:

Redeemable convertible preferred stock par value $0.0001, 1,000,000 shares and 24,545,386 shares authorized and 0 and 23,858,824 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively; aggregate liquidation preference of $67,417 as of December 31, 2021		—		110,265
Total mezzanine equity		$	—	$	110,265
Stockholders’ deficit:
Common stock, $0.0001 par value, 110,000,000 and 43,763,126 shares authorized, 36,849,076 and 6,121,253 outstanding at December 31, 2022 and December 31, 2021, respectively		$	4	$	1
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, $0.0001 par value; 110,000 shares authorized as of both December 31, 2023 and December 31, 2022; 39,597 and 36,849 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively
Common stock, $0.0001 par value; 110,000 shares authorized as of both December 31, 2023 and December 31, 2022; 39,597 and 36,849 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively
Common stock, $0.0001 par value; 110,000 shares authorized as of both December 31, 2023 and December 31, 2022; 39,597 and 36,849 issued and outstanding as of December 31, 2023 and December 31, 2022, respectively
Additional paid-in capital	Additional paid-in capital	158,335		3,736
Accumulated deficit	Accumulated deficit	(148,417)		(109,850)
Total stockholders’ equity (deficit)		9,922		(106,113)
Total liabilities, mezzanine equity and stockholders’ deficit		$	52,311	$	16,462
Total stockholders’ equity
Total liabilities and stockholders’ equity

See the accompanying notes to consolidated financial statements.

8456

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~WAG! GROUP CO.

~~Consolidated Statements of Operations~~CONSOLIDATED STATEMENTS OF OPERATIONS

~~(in thousands except for share amounts and per share data)~~

Year Ended December 31,
2022 2021
Revenues $ 54,865 $ 20,082
Costs and expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below) 4,024 2,777
Platform operations and support 13,825 10,265
Sales and marketing 35,156 10,221
General and administrative 32,415 6,956
Depreciation and amortization 571 388
Total costs and expenses 85,991 30,607
Change in fair value of derivative liability (4,958) —
Gain on forgiveness of PPP loan — 3,482
Interest expense, net (2,470) (61)
Income (loss) before income taxes (38,554) (7,104)
Income tax benefit (expense) (13) 793
Net income (loss) $ (38,567) $ (6,311)
Net earnings (loss) per share
Net loss per share, basic and diluted $ (2.07) $ (1.10)
Weighted average common shares outstanding and dilutive potential common shares (diluted) 18,641,076 5,742,807


	Year Ended December 31,
	2023		2022
	(in thousands, except per share amounts)
Revenues	$	83,916	$	54,865
Costs and expenses:
Cost of revenues (exclusive of depreciation and amortization shown separately below)	5,477		4,024
Platform operations and support	12,475		13,825
Sales and marketing	50,523		35,156
Royalty	1,791		—
General and administrative	19,223		32,415
Depreciation and amortization	1,673		571
Total costs and expenses	91,162		85,991
Interest expense	7,417		2,886
Interest income	(907)		(416)
Other expense, net	21		4,958
Loss before income taxes and equity in net earnings of equity method investment	(13,777)		(38,554)
Income taxes	93		13
Equity in net earnings of equity method investment	553		—
Net loss	$	(13,317)	$	(38,567)
Loss per share, basic and diluted	$	(0.35)	$	(2.07)
Weighted-average common shares outstanding used in computing loss per share, basic and diluted	38,402		18,641

See the accompanying notes to consolidated financial statements.

8557

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~WAG! GROUP CO.

~~Consolidated Statements of Redeemable Preferred Stock and Stockholders’ Deficit~~CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

~~(in thousands, except share data)~~


	Redeemable Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity
	(in thousands)			(in thousands)
Balance as of December 31, 2022	—	$	—	36,849	$	4	$	158,335	$	(148,417)	$	9,922
Issuance of common stock from exercise of stock options and restricted stock units				2,699	—		104				104
Stock-based compensation							4,712				4,712
Shares issued for acquisition				49	—		225				225
Net loss									(13,317)		(13,317)
Balance as of December 31, 2023	—	$	—	39,597	$	4	$	163,376	$	(161,734)	$	1,646

Redeemable Preferred
Stock – Mezzanine
Equity Common Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated
Other
Comprehensive
Income (Loss) Total
Stockholders’
Deficit
Shares Amount Shares Amount
Balance at December 31, 2020 24,545,386 $ 110,265 5,629,095 $ 1 $ 3,345 $ (103,539) $ 1 $ (100,192)
Reverse recapitalization (686,562) — (157,452) — — — — —
As adjusted, beginning of period 23,858,824 $ 110,265 5,471,643 $ 1 $ 3,345 $ (103,539) $ 1 $ (100,192)
Shares issued upon exercise of stock options — $ — 28,248 $ — $ 3 $ — $ — $ 3
Shares issued upon acquisition — $ — 621,362 $ 166 $ 166
Stock-based compensation — — — — 222 — — 222
Other comprehensive loss — — — — — — (1) (1)
Net income (loss) — — — — — (6,311) — (6,311)
Balance at December 31, 2021 23,858,824 $ 110,265 6,121,253 $ 1 $ 3,736 $ (109,850) $ — $ (106,113)
Preferred Series P Issuance, net of issuance costs 1,100,000 10,925 — — — — — —
Shares issued upon exercise of stock options — — 118,514 — 17 — — 17
Conversion of Series P preferred stock to common (1,100,000) (10,925) 1,100,000 — 10,925 — — 10,925
Conversion of preferred to common stock (23,858,824) (110,265) 23,858,824 2 110,263 — — 110,265
Stock-based compensation — — 52,899 — 625 — — 625
Stock-based compensation due to Earnout Shares — — — — 23,867 — — 23,867
Issuance of Community Shares — — 300,000 — 1,971 — — 1,971
Business Combination with CHW, net of transaction costs and other related shares — — 6,645,964 1 10,546 — — 10,547
Shares issued for acquisition of Furmacy, Inc. — — 90,000 — 283 — — 283
Settlement of forward share purchase agreement derivative liability — — (1,438,378) — (3,898) — — (3,898)
Net loss — — — — — (38,567) — (38,567)
Balance at December 31, 2022 — $ — 36,849,076 $ 4 $ 158,335 $ (148,417) $ — $ 9,922


	Redeemable Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	(in thousands)			(in thousands)
Balance as of December 31, 2021	24,545	$	110,265	6,297	$	1	$	3,736	$	(109,850)	$	(106,113)
Reverse recapitalization (Note 3)	(686)	—		(176)	—						—
As adjusted, beginning of period	23,859	110,265		6,121	1		3,736		(109,850)		(106,113)
Issuance of Series P preferred stock, net of issuance costs	1,100	10,925									—
Issuance of common stock from exercise of stock options and restricted stock units				171	—		17				17
Stock-based compensation							24,492				24,492
Conversion of preferred stock to common stock	(24,959)	(121,190)		24,959	2		121,188				121,190
Business Combination with CHW, net of transaction costs and other related shares				6,646	1		10,546				10,547
Issuance of Community Shares				300	—		1,971				1,971
Settlement of Forward Share Purchase Agreements				(1,438)			(3,898)				(3,898)
Shares issued for acquisition				90			283				283
Net loss									(38,567)		(38,567)
Balance as of December 31, 2022	—	$	—	36,849	$	4	$	158,335	$	(148,417)	$	9,922

See the accompanying notes to consolidated financial statements.

8658

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~WAG! GROUP CO.

~~Consolidated Statement of Cash Flows~~CONSOLIDATED STATEMENTS OF CASH FLOWS

~~(in thousands)~~

Year Ended December 31,
2022 2021
Cash flows from operating activities
Net loss $ (38,567) $ (6,311)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation 24,492 222
Gain on PPP loan forgiveness — (3,482)
Amortization of debt discount on debt financing 1,034 —
Provision for deferred taxes — (793)
Depreciation and amortization 571 388
Issuance of Community Shares 1,971 —
Noncash interest – deferred purchase consideration 81 54
Noncash change in fair value of derivatives 4,958 —
Changes in operating assets and liabilities:
Accounts receivable (3,234) (2,478)
Prepaid expenses and other current assets 534 (675)
Deferred costs — (930)
Other assets — 872
Accounts payable 4,853 1,299
Operating lease liabilities 32 —
Accrued expenses and other current liabilities 128 (364)
Deferred revenue 344 88
Other non-current liabilities — (146)
Net cash used in operating activities (2,803) (12,256)
Cash flows from investing activities
Purchases of short-term investments — (17,692)
Proceeds from sale and maturity of short-term investments 2,550 27,481
Payment of deferred purchase consideration (718) (188)
Net cash acquired in acquisition of Furmacy, Inc. 54 —
Cash paid for acquisition of Compare Pet Insurance, Inc. — (1,509)
Purchase of property and equipment (51) (5)
Net cash provided by investing activities 1,835 8,087
Cash flows from financing activities
Proceeds from exercises of stock options 17 3
Payments on PPP loan (404) (54)
Proceeds from Blue Torch Financing Agreement 24,123 —
Repayment of Blue Torch Financing (161) —
Proceeds from the issuance of Series P preferred stock, net of issuance costs 10,925 —
Proceeds from Business Combination with CHW, net of transaction costs 2,589 —
Net cash provided by financing activities 37,089 (51)
Net change in cash, cash equivalents, and restricted cash 36,121 (4,220)
Cash, cash equivalents and restricted cash at beginning of period 2,845 7,065
Cash, cash equivalents and restricted cash at end of period $ 38,966 $ 2,845
Supplemental disclosures of cash flow information:
Cash paid during the year for interest 2,470 22
Cash paid during the year for income taxes — 1
Non-cash financing transactions:
Forward share purchase agreements 4,958 —
Conversion of preferred shares to common stock (121,188) —


	Year Ended December 31,
	2023		2022
	(in thousands)
Cash flow from operating activities:
Net loss	$	(13,317)	$	(38,567)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	4,712		24,492
Non-cash interest expense	2,506		1,115
Depreciation and amortization	1,673		571
Reduction in carrying amount of operating lease right-of-use assets	333		366
Change in fair value of derivative liability	—		4,958
Issuance of Community Shares	—		1,971
Equity in net earnings of equity method investments	(553)		—
Other	12		—
Changes in operating assets and liabilities, net of effect of acquired business:
Accounts receivable	(4,083)		(3,234)
Prepaid expenses and other current assets	(395)		534
Operating lease liabilities	(208)		(334)
Other assets	7		—
Accounts payable	3,995		4,853
Accrued expenses and other current liabilities	(841)		128
Deferred revenue	(478)		344
Other non-current liabilities	172		—
Net cash used in operating activities	(6,465)		(2,803)
Cash flows from investing activities:
Proceeds from sale and maturity of short-term investments	—		2,550
Cash paid for acquisitions, net of cash acquired	(10,430)		54
Cash paid for equity method investment	(1,470)		—
Purchase of property and equipment	(361)		(51)
Other	—		(718)
Net cash provided by (used in) investing activities	(12,261)		1,835
Cash flows from financing activities:
Proceeds from exercises of stock options	104		17
Proceeds from debt, net of discount	—		24,123
Repayment of debt	(1,264)		(565)
Proceeds from issuance of Series P preferred stock, net of issuance costs	—		10,925
Proceeds from Business Combination with CHW, net of transaction costs	—		2,589
Other	(757)		—
Net cash provided by (used in) financing activities	(1,917)		37,089
Net change in cash and cash equivalents	(20,643)		36,121
Cash and cash equivalents, beginning of period	38,966		2,845
Cash and cash equivalents, end of period	$	18,323	$	38,966
Supplemental disclosures of cash flow information:
Interest paid	$	4,982	$	2,470
Income taxes paid	$	40	$	—
Noncash investing and financing activities:
Conversion of preferred stock to common stock	$	—	$	121,188
Forward Share Purchase Agreements	$	—	$	4,958

See the accompanying notes to consolidated financial statements.

8759

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~WAG! GROUP CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of ~~the~~ Business

Wag! Group Co. (“Wag!,”~~, "Wag",~~ “Wag,” the ~~“Company”, “we”~~“Company,” “we,” or “our”), formerly known as CHW Acquisition Corporation (“CHW”), is incorporated in Delaware with headquarters in San Francisco, California. The Company develops and supports proprietary marketplace technologies available as a website and mobile app (“platform” or “marketplace”) that enables independent pet caregivers (“PCG”) to connect with Pet Parents (“Services”) and third party service partners to provide a suite of pet wellness services and products (“Wag! Wellness” or "Wellness"), including pet expert advice, pet wellness plans, and a pet insurance comparison tool. The platform allowsenable Pet Parents (also referred to as ~~“end-user(s)~~“end user(s)”)~~, who require specific~~ to connect with independent pet ~~care~~caregivers (“PCGs”) and third-party service and product partners to obtain pet services ~~to make service requests in the platform, which are then fulfilled by PCGs.~~and products, including pet walking, sitting, boarding, pet insurance comparison, and food and treats. The Company operates in the United States.

On August 9, 2022 (the “Closing Date” or ~~"Merger Date"~~“Merger Date”), Wag! Labs, Inc. ("(“Legacy Wag!"”), CHW ~~Acquisition Corporation (“CHW”)~~, and CHW Merger Sub, Inc. (“Merger Sub”) pursuant to the terms of the Business Combination Agreement and Plan of Merger (the ~~“Business~~“CHW Business Combination Agreement”) dated February 2, 2022, completed the business combination of Legacy Wag! and CHW which was effected by the merger of Merger Sub with and into Legacy Wag!, with Legacy Wag! surviving the Merger as a ~~wholly owned~~wholly-owned subsidiary of CHW (the “Merger,” and, together with the other transactions contemplated by the CHW Business Combination Agreement, the ~~“Business~~“CHW Business Combination”). Upon completion of the Merger on August 9, 2022, following the approval at the extraordinary general meeting of the stockholders of CHW held on July 28, 2022 (the “Special Meeting”), the Company changed its name to Wag! Group Co. (“Post-Combination Company”) and effectively assumed all of CHW’s material operations. Refer to Note 3, - Business ~~Combinations~~Combination with CHW, for more information regarding the Merger.

In November 2022, the Company via its wholly owned subsidiary, Compare Pet Insurance Services, Inc. ("CPI"), entered into an agreement to invest in a new limited liability company for an investment of $1.47 million. The Company funded this investment in the first quarter of 2023. We do not anticipate having control of the entity.

On December 27, 2022 Wag! entered into an Asset Purchase Agreement with Clicks and Traffic LLC (“Dog Food Advisor”) to purchase its Dog Food Advisor assets for cash consideration of $9.0 million. The transaction subsequently closed on January 5, 2023, upon satisfaction of the remaining closing conditions. Dog Food Advisor is one of the most visited and trusted dog food marketplaces, helping Pet Parents make informed decisions about dog and cat food. For additional information around the accounting for the transaction, refer to ~~Note~~15 - ~~Subsequent Events~~.

2. ~~Summary of~~ Significant Accounting Policies

~~Principles of Consolidation and~~ Basis of Presentation

The ~~Company has prepared the~~accompanying consolidated financial statements ~~in accordance with accounting principles generally accepted in~~include the ~~United States~~accounts of ~~America (“GAAP”).~~

~~For periods prior to~~ the ~~Merger, the reported share~~Company and ~~per share amounts~~its wholly-owned subsidiaries. All intercompany balances and transactions have been ~~retroactively converted by the applicable exchange ratio with the exception~~eliminated upon consolidation.

The number of ~~the authorized shares and shares reserved for issuance. The~~ shares and per share amounts prior to the Merger have been retroactively restated as shares reflecting conversion at the exchange ratio of 0.97 established in the CHW Business Combination. See Note 3, Business Combination ~~Agreement. See~~ with CHW~~Note 3—~~, for more information regarding the CHW Business ~~Combinations~~Combination. ~~for additional information.~~

~~Segments~~

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s Chief Executive Officer is the Company’s CODM. The CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance of the Company. As such, the Company has determined that it operates as one operating segment within the United States.

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

Use of Estimates

The preparation of consolidated financial statements in conformity with ~~GAAP~~accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make ~~certain~~ estimates ~~judgements,~~ and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates and assumptions on ~~various factors, including~~current facts, historical experience, and on various other ~~assumptions~~factors that ~~are believed~~it believes to be reasonable under the circumstances, ~~when these~~the results of which form the basis for making judgments about the carrying values ~~are not readily available~~of assets and liabilities and the recording of revenues and expenses. Actual results could differ from ~~other sources.~~those estimates.

Significant items subject to estimates and assumptions include, but are not limited to, fair values of financial instruments, assumptions used in the valuation of common and preferred stock, valuation of intangible assets acquired, valuation of stock-based compensation and warrants, ~~allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed in business combinations~~ and the valuation allowance for deferred income taxes. Actual results may differ from these estimates.

Reclassifications

Certain reclassifications were made to the prior period consolidated statement of operations, consolidated statement of redeemable preferred stock and stockholders’ equity (deficit), and the consolidated statement of cash flows to conform to the current period presentation.

Tab l e of Contents

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This ASU changes the impairment model for most financial assets, requiring the use of an expected loss model which requires entities to estimate the lifetime expected credit loss on financial assets measured at amortized cost. Such credit losses will be recorded as an allowance to offset the amortized cost of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. In addition, credit losses relating to available-for-sale debt securities will now be recorded through an allowance for credit losses rather than as a direct write-down to the security. The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of this guidance during the first quarter of 2023 did not have a material impact on the Company’s consolidated financial statements.

New Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This ASU simplifies the accounting for convertible instruments by eliminating certain accounting models, resulting in fewer embedded conversion features being separately recognized from the host contract, and also amends the guidance for derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. Additionally, the amendments in this ASU affect the diluted EPS calculation for convertible instruments. It requires that the effect of potential share settlement be included in the diluted EPS calculation when a convertible instrument may be settled in cash or shares; the if-converted method as opposed to the treasury stock method is required to calculate diluted EPS for these types of convertible instruments. The amendments in this update are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The adoption of this guidance will not have a material impact on the Company’s consolidated financial statements.

In August 2023, the FASB issued ASU No. 2023-05, Business ~~Combinations~~Combinations—Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement (“ASU 2023-05”). This ASU requires a joint venture to recognize and initially measure its assets and liabilities using a new basis of accounting upon formation, i.e. at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). The amendments in this update are effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025, with early adoption permitted. Joint ventures formed prior to the adoption date may elect to apply the new guidance retrospectively back to their original formation date. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). This ASU improves reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). This ASU improves the transparency of income tax disclosures by requiring: (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. Additionally, the amendments in this ASU improve the effectiveness and comparability of disclosures by: (1) adding disclosures of pretax income (or loss) and income tax expense (or benefit) to be consistent with U.S. Securities and Exchange Commission (“SEC”) Regulation S-X, and (2) removing disclosures that no longer are considered cost beneficial or relevant. The amendments in this update are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are comprised primarily of bank accounts ~~for business combinations using~~and money market funds. These cash and cash equivalents are valued based on Level 1 inputs, which consist of quoted prices in active markets. To reduce its credit risk, the ~~acquisition method of accounting, which requires, among other things, allocation~~Company monitors the credit standing of the financial institutions that hold the Company’s cash and cash equivalents.

Tab l e of Contents

Accounts Receivable, Net

Accounts receivable, net consists of amounts due from payment processors and trade customers that do not bear interest. The Company records an allowance for estimated credit losses inherent in its trade accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted for current market conditions, the financial condition of the customer, the amount of receivables in dispute, and the current receivables aging and payment patterns. The Company does not have any off-balance sheet credit exposure related to its customers. The allowance for credit losses was immaterial as of December 31, 2023 and 2022.

Property and Equipment, Net

Property and equipment, net consisted of the following:


	December 31,
	2023		2022
	(in thousands)
Property and equipment, at cost:
Equipment	$	240	$	200
Internal-use software	762		460
Total property and equipment, at cost	1,002		660
Less: accumulated depreciation and amortization	(655)		(572)
Property and equipment, net	$	347	$	88

The Company capitalizes qualifying proprietary software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed, and (ii) it is probable that the software will be completed and placed in service for its intended use. Capitalization ceases when the software is substantially complete and ready for its intended use including the completion of all significant testing. Costs related to preliminary project activities and post implementation operating activities are expensed as incurred.

Depreciation of equipment and amortization of internal-use software is computed on a straight-line basis over the estimated useful lives of the related assets, which is three years. Depreciation and amortization expense of property and equipment was $0.1 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment based on undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Measurement of an impairment loss is based on the estimated fair value of the asset.

Acquired Intangible Assets

When a business is acquired, a portion of the purchase ~~consideration~~price is typically allocated to ~~the tangible and~~identifiable intangible assets, ~~acquired~~such as customer relationships, developed technology, and ~~liabilities assumed at their estimated fair values on the acquisition date.~~trademarks. The ~~excess of the~~ fair value of ~~purchase consideration~~these assets is determined primarily using the income approach, which requires management to project future cash flows and apply an appropriate discount rate. Intangible assets with finite lives are amortized on a straight-line basis over the ~~values~~estimated useful lives of ~~these identifiable assets and liabilities is recorded as goodwill. When determining~~ the ~~fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to the valuation of intangible~~related assets. ~~Management’s estimates of fair value~~Estimates are based upon assumptions believed to be reasonable but which are inherently ~~uncertain~~uncertain. Assumptions may be incomplete or inaccurate, and ~~unpredictable~~unanticipated events and ~~as a~~circumstances may occur and could result ~~actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments~~in future impairment charges that could be material to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.

~~Certain Significant Risks and Uncertainties~~

The Company has experienced negative cash flows since inception and had an accumulated deficit of $148.4 million and $109.9 million as of December 31, 2022 and December 31, 2021, respectively. Historically, the Company has primarily financed its operations through equity and debt financings. The Company intends to finance its future operations through its existing cash and investments. The Company believes that these sources of liquidity will be sufficient to meet its operating needs for at least the next 12 months.

~~Since December 2019, the coronavirus (“COVID-19”) has spread throughout the United States and in many other countries globally. The extent to which the~~ Company’s operations will continue to be impacted by the COVID-19 pandemic will depend largely on future developments including the emergence of new variants and actions by government authorities and private businesses to contain new outbreaks of the pandemic or respond to its impact, among other things. The COVID-19 pandemic has impacted our business operations, results of operations, financial position, liquidity, and cash flows. The Company’s revenues in 2021 decreased compared to the pre-COVID revenues, and, although the 2022 fiscal year as seen the highest quarterly revenue since inception, the extent of the impact of the pandemic on our business and financial results will depend largely on future developments both globally and within the United States, including the impact on capital, foreign currencies exchange and financial markets, governmental or regulatory orders that impact our business and whether the impacts may result in permanent changes to our end-user’ behavior, all of which are highly uncertain and cannot be predicted.

~~Cash and Cash Equivalents~~

Cash and cash equivalents consist primarily of cash on deposit as well as investments in money market funds that are readily convertible into cash and purchased with original maturities of three months or less.operations.

8962

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~Investments~~

Investments consist mainly of short-term U.S. government and agency securities, commercial paper, and corporate bonds. The Company invests in a diversified portfolio of investments and limits the concentration of its investment in any particular security. Securities with original maturities greater than three months, but less than one year, are included in current assets. All investments are classified as available-for-sale and reported at fair value with unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders’ equity. Management judges whether a decline in value is temporary based on the length of time that the fair market value has been below cost and the severity of the decline. There were no impairments of investments recorded in the years ended December 31, 2022 and 2021.

~~Accounts Receivable~~

Accounts receivable primarily represent amounts charged but not yet received by the balance sheet date, This includes amounts charged by payment processors on behalf of the Company that are in the process of clearing. These amounts are generally cleared in one to three business days. Additionally includes accounts receivable recorded for commission fees earned but not yet received from third parties in connection with Wag! Wellness services. Substantially all accounts receivable are collected and bad debt expense or the allowance for doubtful accounts were not material.

~~Property and Equipment~~

~~Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives are as follows:~~


			~~Estimated useful life~~
~~Equipment~~			~~3 years~~
~~Capitalized software~~			~~3 years~~
~~Leasehold improvements~~			~~Shorter of estimated useful life or lease term~~

~~Maintenance and repair costs are charged to expense as incurred.~~

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. Goodwill is not ~~amortized,~~subject to amortization, but is ~~tested~~reviewed for impairment ~~at least annually~~on an annual basis or more frequently if events or changes in circumstances indicate that the ~~asset~~carrying value of goodwill may not be ~~impaired. Our annual impairment test is~~recoverable. The Company performed ina qualitative assessment during the fourth quarter of ~~each year~~2023 and determined that it is not more likely than not that the ~~Company’s impairment tests are based on a~~fair value of its single ~~operating segment and~~ reporting unit ~~structure. Prior to performing a quantitative evaluation, an assessment of qualitative factors may be performed to determine whether~~is less than its carrying value. If it is determined that it is more likely than not that the fair value of the reporting unit ~~exceeds~~is less than its carrying ~~value.~~amount or if a qualitative assessment is not performed, then the Company would perform the quantitative goodwill impairment test as required, in which it would use a discounted cash flow approach to estimate the fair value of the reporting unit. If the ~~carrying~~fair value of the reporting unit ~~exceeds its fair value, an impairment charge~~ is ~~recognized for the excess of~~less than the carrying value, ofthen a goodwill impairment amount is recorded for the ~~reporting unit over its fair value.~~

~~Intangible Assets, Net~~

~~Intangible assets are recorded at fair value as of the date of acquisition and amortized on a straight- line basis over their estimated useful lives.~~

~~Impairment of Intangible Assets~~

The Company reviews its definite-lived intangibles and other long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. When such events occur, management determines whether there has been impairment by comparing the anticipated undiscounted future net cash flowsdifference up to the carrying value of ~~the asset or asset group.~~goodwill.

~~Table of Contents~~

~~Wag! Group Co.~~Equity Method Investment

~~Notes~~During the fourth quarter of 2022, the Company’s subsidiary, Compare Pet Insurance Services, Inc., entered into an agreement to ~~Consolidated Financial Statements~~

~~If impairment exists,~~invest $1.5 million for 49% ownership in a new limited liability company, which was funded in the ~~assets are written down to its estimated fair value. No impairment~~first quarter of ~~definite-lived intangible~~2023. The investment was accounted for as an equity method investment, with the Company’s proportionate share of the investee’s net income recognized in equity in net earnings of equity method investment within the Company’s consolidated statement of operations, as the Company had less than 50% ownership and ~~long-lived assets was recorded for~~did not control the ~~years~~entity. During the year ended December 31, ~~2022 and 2021.~~2023, the Company recognized $1.8 million of Royalty expenses within its consolidated statements of operations related to fees payable to the equity method investee.

~~Software Development Costs~~

During the third quarter of 2023, the Company acquired the outstanding 51% ownership of the limited liability company for an aggregate purchase price of approximately $2.2 million. The Company ~~incurs costs related~~accounted for the transaction as an asset acquisition using the cost accumulation model to determine the cost to be allocated to the ~~development~~assets acquired, which resulted in the derecognition of ~~its technology platform. The Company will begin~~royalties payable to ~~capitalize costs related to technology development when preliminary development efforts are successfully completed, management has authorized and committed project funding, it is probable that~~ the ~~project will be completed,~~equity method investee of approximately $1.8 million and the ~~technology will be used as intended. Such costs are amortized on~~recognition of intangible assets acquired of approximately $0.2 million and cash acquired of $2.5 million. As a ~~straight-line basis over the estimated useful life~~result of the related asset, which is generally three years. Costs incurred prior to meeting these criteria, together with costs incurred for training and maintenance, are expensed. Costs incurred for significant enhancements that are expected to result in additional functionality are capitalized and expensed overtransaction, the ~~estimated useful life~~limited liability company became a wholly-owned subsidiary of the upgrades. Capitalized development costs are included in property and equipment, net, in the balance sheets, and amortization expense is included in depreciation and amortization in the statements of operations.

~~Stock-Based Compensation~~

~~The~~ Company has an equity incentive plan under which it grants equity awards, including stock options. The Company determines compensation expense associated with stock options based on the estimated grant date fair value method using the Black-Scholes valuation model. The Black-Scholes model considers several variables and assumptions in estimating the fair value of stock-based awards. These variables include per share fair value of the underlying common stock at the measurement date, exercise price, expected term, risk-free interest rate, expected stock price volatility over the expected term, and expected annual dividend yield.

For all stock options granted, the Company calculates the expected term using the simplified method as it has limited historical exercise data to provide a reasonable basis upon which to otherwise estimate expected term, and the options have characteristics of “plain-vanilla” options. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the stock-based award. Due to the limited trading history of the Company’s common stock, the expected volatility assumption is generally based on volatilities of a peer group of similar companies whose share prices are publicly available. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own common stock price becomes available. The Company utilizes a dividend yield of zero, as it has no history or plan of declaring dividends on its common stock.

The Company recognizes share-based compensation expense, equal to the grant date fair value of stock options on a straight-line basis over the requisite service period. The Company accounts for forfeitures as they occur rather than on an estimated basis. Stock-based compensation expense for the years ended December 31, 2022 and 2021 has been reduced for actual forfeitures.

In connection with the Business Combination, Legacy Wag! stockholders and certain members of management and employees of Legacy Wag! that held either a share of common stock, a Legacy Wag! option or a Legacy Wag! RSU Award (collectively "Eligible Company Equityholders") at the date of the Merger, have the contingent right to Earnout Shares as more fully described in ~~Note 3 - Business Combinations~~. For Eligible Company Equityholders who were employees or members of management immediately prior to the completion of the Merger, the rights to the Earnout Shares fully vested on the Merger Date and represent a separate award from their existing share-based payment award. In addition, the rights of the Earnout awards are not dependent upon continued employment by the employee or management with the Company in order to receive the Earnout shares if the conditions of issuance are met in the future. The Company determined that the market condition will not affect the term over which the related compensation expense will be recorded because the employee is not required to be employed at the time the market condition is achieved in order to vest in the award. As such, all service conditions were met and, in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”), the company recorded a charge to stock compensation of $23.9 million on the Merger Date for the full fair value of the employee and management Earnout Shares awarded.

~~Effective with the Merger of August 9, 2022, the Company's 2014 Stock Plan terminated~~ and the Company ~~only issues RSUs on a go-forward basis under~~began consolidating the ~~2022 Omnibus Incentive Plan ("Omnibus Incentive Plan"). As~~

~~Table~~entity as part of ~~Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

of December 31, 2022, the Company has granted RSUs with service conditions. Service conditions that affect whether or not an award vests or becomes exercisable are not directly incorporated into the estimate of fair value at the grant date.

~~Income Taxes~~

The Company accounts for income taxes using an asset and liability approach, which requires the recognition of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in theits consolidated financial or tax returns. The measurement of the deferred items is based on enacted tax laws. In the event the future consequences of differences between financial reporting basis and the tax basis of assets and liabilities result in a deferred tax asset, the Company evaluates the probability of being able to realize the future benefits indicated by such asset. A valuation allowance related to a deferred tax asset is recorded when it is more likely than not that either some portion or the entire deferred tax asset will not be realized. The Company records a valuation allowance to reduce the deferred tax assets to the amount of future tax benefit that is more likely than not to be realized. We regularly review the deferred tax assets for recoverability based on historical taxable income or loss, projected future taxable income or loss, the expected timing of the reversals of existing temporary differences and tax planning strategies. Our judgment regarding future profitability may change due to many factors, including future market conditions and the ability to successfully execute the business plans and/or tax planning strategies. Should there be a change in the ability to recover deferred tax assets, our income tax provision would increase or decrease in the period in which the assessment is changed.

~~Fair Value~~

The Company measures certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. In accordance with ~~ASC 820, Fair Value Measurement (“ASC 820”), the Company uses the fair value hierarchy, which prioritizes the inputs used to measure fair value.~~

~~Level 1~~ — ~~Observable inputs such as quoted prices in active markets for identical assets or liabilities.~~

~~Level 2~~ — Observable inputs other than Level 1, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

~~Level 3~~ — ~~Unobservable inputs for which there are little or no market data and that are significant to the fair value of the assets or liabilities.~~

The carrying amounts of financial instruments, including cash equivalents, investments, accounts receivable, accounts payable, and accrued liabilities approximate their respective fair value due to their short period of maturities.

~~Concentration of Credit Risk~~

Cash, cash equivalents, investments, and amounts at payment processors are potentially subject to concentration of credit risk. Such balances are maintained at financial institutions that management determines to be of high-credit quality. Cash accounts at each institution are insured by the Federal Deposit Insurance Corporation ("FDIC") up to certain limits. At times, such deposits may be in excess of the FDIC insurance limit. The Company has not experienced any losses on its deposits.

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

statements.

Revenue Recognition

The Company recognizes revenue in accordance with ~~ASC~~FASB Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with ~~its~~ Customers. Through its Services offerings, the Company principally generates ~~Service~~Services revenue from service fees charged to PCGs ~~for use of the platform to discover pet service opportunities and~~ to successfully complete a pet care service to a ~~pet parent.~~Pet Parent via the platform. The Company also generates revenue from subscription fees paid by Pet Parents for Wag! Premium and fees paid by PCGs to join the platform. Additionally, through its Wellness and Pet Food & Treat offerings, the Company generates revenue through commission fees paid by ~~third party~~third-party service partners in the form of ‘revenue-per-action’ or conversion activity defined in our agreements with the ~~third party~~respective third-party service partner. For some of the Company’s arrangements with ~~third party~~third-party service partners, the transaction price is considered variable, and an estimate of the transaction price is recorded when the action occurs. The estimated transaction price used in the variable consideration is based on historical data with the respective third-party service partner and the consideration is measured and settled monthly.

The Company enters into terms of service with PCGs and Pet Parents to use the platform (“Terms of Service Agreements”), as well as an Independent Contractor Agreement (“ICA”) with PCGs (the ICA, together with the Terms of Service Agreements, the “Agreements”). The Agreements govern the fees the Company charges the PCGs and Pet Parents, where applicable, for each transaction. Upon acceptance of a transaction, PCGs agree to perform the services that are requested by a ~~pet parent.~~Pet Parent. The acceptance of a transaction request combined with the Agreements establishes enforceable rights and obligations for each transaction. A contract exists between the Company and ~~the PCGs~~its customers after both the PCGs and ~~pet parent~~Pet Parent accept a transaction request and the PCGs ability to cancel the transaction lapses. For Wag! Wellness ~~revenue,~~and Pet Food & Treat revenues, the Company enters into agreements with ~~third party~~third-party service partners which define the action by a ~~pet parent~~Pet Parent that results in the Company earning and receiving a commission fee from the third-party service partner.

Tab l e of Contents

Wag!’s service obligations are performed, and revenue is recognized for fees earned ~~from PCGs~~ related to the facilitation and completion of a pet service transaction between the ~~pet parent~~Pet Parent and the PCG through the use of our platform. Revenue generated from the Company’s Wag! Premium subscription is recognized on a ratable basis over the contractual period, which is generally one month to one year ~~from the payment of the subscription fee~~ depending on the type of subscription purchased by the ~~pet parent. Unused~~Pet Parent. Prepaid subscription amounts are ~~recorded as gift card and subscription liabilities on~~included in Deferred revenue within the Company’s consolidated balance ~~sheet.~~sheets. Revenue related to the fees paid by the PCG to join the platform are recognized upon processing of the applications. Wag! Wellness and Pet Food & Treat revenue performance ~~obligation is~~obligations are completed, and revenue is recognized, when an ~~end-user~~end user completes an action or conversion activity.

Principal vs. Agent Considerations

Judgment is required in determining whether the Company is the principal or agent in transactions with PCGs and Pet Parents. The Company ~~evaluated~~evaluates the presentation of revenues on a gross or net basis based on whether the Company controls the service provided to the ~~pet parent~~Pet Parent and is the principal (i.e., “gross”), or whether the Company arranges for other parties to provide the service to the ~~pet parent~~Pet Parent and is an agent (i.e. “net”). ~~This determination also impacts the presentation of incentives provided to both PCGs and Pet Parents, as well as discounts and promotions offered to Pet Parents to the extent they are not customers.~~

The Company’s role in a transaction on the platform is to facilitate PCGs finding, applying, and completing a successful pet care service for a ~~pet parent.~~Pet Parent. The Company has concluded it is the agent in transactions with PCGs and Pet Parents because, among other factors, the Company’s role is to facilitate pet service ~~opportunities to PCGs and~~opportunities; it is not responsible for ~~nor controls~~and does not control the delivery of pet services provided by the PCGs to the Pet Parents.

Gift Cards

The Company sells gift cards that can be redeemed by Pet Parents through the platform. Proceeds from the sale of gift cards are deferred and recorded as contract liabilities in ~~gift card and subscription liabilities on~~Deferred revenue within the Company’s consolidated balance sheets until Pet Parents use the card to place orders on our platform. When gift cards are redeemed, revenue is recognized on a net basis as the difference between the amounts collected from the purchaser less

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

amounts remitted to PCGs. Unused gift cards are ~~recorded as gift card and subscription liabilities on~~included in Deferred revenue within the Company’s consolidated balance ~~sheet.~~sheets.

The Company recognizes breakage revenue based on historical redemption patterns.

Incentives

The Company offers discounts and promotions to encourage use of the Company’s platform. These ~~are offered in various forms of discounts and promotions and include:~~

~~Targeted pet parent discounts and promotions: These discounts and~~ promotions are ~~offered to a limited number of Pet Parents in a specific market to acquire, re-engage, or~~ generally increase Pet Parents’ use of the platform, and are akin to a coupon. The Company records the cost of these discounts and promotions as sales and marketing expenses at the time they are redeemed by the pet parent.

~~Market-wide promotions: These promotions are~~ pricing actions in the form of discounts that reduce the price Pet Parents pay PCGs for services. These promotions result in a lower fee earned by the Company from the PCG. Accordingly, the Company records the cost of these promotions as a reduction of ~~revenues at the time the PCG service is completed.~~revenues. Discounts on services offered through our subscription program are also recorded as a reduction of revenues.

~~Cost of Revenues (exclusive of depreciation and amortization)~~

Cost of revenues consists of costs directly related to revenue generating transactions, which primarily includes fees paid to payment processors for payment processing fees, hosting and platform-related infrastructure costs, third-party costs for background checks for Pet Caregivers, and other costs arising as a result of revenue transactions that take place on our platform, excluding depreciation and amortization.

~~Platform Operations and Support~~

~~Platform operations and support expenses include personnel-related compensation costs of technology and operations teams, and third-party operations support costs.~~

~~Sales and Marketing~~

Sales and marketing expenses include personnel-related compensation costs of the marketing team, advertising expenses, and pet parent incentives. Sales and marketing expenses are expensed as incurred. Advertising expenses were $6.9 million and $5.0 million during the years ended December 31, 2022 and 2021, respectively.

~~General and Administrative~~

General and administrative expenses include personnel-related compensation costs for corporate employees, such as management, accounting, and legal as well as insurance and other expenses used to operate the business.

~~Depreciation and Amortization~~

Depreciation and amortization expenses primarily consist of depreciation and amortization expenses associated with the Company’s property and equipment. Amortization includes expenses associated with the Company’s capitalized software and website development, as well as acquired intangible assets.

~~Earnings (Loss)~~Loss Per Share

The Company ~~computes net income (loss) per common stock following~~follows the two-class method ~~required~~when computing loss per share when shares issued meet the definition of participating securities. The two-class method determines loss per share for ~~multiple classes~~each class of common stock and participating ~~securities. The Company considers the redeemable preferred stock~~securities according to ~~be participating securities.~~dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income ~~(loss)~~ available to ~~common~~ stockholders for the period to be allocated between ~~multiple classes of~~ common stock and participating securities based upon their respective rights to receive dividends as if all income ~~(loss)~~ for the period had been distributed.

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

distributed. The holders of the Company’s redeemable preferred stock would be entitled to dividends in preference to common stockholders, at specified rates, if declared. Such dividends are not cumulative. Any remaining earnings would be distributed among the holders of redeemable preferred stock and common stock pro rata. Holders of the Company’s redeemable preferred stock are not contractually obligated to participate in the Company’s losses. As such, the Company’s net losses for the years ended December 31, 2022 and 2021 were not allocated to these participating securities.

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding during the period. The diluted net income (loss) per share is computed by giving effect to all potentially dilutive securities outstanding for the period. For periods in which the Company reports net losses, diluted ~~net~~ loss per ~~common stock~~share is the same as basic ~~net~~ loss per ~~common stock,~~share because ~~all~~ potentially dilutive ~~securities~~common shares are not assumed to have been issued if their effect is anti-dilutive.

~~Accounting for Warrants~~

Tab l e of Contents

Business Combinations

The Company accounts for ~~warrants~~business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as ~~either equity-classified or liability-classified instruments~~goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates. After the purchase accounting is finalized, any subsequent adjustments are reflected in the consolidated statements of operations. Acquisition costs, such as legal and consulting fees, are expensed as incurred.

Fair Value Measurements

Fair value accounting is applied to all financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). As of December 31, 2023 and 2022, the carrying amounts of cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximated their fair values due to their relatively short maturities. Management believes the terms of its long-term variable-rate debt reflect current market conditions for an ~~assessment of the instruments’ specific~~instrument with similar terms and ~~applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether~~maturity; as such, the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common shares and whether the instrument holders could potentially require “net cash settlement” in a circumstance outsidecarrying value of the Company’s ~~control, among other conditions for equity classification. This assessment, which requires~~debt, excluding the ~~use~~disclosed amount of ~~professional judgment, is conducted at the time of~~debt discount and warrant ~~issuance~~allocation, approximated its fair value.

Assets and as of each subsequent period end date while the instruments are outstanding. Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the Business Combination qualify for equity accounting treatment. Additionally, the Company considers its warrants ("Lender Warrants") issued in conjunction with the Blue Torch Financing Arrangement (see ~~Note 10 - Debt~~ ~~for additional detail) to be equity classified since they do not meet the liability classification criteria. For further detail on the Company's Warrants (Public, Private and Lender), refer to~~ ~~Note 11 - Stockholders’ Deficit and Mezzanine Equity~~.

~~Forward Share Purchase Agreements~~

The Company accounted for the Forward Share Purchase Agreements ("FPAs") as a liability under ASC 480, Distinguishing Liabilities from Equity, because it embodied an obligation to repurchase the Company’s shares by paying cash. Therefore, the option was classified as a current liability and is measuredliabilities recorded at fair value on a recurring basis on the ~~Company’s Consolidated Balance Sheets.~~consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The ~~unrealized gains~~authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1 — Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Inputs (other than quoted prices in active markets included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and ~~losses from changes~~quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the FPAs is reflected in the Consolidated Statements of Operations. This liability was subject to re-measurement at each balance sheet date until exercised, and any change in fair value was recognized in our Consolidated Statement of Operations. As of December 31, 2022, all options under these agreements expiredassets or ~~were exercised. For more information, refer to~~ ~~Note 5 - Fair Value Measurements~~ ~~and~~ ~~Note 3 - Business Combinations~~.liabilities.

Concentration Risks ~~and Uncertainties~~

Significant customers are those which represent more than 10% of the Company’s total ~~revenue~~revenues for the period or accounts receivable balance atas of the period end date. During the year ended December 31, 2023, the Company had two customers that accounted for 10% or more of total revenues. These customers each ~~balance sheet date.~~ represented $13.5 million and $16.5 million of total revenues for the year ended December 31, 2023, and in aggregate, accounted for 36% of the Company’s total revenues for the year ended December 31, 2023. As of December 31, 2023, the Company had three customers that accounted for 10% or more of accounts receivable, and in aggregate, accounted for 58% of the Company’s total accounts receivable as of December 31, 2023.

During the year ended December 31, 2022, the Company had two customers that accounted for 10% or more of total ~~revenue.~~revenues. These customers each represented $7$6.6 million ~~to $8~~and $8.3 million of total ~~revenue~~revenues for the year ended December 31, 2022, and in aggregate, accounted for 27% of the Company’s total ~~revenue~~revenues for the year ended December 31, 2022. As of December 31, 2022, the Company had four customers that accounted for 10% or more of accounts ~~receivable. In~~receivable, and in aggregate, ~~these customers represented~~accounted for 65% of the Company’s total accounts receivable as of December 31, 2022. ~~During the year ended December 31, 2021, the Company did not have any customers that accounted for 10% or more~~

Tab l e of ~~total revenue or accounts receivable.~~ Contents

Based on the nature of ~~third party~~third-party partners, together with historical collection patterns, the Company does not anticipate any collectability issues with these receivables and closely monitors the outstanding receivables for payment within ~~agreed upon~~agreed-upon time periods.

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~Reclassifications~~

Certain reclassifications have been made to prior year financial information to conform to the current year presentation. In particular, certain Money market funds have been reclassified out of Short-term investments available for saleOther Risks and ~~into Cash and cash equivalents on the Consolidated Balance Sheet, and Statement of Cash Flows.~~

~~Recent Accounting Pronouncements Adopted~~Uncertainties

The Company has ~~applied the option given to~~historically generated negative cash flows from operations and has primarily financed its operations through private and public ~~companies to adopt new or revised accounting guidance as an “emerging growth company” under the Jumpstart Our Business Startups Act~~sales of 2012 (the “JOBS Act”) either (1) within the same time periods as those otherwise applicable to public business entities, or (2) within the same time periods as private companies, including early adoption when permissible. When permissible,equity securities and debt. As of December 31, 2023, the Company ~~has elected to adopt new or revised accounting guidance within the same time period as private companies, as indicated below.~~had cash and cash equivalents of $18.3 million.

~~On January 1, 2022, the Company adopted Accounting Standards Update ("ASU") No. 2016-02,~~ ~~Leases (Topic 842)~~. This standard requires lessees to recognize all leases with initial terms in excess of one year on their balance sheet as a right-of-use asset and a lease liability at the commencement date. The Company adopted the new leases standard utilizing the modified retrospective transition method, under which amounts in prior periods presented were not restated. For contracts existing at the time of adoption, the Company elected to not reassess (i) whether any are or contain leases, (ii) lease classification, and (iii) initial direct costs. The Company also elected the practical expedient to combine non-lease components and lease components for real estate leases. Upon adoption, the Company recorded $0.5 million of right-of-use assets and $0.5 million of lease liabilities on its consolidated balance sheet.

~~On January 1, 2022, the Company adopted ASU 2019-12,~~ ~~Income Taxes~~ (~~Topic 740): Simplifying the Accounting for Income Taxes. This ASU removes certain exceptions to the general principles of~~ ~~Topic 740~~ ~~and provides clarification and simplification of existing guidance. The adoption of ASU 2019-12 did not have a material effect on the consolidated financial statements.~~

~~Accounting Standards Issued but Not Yet Adopted~~

~~Credit Losses~~

~~In June 2016, the FASB issued ASU No. 2016-13, (Topic 326),~~ ~~Financial Instruments — Credit Losses: Measurement of Credit Losses on Financial Instruments~~ which amends the current accounting guidance and requires the use of the new forward-looking “expected loss” model, rather than the “incurred loss” model, which requires all expected losses to be determined based on historical experience, current conditions and reasonable and supportable forecasts. This guidance amends the accounting for credit losses for most financial assets and certain other instruments including trade and other receivables, held-to-maturity debt securities, loans, and other instruments.

In November 2019, the FASB issued ASU No. 2019-10 to postpone the effective date of ASU No. 2016-13 for public business entities eligible to be smaller reporting companies ("SRCs") as defined by the SEC. ASU No. 2016-13 is effective for SRCs for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company expects operating losses and negative cash flows from operations to ~~adopt~~continue in the ~~standard using~~foreseeable future as it continues to invest in growing its business. The Company’s primary uses of cash include operating costs such as product and technology expenses, marketing expenses, personnel expenses and other expenditures necessary to support its operations and growth. Although the ~~modified retrospective transition method~~Company currently anticipates that its existing cash and ~~does not expect~~cash equivalents will be sufficient to meet its working capital, capital expenditure, and debt obligation needs for at least the ~~adoption~~next 12 months, the Company may seek additional financing over the long term, including to ~~have an impact~~refinance or repay amounts due under the Financing Agreement that matures in August 2025. Accordingly, the Company may need to engage in equity or debt financings to secure additional funds. The Company’s future capital requirements and the ~~accumulated deficit~~adequacy of available funds will depend on many factors.

Segment Reporting

The Company’s chief operating decision maker regularly reviews financial information on a consolidated basis to make decisions about resource allocation and assess its performance. As such, the ~~consolidated balance sheets~~Company determined that it operates as ~~of January 1, 2023.~~

~~Enactment of the Inflation Reduction Act of 2022~~

~~On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”) which, among other changes, created~~ a ~~new corporate alternative minimum tax (“AMT”) based on adjusted financial statement income~~single operating and imposes a 1% excise tax on corporate stock repurchases. The effective date of these provisions is January 1, 2023. The enactment of the IRA did not have an impact on the Company’s financial statements in

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~2022. The Company does not expect to be an applicable corporation subject to the AMT tax in 2023 based on its reported GAAP earnings for the past three years.~~reportable segment.

3. ~~Business Combinations~~

Business Combination with CHW

As described in Note 1,Organization and Description of Business, the Merger with CHW was consummated on August 9, 2022 (the ~~“Merger~~“Business Combination Closing Date”). ~~On the Merger Date, Wag Labs, Inc. (“Legacy Wag!”),~~The CHW ~~Acquisition Corporation, a Cayman Islands exempted company (“CHW”), and CHW Merger Sub Inc., a Delaware corporation and a direct, wholly owned subsidiary of CHW (“Merger Sub”), consummated the closing of the transactions contemplated by the Business Combination Agreement, dated February 2, 2022, by and among Legacy Wag!, CHW, and Merger Sub (the “Business Combination Agreement”), following the approval at an extraordinary general meeting of CHW’s shareholders held on July 28, 2022 (the “Special Meeting”).~~

Pursuant to the terms of the Business Combination Agreement, a business combination of Legacy Wag! and CHW was effected by the merger of Merger Sub with and into Legacy Wag!, with Legacy Wag! surviving the merger as a wholly owned subsidiary of CHW (the “~~Merger,” and, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). In connection with the consummation of the Business Combination on the day prior to the Merger Date, CHW changed its name from CHW Acquisition Corporation to Wag! Group Co.~~

~~The~~ Business Combination was accounted for as a reverse recapitalization in accordance with ~~accounting principles generally accepted in the United States of America.~~U.S. GAAP. Under this method of accounting, CHW was treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the CHW Business Combination was treated as the equivalent of Wag! issuing shares for the net assets of CHW, accompanied by a recapitalization. The shares and net earnings (loss) per common share prior to the Merger have been retroactively restated as shares reflecting the exchange ratio established in the Merger (0.97 shares of the Company’s common stock for each share of Legacy Wag! common stock). The net assets of CHW have been recognized at carrying value, with no goodwill or other intangible assets recorded. Wag! accounted for the acquisition of CHW based on the amount of net assets acquired upon consummation.

Wag! has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

•Wag!’s shareholders have a majority of the voting power of the Post-Combination Company;

•Wag! appointed the majority of the board of directors of the Post-Combination Company;

•Wag!’s existing management comprises the management of the Post-Combination Company;

•Wag! comprises the ongoing operations of the Post-Combination Company; and

•Wag! is the larger entity based on historical revenue and has the larger employee base.

In connection with the Special Meeting and the CHW Business Combination, the holders of 9,593,970 shares of CHW’s ordinary shares, par value $0.0001 per share, exercised their right to redeem their shares for cash at a redemption price of approximately $10.00 per share, for an aggregate redemption amount of $95,939,700. As a result, the Company received approximately $29.1 million, of which ~~$23.9~~$24.7 million was placed in escrow (and classified as ~~Restricted Cash)~~restricted cash) in accordance with the Forward Share Purchase Agreements (see section below ~~entitled "Forward~~titled “Forward Share Purchase ~~Agreements"~~Agreements” for additional information). As of the date of the Merger, the Company also entered into a financing arrangement with Blue Torch Finance, LLC and received net proceeds of $29.4 million from a Secured Note (see Note 8, ~~Note 10 -~~Long-Term Debt, for additional information). Additionally, the Company received $5 million from ~~the~~a PIPE and Backstop Investor as a result of the agreement entered into by CHW with the PIPE and Backstop Investor party on February 2, 2022 that closed immediately prior to the Merger.

Tab l e of Contents

Upon the consummation of the Merger, the following transactions occurred (the “~~Conversion~~”“Conversion”):

i.all outstanding shares of Legacy Wag!’s preferred stock, except for Legacy Wag! Series P Shares (as described in part (vi) below), were converted into shares of the Company’s common stock, par value

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~$0.0001~~ $0.0001 per share, at the then-effective conversion rate as calculated pursuant to the CHW Business Combination Agreement;

ii.the cancellation of each issued and outstanding share of Legacy Wag!’s common stock and the conversion into the right to receive a number of shares of the Company’s common stock equal to the exchange ratio of 0.97 shares of the Company’s common stock for each share of Legacy Wag! common stock;

iii.the conversion of 91,130 warrants issued and outstanding by Legacy Wag! in 2017 to two lenders (the “~~Legacy~~“Legacy Wag! Common ~~Warrants~~”Warrants”) into warrants exercisable for shares of the Company’s common stock with the same terms except for the number of shares exercisable and the exercise price, each of which were adjusted using an exchange ratio of 0.97 for Legacy Wag! Common Warrants (further described in Note 10, ~~Note 11 -~~Redeemable Preferred Stock and Stockholders’ Deficit ~~and Mezzanine Equity~~);

iv.the conversion of all outstanding vested and unvested options to purchase shares of Legacy Wag! common stock (the “~~Legacy~~“Legacy Wag! ~~Options~~”Options”) into options exercisable for shares of the Company’s common stock with the same terms and conditions as were applicable to the Legacy Wag! Options immediately prior to the Conversion, except for the number of shares exercisable and the exercise price, each of which were adjusted using the exchange ratio of 0.97 for Legacy Wag! Options;

v.the conversion of the outstanding restricted stock unit award covering shares of Legacy Wag! common stock (each, a “~~Legacy~~“Legacy Wag! RSU ~~Award~~”Award”) into awards covering a number of shares of Wag! common stock (rounded down to the nearest whole number) with the same terms and conditions as were applicable to the Legacy Wag! RSU Awards immediately prior to the Conversion, except for the number of shares subject to the award, which was adjusted using the exchange ratio of 0.97 for Legacy Wag! RSU Awards;

vi.the conversion of 1,100,000 shares of Legacy Wag! Series P Shares into the Company’s common stock on a one-for-one basis;

vii.the issuance and sale of 500,000 CHW ordinary shares for a purchase price of $10.00 per share and an aggregate purchase price of $5,000,000 immediately prior to or substantially concurrently with the Merger Date;

viii.immediately prior to the Effective Time, each CHW ordinary share (including any Sponsor Shares (as defined below) not forfeited) was converted into shares of the Company’s common stock;

ix.the cancellation of 13,327 founder shares held by the Sponsor in accordance with the terms of the CHW Founders Stock Letter (as defined below) and the CHW Business Combination Agreement;

x.the issuance of 300,000 Wag! Community Shares ("(“Community ~~Shares"~~Shares”) that the Company may distribute to members of the pet wellness and welfare community as identified by our officers and directors; and

xi.the cancellation of 20,000 founder shares held by Sponsor in connection with the CHW Business Combination and in accordance with the CHW Founders Stock Letter and the CHW Business Combination Agreement.

Forward Share Purchase Agreements

Simultaneously with the closing of the CHW Business Combination, the Company deposited $24.7 million into an escrow account pursuant to four Forward Share Purchase Agreements ~~("FPAs"~~(“FSPAs”) entered into by CHW on August 5, 2022. In accordance with the ~~FPAs,~~FSPAs, on the ~~date~~three month anniversary of the ~~purchase by the Company of the Investor Shares~~Business Combination Closing Date (the ~~"Put Date"~~“Put Date”), the participating investors ~~may~~could elect to sell and transfer to the Company, and the Company ~~will~~would purchase, in the aggregate, up to 2,393,378 shares of common stock of the Company, consisting of shares of common stock then held by the Investors ~~and not sold and repurchased by the~~. Each Investor ~~since the Merger Date. In conjunction with the sale of the Investor Shares~~was obligated to ~~the Company, each Investor shall~~ notify the Company and the Escrow Agent in writing five business days prior to the Put Date whether or not such Investor iswas exercising its right to sell the ~~Investor Shares~~shares that such Investor ~~holds~~held to the Company pursuant to the ~~FPAs~~FSPAs (each, a “Shares Sale Notice”). If a Shares Sale Notice iswas timely delivered by an Investor to the Company and the Escrow Agent, the Company ~~will~~was obligated to purchase ~~from such Investor~~ the ~~Investor Shares~~shares held by such Investor on the Put Date. If the Investor ~~sells~~sold any ~~Investor Shares~~shares in the open market after the Merger Date and prior to Put

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

Date (such sale, the “Early Sale” and such shares, the “Early Sale Shares”), the Escrow Agent ~~shall~~would release from the ~~Escrow Account~~escrow account to the Company an amount equal to $10.30 per Early Sale Share sold in such Early Sale.

Tab l e of Contents

The Company’s purchase of the Investor ~~Shares were~~shares was made with funds from the escrow account attributed to ~~the Investor Shares. In the event that an Investor sells any Investor Shares in an Early Sale, it shall provide notice to the Company and the Escrow Agent within three business days of~~ such sale, and the Escrow Agent shall release from the escrow account for the Company’s use without restriction an amount equal to the pro rata portion of the escrow attributed to the Investor Shares which the Investor has sold.Investor. In the event that the Investor ~~chooses~~chose not to sell to the Company any ~~Investor Shares~~shares that the Investor ~~owns~~owned as of the ~~three-month anniversary of the Merger~~Put Date, the Escrow Agent ~~shall~~would release all remaining funds from the escrow account for the Company’s use without restriction. The Company accounts for the ~~FPAs~~FSPAs as a derivative liability, remeasured to fair value on a recurring basis, with changes in fair value recorded to earnings. For more information, see Note 4, ~~Note 5 -~~ Fair Value Measurements.

On November 1, 2022, the Company entered into an amendment to ~~a Forward Purchase Agreement~~an FSPA (the “Amended Agreement”) for ~~955 thousand~~approximately 1.0 million shares. The Amended Agreement modified the date by which such ~~holder could~~holders may elect to have the Company repurchase ~~its~~their shares to November 23, 2022. No other terms were modified. Effective November 9, 2022, ~~the~~ holders of ~~three FPAs~~1.4 million shares subject to the FSPAs, elected to have the Company repurchase ~~the 1.4 million~~their remaining shares ~~covered by their FPAs~~ for an aggregate repurchase price of $14.8 million. The remaining investor and holder of ~~955 thousand~~955,000 shares did not elect to sell its shares to the Company as of the extension date per the Amended Agreement and, as such, the Escrow Agent released the corresponding funds from the escrow account for the Company’s use without restriction in total of $9.8 million.

Financing Agreement

On the Merger Date, the Company entered into a financing agreement with Blue Torch ~~Finance, LLC.~~. See Note 8, ~~Note 10 -~~Long-Term Debt, for additional information.

Reverse Recapitalization

The following table reconciles the elements of the CHW Business Combination, accounted for as a reverse recapitalization, to the ~~Consolidated Statements~~consolidated statements of ~~Cash Flows~~cash flows and ~~the Consolidated Statements~~ of ~~Stockholders' Deficit~~stockholders' equity (deficit) for the year ended December 31, ~~2022 (in thousands)~~2022):


	Reverse Recapitalization
	(in thousands)
Cash – CHW’s trust (net of redemptions)	$	28,330
Cash – PIPE and Backstop Investor	5,202


Payment of transaction costs and other related expenses	(12,488)
Payment of deferred transaction costs	(9,318)

Proceeds from merger with CHW, net of issuance costs as of the Merger Date	$11,726		~~11,726~~
Reversal of APIC impact recorded upon issuance of Forward Share Purchase Agreements ~~("FPAs"~~(“FSPAs”) in August 2022	(23,203)
Cash received from ~~FPA~~FSPA at Put Date	9,837
APIC impact of ~~FPA~~FSPA at Put Date, net of cash received	4,229
Proceeds from merger with CHW, net of issuance costs as of December 31, 2022	$	2,589

9968

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~


		Number of Shares

	(in thousands)
CHW public shares, prior to ~~redemptions¹~~redemptions(1)		~~12,500,000~~12,500
Less redemption of CHW shares		~~(9,593,970)~~(9,594)
CHW public shares, net of redemptions		~~2,906,030~~2,906
Sponsor Shares		~~3,117,500~~3,118
PIPE and Backstop Shares		~~500,000~~500


CHW Business Combination and Financing Shares		~~6,523,530~~6,524
Other share activity (Analyst ~~Shares²~~Shares(2), Warrant Exercises)		122	~~122,434~~
CHW Business Combination, Financing Shares and Other Related Shares		~~6,645,964~~6,646
Legacy Wag! ~~Shares³~~Shares(3)		31,100	~~31,100,000~~
Total shares of common stock immediately after CHW Business Combination		~~37,745,964~~37,746

(1) Includes 2,393,378 shares of common stock of the Company subject to the Forward Share Purchase Agreements.

²(2) 50,000 shares were issued to Craig-Hallum Capital Group LLC at a price of $4.83 per share.

³(3) The number of Legacy Wag! shares was determined from the shares of Legacy Wag! common and preferred stock outstanding immediately prior to the closing of the CHW Business Combination of 30,863,283, which are presented net of the common and preferred stock redeemed, converted at the exchange ratio of approximately 0.97 shares of the Company’s common stock for each share of Legacy Wag! common and preferred stock, with the exception of 1,100,000 Legacy Wag! Series P Shares which converted into the Company’s common stock on a one-for-one basis.

Earnout Compensation

In connection with the CHW Business Combination, Legacy Wag! stockholders and certain members of management and employees of Legacy Wag! that held either a share of common stock, a Legacy Wag! ~~option~~Option or a Legacy Wag! RSU Award (collectively ~~"Eligible~~“Eligible Company ~~Equityholders"~~Equityholders”) at the date of the Merger have the contingent right to Earnout Shares. The aggregate number of Earnout Shares and Management Earnout Shares is 10,000,000 and 5,000,000 shares of Wag! common stock, respectively. The Earnout Shares will be issued following the CHW Business Combination, only if certain Wag! share price conditions are met over a ~~three-year~~three-year period from the effective Merger Date. The Earnout Shares are subject to the occurrence of certain triggering events based on a three year period from the Merger Date as defined in the CHW Business Combination Agreement as:

1.5,000,000 shares are earned if the stock price of the Company is or exceeds $12.50 for 20 out of any 30 consecutive trading days (“Triggering Event I”)

2.5,000,000 shares are earned if the stock price of the Company is or exceeds $15.00 for 20 out of any 30 consecutive trading days (“Triggering Event II”); and

3.5,000,000 shares are earned if the stock price of the Company is or exceeds $18.00 for 20 out of any 30 consecutive trading days (“Triggering Event III”) (collectively, the “Triggering Events”).

Additionally, if there is a change of control transaction, the agreed upon selling price of the Company on a per share basis, would be the fair value of the shares inclusive of the resulting triggered Earnout Shares upon consummation of the proposed transaction. The per share price in a change in control would be used to determine whether the Triggering Events have been met, and depending on the per share price, a certain number of shares will be issued.

Tab l e of Contents

The Earnout Shares and Management Earnout Shares are classified as equity transactions at initial issuance and at settlement when and if the triggering conditions are met. The Earnout ~~shares~~Shares are ~~equity classified~~equity-classified since they do not meet the liability classification criteria outlined in FASB ASC Topic 480, Distinguishing Liabilities from Equity, and are both (i) indexed to the Company’s own shares and (ii) meet the criteria for equity classification. Until the shares are issued upon a Triggering Event, the Earnout ~~shares~~Shares are not included in shares outstanding. As of the date of the CHW Business Combination, the Earnout ~~share~~Share awards had a total fair value of $23.9 million determined using a Monte Carlo fair value methodology in each of the $12.50, $15.00, and

~~100~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~$18.00~~ $18.00 Earnout tranches multiplied by the number of Earnout Shares allocated to each individual pursuant to the calculation defined in the CHW Business Combination Agreement. The following table provides ~~the~~a range of assumptions used to determine fair value:

Stock Price
(in whole dollars) Dividend Yield Volatility Risk-Free Interest Rate Expected Term
(in years)
Earnout Shares $ 8.28 — % 44.00 % 3.20 % 3


	Stock Price		Dividend Yield		Volatility		Risk-Free Interest Rate		Expected Term
Earnout Shares	$	8.28	—	%	44.00	%	3.20	%	3 years

As a result of the issuance of Community Shares, ~~stock~~stock-based compensation expense incurred in connection with the Earnout Shares, and fair value measurement of the ~~FPAs~~FSPAs, the Company incurred $39.5 million in ~~transaction related~~transaction-related charges during the year ended December 31, 2022 in ~~2022 within General and administrative, Sales and marketing and Platform~~platform operations and support, sales and ~~Change in fair value~~marketing, general and administrative, and other expense, net within its consolidated statements of derivative liability on the Consolidated Statements of Operations. As a result of the expiration of the FPAs, an additional $8.7 million gain comprised of a $0.9 million gain upon settlement on November 9, 2022, and a $7.8 million gain recognized upon the extended settlement date of November 23, 2022 were recognized.operations.

~~Acquisition of Compare Pet Insurance, Inc.~~4. Fair Value Measurements

~~On August 3, 2021,~~The following tables provide information about the Company acquired Compare Pet Insurance, Inc. ("CPI") for $3.5 million in cash consideration, and $0.17 million in common stock consideration, consisting of a total of 639,000 shares of common stock. Of the cash consideration purchase price, $1.5 million was paid on the acquisition date and the remaining $2.0 million to be paid pro-rata quarterly over the next three years starting in the fourth quarter of 2021. The deferred purchase consideration, which was recordedCompany’s financial instruments that are measured at ~~its~~ fair value on a recurring basis and indicate the ~~acquisition date, is presented~~fair value hierarchy of the valuation techniques utilized to determine such values as of December 31, 2023 and 2022:


	December 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	11,388	$	—	$	—	$	11,388
Total cash equivalents	11,388		—		—		11,388
Total assets at fair value	$	11,388	$	—	$	—	$	11,388


	December 31, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Cash equivalents:
Money market funds	$	31,690	$	—	$	—	$	31,690
Total cash equivalents	31,690		—		—		31,690
Total assets at fair value	$	31,690	$	—	$	—	$	31,690

The Company’s money market funds were valued using Level 1 inputs because they were valued using quoted prices in ~~accrued expenses and other current liabilities, as well as other non-current liabilities on the consolidated balance sheet.~~active markets. As of December 31, 2023 and 2022, the Company’s cash equivalents approximated their estimated fair value. As such, there are no unrealized gains or losses related to the Company’s cash equivalents.

5. Leases

The Company leases office space under non-cancellable lease agreements which expire between 2026 and 2028. Certain of these arrangements have free rent, escalating rent payment provisions, lease renewal options, and tenant allowances. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. Leases with an initial term of twelve months or less are not recorded on the Company’s consolidated balance sheets, and the Company does not separate non-lease components from lease components.

Tab l e of Contents

In June 2023, the Company entered into a non-cancellable agreement to lease office space in Phoenix, Arizona to replace its existing office space in Phoenix. The base rent is approximately $0.9 million in the aggregate over the original lease term of 65 months from the commencement date.

Lease cost is recognized on a straight-line basis over the lease term. The components of lease cost are as follows:


	Year Ended December 31,
	2023		2022
	(in thousands)
Lease cost:
Fixed operating lease cost	$	399	$	369
Short-term lease cost	—		567
Variable lease cost(1)	8		184
Total lease cost	$	407	$	1,120

(1) Variable lease costs, which include items such as real estate taxes, common area maintenance, and changes based on an index or rate, are not included in the calculation of the right-of-use assets and are recognized as incurred.

As of December 31, ~~2021,~~2023, maturities of operating lease liabilities were as follows:


	Amount
	(in thousands)
2024	$	414
2025	424
2026	216
2027	175
2028	163
Total lease payments	1,392
Less: imputed interest	(190)
Present value of lease liabilities	$	1,202

As the ~~amounts included~~implicit rate in ~~accrued expenses and other current liabilities, as well as other non-current liabilities~~the Company's leases is generally unknown, the Company uses its incremental borrowing rate based on the ~~consolidated balance sheet, were $1.4 million~~information available at the lease commencement date in determining the present value of future lease payments. The Company gives consideration to its existing credit arrangements, term of the lease, total lease payments and ~~$1.9 million, respectively. No working capital was acquired from CPI.~~

adjusts for the impacts of collateral, as necessary, when calculating its incremental borrowing rates. The ~~purchase consideration allocation was as follows (in thousands):~~


	As of August 3, 2021
~~Intangible assets~~	$	~~3,045~~
~~Goodwill~~	~~1,427~~
~~Deferred tax liabilities~~	~~(792)~~
~~Total purchase consideration~~	$	~~3,680~~

lease term may include options to extend or terminate the lease when it is reasonably certain the Company will exercise any such options. The ~~table below summarizes the fair value~~weighted-average remaining lease term and the ~~estimated useful lives~~weighted-average discount rate used to calculate the present value of ~~the acquired intangible assets (in thousands):~~lease liabilities are as follows:

Fair Value Estimated
Useful
Life (years)
Developed technology $ 648 4
Customer relationships and licenses 2,121 5-10
Trademarks 276 7
Total intangible assets $ 3,045


	December 31,
	2023		2022
Weighted-average remaining lease term	3.8 years		2.3 years
Weighted-average discount rate	7.8	%	8.6	%

Tab l e of Contents

Supplemental cash flow information related to leases is as follows:


	Year Ended December 31,
	2023		2022
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	281	$	370
Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	$	676	$	514

6. Goodwill and Other Intangible Assets

Goodwill recorded in connection with the ~~acquisition~~Company’s acquisitions is primarily ~~attributed~~attributable to the assembled workforce and anticipated operational synergies. Goodwill is reviewed for impairment at least annually, absent any interim indicators of impairment. Goodwill was $4.6 million and $1.5 million as of December 31, 2023 and 2022, respectively. The ~~resulting~~increase in goodwill ~~is not deductible for tax purposes.~~during the year ended December 31, 2023 was due to the acquisitions of businesses during 2023 as further discussed in Note 15, Acquisitions.

The gross carrying amounts and accumulated amortization of the Company’s intangible assets with determinable lives as of December 31, 2023 and 2022 were as follows:


	December 31, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
Finite-lived intangible assets:
Customer relationships and licenses	$	7,686	$	(1,550)	$	6,136
Media brand	1,250		(52)		1,198
Developed technology	1,073		(479)		594
Trademarks	1,052		(201)		851
Pharmacy board licenses	5		(5)		—
Total finite-lived intangible assets	11,066		(2,287)		8,779
Indefinite-lived intangible assets	49		—		49
Total intangible assets	$	11,115	$	(2,287)	$	8,828


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
	(in thousands)
Finite-lived intangible assets:
Customer relationships and licenses	$	2,166	$	(422)	$	1,744
Developed technology	783		(226)		557
Trademarks	291		(56)		235
Pharmacy board licenses	5		—		5
Total finite-lived intangible assets	3,245		(704)		2,541
Indefinite-lived intangible assets	49		—		49
Total intangible assets	$	3,294	$	(704)	$	2,590

~~101~~72

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes~~Amortization expense related to ~~Consolidated Financial Statements~~

~~Acquisition~~customer relationships and licenses, media brand, developed technology, trademarks, and pharmacy board licenses is recorded in depreciation and amortization within the Company’s consolidated statements of ~~Furmacy, Inc.~~

~~On October 24, 2022, the Company closed on the acquisition~~operations. Amortization expense of Furmacy, Inc. (“Furmacy”). The acquisition was an all stock transaction whereby consideration was satisfied through the issuance 90,000 shares of Wag! common stock which was valued at $283 thousand, based on the fair value of the securities on their date of issuance. The acquisition was not material. Furmacy empowers veterinary clinics with easy-to-use pharmacy software, giving them the ability to prescribe pet medication instantly and have it delivered to the Pet Parents’ door the same-day, and usually in less than a few hours, from a local warehouse. For detail regarding the goodwill and intangible assets ~~recognized~~with determinable lives was $1.6 million and $0.5 million for the years ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, the estimated future amortization expense of intangible assets with determinable lives was as ~~a result of the acquisition, refer to~~ ~~Note~~ ~~6 -Goodwill and Intangible Assets~~ ~~of Notes to the Consolidated Financial Statements.~~follows:


	Amount
	(in thousands)
2024	$	2,190
2025	2,067
2026	1,360
2027	1,209
2028	632
Thereafter	1,321
Total	$	8,779

~~4. Revenue and~~7. Contract Liabilities

~~Revenue~~

~~The following table presents the Company’s revenues disaggregated by offering (in thousands):~~

Years Ended December 31,
2022 2021
Services revenue $ 21,823 $ 14,951
Wellness revenue 33,042 5,131
Total revenues $ 54,865 $ 20,082

~~Contract liabilities~~

The timing of ~~services~~Services revenue recognition may differ from the timing of invoicing to or collections from customers. The Company’s contract liabilities balance, which is included in ~~gift card and subscription liabilities on~~Deferred revenue within the Company’s consolidated balance sheets, is primarily comprised of unredeemed gift cards, prepayments received from consumers for Wag! Premium subscriptions, and certain consumer credits for which the revenue is recognized over time as they are used for services on ~~our~~its platform. The contract liabilities balance was ~~$2.2~~$1.8 million and ~~$1.9~~$2.2 million as of December 31, ~~2022~~2023 and ~~December 31, 2021,~~2022, respectively. Revenues recognized ~~for the years ended December 31, 2022 and 2021~~ related to the Company’s contract liabilities as of the beginning of the year was ~~$0.3~~$1.6 million and ~~$0.1~~$0.3 million ~~respectively.~~

~~6. Fair Value Measurements~~

~~The Company’s financial assets that are measured at fair value on a recurring basis, by level within the fair value hierarchy, are as follows (in thousands):~~

December 31, 2022
Level 1 Level 2 Level 3 Total
Cash equivalents
Money market funds $ 31,690 $ — $ — $ 31,690
Total financial assets $ 31,690 $ — $ — $ 31,690

December 31, 2021
Level 1 Level 2 Level 3 Total
Cash equivalents
Money market funds $ 837 $ — $ — $ 837
Short-term investments
Corporate bonds — 2,554 — 2,554
Total financial assets $ 837 $ 2,554 $ — $ 3,391

~~102~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~Unrealized gains and losses for the three and years ended December 31, 2022 and 2021 are immaterial.~~

~~Forward Share Purchase Agreements Liability~~

On November 9, 2022, the Company settled the derivative liability associated with the Forward Share Purchase Agreements ("FPAs") by repurchasing 1,438,378 shares of common stock at $10.30 on the settlement date. The fair value on the settlement date for the exercised FPAs was $10.9 million and was equal to the intrinsic value of the put option on the settlement date (November 9, 2022). The intrinsic value was calculated using an exercise price of $10.30 per share and stock price of $2.71 per share.

As described in Note 3 - Business Combinations, the Company entered into an Amended Agreement with one investor for 955,000 shares prior to the original settlement date. The investor did not elect to sell its shares to the Company as of the extension date and, the FPA expired unexercised, and the liability was effectively settled for no consideration. As such, the fair value of this FPA was $0 upon settlement, and the Company reversed the previously recorded liability balance as of the last measurement date and recognized a $7.8 million gain on fair value of derivative liability on the consolidated statement of operations in the fourth quarter.

As described above, the derivative liability was remeasured to its intrinsic value at the date the underlying shares were repurchased or settled unexercised. Based on the above, $5.0 million was recognized as a net loss within change in fair value of derivative liability on the consolidated statements of operations in 2022. The net loss is comprised of a $13.7 million loss recognized in the third quarter of 2022, a $0.9 million gain upon settlement on November 9, 2022, and a $7.8 million gain recognized upon the extended settlement date of November 23, 2022.

The liability for the FPAs was valued using a Black-Scholes Option Pricing formula, except upon settlement in which the fair value was used, which is considered to be a Level 3 fair value measurement. The fair value of the FPAs are based on the current stock price and a weighted average of historical volatilities from select benchmark companies. The following table presents the quantitative information regarding Level 3 fair value measurements of the Forward Purchase Agreements as of the following dates:

September 30, 2022 August 9, 2022
Exercise price $ 10.30 $ 10.30
Stock price $ 2.05 $ 8.28
Volatility 42.0 % 70.0 %
Term (in years) 0.25 0.25
Risk-free rate 2.9 % 2.7 %
Dividend Yield — % — %

~~6. Goodwill and Intangible Assets~~

~~Goodwill~~

~~The following table summarizes the changes in the carrying amount of goodwill~~ for the years ended December 31, ~~2022~~2023 and ~~December 31, 2021, respectively (in thousands):~~


~~Balance December 31, 2020~~	$	—
~~CPI Acquisition~~	~~1,427~~
~~Balance December 31, 2021~~	$	~~1,427~~
~~Furmacy Acquisition [1]~~	24
~~Balance December 31,~~ 2022,	$	~~1,451~~

[1] On October 24, 2022, the Company acquired Furmacy Inc. (“Furmacy”) for strategic opportunities related to expansion opportunities into the overall Pet Industry via the vet care and product sales channel. At December 31, 2022, goodwill related to the acquisition of Furmacy was $24 thousand. See ~~Note 3 - Business Combinations~~ ~~for additional detail.~~

~~103~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~Intangible Assets~~

~~The gross book value and accumulated amortization of intangible assets were as follows (in thousands):~~

December 31, 2022 December 31, 2021
Gross Book
Value Accumulated
Amortization Net Book
Value Gross Book
Value Accumulated
Amortization Net Book
Value
Developed technology 783 (226) 557 608 (65) 543
Customer relationships and licenses 2,166 (422) 1,744 2,170 (125) 2,045
Trademarks 291 (56) 235 276 (16) 260
Pharmacy board licenses 5 — 5 — — —
Total Finite Life Intangibles 3,245 (704) 2,541 3,054 (206) 2,848
Total Indefinite Life Intangible Assets $ 49 $ 49 $ 40 $ 40

Included in intangible assets is $49 thousand of indefinite-lived intangible assets, which are not subject to amortization. The weighted average amortization period remaining as of December 31, 2022 for each class of intangible assets were as follows (in years):


~~Developed technology~~			~~3 - 4 years~~

~~Strategic customer relationships and licenses~~			~~5 - 9 years~~

~~Trademarks~~			~~2 - 6 years~~




~~Pharmacy board licenses~~			~~1 year~~

Amortization expense related to acquired intangible assets for the year ended December 31, 2022 was $0.5 million. The Company did not recognize any intangible asset impairment losses during the year ended December 31, 2022.

~~Based on the amounts recorded at December 31, 2022 the Company estimates intangible asset amortization expense in each of the years ending December 31 as follows (in thousands):~~

2023 $ 553
2024 548
2025 474
2026 376
2027 249
Thereafter 341
Total $ 2,541

~~104~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~7. Property and Equipment, Net~~

~~Property and equipment, net, consists of the following (in thousands):~~

As of December 31,
2022 2021
Equipment $ 200 $ 136
Capitalized software 460 460
Total property and equipment 660 596
Less: accumulated depreciation and amortization 572 506
Property and equipment, net $ 88 $ 90

~~Depreciation and amortization expenses were $571 thousand and $388 thousand in 2022 and 2021,~~ respectively.

8. ~~Leases~~Long-Term Debt

~~Operating Leases~~Paycheck Protection Program Loan

The Company leases its facilities under non-cancelable lease agreements which expire between 2022 and 2026. Certain of these arrangements have free rent, escalating rent payment provisions, lease renewal options, and tenant allowances. Rent expense is recognized on a straight-line basis over the noncancellable lease term.

In April 2019, the Company entered into a non-cancellable agreement to lease office space in Mountain View, California. The lease is a two-year operating lease, which includes scheduled rent escalations during the lease term. The Company had an option to extend the lease through 2025, although the Company did not exercise the option and the lease expired in the third quarter of 2022.

~~In February~~On August 5, 2020, the Company ~~entered into~~received loan proceeds of approximately $5.1 million from a ~~non-cancellable sublease agreement for its Mountain View office space.~~financial institution pursuant to the Paycheck Protection Program (the “PPP Loan”) established by the Coronavirus Aid, Relief, and Economic Security Act, of which $3.5 million was subsequently forgiven. The ~~sublease agreement commenced~~PPP Loan matures on ~~April 1, 2020. Under the term~~August 5, 2025 and bears interest at a fixed rate of ~~the sublease agreement, the Company received $2.0 million in base lease~~1.00%. Principal and interest payments ~~plus reimbursement of certain operating expenses over the term of the sublease, which ended in July 2022.~~ are payable monthly.

During the years ended December 31, 2023 and 2022, the Company repaid a total amount of $0.5 million and ~~2021,~~$0.4 million, respectively, on amounts outstanding under the PPP Loan. As of December 31, 2023 and December 31, 2022, the amount outstanding under the PPP Loan was $0.8 million and $1.2 million, respectively.

During the years ended December 31, 2023 and 2022, the Company recognized ~~$0.5 million~~immaterial amounts of interest expense relating to the PPP Loan.

Blue Torch Financing and ~~$0.9 million, respectively, of sublease income under this agreement.~~Warrant Agreement

~~In February 2020,~~On August 9, 2022, the Company entered into a ~~non-cancellable~~financing agreement and warrant agreement with Blue Torch Finance, LLC (together with its affiliated funds and any other parties providing a commitment thereunder, including any additional lenders, agents, arrangers or other parties joined thereto after the date thereof, collectively, “Blue Torch”), pursuant to ~~lease additional office space in Mountain View, California for a one-year period. There was no option~~which, among other things, Blue Torch agreed to extend ~~the lease.~~

~~In November 2021, the Company entered into~~an approximately $32.2 million senior secured term loan (the “Financing Agreement”) . The Financing Agreement is secured by a ~~non-cancellable agreement to lease office space~~first priority security interest in Phoenix, Arizona for a 21-month period. The lease contains an escalation clause and free rent. The monthly base rent will be $10.4 thousand for months two through thirteen and will increase by approximately 1.9% over the initial term. There is no option to extend the lease.

~~The Company's corporate headquarters are located in San Francisco, California, pursuant to an operating lease that was to expire in August 2023.~~ On October 28, 2022, the lease agreement was amended to extend for a period of 30 months through February 28, 2026. The monthly base rent will be $20.4 thousand for the first year and will increase by 3.0% per year over the initial term.

As a result of the Furmacy acquisition on October 24, 2022, the Company assumed two real-estate operating leases for their headquarter location in El Dorado Hills, California. The leases are separate and distinct for office space and warehouse use. The remaining lease term as of the acquisition date was 13 months for each lease. The Company measured the lease liabilities at the present value of the remaining lease payments, as if each acquired lease was a new leasesubstantially all assets of the Company and its subsidiaries.

The Financing Agreement bears interest at a floating rate of interest equal to, at the ~~acquisition date. There is no~~Company’s option, ~~to extend~~Secured Overnight Financing Rate (“SOFR”) plus 10.00% per annum or the ~~leases further.~~reference rate plus 9.00% per annum, with the reference rate defined as the greatest of:

•2.00% per annum;

~~105~~73

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes~~•the federal funds effective rate plus 0.50% per annum;

•one-month SOFR plus 1.00% per annum; and

•the prime rate announced by the Wall Street Journal from time to ~~Consolidated Financial Statements~~

time.

~~Non-cash activities involving Right~~SOFR will be subject to a floor of ~~Use ("ROU")~~1.00% per annum, and the reference rate will be subject to a floor of 2.00% per annum. Interest will be payable in arrears at the end of each SOFR interest period (but at least every three months) for SOFR borrowings and quarterly in arrears for reference rate borrowings.

The Financing Agreement matures in three years after the Closing Date and is subject to quarterly amortization payments of principal, in an aggregate amount equal to 2.00% of the outstanding principal amount in the first year after closing, 3.00% of the outstanding principal amount in the second year after closing, and 5.00% of the outstanding principal amount in the third year after closing. The remaining outstanding principal balance of the Financing Agreement is due and payable in full on the maturity date. In addition to scheduled amortization payments, the Financing Agreement contains customary mandatory prepayment provisions that require principal prepayments of the loan upon certain triggering events, including receipt of asset sale proceeds outside of the ordinary course of business, receipt of certain insurance proceeds, and receipt of proceeds of non-permitted debt. The loan may also be voluntarily prepaid at any time, subject to the payment of a prepayment premium and a make-whole payment. The prepayment premium is payable for voluntary payments and certain mandatory prepayments, and is equal to: (i) an interest make-whole payment plus 3.00% of the principal amount of such prepayment in the first year after closing; (ii) 2.00% of the principal amount of such prepayment in the second year after closing; and (iii) 0% thereafter.

The Financing Agreement contains customary representations and warranties, affirmative covenants, financial reporting requirements, negative covenants and events of default. The negative covenants impose restrictions on the ability of the Company and its subsidiaries to incur indebtedness, grant liens, make investments, make acquisitions, declare and pay restricted payments, prepay junior or subordinated debt, sell assets, and enter into transactions with affiliates, in each case, subject to certain customary exceptions.

The Company’s obligations under the Financing Agreement are guaranteed by certain of its subsidiaries meeting materiality thresholds. Such obligations, including the ~~impact~~guarantees, are secured by substantially all of ~~adopting~~ the ~~new lease standard~~personal property of the Company and its subsidiary guarantors, including pursuant to a Security Agreement simultaneously entered into on ~~January 1, 2022, were $0.5~~August 9, 2022. The Financing Agreement establishes the following financial covenants: (i) the Company's trailing annual aggregate revenue shall exceed certain thresholds as of the end of each monthly computation period as defined therein; and (ii) liquidity shall not be less than $5 million at any time. The Company was in ~~assets and $0.5 million in liabilities. Operating lease expense under ASC 842 for leased facilities was $0.4 million, net~~compliance with these covenants as of ~~sublease income of $0.5 million, and variable lease costs were $0.1 million for the year ended~~ December 31, ~~2022. Rent expense~~2023. During the first quarter of 2023, the Company received a waiver regarding a covenant for ~~operating leases, as previously reported under former lease accounting standards, net~~timely reporting and execution of ~~sublease income, was $2.6 million for~~agreements with respect to the ~~year ended December 31, 2021.~~creation of a new wholly-owned subsidiary to hold the Dog Food Advisor assets.

As of December 31, 2023 and 2022, the ~~future minimum lease payments~~interest rate for borrowings under the Financing Agreement was 15.61% and 14.84%, respectively.

During the years ended December 31, 2023 and 2022, the Company repaid a total amount of $0.8 million and $0.2 million, respectively, on amounts outstanding under the Financing Agreement. As of December 31, 2023 and December 31, 2022, the amount outstanding under the Financing Agreement was $31.2 million and $32.0 million, respectively.

During the years ended December 31, 2023 and 2022, the Company recognized $4.9 million and $1.8 million, respectively, of interest expense relating to the Financing Agreement.

Tab l e of Contents

On the closing of the Financing Agreement, the Company also entered into the Lender Warrant Agreement with Vstock Transfer, LLC as warrant agent, pursuant to which affiliates of Blue Torch received 1,896,177 warrants to acquire common stock of the Company, par value $0.0001 per share (“Common Stock”), for $11.50 per whole share (such warrants, the “Lender Warrants”). The Lender Warrants were issued pursuant to the SPAC Warrant Agreement (as defined in the CHW Business Combination Agreement) and are subject to the terms and conditions thereof, as modified (whether reflected in the terms of the Lender Warrants issued on the Merger Date, or in an amendment to or exchange for the Lender Warrants consummated after the Merger Date) to provide that (i) the exercise period of the Lender Warrants will terminate on the earliest to occur of (x) the date that is ten years after completion of the CHW Business Combination, (y) liquidation of the Company, and (z) redemption of the Lender Warrants as provided in the SPAC Warrant Agreement (the “Lender Warrant Expiration Date”), (ii) Blue Torch has the ability to net exercise the Lender Warrants (based on the fair value of the stock at the time of net exercise, fair value being equal to the public trading price at the time of exercise) on a cashless basis, (iii) Blue Torch received the benefit of certain customary representations and warranties from the Company, and (iv) the Lender Warrants are not required to be registered under ~~operating leases~~the Securities Act.

At the date of issuance, the Company classified the Lender Warrants as equity and recognized them in additional paid-in capital within its consolidated balance sheet. As the Lender Warrants were classified as ~~follows (in thousands):~~

2023 288
2024 248
2025 255
2026 43
Total minimum lease payments $ 834

equity, the Company will not remeasure the Lender Warrants each accounting period. The ~~weighted average~~Company estimated the fair value of warrants exercisable for common stock using the Black-Scholes option valuation model. The Black-Scholes option valuation model inputs are based on the estimated fair value of the underlying common stock at the valuation measurement date, the remaining ~~lease~~contractual term of the warrant, the risk-free interest rates, the expected dividends, and the ~~weighted average discount rate~~expected volatility of the price of the Company’s ~~operating leases is 2.3 years and 8.6% at~~underlying stock.

As the Lender Warrants were classified as equity, the proceeds were allocated based on the relative fair values of the financial instruments issued as a whole.

Total Debt

As of December 31, ~~2022. The discount rates are generally based on estimates~~2023, annual scheduled principal payments of ~~the Company’s incremental borrowing rate,~~debt were as ~~the discount rates implicit in the Company’s leases cannot be readily determined.~~follows:


	Amount
	(in thousands)
2024	$	1,751
2025	30,227
Total principal payments	$	31,978

9. Commitments and Contingencies

Legal and ~~other contingencies~~Other Contingencies

From time to time, the Company ismay be a party to litigation and subject to claims, including ~~non- income~~non-income tax audits, in the ordinary course of business. The Company ~~follows~~accrues a thorough process to estimate the reasonably possible loss or range of loss, and only if the Company is unable to make such an estimate does the Company conclude and disclose that an estimate cannot be made. Accordingly, unless otherwise indicated below, a reasonably possible loss or range of loss associated with any individual contingency cannot be estimated. The Company accrues an estimate for the probable loss or a range of lossliability when management believes information available to it prior to the issuance of the consolidated financial statements indicates ~~that~~it is probable a loss has been incurred as of the date of the consolidated financial statements and the amount of loss can be reasonably estimated. The Company adjusts its ~~estimated~~ accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Legal costs are expensed as incurred. Although the results of litigation and claims cannot be predicted with certainty, management concluded that there was not a reasonable probability that it ~~would incur~~had incurred a ~~reasonably estimable~~ material loss during the periods presented related to such loss contingencies. Therefore, the Company has not recorded a reserve for any such contingencies.

Given the inherent uncertainties and unpredictability of litigation, the ultimate outcome of ongoing matters cannot be predicted with ~~certainty. Litigation is inherently unpredictable,~~certainty but the Company believes it has valid defenses with respect to the legal matters pending against it. Nevertheless, the consolidated financial statements could be materially adversely affected in a particular period by the resolution of one or more of these contingencies. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense, and settlement costs, diversion of management resources, and other factors. Liabilities established to provide for contingencies are adjusted as further information develops, circumstances changes, or contingencies are resolved; such changes are recorded in the accompanying statements of operations during the period of the change and reflected in accrued expenses and other current liabilities on the accompanying consolidated balance sheets.

Tab l e of Contents

The Company has been and continues to be involved in numerous legal proceedings related to ~~Pet Caregiver~~PCG classification. In California, Assembly Bill No. 5 (AB-5) implemented a presumption that workers are employees. However, AB-2257 exempts agencies providing referrals for certain animal services, including dog walking, from AB-5. The Company believes that it falls within this exemption. Nevertheless, the interpretation or enforcement of the exemption could change.

~~In August 2018, the New York State~~ The United States Department of Labor ~~(“DOL”) issued an Investigation Report assessing~~announced on October 11, 2022 that it would publish a Notice of Proposed Rulemaking regarding the ~~Company with approximately $250,000 in unemployment insurance contributions for our independent contractors. In May 2021, the Unemployment Insurance Appeal Board affirmed its decision sustaining the~~

~~106~~

~~Table~~classification of ~~Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~Department’s assessment. Interest continues to accrue on this assessment. As of December 31, 2022, the Company’s liability related to this matter is $248 thousand.~~

~~In November 2019, California issued an assessment alleging various violations and penalties related to alleged misclassification of pet caregivers who use the Company’s platform~~workers as independent ~~contractors.~~contractors or employees. The Company ~~has challenged both~~is monitoring the ~~legal basis and the amount~~development of the ~~assessment, of $1.7 million~~proposed rule and will evaluate in ~~unemployment insurance contributions for our independent contractors. In April 2022, the California Employment Development Department ("CA EED") initiated~~ a ~~routine employment tax audit~~future period any potential impact of the Company. We are engaged in ongoing discussions with the CA EDD, including providing additional data that has been requested, in order to determine what, if any, additional assessments are warranted. CA EDD alleges the Company owes approximately $1.3 million in unemployment insurance contributions forfinal rule, when issued, on our independent contractors. In response we submitted a Petition for Reassessment and intend to defend ourselves vigorously in this pending matter. The Company believes given the inherent uncertainties of litigation, the outcome of this matter is not considered probable nor estimable and, therefore, the Company has not recorded a reserve.operations.

The Company is subject to audits by taxing authorities and other forms of investigation, audit, or inquiry conducted by federal, state, or local governmental agencies. Due to the inherent uncertainties in the final outcome of such matters, the Company can give no assurance that it will prevail in such matters, which could have an adverse effect on the Company’s business. In addition, the Company may be subject to greater risk of legal claims or regulatory actions as it increases and continues its operations in jurisdictions where the laws and regulations governing online marketplaces or the employment classification of service providers who use online marketplaces are uncertain or unfavorable.

In November 2019, California issued an assessment alleging various violations and penalties related to alleged misclassification of pet caregivers who use the Company’s platform as independent contractors. The Company has challenged both the legal basis and the amount of the assessment, of $1.7 million in unemployment insurance contributions for our independent contractors. In April 2022, the California Employment Development Department ("CA EDD") initiated a routine employment tax audit of the Company. The Company is engaged in ongoing discussions with the CA EDD, including providing additional data that has been requested, in order to determine what, if any, additional assessments are warranted. CA EDD alleges the Company owes approximately $1.3 million in unemployment insurance contributions for our independent contractors. In response, the Company submitted a Petition for Reassessment and intend to defend itself vigorously in this pending matter. The Company believes given the inherent uncertainties of litigation, the outcome of this matter is not considered probable nor estimable and, therefore, the Company has not recorded a reserve.

In August 2018, the New York State Department of Labor (“NY DOL”) issued an Investigation Report assessing the Company with approximately $0.2 million in unemployment insurance contributions for our independent contractors. In August 2023, the Company completed payments of $0.4 million to the DOL, which represented the amount of the assessment plus interest and was recognized in general and administrative expenses within the Company’s consolidated statement of operations for the year ended December 31, 2023.

In December 2019, Wag Hotels, Inc. filed a lawsuit against the Company alleging various claims related to breach of contract and trademark infringement. On June 29, 2023, the parties agreed to a settlement amount of $0.5 million to resolve all claims, with an initial payment up front and the remaining payments over 25 months. The settlement was executed on August 30, 2023. The $0.5 million was recognized in general and administrative expenses within the Company’s consolidated statement of operations for the year ended December 31, 2023 and the Company has recorded a corresponding liability in Accrued expenses and other current liabilities and Other non-current liabilities within its consolidated balance sheet as of December 31, 2023.

In December 2023, the NY DOL issued an investigation report assessing the Company with approximately $1.8 million in unemployment insurance contributions, including interest and penalties, for its independent contractors. On January 19, 2024, the Company submitted a request for hearing contesting assessment. The Company believes given the inherent uncertainties of litigation, the outcome of this matter is not considered probable nor estimable and, therefore, the Company has not recorded a reserve.

As of December 31, ~~2022 and 2021,~~2023, management did not believe that the outcome of pending matters would have a material ~~adverse~~ effect on the Company’s financial position, results of operations, or cash flows.

~~10. Debt~~

~~PPP Loan~~

In August 2020, the Company received loan proceeds of $5.1 million from a financial institution pursuant to the Paycheck Protection Program (the “PPP Loan”) as administered by the U.S. Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further required the Company to take into account its then current business activity and its ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the forgiveness of the loan attendant to these funds, was dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on its adherence to the forgiveness criteria.

In August 2021, the Company applied for forgiveness of $3.5 million of the PPP Loan, and in September 2021, the SBA approved the Company’s loan forgiveness application in the amount of $3.5 million. The term of the PPP Loan is five years with a maturity date of August 2025 and contains a fixed annual interest rate of 1.00% Principal and interest payments began in November 2021. As of December 31, 2022, the outstanding principal balance was $1.2 million.

~~Blue Torch Financing and Warrant Agreement~~

On August 9, 2022, the Legacy Wag! entered into a financing agreement and warrant agreement with Blue Torch Finance, LLC (together with its affiliated funds and any other parties providing a commitment thereunder, including any additional lenders, agents, arrangers or other parties joined thereto after the date thereof, collectively, the “Debt Financing Sources”), pursuant to which, among other things, the Debt Financing Sources agreed to extend an approximately $32.17 million senior secured term loan credit facility (the “Credit Facility”). Legacy Wag! is the primary borrower under the Credit Facility, the Company is a parent guarantor and

~~107~~

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~substantially all of the Company’s existing~~10. Redeemable Preferred Stock and ~~future subsidiaries are subsidiary guarantors. The Credit Facility is secured by a first priority security interest in substantially all assets of the Company and the guarantors.~~

The Credit Facility bears interest at a floating rate of interest equal to, at Legacy Wag’s option, Secured Overnight Financing Rate ("SOFR") plus 10.00% per annum or the reference rate plus 9.00% per annum, with the reference rate defined as the greatest of:

•~~2.00% per annum;~~

•~~the federal funds effective rate plus 0.50% per annum;~~

•~~one-month SOFR plus 1.00% per annum; and~~

•~~the prime rate announced by the Wall Street Journal from time to time.~~

SOFR will be subject to a floor of 1.00% per annum, and the reference rate will be subject to a floor of 2.00% per annum. Interest will be payable in arrears at the end of each SOFR interest period (but at least every three months) for SOFR borrowings and quarterly in arrears for reference rate borrowings.

The Credit Facility matures in three years after the Closing Date, and will be subject to quarterly amortization payments of principal, in an aggregate amount equal to 2.00% of the principal amount of the Credit Facility in the first year after closing, 3.00% of the principal amount of the Credit Facility in the second year after closing and 5.00% of the principal amount of the Credit Facility in the third year after closing. The remaining outstanding principal balance of the Credit Facility will be due and payable in full on the maturity date. In addition to scheduled amortization payments, the Credit Facility contains customary mandatory prepayment provisions that require principal prepayments of the Credit Facility upon certain triggering events, including receipt of asset sale proceeds outside of the ordinary course of business, receipt of certain insurance proceeds and receipt of proceeds of non-permitted debt. The Credit Facility may also be voluntarily prepaid at any time, subject to the payment of a prepayment premium. The prepayment premium is payable for voluntary payments and certain mandatory prepayments, and is equal to an interest make-whole payment plus 3.00% of the principal amount of such prepayment in the first year after closing, 2.00% of the principal amount of such prepayment in the second year after closing, and 0% thereafter. No interest make-whole payment is due after the first year.

The Credit Facility contains customary representations and warranties, affirmative covenants, financial reporting requirements, negative covenants and events of default. The negative covenants included in the Financing Agreement impose restrictions on the ability of Legacy Wag, the guarantors and their subsidiaries to incur indebtedness, grant liens, make investments, make acquisitions, declare and pay restricted payments, prepay junior or subordinated debt, sell assets and enter into transactions with affiliates, in each case, subject to certain customary exceptions.

Legacy Wag’s obligations under the Blue Torch Financing Agreement are guaranteed by certain of its subsidiaries meeting materiality thresholds set forth in the Blue Torch Financing Agreement (the "Financing Agreement"). Such obligations, including the guarantees, are secured by substantially all of the personal property of the Company and its subsidiary guarantors, including pursuant to a Security Agreement entered into on August 9, 2022. The Blue Torch Financing Agreement establishes the following financial covenants: (i) Legacy Wag's trailing annual aggregate revenue shall exceed certain thresholds as of the end of each monthly computation period as defined therein; and (ii) Liquidity shall not be less than $5 million at any time. Legacy Wag! was in compliance with all covenants as of December 31, 2022. The facility was fully drawn upon as of December 31, 2022. The Company has incurred $0.6 million in interest expense as of December 31, 2022 at an annual interest rate of 12.95%. As of December 31, 2022, the outstanding principal balance was $26.2 million, net of discount of $7.0 million.

On the closing of the Credit Facility, Legacy Wag! also entered into the Lender Warrant Agreement with Vstock Transfer, LLC as warrant agent, pursuant to which affiliates of Blue Torch Capital LP (“Blue Torch”) received 1,896,177 warrants to acquire common stock of the Company, par value $0.0001 per share (“Common Stock”), for $11.50 per whole share (such warrants, the “Lender Warrants”). The Lender Warrants were issued pursuant to the SPAC Warrant Agreement (as defined in the Business Combination Agreement) and are subject to the terms and conditions thereof, as modified (whether reflected in the terms of the Lender Warrants issued on the Merger Date, or in an amendment to or exchange for the Lender Warrants consummated after the

~~108~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

Merger Date) to provide that (i) the exercise period of the Lender Warrants will terminate on the earliest to occur of (x) the date that is ten years after completion of the Business Combination, (y) liquidation of the Company, and (z) redemption of the Lender Warrants as provided in the SPAC Warrant Agreement (the “Lender Warrant Expiration Date”), (ii) Blue Torch has the ability to net exercise the Lender Warrants (based on the fair value of the stock at the time of net exercise, fair value being equal to the public trading price at the time of exercise) on a cashless basis, (iii) Blue Torch received the benefit of certain customary representations and warranties from the Company, and (iv) the Lender Warrants are not required to be registered under the Securities Act.

We classify the Lender Warrants as equity on our consolidated balance sheet as of December 31, 2022. As the Warrants are classified as equity instruments, the Company will not remeasure the Warrants each accounting period. The Company estimated the fair value of warrants exercisable for common stock using the Black-Scholes option valuation model. The Black-Scholes option valuation model inputs are based on the estimated fair value of the underlying common stock at the valuation measurement date, the remaining contractual term of the warrant, the risk-free interest rates, the expected dividends, and the expected volatility of the price of the Company’s underlying stock. These estimates, especially the expected volatility, are highly judgmental and could differ materially in the future.

Carry Value as of December 31, 2022
(in thousands) Exercise Price
(in whole dollars) Dividend Yield Volatility Risk-Free Interest Rate Expected Term
(in years)
Lender Warrants $ 6,104 $ 11.50 — % 33.00 % 2.97 % 10

~~As the Lender Warrants are not liability classified instruments, the proceeds were allocated based on the relative fair values of the financial instruments issued as a whole.~~

~~Future minimum payments of the principal on the Company’s outstanding obligations as of December 31, 2022 were as follows (in thousands):~~

Amounts
2023 $ 1,264
2024 1,751
2025 30,227
Total principal amount $ 33,242

~~Letters of Credit~~

As of December 31, 2022 and 2021, the Company had letters of credit outstanding of $0 and $0.8 million included in other assets on the Company’s consolidated balance sheet, respectively. The Company no longer has letters of credit in place as of December 31, 2022.

~~11.~~ Stockholders’ Equity (Deficit) ~~and Mezzanine Equity~~

~~Accumulated Other Comprehensive Income (Loss)~~

~~Changes to accumulated other comprehensive income (loss) for the year ended December 31, 2022 and 2021 were immaterial.~~

Redeemable Preferred Stock

On January 28, 2022, ~~The Company~~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 ~~the Company’s~~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

~~109~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

was not completed, as defined in the Company’s ~~Amended and Restated~~ Certificate of Incorporation. Upon consummation of the Merger, the Series P ~~Shares~~shares converted into the Company’s common stock on a one-for-one basis.

In connection with the Merger, all shares of redeemable convertible preferred stock ~~had been~~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.

The Company had outstanding redeemable preferred stock as follows. The amounts in the table below have been adjusted to reflect the exchange ratio (approximately 0.97 shares of the Company’s common stock for each share of Legacy Wag! common stock) established in the Merger:
December 31, 2021
Series Shares Designated Shares Issued and
Outstanding Carrying Amount Liquidation
Preference
Seed 4,502,881 4,376,930 $ 19,382 $ 3,117
A 6,072,815 5,902,952 25,969 9,500
B 6,694,033 6,506,793 32,057 15,000
C 7,275,657 7,072,149 32,857 39,800
Total 24,545,386 23,858,824 $ 110,265 $ 67,417

Pursuant to the Company’s ~~certificate~~Certificate of ~~incorporation,~~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 December 31, ~~2022,~~2023, no shares of preferred stock were issued and outstanding.

~~Common Stock~~

As December 31, 2022 and December 31, 2021, the Company had authorized 110,000,000 and 43,763,126 shares of common stock (“common stock”) at a par value of $0.0001 per share, respectively. As of December 31, 2022 and December 31, 2021, 36,849,076 and 6,121,253 shares of the Company’s common stock were issued and outstanding, respectively. 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 Compensation Plans~~

~~2014 Stock Option Plan~~

Under the Company’s 2014 Stock Option Plan (the “2014 Plan”), options were granted at fair value, and generally vest over four years and expire in ten years. The 2014 Plan provided for the grant of incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), and other stock awards, or collectively, “stock awards”. The 2014 Plan allowed ISOs to be granted only to Legacy Wag!’s employees and the employees of Legacy Wag!’s parents or affiliates. The 2014 Plan allowed all other awards to be granted to Legacy Wag!’s employees, non-employee directors and consultants and the employees and consultants of Legacy Wag!’s parent or affiliates. The Company has granted stock options and restricted stock units (“RSUs”) under the 2014 Plan. In connection with the consummation of the Merger and following the Acquisition Closing, each option converted into an option to purchase shares of Wag! common stock. As of the Acquisition Closing, the Company no longer grants options under the 2014 Plan.

~~110~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~Omnibus Incentive Plan~~

The Wag! Group Co. 2022 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) was adopted by the stockholders in connection with the Merger and became effective upon the Acquisition Closing. The Omnibus Incentive Plan replaced the 2014 Plan which expired as to future grants as of the effective date of the Merger. The maximum aggregate number of shares (subject to adjustment) of our common stock reserved for issuance under the Omnibus Incentive Plan is 6,378,729. Additionally, the number of shares of Wag! common stock reserved for issuance under the Omnibus Incentive Plan will automatically increase on January 1st of each year, beginning on January 1, 2023 and continuing through and including January 1, 2032, in an amount equal to (i) a maximum of 10% of Wag! common stock outstanding as of each December 31st of the preceding calendar year or (ii) a lesser amount as determined by the Board. The 2022 Plan allows for the issuance of ISOs, NSOs, restricted stock awards, stock appreciation rights, restricted stock units (“RSUs”), and performance awards. The Board of Directors determines the period over which options become exercisable and options generally vest over a ~~three~~ or ~~four-year period. The Company has not granted any stock options under this plan as of December 31, 2022. The Company granted 4.1 million RSUs under this plan as of December 31, 2022.~~

~~Employee Stock Purchase Plan~~

The Company sponsors the Wag! Group Co. Employee Stock Purchase Plan (the “ESPP”) which was adopted by the stockholders in connection with the Merger and became effective upon the Acquisition Closing. Under this plan, eligible employees have the opportunity to purchase shares of common stock at a discount through accumulated contributions of their earned compensation. The ESPP’s initial share reserve is 6,378,729 shares of common stock. Although effective, offering periods will not commence under the ESPP until determined by the Board or the compensation committee.

The ESPP provides a significant incentive by allowing employees to purchase shares of common stock at a discount. Accordingly, the plan is a non-compensatory plan. As of December 31, 2021, there were 6,378,729 shares available for future issuance as the plan has yet to commence.

~~A summary of the Company’s option activity under the 2014 Plan is as follows:~~

Number of
Options Weighted-average
exercise
price Weighted-
Average
Remaining
Contractual
Term
(Years) Aggregate
Intrinsic
Value
(in millions)
Outstanding, December 31, 2021 7,368,461 $ 0.39
Granted — —
Exercised (118,514) 0.11
Cancelled/forfeited (55,880) 0.91
Outstanding, December 31, 2022 7,194,067 $ 0.40 7.2 $ 19.3

The weighted-average grant date fair value of options granted during the year ended December 31, 2021 was $0.03 per option. The estimated grant date fair values of employee stock-based options were calculated using the Black-Scholes valuation model, based on the following assumptions. Since the Company does not a history of paying dividends, the expected dividend yield is 0%.The Company did not grant any options in 2022.

2022 2021
Expected term N/A 5.20 – 9.97 years
Volatility (%) N/A 57.9% – 59.5%
Risk-free interest rate (%) N/A 0.7% – 1.6%

~~As of December 31, 2022, the aggregate stock compensation expense remaining to be amortized was $59.4 thousand related to stock options. The Company expects this compensation balance to be recognized~~

~~111~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~over a weighted average of 1.44 years. The Company does not currently expect to continue to issue stock option awards to its employees in future periods.~~

Includes the impact of $23.9 million of stock-based compensation charges recorded to additional-paid in capital related to Earnout Shares of New Wag! Common Stock in the third quarter of 2022. Since the Earnout awards are issued to the Eligible Company Equityholders and management as of the date of the merger without any requirement of future service obligations, the Company recorded a stock-based compensation entry reflected in the consolidated balance sheets as well as the income statement of the entire Earnout award fair value.

~~Restricted Stock~~

The Company accounts for restricted stock issued to employees at fair value, based on the market price of stock on the date of grant. The Company recognizes the expense on straight-line basis over the requisite service period and recognizes forfeitures as they occur. The fair value of restricted stock units awarded are measured at the grant date. Almost all restricted stock was issued to founders or employees of the Company.

~~A summary of restricted stock activity for the years ended December 31, 2022 is as follows:~~

Restricted Stock (Unvested)
Number of
Shares Weighted Average Grant
Date Fair Value
($ per share)
Unvested at December 31, 2021 169,283 $ 0.22
Grants 4,091,394 2.50
Vested (52,902) 0.22
Forfeited (13,000) 2.50
Unvested at December 31, 2022 4,194,775 $ 2.44

As of the years ended December 31, 2022 and 2021 there was $9.8 million and $14.0 thousand of unrecognized expense related to unvested restricted stock. The Company expects this compensation balance to be recognized over a weighted average of 2.69 years.

~~The following table summarizes the total stock-based compensation expense by function for the year ended December 31, 2022 and 2021 (in thousands).~~

2022 2021
Operations and support $ 2,991 $ 36
Sales and marketing 2,138 11
General and administrative 19,363 175
Total $ 24,492 $ 222

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~~was $1.54, and the term of the warrants ~~were~~was 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

~~112~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

exchange ratio of 0.97 for Legacy Wag! Common Warrants. ~~Subsequent to~~During the ~~Business Combination,~~year ended December 31, 2022, the two Legacy Wag! holders net exercised their warrants on a cashless basis for 72,434 ~~shares.~~

~~A summary of Legacy Wag! common stock warrants outstanding as of December 31, 2022 and December 31, 2021 is as follows:~~

Number of
Shares* Weighted Average
Exercise
Price ($ per share) Aggregate
Intrinsic
Value
Outstanding at December 31, 2022 — $ — —
Outstanding at December 31, 2021 88,756 $ 1.59 —

*The shares of ~~the Company's warrants have been retroactively adjusted as shares reflecting the exchange ratio.~~common stock.

CHW Public and Private Placement Warrants

Prior to the Merger, CHW issued 12,500,000 of Public Warrants and 4,238,636 of Private Placement Warrants ~~together~~(together, the ~~Warrants, (the~~ “Warrants”)~~, respectively,~~ 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 Placement 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 the Private Placement ~~Warrants. Additionally,~~Warrants originally issued to CHW and the 12,500,000 shares of common stock that are issuable upon the exercise of the 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 Business Combination or 12 months from CHW's IPO closing date.~~2022. The Warrants will expire on the fifth anniversary of the CHW Business ~~Combination, or earlier upon redemption or liquidation.~~Combination.

~~The~~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 apply. The following table provides quantitative information regarding fair value measurements at issuance on September 1, 2021:

Share Price
(in whole dollars) Exercise Price
(in whole dollars) Dividend Yield Volatility Risk-Free Interest Rate Expected Term
(in years)
$ 10.00 $ 11.50 — % 22.00 % 1.31 % 5

~~The fair value as of September 1, 2021 was $1.32 per share.~~ As of December 31, ~~2022, the Company has~~2023, 12,500,000 of Public Warrants and 3,895,564 of Private Placement Warrants ~~outstanding respectively.~~remained outstanding.

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.

~~113~~77

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

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.~~Warrants.

Accumulated Other Comprehensive Income

~~12. Income Taxes~~

~~The Company’s provision for~~There were no changes in accumulated other comprehensive income ~~taxes~~ for the years ended December 31, 2023 and 2022.

11. Revenues

The following table presents the Company’s revenues disaggregated by offering:


	Year Ended December 31,
	2023		2022
	(in thousands)
Services revenue	$	24,422	$	21,823
Wellness revenue	52,922		33,042
Pet food & treats revenue	6,572		—
Total revenues	$	83,916	$	54,865

12. Stock-Based Compensation

In 2014, the Company adopted the 2014 Stock Option Plan (the “2014 Plan”), which provided for the grant of stock options and stock unit awards. Options granted under the 2014 Plan were either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). The 2014 Plan allowed ISOs to be granted only to employees of Legacy Wag! and its parents or affiliates, while stock awards other than ISOs were allowed to be granted to employees, nonemployee directors, and consultants of Legacy Wag! and its parents or affiliates.

In August 2022, in connection with the Merger, the Company’s stockholders approved the Wag! Group Co. 2022 Omnibus Incentive Plan (the “2022 Plan”), which replaced the 2014 Plan. After the adoption thereof, no additional awards were granted under the 2014 Plan. The 2022 Plan provides for the grant of stock options, stock appreciation awards, restricted stock and ~~2021 was~~stock unit awards. Awards generally vest in equal quarterly installments over a three- or four-year period, provided that the initial vest generally occurs after a one-year cliff. Stock unit awards granted to nonemployee directors generally vest over a one-year period. As of December 31, 2023, an aggregate of approximately 0.5 million shares remained available for future issuance under the 2022 Plan.

Stock unit awards are valued at the market value on the date of grant. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period and recognizes forfeitures as they occur.

During the years ended December 31, 2023 and 2022, the Company granted stock unit awards with service conditions to certain employees and nonemployee directors. The Company did not grant any stock options during the years ended December 31, 2023 and 2022.

Tab l e of ~~$13 thousand and benefit of $793 thousand, respectively.~~ Contents

The ~~provision~~following table summarizes the activities for ~~income taxes consisted of $19.8 thousand in deferred U.S. federal income tax and $1.5 thousand in deferred state income tax~~all stock options under the Company’s stock-based compensation plans for the year ended December 31, ~~2022.~~2023:


	Number of Options Outstanding	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life	Aggregate Intrinsic Value(1)
	(in thousands)				(in thousands)
Outstanding as of December 31, 2022	7,194	$	0.40	7.19 years	$	19,292
Granted	—	$	—
Exercised	(1,010)	$	0.10
Forfeited or expired	(21)	$	2.75
Outstanding as of December 31, 2023	6,163	$	0.44	6.06 years	$	8,934
Exercisable as of December 31, 2023	6,021	$	0.44	6.06 years	$	8,715
Vested and expected to vest as of December 31, 2023	6,163	$	0.44	6.06 years	$	8,934

(1) The ~~Company files federal~~intrinsic value is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock awards.

The total intrinsic value of stock options exercised during the years ended December 31, 2023 and ~~state income tax returns with varying statutes~~2022 was $2.2 million and $0.3 million, respectively.

The following table summarizes the activities for all restricted stock units (“RSUs”) under the Company’s stock-based compensation plans for the year ended December 31, 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	2,000	$	2.34
Vested	(1,692)	$	2.44
Forfeited	(181)	$	2.40
Outstanding and nonvested as of December 31, 2023	4,322	$	2.39
Expected to vest as of December 31, 2023	4,322	$	2.39

The total vesting date fair value of ~~limitations.~~ RSUs which vested during the years ended December 31, 2023 and 2022 was $3.8 million and $0.4 million, respectively.

The ~~tax years from 2015 to 2022 remain open to examination.~~ following table provides information about stock-based compensation expense by financial statement line item:


	Year Ended December 31,
	2023		2022
	(in thousands)
Platform operations and support	$	1,025	$	2,991
Sales and marketing	739		2,138
General and administrative	2,948		19,363
Total stock-based compensation expense	$	4,712	$	24,492

Tab l e of Contents

As of December 31, 2023, the total unrecognized compensation cost related to all nonvested stock options was $20 thousand and the related weighted-average period over which it is expected to be recognized was approximately 1.23 years.

As of December 31, 2023, the total unrecognized compensation cost related to all nonvested RSUs was $9.3 million and the related weighted-average period over which it is expected to be recognized was approximately 2.11 years.

Employee Stock Purchase Plan

In August 2022, ~~no examination is~~ in ~~progress in federal or state jurisdictions.~~

~~The reconciliation~~connection with the Merger, the Company adopted the Wag! Group Co. 2022 Employee Stock Purchase Plan (“ESPP”). Under the terms of the ~~statutory federal income tax rate~~ESPP, rights to purchase common shares may be granted to eligible qualified employees subject to certain restrictions. The ESPP enables the Company’s eligible employees, through payroll withholdings, to purchase a limited number of common shares at 85% of the fair market value of a common share either at the beginning of that offering period or on the applicable exercise date, whichever is less. In connection with the adoption of the ESPP, the Company has reserved for issuance a total of approximately 6.4 million shares. Although effective, ~~tax rate was~~the plan has yet to commence and offering periods under the ESPP will not commence until determined by the compensation committee of the Company’s board of directors.

13. Income Taxes

Income taxes were as follows:

Year Ended December 31,
2022 2021
Statutory rate 21.0 % 21.0 %
State tax 1.4 % 2.2 %
Valuation allowance (9.1) % (21.9) %
Other (0.1) % — %
Stock based compensation (12.3) % (0.6) %
Change in fair value of derivative liability (2.7) % — %
Transaction costs - Success based 1.8 % — %
PPP Loan Forgiveness — % 10.0 %
Total — % 10.6 %


	Year Ended December 31,
	2023		2022
	(in thousands)
Current tax expense:
Federal	$	—	$	—
State	93		34
Total current tax expense	93		34
Deferred:
Federal	—		(20)
State	—		(1)
Total deferred tax expense	—		(21)
Total tax expense	$	93	$	13

~~114~~80

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

The significant ~~components~~categories of ~~the Company’s~~temporary differences that gave rise to deferred tax assets and liabilities were as ~~follows (in thousands):~~follows:


		Year Ended December 31,
		2022		2021
			December 31,				December 31,
			2023			2023		2022
			(in thousands)				(in thousands)
Deferred tax assets:	Deferred tax assets:
Net operating loss		$	54,628	$	52,373
Net operating loss carryforwards
Net operating loss carryforwards
Net operating loss carryforwards
Capitalized research and development costs
Stock-based compensation	Stock-based compensation	205		25
Accrued expenses
Charitable contributions	Charitable contributions	416		214
Accrued expenses		591		453
Capitalized research and development		1,249		—
Lease liability		218		—
Operating lease liabilities
Other	Other	868		489
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets	Total deferred tax assets	$	58,175	$	53,554
Deferred tax liabilities:	Deferred tax liabilities:
Fixed assets		$	—	$	(20)
Right-of-use asset		(191)
Intangibles assets		(713)		(731)

Intangible assets
Intangible assets
Intangible assets
Operating lease right-of-use assets
Total deferred tax liabilities	Total deferred tax liabilities	$	(904)	$	(751)
Valuation allowance		57,271		52,803
Net deferred tax taxes		$	—	$	—
Total net deferred tax assets

Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. Net deferred tax assets consisted primarily of net operating loss carryforwards of $58.0 million and $54.6 million as of December 31, 2023 and 2022, respectively, related to U.S. federal and state taxes. A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. As of December 31, 2023 and 2022, the Company held valuation allowances against its deferred tax assets due to the uncertainty of realizing future benefits from its net operating loss carryforwards and other deferred tax assets. The valuation allowance increased by approximately $3.6 million and $4.5 million ~~for~~during the ~~year~~years ended December 31, 2023 and 2022, compared to the increase of $1.6 million for the year ended December 31, 2021. The Company believes that, based on a number of factors, the available objective evidence creates sufficient uncertainty regarding the realizability of the deferred tax assets such that a valuation allowance has been recorded. These factors include the Company’s history of net losses since its inception. No uncertain tax positions have been identified.respectively.

~~As of December 31, 2022, the Company had~~ U.S. federal and state net operating loss carryforwards of approximately ~~$209~~$222.9 million and ~~$178~~$186.3 million, ~~respectively. The federal net operating loss carryforwards generated~~respectively, for income tax purposes are available to offset future taxable income as of December 31, ~~2017~~2023. $198.4 million of ~~$24.4 million will expire in 2037, while $184.6 million~~the U.S. federal net operating ~~loss carryforwards generated in post December 31, 2017 or later do not expire due~~losses can be carried forward indefinitely and are available to ~~the provisions in the Tax Cuts and Jobs Act, but may only~~ offset 80% of future taxable ~~income~~income. If not used, these federal carryforwards will begin to expire in ~~periods of future utilization.~~varying amounts beginning in 2037. The state net operating loss carryovers will begin to expire in 2038 and will continue to expire through 2042.

The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of net operating losses and tax credit carryforwards in the event that there is a change in ownership as provided by Section 382 and Section 383 of the Internal Revenue Code (“IRC”) and similar state provisions. Such a limitation could result in the limitation and/or expiration of the net operating loss carryforwards and tax credits before utilization, which could result in increased future tax liabilities when the Company becomes taxable for federal or state purposes. The Company has experienced ownership changes within the meaning of ~~Sec.~~Section 382 of the ~~Internal Revenue Code (“IRC”)~~IRC at various dates from 2015 through 2019. ~~Based on the Sec. 382 study, the Company has determined that $35.3 million federal and $37.6 million California net operating losses are subject to Sec. 382 limitations, respectively.~~

The Company ~~files returns~~had no uncertain tax positions as of December 31, 2023 and 2022. As of December 31, 2023, the Company’s tax filings are generally subject to examination in major tax jurisdictions.

Tab l e of Contents

The reconciliation between the provision for income taxes at the statutory rate and the provision for income taxes at the effective tax rate is as follows:


	Year Ended December 31,
	2023		2022
	(in thousands)
Tax expense at United States statutory rate	21.0	%	21.0	%
Increase (decrease) in tax resulting from:
State taxes, net of federal effect	2.8	%	1.4	%
Change in valuation allowance	(21.5)	%	(9.1)	%
Stock-based compensation	(1.0)	%	(12.3)	%
Change in fair value of derivative liability	—	%	(2.7)	%
Transaction costs – success-based	—	%	1.8	%
Other	(2.0)	%	(0.1)	%
Total	(0.7)	%	—	%

14. Retirement Plan

The Company maintains a defined-contribution savings plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. The plan is available to substantially all employees who meet the minimum age and length of service requirements. The Company’s contribution expense relating to this plan was $0.1 million and $0.1 million for the years ended December 31, 2023 and 2022, respectively.

15. Acquisitions

Acquisition of Compare Pet Insurance

On August 3, 2021, the Company acquired 100% of the outstanding equity interests of Compare Pet Insurance Services, Inc. (“CPI”), one of the leading pet insurance marketplaces in the U.S., for cash consideration of $3.5 million and 0.6 million common shares with a fair value of $0.2 million as of the closing date. Of the cash consideration of $3.5 million, $1.5 million was paid on the acquisition date and the remaining $2.0 million will be paid in quarterly installments over three years, starting in the fourth quarter of 2021. The deferred purchase consideration, which was recorded at fair value on the acquisition date, was recognized in accrued expenses and other current liabilities, as well as other non-current liabilities, within the Company’s the consolidated balance sheet. As of December 31, 2023 and 2022, the amounts included in accrued expenses and other current liabilities, as well as other non-current liabilities, within the Company’s consolidated balance sheets, were $0.5 million and $1.2 million, respectively.

Acquisition of Dog Food Advisor

On January 5, 2023, the Company entered into an Asset Purchase Agreement with Clicks and Traffic LLC to purchase its Dog Food Advisor (“DFA”) assets for cash consideration of $9.0 million. Of the cash consideration of $9.0 million, $8.1 million was paid on the acquisition date and the remaining $0.9 million was deposited into an escrow account as an indemnification holdback for a period of 12 months. No working capital was acquired as part of the transaction. The Company incurred less than $0.1 million in transaction-related costs during the first quarter of 2023 in connection with the ~~U.S. federal government,~~acquisition of DFA, which are included in general and ~~various state jurisdictions.~~administrative expenses within the Company’s consolidated statement of operations. The acquisition marked the Company’s ~~returns have been,~~entrance into the Pet Food & Treats market, in line with its strategy to be an all-inclusive, trusted partner for the premium Pet Parent.

Tab l e of Contents

The assets acquired were recognized at fair value as of the date of the acquisition. During 2023, the Company finalized the analysis of the purchase price and ~~could~~no adjustments were made to the assessed fair values. The following table summarizes the final fair values assigned to the assets acquired:


	January 5, 2023
	(in thousands)
Intangible assets	$	5,950
Goodwill	3,050
Total purchase consideration	$	9,000

The table below summarizes the fair value and the estimated useful lives of the acquired intangible assets:

January 5,
2023

Estimated Weighted-Average Useful Life

(in thousands)

Developed technology and website content

1,950

5 years

Strategic customer relationships and subscriber lists

3,600

8 years

Trademarks

400

10 years

Total intangible assets

5,950

7 years

Goodwill recognized as a result of this acquisition is deductible for tax purposes.

Pro forma disclosures required under ASC 805-10-50 are not presented because the pro forma impacts on the current period and prior year comparable period are not material.

Acquisition of Maxbone, Inc.

On April 6, 2023, the Company acquired 100% of the outstanding equity interests of MaxBone, Inc., a top-tier digital platform for modern pet essentials, for cash consideration of $0.5 million and 0.1 million common shares with a fair value of $0.2 million as of the closing date. Of the $0.2 million of common stock consideration, $0.1 million was issued on the acquisition date and the remaining $0.1 million will be issued in the future ~~subject to examination which may, or may not, have an impact~~after the indemnification holdback period expires 12 months after the acquisition close. The acquisition expanded the Company’s reach into the Pet Supplies market, while remaining committed to the ~~consolidated financial statements.~~needs and standards of the premium Pet Parent.

Acquisition of Woof Woof TV

On December 15, 2023, the Company acquired 100% of the outstanding equity interests of Rowlo Woof Limited (“Woof Woof TV”), a digital media publishing company focusing on content for dog lovers, for cash consideration of $1.3 million. Of the $1.3 million of cash consideration, $1.1 million was paid on the acquisition date and the remaining $0.2 million was deposited into an escrow account as an indemnification holdback for a period of 12 months. The Company accounted for the transaction as an asset acquisition, as substantially all of the fair value of the gross assets acquired was concentrated in a single identifiable asset.

The table below summarizes the fair value and the estimated useful life of the acquired intangible asset:

December 15,
2023

Estimated Weighted-Average Useful Life

(in thousands)

Media brand

1,250

2 years

Total intangible assets

1,250

2 years

~~115~~83

~~Table~~Tab l e of Contents

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

~~13.~~16. Loss ~~per share~~Per Share

The following ~~table shows the computation of basic and diluted earnings per share for December 31, 2022 and December 31, 2021 (in thousands, except share data):~~

Year ended December 31,
2022 2021
Numerator:
Net income (loss) attributable to common stockholders $ (38,567) $ (6,311)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders 18,641,076 5,742,807
Net loss per share attributable to common stockholders, basic and diluted $ (2.07) $ (1.10)

~~The potential shares of common stock that were~~participating securities have been excluded from the computation of diluted ~~net~~ loss per share ~~attributable to common stockholders~~ for the periods presented because including them would have been ~~anti-dilutive are as follows:~~anti-dilutive:

Years ended December 31,
2022 2021
Series Seed convertible preferred shares — 4,376,930
Series A convertible preferred shares — 5,902,952
Series B convertible preferred shares — 6,506,794
Series C convertible preferred shares — 7,072,149
Series P convertible preferred shares — —
Earnout Shares 15,000,000 —
Options and RSUs issued and outstanding 11,388,842 7,537,744
Warrants issued and outstanding 18,291,741 88,756
Total 44,680,583 31,485,325


	Year Ended December 31,
	2023	2022
	(in thousands)
Earnout Shares	15,000	15,000
Options and RSUs issued and outstanding	10,485	11,389
Warrants issued and outstanding	18,292	18,292
Shares related to acquisition indemnification holdback	51	—
Total	43,828	44,681

All unvested Earnout Shares are excluded from basic and diluted ~~net~~ loss per share as such shares are contingently issuable ~~until~~only when the share price of the Company’s common stock exceeds specified thresholds, ~~that have~~which had not been achieved as of December 31, ~~2022. For further information on Earnout Shares, see~~ ~~Note 3 - Business Combinations~~.

~~14. 401(k) Plan~~

In 2019, the Company adopted a 401(k) Plan that qualifies as a deferred salary arrangement under Section 401 of the IRC. Under the 401(k) Plan, participating employees may defer a portion of their pretax earnings not to exceed the maximum amount allowable. The Company incurred expenses related to the 401(k) match of $60 thousand during the year ended December 31, 2022, no amounts were contributed to the plan in 2022 but are expected to be contributed in the first quarter of 2023. ~~The Company did not make any contributions to the plan during the year ended December 31, 2021.~~

~~15. Subsequent Events~~

~~Acquisition of Dog Food Advisor~~

On January 5, 2023, the Company announced the successful completion of its acquisition of Dog Food Advisor assets from Clicks and Traffic LLC (“Dog Food Advisor”) for cash consideration of $9.0 million. The acquisition was previously announced on January 3, 2023 and will expand Wag!’s reach into the Pet Food and Treats market of the pet industry. As the transaction recently closed, the Company is in the process of

~~116~~

~~Table of Contents~~

~~Wag! Group Co.~~

~~Notes to Consolidated Financial Statements~~

completing the purchase price accounting related to the business combination. We anticipate that a significant portion of the purchase consideration will be allocated to acquired intangible assets, specifically technology, and goodwill. We expect the preliminary purchase price accounting to be completed when all information on facts and circumstances that existed as of the acquisition date become available, but not to exceed 12 months following the acquisition date.

~~Expiration of Lock-Up Agreement~~

In connection with the Business Combination Agreement, on the Merger Date, CHW and certain Legacy Wag! stockholders entered into a lock-up agreement (the “Lock-Up Agreement”). Additionally, the Company's Bylaws provides for similar restrictions on other Legacy Wag! stockholders (collectively with the Lock-Up Agreement, the "Lock-Up Restrictions"). Pursuant to the Lock-Up Restrictions, such stockholders were subject to transfer restrictions during the period beginning on the Merger Date and ending on the date that is the earlier of (i) 180 days after the Merger Date and (ii) the date on which Wag! completes a liquidation, merger, capital stock exchange, reorganization or other similar transactions that result in all of Wag!’s stockholders having the right to exchange their shares for cash, securities or other property (the “Lock-Up Period”).

~~On February 5, 2023, the Lock-Up Period expired and the Lock-Up Restrictions were removed.~~

~~117~~84

~~Table~~Tab l e of Contents

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial ~~Disclosures~~

There is no information to report pursuant to Item 304(b) of Regulation S-K. The information required by Item 304(a) of Regulation S-K was previously reported under Item 4.01 of our Current Report on Form 8-K filed on August 9, 2022.

Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

~~Disclosure~~The term “disclosure controls and procedures, ~~are~~” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and other procedures that are designed to ~~ensure~~provide reasonable assurance that information required to be disclosed by a company in ~~our~~the reports ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ~~ensure~~provide reasonable assurance that information required to be disclosed by a company in ~~our~~the reports ~~filed~~that it files or ~~submitted~~submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Because there are inherent limitations in all control systems, a control system, no matter how well conceived and operated, can provide only reasonable, as opposed to absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, ~~(who serve as our Principal Executive Officer and Principal Financial Officer), to allow timely decisions regarding required disclosure.~~

~~As required by Rules 13a-15 and 15d-15 under~~evaluated the ~~Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the~~ effectiveness ~~of the design and operation~~ of our disclosure controls and procedures as of December 31, ~~2022.~~2023. Based ~~upon this~~on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, due to the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)~~, as of the end of the period covered by this Annual Report on Form 10-K,~~ were not effective ~~in design~~at a reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and ~~operation, as a result~~maintaining adequate internal control over financial reporting. Our management has assessed the effectiveness of ~~the material weaknesses in~~ our internal control over financial reporting as of December 31, 2023. In making this assessment of internal control over financial reporting, our management used the criteria described ~~below.~~

Internal Control ~~over Financial Reporting~~

– Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

~~In connection with the preparation~~A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our ~~consolidated~~annual or interim financial statements ~~as of and for the fiscal year ended December 31, 2022, we~~will not be prevented or detected on a timely basis. We identified a material weakness in our internal control over financial reporting related to insufficient resources needed to fully implement our internal control risk assessment process, evaluate the technical accounting aspects of certain material transactions and effectively design and implement certain process level controls. We also identified a material weakness regarding the risk assessment process related to information technology general controls and activities of service organizations, the design and implementation of logical access, segregation of duties and program change controls and certain process level controls related to information used in the execution of those controls that impact our financial reporting ~~processes~~.processes.

~~We have begun implementing remedial measures,~~These material weaknesses resulted in the immaterial misstatement of our consolidated financial statements for the year ended December 31, 2023, and ~~while there can be no assurance~~for quarterly periods in 2023. Additionally, these material weaknesses could result in a misstatement of the account balances or disclosures that ~~our efforts will be successful, we plan to remediate the~~would result in a material ~~weaknesses. These plans include implementing technology, hiring personnel, and other activities, including engaging external resources.~~

~~As discussed elsewhere in this Annual Report, we completed the Business Combination (“Merger”) on August 9, 2022. Prior~~misstatement to the ~~Merger,~~annual or interim consolidated financial statements that would not be prevented or detected.

Because of these material weaknesses, our predecessor, CHW Acquisition Corp. (“CHW”), was a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or other similar business combination with one or more operating businesses. As a result, CHW’s previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date, as CHW’s liabilities and operations prior to the Merger were insignificant compared to those of the consolidated entity post-Merger. The design of our internal controls over financial reporting post-Merger has required and will continue to require significant time and resources from management ~~and other personnel.~~

~~This Annual Report does~~concluded that we did not ~~include a report of management’s assessment regarding~~maintain effective internal control over financial reporting as of December 31, 2023.

We are not required to have, or ~~an attestation report of the company’s~~to engage our independent registered public accounting firm ~~due~~ to ~~a transition period established by rules~~perform, an audit of the ~~SEC.~~effectiveness of our internal control over financial reporting for as long as we are an “emerging growth company” pursuant to the provisions of the JOBS Act, and we therefore did not do so.

Tab l e of Contents

Remediation Plan

To address our material weaknesses, we have added accounting and finance personnel and implemented new financial accounting processes, controls, and systems. We are continuing to take steps to remediate the material weaknesses described above through implementing enhancements and controls within our accounting and proprietary systems, utilizing additional qualified accounting and finance resources and further evolving our accounting close processes. We will not be able to fully remediate these material weaknesses until these steps have been completed and the controls have been operating effectively for a sufficient period of time.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

(a)None.

(b)On December 8, 2023, Maziar Arjomand, our Chief Technology Officer, adopted a 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 180,000 shares of common stock and 180,000 shares of common stock issuable upon the exercise of options. The trading plan is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration of the trading plan is until March 31, 2025, or earlier if all transactions under the trading plan are completed.

No other officers, as defined in Rule 16a-1(f), or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” as defined in Regulation S-K Item 408, during the last fiscal quarter.

Item 9C. Disclosure Regarding Foreign Jurisdictions that ~~Prevents~~Prevent Inspections

None.

~~118~~86

~~Table~~Tab l e of Contents

~~Not applicable.~~PART III

~~Part III~~

Item 10. Directors, Executive Officers and Corporate Governance

~~Certain of the~~The information ~~called for~~required under this Item is incorporated herein by ~~Item 10 will be set forth in the~~reference to our definitive proxy statement ~~for the 2023 annual meeting of stockholders (the “Proxy Statement”)~~ to be filed ~~by Wag! Group Co.~~ with the ~~Securities and Exchange Commission within~~SEC no later than 120 days after the ~~end~~close of ~~the~~our fiscal year ~~covered by this Form 10-K under the captions and subcaptions “Board and Governance Matters”, and “Director Nominees" and is incorporated herein by reference.~~ended December 31, 2023.

~~The Company~~Our Board has adopted a Code of ~~Ethics for Senior Financial Officers, Corporate Governance Guidelines~~Conduct that applies to all of our employees, officers and directors. The full text of our Code of ~~Business~~ Conduct ~~which are applicable to all employees of the Company, including the principal executive officer, principal financial officer, and principal accounting officer. The Corporate Governance documents are~~is available on ~~the~~our investor relations ~~section~~website at investors.wag.co under the “Corporate Governance” section. We intend to satisfy the disclosure requirement under Item 5.05 of ~~the Company’s website at: https://investors.wag.co/corporate-governance/documents-charters.~~

~~Any~~Form 8-K regarding amendments to, or waiver from, a provision of ~~or material amendment to, the~~our Code of ~~Ethics~~Conduct by posting such information on the website address and ~~Business Conduct will be posted promptly to our web site in accordance with applicable Nasdaq and SEC rules.~~location specified above.

Item 11. Executive Compensation

The information required byunder this ~~item~~Item is incorporated herein by reference to our definitive proxy statement ~~relating~~ to ~~the 2023 annual meeting of shareholders. The definitive proxy statement will~~ be filed with the SEC ~~within~~no later than 120 days after the close of our fiscal year ended December 31, ~~2022.~~2023.

Item 12. Security Ownership of Certain Beneficial ~~Owner~~Owners and Management and Related Stockholder Matters

Item 13. Certain Relationships and Related Transactions, and Director Independence

Item 14. Principal ~~Accounting~~Accountant Fees and Services

2023.

~~119~~87

~~Table~~Tab l e of Contents

~~Part~~PART IV

Item ~~15.Exhibits~~15. Exhibit and Financial Statement ~~Schedules.~~Schedules

(a)~~Exhibits.~~The following documents are filed as part of this Annual Report on Form 10-K, or incorporated herein by reference:

1.Financial Statements. The financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this document are filed as part of this Annual Report on Form 10‑K.

2.Financial Statement Schedules. Schedules are omitted because the required information is inapplicable, not material, or the information is presented in the consolidated financial statements or related notes.

3.Exhibits.The exhibits listed in the Exhibit Index immediately below are filed as part of this ~~registration statement.~~Annual Report on Form 10-K, or are incorporated by reference herein.

Incorporated by Reference
Exhibit
Number Description Schedule/
Form File No. Exhibit Filing Date
2.1+
Business Combination Agreement, dated as of February 2, 2022, by and among CHW Acquisition Corporation, Wag Labs, Inc. and the other parties hereto.
8-K 001-40764 2.1 February 3, 2022
3.1
Certificate of Incorporation of Wag! Group Co.
8-K 001-40764 3.2 August 15, 2022
3.2
Bylaws of Wag! Group Co.
8-K 001-40764 3.3 August 15, 2022
4.1
Warrant Agreement, dated as of August 30, 2021, by and between CHW and VStock Transfer LLC, as warrant agent.
S-4 333-263418 4.4 July 1, 2022
4.2*
Specimen Common Stock Certificate.
4.3*
Specimen Warrant Certificate.
4.4 Description of Securities.
10.1
Lock-Up Agreement, dated as of February 2, 2022, by and among CHW Acquisition Corporation and each of the other parties signatories thereto.
8-K 001-40764 10.1 February 3, 2022
10.2
Amended and Restated Registration Rights Agreement dated August 9, 2022, by and among Wag! Group Co. and the other parties signatories thereto.
8-K 001-40764 10.2 August 15, 2022
10.3
CHW Founders Stock Letter, dated as of February 2, 2022, by and among the Sponsor, Jonah Raskas, Mark Grundman and CHW.
8-K 001-40764 10.6 February 3, 2022
10.4 PIPE and Backstop Subscription Agreement, dated as of February 2, 2022, by and between CHW and the other parties signatories thereto. 8-K 001-40764
10.3,
10.4,
10.5
February 3, 2022
10.5
Stockholder Support Agreement, dated as of February 2, 2022, by and among CHW Acquisition Corporation, Wag Labs, Inc. and the other parties signatories thereto.
8-K 001-40764 10.7 February 3, 2022
10.6#
Wag! Group Co. 2022 Omnibus Incentive Plan.
S-4/A 333-263418 10.6 May 10, 2022
10.7#
Wag! Group Co. 2022 Employee Stock Purchase Plan.
S-4/A 333-263418 10.7 May 10, 2022
+10.80
Financing Agreement, dated August 9, 2022, between Blue Torch Finance, LLC and Wag! Group Co. and the other parties signatories thereto.
8-K 001-40764 10.6 August 15, 2022
(b)Exhibit Index:

Incorporated by Reference

Exhibit Number

Description

Form

Exhibit

Filing Date

2.1†

Business Combination Agreement, dated as of February 2, 2022, by and among CHW Acquisition Corporation, Wag Labs, Inc. and the other parties hereto

8-K

2.1

2/3/2022

3.1

Corrected Certificate of Incorporation of Wag! Group Co.

8-K

3.1

3/8/2024

3.2

Bylaws of Wag! Group Co.

8-K

3.2

8/15/2022

4.1

Warrant Agreement, dated as of August 30, 2021, by and between CHW and VStock Transfer LLC, as warrant agent

S-4

4.1

9/2/2021

4.2

Specimen Common Stock Certificate

S-1

4.2

9/14/2022

4.3

Specimen Warrant Certificate

S-1

4.3

9/14/2022

4.4*

Description of Securities

4.5

CHW Founders Stock Letter, dated as of February 2, 2022, by and among the Sponsor, Jonah Raskas, Mark Grundman and CHW

8-K

10.6

2/3/2022

4.6

Amended and Restated Registration Rights Agreement dated August 9, 2022, by and among Wag! Group Co. and the other signatories thereto

8-K

10.2

8/15/2022

4.7

PIPE and Backstop Subscription Agreement, dated as of February 2, 2022, by and between CHW and the other signatories thereto

8-K

10.3, 10.4, 10.5

2/3/2022

10.1#

2014 Equity Plan of Wag Labs, Inc.

S-1

10.16

9/14/2022

10.2#

Form of 2014 Equity Plan Stock Option Grant Notice and Agreement (Installment Exercise) of Wag Labs, Inc.

S-1

10.17

9/14/2022

10.3#

Form of 2014 Equity Plan Stock Option Grant Notice and Agreement (Early Exercise) of Wag Labs, Inc.

S-1

10.18

9/14/2022

10.4#

Form of 2014 Equity Plan Restricted Stock Unit Grant Notice and Agreement of Wag Labs, Inc.

S-1

10.19

9/14/2022

10.5#

2020 Management Carve-out Bonus Plan of Wag Labs, Inc.

S-1

10.15

9/14/2022

10.6#*

Wag! Group Co. 2022 Omnibus Incentive Plan

10.7#*

Wag! Group Co. 2022 Employee Stock Purchase Plan

10.8#

Form of Restricted Stock Unit Grant Notice and Grant Agreement under the Wag! Group Co. 2022 Omnibus Incentive Plan

S-8

99.2

12/1/2022

10.9#

Form of Wag Labs, Inc. Executive Offer Letter

S-1

10.14

9/14/2022

10.10#

Form of Wag Labs, Inc. Earnout Letter

S-1

10.13

9/14/2022

10.11#

Form of Wag! Group Co. Director Offer Letter

S-1

10.12

9/14/2022

10.12†

Financing Agreement, dated August 9, 2022, between Blue Torch Finance, LLC and Wag! Group Co. and the other parties signatories thereto

8-K

10.6

8/15/2022

10.13†

Security Agreement, dated August 9, 2022, between Blue Torch Finance, LLC and Wag! Group Co. and the other parties signatories thereto

8-K

10.8

8/15/2022

~~120~~88

~~Table~~Tab l e of Contents

Incorporated by Reference
Exhibit
Number Description Schedule/
Form File No. Exhibit Filing Date
+10.90
Security Agreement, dated August 9, 2022, between Blue Torch Finance, LLC and Wag! Group Co. and the other parties signatories thereto.
8-K 001-40764 10.8 August 15, 2022
+10.100
Warrant Agreement, dated August 9, 2022, between Blue Torch Capital LLC and Wag! Group Co.
8-K 001-40764 10.7 August 15, 2022
10.11
Form of Forward Share Purchase Agreement, dated August 5, 2022, by and between CHW and each of Milton Arbitrage Partners, LLC, MMCAP International Inc. SPC, Nautilus Master Fun, L.P., Polar Multi-Strategy master Fund and the other parties signatories thereto.
8-K 001-40764 10.1 August 8, 2022
10.12#
Form of Wag! Group Co. Director Offer Letter.
10.13#
Form of Wag Labs, Inc. Earnout Letter.
10.14*#
Form of Wag Labs, Inc. Executive Offer Letter.
10.15*#
2020 Management Carve-out Bonus Plan of Wag Labs, Inc.
10.16*#
2014 Equity Plan of Wag Labs, Inc.
10.17*#
Form of 2014 Equity Plan Stock Option Grant Notice and Agreement (Installment Exercise) of Wag Labs, Inc.
10.18*#
Form of 2014 Equity Plan Stock Option Grant Notice and Agreement (Early Exercise) of Wag Labs, Inc.
10.19*#
Form of 2014 Equity Plan Restricted Stock Unit Grant Notice and Agreement of Wag Labs, Inc.
16.2 Letter from Marcum LLP as to the change in certifying accountant, dated as of August 15, 2022. 8-K 001-40764 16.1 August 15, 2022
21.1
Subsidiaries of Wag! Group Co.
8-K 001-40764 21.1 August 15, 2022
23.1*
Consent of BDO USA, LLP, independent registered public accounting firm of Wag! Group Co.
24.1* Power of Attorney (included on signature page).
31.1*
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~121~~

~~Table of Contents~~

10.14†

Warrant Agreement, dated August 9, 2022, between Blue Torch Capital LLC and Wag! Group Co.

8-K

10.7

8/15/2022

10.15

Form of Forward Share Purchase Agreement, dated August 5, 2022, by and between CHW and each of Milton Arbitrage Partners, LLC, MMCAP International Inc. SPC, Nautilus Master Fun, L.P., Polar Multi-Strategy master Fund and the other parties signatories thereto

8-K

10.1

8/8/2022

16.1

Letter from BDO USA, P.C. to the Securities and Exchange Commission dated September 11, 2023

8-K

16.1

9/12/2023

21.1*

S ubsidiaries of the Registra nt

23.1*

Consent of Independent Registered Public Accounting Firm – PricewaterhouseCoopers LL P

23.2*

Consent of Independent Registered Public Accounting Firm – BDO USA, P.C.

24.1*

Power of Attorney (included on the Signatures page of this Annual Report on Form 10-K)

31.1*

Rule 13a–14(a)/15d–14(a) Certification of Principal Executive Officer

31.2*

Rule 13a–14(a)/15d–14(a) Certification of Principal Financial Officer

32.1**

Section 1350 Certification of Principal Executive Officer and Principal Financial Officer

97.1*

Wag! Group Co. Errone ously Awarded Compensation Re covery Policy

101.INS

XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

~~Incorporated by Reference~~

Exhibit
Number

~~Description~~

Schedule/
Form

~~File No.~~

~~Exhibit~~

~~Filing Date~~

31.2*

~~Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~

32.1*

~~Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

~~101.SCH~~

~~Inline XBRL Taxonomy Extension Schema Document.~~

~~101.PRE~~

~~Inline XBRL Taxonomy Extension Presentation Linkbase Document.~~

~~101.CAL~~

~~Inline XBRL Taxonomy Extension Calculation Linkbase Document.~~

~~101.DEF~~

~~Inline XBRL Taxonomy Extension Definition Linkbase Document.~~

~~101.LAB~~

~~Inline XBRL Taxonomy Extension Label Linkbase Document.~~

~~104~~

~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)~~

~~_________________~~* Filed herewith.


*			~~Filed~~** Furnished herewith.


#			~~Indicates a management~~# Management contract or compensatory plan ~~contract~~ or arrangement.


+			Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601. Wag! Group Co. agrees to furnish a copy of all omitted exhibits and schedules to the SEC† Certain schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K under the Securities Act. The Company agrees to furnish supplementally any omitted schedules to the Securities and Exchange Commission upon request. ^ Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because they are both (i) not material and (ii) the type that the registrant treats as private or confidential. A copy of the omitted portions will be furnished to the Securities and Exchange Commission upon ~~its~~ request.


†			Certain portions of this exhibit (indicated by asterisks) have been omitted pursuant to Item 601(b)(10) of Regulation S-K because they are both not material and are the type that Wag! Group Co. treats as private or confidential.

Item 16. Form 10-K Summary

None.

~~122~~89

~~Table~~Tab l e of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of ~~1933,~~1934, the registrant has duly caused this ~~registration statement~~report to be signed on its behalf by the undersigned, thereunto duly ~~authorized in the City of San Francisco, State of California, on this 30th day of March 2023.~~authorized.


			WAG! GROUP CO.

			By:			/s/ ~~Garrett Smallwood~~GARRETT SMALLWOOD
						Garrett Smallwood
						Chief Executive Officer and Chairman
						(Principal Executive Officer)

Date: March 20, 2024


			By:			/s/ ALEC DAVIDIAN
						Alec Davidian
						Chief Financial Officer
						(Principal Financial and Accounting Officer)

Date: March 20, 2024

~~123~~

~~Table~~Tab l e of Contents

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints ~~Garrett Smallwood,~~ Alec Davidian and Nicholas Yu, and each ~~one~~ of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for ~~them~~him or her and in ~~their~~his or her name, place and stead, in any and all capacities, to sign any and all amendments to this ~~annual report~~Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents ~~and each of them,~~ full power and authority to do and perform each and every act and thing requisite ~~and~~or necessary to be done in connection therewith, as fully to all intents and purposes as ~~they~~he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

~~Signature~~

~~Title~~

~~Date~~

/s/ ~~Garrett Smallwood~~GARRETT SMALLWOOD

Chief Executive Officer and ~~Director (Principal Executive Officer)~~Chairman

March ~~30, 2023~~20, 2024

Garrett Smallwood

(Principal Executive Officer and Director)

/s/ ~~Alec Davidian~~ALEC DAVIDIAN

Chief Financial Officer ~~(Principal~~

March 20, 2024

Alec Davidian

(Principal Financial and Accounting Officer)

/s/ KIMBERLY A. BLACKWELL

Director

March ~~30, 2023~~20, 2024

~~Alec Davidian~~Kimberly A. Blackwell

/s/ ~~Nicholas Yu~~MELINDA CHELLIAH

Director

~~General Counsel~~

March ~~30, 2023~~20, 2024

~~Nicholas Yu~~Melinda Chelliah

/s/ ~~Roger Lee~~ROGER LEE

Director

~~Director~~

March ~~30, 2023~~20, 2024

Roger Lee

/s/ ~~Melinda Chelliah~~JOCELYN MANGAN

Director

~~Director~~

March ~~30, 2023~~20, 2024

~~Melinda Chelliah~~Jocelyn Mangan

/s/ ~~Jocelyn Mangan~~SHEILA LIRIO MARCELO

Director

~~Director~~

March ~~30, 2023~~20, 2024

~~Jocelyn Mangan~~Sheila Lirio Marcelo

/s/ ~~Brian Yee~~BRIAN YEE

Director

~~Director~~

March ~~30, 2023~~20, 2024

Brian Yee

~~/s/ Kimberly A. Blackwell~~

~~Director~~

~~March 30, 2023~~

~~Kimberly A. Blackwell~~

~~/s/ Sheila Lirio Marcelo~~

~~Director~~

~~March 30, 2023~~

~~Sheila Lirio Marcelo~~

~~124~~91


Delaware		88-3590180
~~Delaware~~	~~88-3590180~~
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


55 Francisco Street, Suite 360 San Francisco, California			94133
(Address of ~~Principal Executive Offices)~~principal executive offices)			(Zip Code)


Large accelerated filer	o☐	Accelerated filer	o☐
Non-accelerated filer	x☒	Smaller reporting company	x☒
		Emerging growth company	x☒


~~[1]~~			~~Source: American Pet Products Association (“APPA”) – Actual Sales within the U.S. Market in 2021.~~
~~[2]~~			~~The “Wellness” category equates to the APPA “Vet Care & Product Sales” market category.~~


x			☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


o			☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


		Page Number
	~~Part~~PART I		2
Item 1.	Business	24
Item 1A.	Risk Factors	1815
Item 1B.	Unresolved Staff Comments	6542
Item 1C.	Cybersecurity	42
Item 2.	Properties	6543
Item 3.	Legal Proceedings	6643
Item 4.	Mine Safety Disclosures	6643

	~~Part~~PART II		67
Item 5.	Market for ~~Registrant's~~Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	6744
Item 6.	[Reserved]	6744
Item 7.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	6844
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	8153
Item 8.	Financial Statements and Supplementary Data	8253
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial ~~Disclosures~~Disclosure	~~118~~85
Item 9A.	Controls and Procedures	~~118~~85
Item 9B.	Other Information	~~118~~86
Item 9C.	Disclosure Regarding Foreign Jurisdictions that ~~Prevents~~Prevent Inspections	~~118~~86

	~~Part~~PART III		~~119~~
Item 10.	Directors, Executive Officers and Corporate Governance	~~119~~87
Item 11.	Executive Compensation	~~119~~87
Item 12.	Security Ownership of Certain Beneficial ~~Owner~~Owners and Management and Related Stockholder Matters	~~119~~87
Item 13.	Certain Relationships and Related Transactions, and Director Independence	~~119~~87
Item 14.14.	Principal ~~Accounting~~Accountant Fees and Services	~~119~~87

	~~Part~~PART IV
Item 15.	~~120~~
~~Item 15.~~	~~Exhibits,~~Exhibit and Financial Statement Schedules	~~120~~88
Item 16.	Form 10-K Summary	~~122~~89
	Signatures	~~123~~90


		Board					Leadership				Non-Leadership
		2022			2021		2022		2021		2022		2021
			Board																		Board						Leadership					Non-Leadership
			2023															2023				2022			2023				2022			2023			2022
American Indian or Alaska Native	American Indian or Alaska Native	—		%	—	%	—	%	—	%	2	%	—	%	American Indian or Alaska Native	—	%		—	%			—	%		—		%		2	%		2	%
Asian	Asian	33		%	20	%	5	%	8	%	16	%	15	%	Asian	33	%		33	%			9	%		5		%		14	%		16	%
Black or African American	Black or African American	17		%	—	%	5	%	8	%	6	%	8	%	Black or African American	17	%		17	%			5	%		5		%		8	%		6	%
Hispanic or Latino	Hispanic or Latino	—		%	—	%	—	%	—	%	16	%	14	%	Hispanic or Latino	—	%		—	%			—	%		—		%		19	%		16	%
Two or More Races	Two or More Races				—	%	5	%	—	%	8	%	6	%	Two or More Races	—	%		—	%			5	%		5		%		8	%		8	%
White	White	50		%	80	%	85	%	84	%	52	%	57	%	White	50	%		50	%			81	%		85		%		49	%		52	%


	2022		2021
24 years and younger	4	%	8	%
25-29 years	24	%	28	%
30-34 years	32	%	19	%
35-39 years	8	%	11	%
40-49 years	22	%	21	%
50+ years	10	%	13	%


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs [1]
October 1, 2022 - October 31, 2022	—	$	—	—	$	24,651,793
November 1, 2022 - November 30, 2022	1,438,378	$	10.30	1,438,378	$	—
December 1, 2022 - December 31, 2022	—	$	—	—	$	—
Total	1,438,378	$	10.30	1,438,378	$	—


	Years Ended December 31,
($ in thousands, except percentages)	2022		2021		$ Change		% Change
Revenues	$	54,865	$	20,082	$	34,783	173	%
Costs and expenses:
Cost of revenues, excluding depreciation and amortization	4,024		2,777		1,247		45	%
Platform operations and support	13,825		10,265		3,560		35	%
Sales and marketing	35,156		10,221		24,935		244	%
General and administrative	32,415		6,956		25,459		366	%
Depreciation and amortization	571		388		183		47	%
Total costs and expenses	85,991		30,607		55,384		181	%
Change in fair value of derivatives	(4,958)		—		(4,958)		NM
Gain on forgiveness of PPP loan	—		3,482		(3,482)		NM
Interest expense, net	(2,470)		(61)		(2,409)		3949	%
Loss before income taxes	(38,554)		(7,104)		(31,450)		443	%
Income tax benefit (expense)	(13)		793		(806)		NM
Net income (loss)	$	(38,567)	$	(6,311)	$	(32,256)	511	%


	Years Ended December 31,
($ in thousands)	2022		2021
Net cash flows used in operating activities	$	(2,803)	$	(12,256)
Net cash flows (used in) provided by investing activities	1,835		8,087
Net cash flows provided by financing activities	37,089		(51)
Net change in cash, cash equivalents, and restricted cash	$	36,121	$	(4,220)


	Redeemable Preferred Stock – Mezzanine Equity			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Deficit
	Shares	Amount		Shares	Amount
Balance at December 31, 2020	24,545,386	$	110,265	5,629,095	$	1	$	3,345	$	(103,539)	$	1	$	(100,192)
Reverse recapitalization	(686,562)	—		(157,452)	—		—		—		—		—
As adjusted, beginning of period	23,858,824	$	110,265	5,471,643	$	1	$	3,345	$	(103,539)	$	1	$	(100,192)





Shares issued upon exercise of stock options	—	$	—	28,248	$	—	$	3	$	—	$	—	$	3
Shares issued upon acquisition	—	$	—	621,362			$	166					$	166
Stock-based compensation	—	—		—	—		222		—		—		222
Other comprehensive loss	—	—		—	—		—		—		(1)		(1)
Net income (loss)	—	—		—	—		—		(6,311)		—		(6,311)
Balance at December 31, 2021	23,858,824	$	110,265	6,121,253	$	1	$	3,736	$	(109,850)	$	—	$	(106,113)








Preferred Series P Issuance, net of issuance costs	1,100,000	10,925		—	—		—		—		—		—




Shares issued upon exercise of stock options	—	—		118,514	—		17		—		—		17
Conversion of Series P preferred stock to common	(1,100,000)	(10,925)		1,100,000	—		10,925		—		—		10,925
Conversion of preferred to common stock	(23,858,824)	(110,265)		23,858,824	2		110,263		—		—		110,265

Stock-based compensation	—	—		52,899	—		625		—		—		625
Stock-based compensation due to Earnout Shares	—	—		—	—		23,867		—		—		23,867

Issuance of Community Shares	—	—		300,000	—		1,971		—		—		1,971
Business Combination with CHW, net of transaction costs and other related shares	—	—		6,645,964	1		10,546		—		—		10,547
Shares issued for acquisition of Furmacy, Inc.	—	—		90,000	—		283		—		—		283
Settlement of forward share purchase agreement derivative liability	—	—		(1,438,378)	—		(3,898)		—		—		(3,898)
Net loss	—	—		—	—		—		(38,567)		—		(38,567)
Balance at December 31, 2022	—	$	—	36,849,076	$	4	$	158,335	$	(148,417)	$	—	$	9,922


	Stock Price (in whole dollars)		Dividend Yield		Volatility		Risk-Free Interest Rate		Expected Term (in years)
Earnout Shares	$	8.28	—	%	44.00	%	3.20	%	3


	Fair Value		Estimated Useful Life (years)
Developed technology	$	648	4
Customer relationships and licenses	2,121		5-10
Trademarks	276		7
Total intangible assets	$	3,045


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	837	$	—	$	—	$	837
Short-term investments

Corporate bonds	—		2,554		—		2,554
Total financial assets	$	837	$	2,554	$	—	$	3,391


	September 30, 2022			August 9, 2022
Exercise price	$	10.30		$	10.30
Stock price	$	2.05		$	8.28
Volatility	42.0		%	70.0		%
Term (in years)	0.25			0.25
Risk-free rate	2.9		%	2.7		%
Dividend Yield	—		%	—		%


	December 31, 2022					December 31, 2021
	Gross Book Value		Accumulated Amortization	Net Book Value		Gross Book Value		Accumulated Amortization	Net Book Value







Developed technology	783		(226)	557		608		(65)	543
Customer relationships and licenses	2,166		(422)	1,744		2,170		(125)	2,045
Trademarks	291		(56)	235		276		(16)	260
Pharmacy board licenses	5		—	5		—		—	—
Total Finite Life Intangibles	3,245		(704)	2,541		3,054		(206)	2,848
Total Indefinite Life Intangible Assets	$	49		$	49	$	40		$	40


	Carry Value as of December 31, 2022 (in thousands)		Exercise Price (in whole dollars)		Dividend Yield		Volatility		Risk-Free Interest Rate		Expected Term (in years)
Lender Warrants	$	6,104	$	11.50	—	%	33.00	%	2.97	%	10


	Amounts
2023	$	1,264
2024	1,751
2025	30,227

Total principal amount	$	33,242


	December 31, 2021
Series	Shares Designated	Shares Issued and Outstanding	Carrying Amount		Liquidation Preference
Seed	4,502,881	4,376,930	$	19,382	$	3,117
A	6,072,815	5,902,952	25,969		9,500
B	6,694,033	6,506,793	32,057		15,000
C	7,275,657	7,072,149	32,857		39,800
Total	24,545,386	23,858,824	$	110,265	$	67,417


	Number of Options	Weighted-average exercise price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in millions)
Outstanding, December 31, 2021	7,368,461	$	0.39
Granted	—	—
Exercised	(118,514)	0.11
Cancelled/forfeited	(55,880)	0.91
Outstanding, December 31, 2022	7,194,067	$	0.40	7.2	$	19.3


	Restricted Stock (Unvested)
	Number of Shares	Weighted Average Grant Date Fair Value ($ per share)
Unvested at December 31, 2021	169,283	$	0.22
Grants	4,091,394	2.50
Vested	(52,902)	0.22
Forfeited	(13,000)	2.50
Unvested at December 31, 2022	4,194,775	$	2.44



	2022		2021
Operations and support	$	2,991	$	36
Sales and marketing	2,138		11
General and administrative	19,363		175
Total	$	24,492	$	222


	Number of Shares*	Weighted Average Exercise Price ($ per share)		Aggregate Intrinsic Value
Outstanding at December 31, 2022	—	$	—	—
Outstanding at December 31, 2021	88,756	$	1.59	—


Share Price (in whole dollars)		Exercise Price (in whole dollars)		Dividend Yield		Volatility		Risk-Free Interest Rate		Expected Term (in years)
$	10.00	$	11.50	—	%	22.00	%	1.31	%	5