Filed Pursuant to Rule 424(b)(3)
Registration No. 333-260568

 

PROSPECTUS SUPPLEMENT NO. 4

(To the Prospectus dated April 6, 2022)

UP TO 15,660,417 SHARES OF COMMON STOCK

AND

UP TO 89,627,117 SHARES OF COMMON STOCK

UP TO 6,316,667 REDEEMABLE WARRANTS

OFFERED BY THE SELLING SECURITY HOLDERS

OF

ENJOY TECHNOLOGY, INC.

 

 

This prospectus supplement supplements the prospectus, dated April 6, 2022 (the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-260568). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 16, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement.

The Prospectus and this prospectus supplement relate to the issuance by us of an aggregate of up to 15,660,417 shares of our common stock, $0.0001 par value per share (“Common Stock”), which consists of (i) up to 6,316,667 shares of Common Stock that are issuable upon the exercise of 6,316,667 warrants (the “Private Placement Warrants”) originally issued in a private placement in connection with the initial public offering of Marquee Raine Acquisition Corp., a Cayman Islands exempted company (“MRAC” and, after the Domestication, “Enjoy Technology, Inc.”) by the holders thereof and (ii) up to 9,343,750 shares of Common Stock that are issuable upon the exercise of 9,343,750 warrants (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”) originally issued in the initial public offering of MRAC by the holders thereof.

The Prospectus and this prospectus supplement also relate to the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”) of (i) up to 89,627,117 shares of Common Stock, consisting of (a) up to 8,000,000 PIPE Shares (as defined in the Prospectus), (b) up to 9,343,750 sponsor shares (including 2,201,250 Sponsor Earnout Shares (as defined in the Prospectus)), (c) up to 6,316,667 shares of Common Stock issuable upon the exercise of the Private Placement Warrants, (d) 5,500,906 shares of Common Stock issued pursuant to the Backstop Agreement (as defined in the Prospectus), (e) 450,000 shares of Common Stock issued pursuant to the Equity Fee Agreement (as defined in the Prospectus) and (f) up to 60,015,794 shares of Common Stock pursuant to the Registration Rights Agreement (as defined in the Prospectus), and (ii) up to 6,316,667 Private Placement Warrants.

The Common Stock and Warrants are listed on the Nasdaq Capital Market (the “Nasdaq”), under the ticker symbol “ENJY” for the Common Stock and “ENJYW” for the Warrants. Prior to the Domestication, MRAC’s Class A ordinary shares, par value $0.0001 per share (the “MRAC Class A ordinary shares”) and warrants to purchase MRAC Class A ordinary shares (the “MRAC Warrants”) traded under the ticker symbols “MRAC”, and “MRACW”, respectively, on Nasdaq. On May 13, 2022, the closing sale price of our Common Stock as reported by Nasdaq was $0.73 per share and the closing price of our Warrants was $0.11 per warrant.

This prospectus supplement should be read in conjunction with the Prospectus, including any amendments or supplements thereto, which is to be delivered with this prospectus supplement. This prospectus supplement is qualified by reference to the Prospectus, including any amendments or supplements thereto, except to the extent that the information in this prospectus supplement updates and supersedes the information contained therein.

This prospectus supplement is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any amendments or supplements thereto.

Investing in shares of our Common Stock or Warrants involves risks that are described in the “Risk Factors” section beginning on page 10 of the Prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus supplement or the Prospectus or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus supplement is May 16 2022.

 

e

 

 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022

 

 

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____

 

 

Commission File Number: 001-39800

 

 

img170307419_0.jpg 

 

ENJOY TECHNOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

98-1566891

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

3240 Hillview Avenue

Palo Alto, CA

 

94304

(Address of principal executive offices)

 

(Zip Code)

 

(888) 463-6569

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name or former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Shares, $0.0001 par value per share

 

ENJY

 

The Nasdaq Stock Market LLC

Warrants to purchase common stock

 

ENJYW

 

The Nasdaq Stock Market LLC

 

 

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

 

Large accelerated filer ☐

Accelerated filer ☐

 

 

 

 

Non-accelerated filer ☒

Smaller reporting company ☒

 

 

 

 

 

Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

 

The number of shares of registrant's common stock outstanding as of May 13, 2022 was 120,707,693

 

 

 


 

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

6

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

6

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss For The Three Months Ended March 31, 2022 and 2021

7

 

 

 

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) For The Three Months Ended March 31, 2022 and 2021

8

 

 

 

 

Condensed Consolidated Statements of Cash Flows For The Three Months Ended March 31, 2022 and 2021

9

 

 

 

 

Notes to Condensed Consolidated Financial Statements

10

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

 

 

 

Item 4.

Controls and Procedures

42

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

45

 

 

 

Item 1A.

Risk Factors

45

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80

 

 

 

Item 3.

Defaults Upon Senior Securities

81

 

 

 

Item 4.

Mine Safety Disclosures

81

 

 

 

Item 5.

Other Information

81

 

 

 

Item 6.

Exhibits

82

 

2


 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Enjoy Technology, Inc. (“Enjoy,” the “Company,” “we,” “us,” and “our”) contains statements that are forward-looking and as such are not historical facts. This includes, without limitation, statements under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our current financial position and future financial and operating performance, business strategy and the plans and objectives of management for future operations, including our outlook and guidance, the demand for our products, services and support, the supply chain and inventory levels, our ability to expand into new markets, our ability to invest in our platform for future growth, and our ability to deliver on our long-term strategy. These statements constitute projections, forecasts and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of performance. They involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these statements. Such statements can be identified by the fact that they do not relate strictly to historical or current facts. When used in this Quarterly Report, words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. When we discuss our strategies or plans, we are making projections, forecasts or forward-looking statements. Such statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management.

These forward-looking statements are based on information available as of the date of this Quarterly Report and current expectations, forecasts and assumptions, which involve a number of judgments, risks and uncertainties, including without limitation, statements related to:

our review of strategic alternatives and plans to improve our liquidity and financial position in response to the substantial doubt about our ability to continue as a going concern;
our ability to obtain additional financing or capital in amounts sufficient, or on favorable terms, to fund our operations;
our projected financial information, anticipated growth rate, and market opportunity;
the impact of the regulatory environment and complexities with compliance related to such environment;
the impact of the COVID-19 pandemic;
our ability to evaluate future prospects of our strategy for delivering products and services;
our ability to develop and maintain an effective system of internal controls over financial reporting;
our ability to grow market share in our existing markets or any new markets we may enter;
our ability to respond to general economic conditions;
the impact of economic downturns and other macroeconomic conditions or trends;
the impact of consumer discretionary spending;
the health of the mobile retail industry;
risks associated with our assets and increased competition in the global mobile retail market;
our ability to achieve and maintain profitability in the future;
our ability to maintain existing commercial relationships and successfully enter into new commercial relationships;
our ability to access sources of capital, including debt financing and securitization funding to finance our leased warehouses and inventories and other sources of capital to finance operations;
our ability to maintain and enhance our products and brand, and to attract Consumers (as defined herein);
our ability to maintain or enhance current Customer (as defined herein) and Consumer satisfaction and trust levels;
our ability to manage, develop and refine our technology platform, including our Mobile Store (as defined herein);
our ability to recruit and maintain Experts (as defined herein);
the success of strategic relationships with third parties; and
other risk factors described under Part II, Item 1A of this Quarterly Report.

 

3


 

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report.

Many of the risks and factors that will determine these results and shareholder value are beyond our ability to control or predict. All such forward-looking statements speak only as of the date of this Quarterly Report. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this Cautionary Statement Regarding Forward-Looking Statements.

SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties that represent challenges that we face in connection with the successful implementation of our strategy and the growth of our business. Investing in our common stock involves numerous risks, including the risks described in “Part II, Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q. Below are some of these risks, among others, which may offset our competitive strengths or have a negative effect on our business strategy, financial condition or operating results, which could cause a material decline in the price of shares of our common stock or warrants and result in a loss of all or a portion of your investment:

We may not be able to continue as a going concern and holders of our common stock could suffer a total loss of their investment.
There can be no assurance that our review of strategic alternatives will result in a transaction satisfactory to holders of our common stock or any change at all.
The pursuit of the additional capital and strategic alternatives will consume a substantial portion of the time and attention of our management and require additional capital resources and may be disruptive to our business, which could have a material adverse effect on our business, financial condition and results of operations.
In the event we pursue Bankruptcy Protection (as defined herein), we will be subject to the risks and uncertainties associated with such proceedings.
In the event we are unable to pursue Bankruptcy Protection under Chapter 11 of the United States Bankruptcy Code, or, if pursued, successfully emerge from such proceedings, it may be necessary to pursue Bankruptcy Protection under Chapter 7 of the United States Bankruptcy Code for all or a part of our businesses.
Our ability to raise capital in the future may be limited, and may lead to potential dilution to our stockholders.
We have a history of net losses, we anticipate increasing expenses in the future, and we may not be able to achieve profitability in the future.
We may be required in the future to incur significant write-downs in connection with impairment charges related to our long-lived assets, which could adversely affect our results of operations.
The COVID-19 pandemic is unprecedented and has impacted, and may continue to impact, our key metrics and results of operations in numerous ways that remain volatile and unpredictable.
We have a limited operating history with a new model and strategy in an evolving industry and we may fail to achieve the market acceptance necessary for success.
A number of factors may cause our results of operations to fluctuate.
We identified material weaknesses in our internal control over financial reporting.
We may not timely and effectively scale and adapt our existing technology and business to meet our Business Partners’ (as defined herein) expectation.
We rely on consumer discretionary spending.
The loss of key senior management personnel or an inability to hire, train and retain employees could harm our business.
Changes in the availability of and the cost of labor could adversely affect our business.
If the mobile retail store market does not continue to grow our results of operations could be adversely affected.
Our operating results are subject to the seasonal nature of consumer behavior patterns.
Risks associated with our commercial relationships could adversely affect our financial performance, reputation, brand and commercial relationships.

4


 

We face intense indirect competition.
We depend on our Business Partners to perform certain services regarding the products that we offer.
We rely on third-party background check providers to screen potential employees, including Experts.
Actual or alleged conduct by our team members has exposed, and may in the future expose, us to legal risk and damage our reputation.
Our recent growth rates may not be sustainable or indicative of our future growth and there is a risk that we will not be able to continue operating as a going concern.
We may face difficulties as we expand our operations into new local markets.
Two of our Business Partners account for a significant portion of our revenue.
Our global operations expose us to the fluctuations of international markets.
Our warrants are accounted for as liabilities.
Future issuances of debt securities and equity securities may adversely affect us, our common stock and may be dilutive to existing stockholders.
Our failure to meet the continued listing requirements of Nasdaq including maintaining a minimum closing bid price of $1.00 per share.
Our warrants may be out of the money at the time they become exercisable and they may expire worthless.
With the approval by the holders of at least 50% of the then-outstanding public warrants, we may amend the terms of the warrants in a manner that may be adverse to holders.
We may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of the common stock.

 

5


 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

ENJOY TECHNOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

37,277

 

 

$

85,836

 

Restricted cash

 

 

1,710

 

 

 

1,710

 

Accounts receivable, net

 

 

5,355

 

 

 

9,977

 

Prepaid expenses and other current assets

 

 

3,251

 

 

 

4,159

 

Total current assets

 

 

47,593

 

 

 

101,682

 

Property and equipment, net

 

 

16,372

 

 

 

15,945

 

Operating lease right-of-use assets

 

 

40,144

 

 

 

 

Intangible assets, net

 

 

842

 

 

 

867

 

Other assets

 

 

6,660

 

 

 

6,631

 

Total assets

 

$

111,611

 

 

$

125,125

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,961

 

 

$

6,102

 

Accrued expenses and other current liabilities

 

 

16,420

 

 

 

20,110

 

Operating lease liabilities, current

 

 

14,467

 

 

 

 

Total current liabilities

 

 

36,848

 

 

 

26,212

 

Operating lease liabilities, non-current

 

 

29,193

 

 

 

 

Derivative warrant liabilities

 

 

3,915

 

 

 

6,577

 

Total liabilities

 

 

69,956

 

 

 

32,789

 

COMMITMENTS AND CONTINGENCIES (Note 16)

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Common stock, $0.0001 par value, 500,000,000 shares authorized at March 31, 2022 and December 31, 2021, respectively;
   120,111,678 and 119,624,679 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

12

 

 

 

12

 

Additional paid-in capital

 

 

738,908

 

 

 

734,142

 

Accumulated other comprehensive income

 

 

522

 

 

 

724

 

Accumulated deficit

 

 

(697,787

)

 

 

(642,542

)

Total stockholders’ equity

 

 

41,655

 

 

 

92,336

 

Total liabilities and stockholders’ equity

 

$

111,611

 

 

$

125,125

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6


 

ENJOY TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

24,024

 

 

$

19,346

 

Operating expenses:

 

 

 

 

 

 

Cost of revenue

 

 

34,810

 

 

 

24,168

 

Operations and technology

 

 

27,332

 

 

 

19,233

 

General and administrative

 

 

19,680

 

 

 

12,098

 

Total operating expenses

 

 

81,822

 

 

 

55,499

 

Loss from operations

 

 

(57,798

)

 

 

(36,153

)

Loss on convertible loans

 

 

 

 

 

(1,865

)

Interest expense

 

 

(38

)

 

 

(1,407

)

Interest income

 

 

2

 

 

 

2

 

Other income, net

 

 

2,623

 

 

 

134

 

Loss before provision for income taxes

 

 

(55,211

)

 

 

(39,289

)

Provision for income taxes

 

 

34

 

 

 

177

 

Net loss

 

$

(55,245

)

 

$

(39,466

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

Cumulative translation adjustment

 

 

(202

)

 

 

(4

)

Total comprehensive loss

 

$

(55,447

)

 

$

(39,470

)

Net loss per share, basic and diluted

 

$

(0.46

)

 

$

(1.81

)

Weighted average shares used in computing net loss per share, basic and
   diluted

 

 

119,795,897

 

 

 

21,757,502

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7


 

ENJOY TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Amounts in thousands, except share amounts)

(Unaudited)


 

 

 

Redeemable
Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares (1)

 

 

Amount

 

 

 

Shares (1)

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2021

 

 

 

 

$

 

 

 

 

119,624,679

 

 

$

12

 

 

$

734,142

 

 

$

724

 

 

$

(642,542

)

 

$

92,336

 

Issuance of common stock under stock plan, net of shares withheld for employee taxes

 

 

 

 

 

 

 

 

 

444,586

 

 

 

 

 

 

118

 

 

 

 

 

 

 

 

 

118

 

Issuance of common stock upon
   exercise of warrants

 

 

 

 

 

 

 

 

 

42,413

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,121

 

 

 

 

 

 

 

 

 

5,121

 

Withholding taxes from stock plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(473

)

 

 

 

 

 

 

 

 

(473

)

Foreign currency translation
   adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(202

)

 

 

 

 

 

(202

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(55,245

)

 

 

(55,245

)

Balances at March 31, 2022

 

 

 

 

 

 

 

 

 

120,111,678

 

 

 

12

 

 

 

738,908

 

 

 

522

 

 

 

(697,787

)

 

 

41,655

 

 

 

 

Redeemable
Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares (1)

 

 

Amount

 

 

 

Shares (1)

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity (Deficit)

 

Balances at December 31, 2020

 

 

51,518,255

 

 

$

353,692

 

 

 

 

21,416,436

 

 

$

1

 

 

$

6,601

 

 

$

884

 

 

$

(421,933

)

 

$

(414,447

)

Issuance of Series C redeemable convertible preferred stock (net of issuance costs)

 

 

1,362,099

 

 

 

15,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under stock plan

 

 

 

 

 

 

 

 

 

391,372

 

 

 

 

 

 

423

 

 

 

 

 

 

 

 

 

423

 

Debt extinguishment of convertible loan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

36,782

 

 

 

 

 

 

 

 

 

36,782

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

878

 

 

 

 

 

 

 

 

 

878

 

Foreign currency translation
   adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4

)

 

 

 

 

 

(4

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39,466

)

 

 

(39,466

)

Balances at March 31, 2021

 

 

52,880,354

 

 

 

368,692

 

 

 

 

21,807,808

 

 

 

1

 

 

 

44,684

 

 

 

880

 

 

 

(461,399

)

 

 

(415,834

)

 

(1) The shares of the Company’s common and redeemable convertible preferred stock, prior to the Merger (as defined in Note 1) have been retroactively restated to reflect the

exchange ratio of approximately 0.34456 established in the Merger as described in Note 3.

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


 

ENJOY TECHNOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(55,245

)

 

$

(39,466

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,155

 

 

 

916

 

Stock-based compensation

 

 

5,121

 

 

 

878

 

Loss on asset disposal

 

 

13

 

 

 

 

Accretion of debt discount

 

 

 

 

 

289

 

Non-cash operating lease expense

 

 

4,227

 

 

 

 

Revaluation of warrants

 

 

(2,662

)

 

 

(26

)

Foreign currency transaction (gain) loss

 

 

38

 

 

 

(79

)

Revaluation of convertible debt

 

 

 

 

 

1,865

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

4,560

 

 

 

(239

)

Prepaid expenses and other current assets

 

 

743

 

 

 

534

 

Other assets

 

 

(207

)

 

 

(161

)

Operating lease liabilities

 

 

(4,300

)

 

 

 

Accounts payable

 

 

(513

)

 

 

(267

)

Accrued expenses and other current liabilities

 

 

(690

)

 

 

488

 

Net cash used in operating activities

 

 

(47,760

)

 

 

(35,268

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(437

)

 

 

(537

)

Net cash used in investing activities

 

 

(437

)

 

 

(537

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from convertible loan

 

 

 

 

 

200

 

Proceeds from issuance of redeemable convertible preferred stock

 

 

 

 

 

15,000

 

Proceeds from issuance of common stock

 

 

118

 

 

 

423

 

Payment of deferred financing costs

 

 

 

 

 

(695

)

Tax-related withholding of common stock

 

 

(473

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(355

)

 

 

14,928

 

Effect of exchange rate on cash, cash equivalents and restricted cash

 

 

(7

)

 

 

(26

)

Net decrease in cash, cash equivalents and restricted cash

 

 

(48,559

)

 

 

(20,903

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

87,546

 

 

 

63,946

 

Cash, cash equivalents and restricted cash, end of period

 

$

38,987

 

 

$

43,043

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

38

 

 

$

1,083

 

Supplemental disclosure of non-cash operating and financing activities:

 

 

 

 

 

 

Property and equipment, net included in accounts payable

 

$

501

 

 

$

91

 

Property and equipment, net included in accrued expenses and other current liabilities

 

$

658

 

 

$

 

Operating lease ROU assets obtained in exchange for lease obligations

 

$

937

 

 

$

 

Non-cash interest

 

$

 

 

$

325

 

Gain on extinguishment of convertible loan

 

$

 

 

$

36,782

 

Deferred transaction costs included in accounts payable

 

$

 

 

$

1,291

 

Deferred transaction costs included in accrued expenses and other current liabilities

 

$

 

 

$

1,030

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9


 

ENJOY TECHNOLOGY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share amounts or as otherwise indicated)

(Unaudited)

1.
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Enjoy Technology, Inc. (“Enjoy” or the “Company”) was incorporated in the state of Delaware in May 2014, and is headquartered in Palo Alto, California. Enjoy operates mobile stores providing in home delivery, set up and a full shopping experience for technology and telecom companies in the United States of America, United Kingdom, and Canada. References herein to Enjoy or the Company mean Enjoy Technology, Inc., and its consolidated subsidiaries.

Reorganization – In January 2021, Enjoy Technology, Inc. filed documents with the Delaware Secretary of State to effect a holding company reorganization (the “Reorganization”), which resulted in a newly formed Delaware corporation, Enjoy Technology Holding Company (“Enjoy Holdings”), owning all the capital stock of Enjoy Technology, Inc. Enjoy Holdings was initially a direct, wholly owned subsidiary of Enjoy Technology, Inc. Pursuant to the Reorganization, the newly formed entity (“Merger Sub”), a direct, wholly owned subsidiary of Enjoy Holdings and an indirect, wholly owned subsidiary of Enjoy Technology, Inc., merged with and into Enjoy Technology, Inc., with Enjoy Technology, Inc., surviving as a direct, wholly owned subsidiary of Enjoy Holdings. Each share of each class of Enjoy Technology, Inc., stock issued and outstanding immediately prior to the Reorganization was automatically converted into an equivalent corresponding share of Enjoy Holdings stock, having the same designations, rights, powers and preferences and the qualifications, limitations and restrictions as the corresponding share of Enjoy Technology, Inc., stock being converted. Accordingly, upon consummation of the Reorganization, Enjoy Technology, Inc.’s current stockholders became stockholders of Enjoy Holdings. The stockholders of Enjoy Technology, Inc., did not recognize any gain or loss for U.S. federal income tax purposes upon the conversion of their shares in the Enjoy Holdings. Finally, Enjoy Technology Inc changed its name to Enjoy Technology LLC while Enjoy Holdings changed its name to Enjoy Technology, Inc.

Marquee Raine Acquisition Corp. MergerOn April 28, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Marquee Raine Acquisition Corp. ((“MRAC”), prior to the closing of the merger and “New Enjoy”, following the closing of the merger), a publicly traded Special Purpose Acquisition Company. On October 15, 2021 (the “Closing Date”), the Company and MRAC consummated the merger transaction contemplated by the Merger Agreement (the “Merger”), following approval at a special meeting of the stockholders of MRAC held on October 13, 2021.

See Note 3, “Reverse Recapitalization” for further details of the Merger.

Basis of Presentation – The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements include the accounts of Enjoy Technology, Inc. and its wholly owned subsidiaries. As permitted for interim reporting, certain footnotes or other financial information that are normally required by U.S. GAAP may be condensed or omitted, unless otherwise required by U.S. GAAP or SEC rules and regulations. These condensed consolidated financial statements were prepared on the same basis as and should be read in conjunction with the Company’s annual consolidated financial statements as of and for the year ended December 31, 2021 and notes thereto included in the Company's fiscal 2021 Annual Report on Form 10-K. In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair statement have been included in these condensed consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other interim period or future year. The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited annual consolidated financial statements but does not include all information required by U.S. GAAP for annual consolidated financial statements.

10


 

Reclassifications To conform to current presentation, the Company reclassified certain costs within each of its operating expense line items in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021. These changes have no impact on the Company’s previously reported consolidated net loss and comprehensive loss, cash flows, or basic and diluted net loss per share amounts for the periods presented.

Going Concern – The condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern and do not include any adjustments to reflect the possible future effects of the recoverability and classification of assets, or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Since inception, the Company has incurred losses and cash outflows from operations. During the three months ended March 31, 2022, the Company incurred net losses of $55.2 million and cash outflows from operations used $47.8 million. As of March 31, 2022, the Company had an accumulated deficit of approximately $697.8 million. The Company has historically financed its operations through the issuance and sale of redeemable convertible preferred stock and through issuance of debt. Management expects that operating losses and negative cash flows from operating activities will continue in the foreseeable future as the Company works to fund its operations and as it progresses through its review of strategic alternatives.

Management believes that there is a substantial doubt concerning the Company’s ability to continue as a going concern.

On May 11, 2022 the Company secured interim financing of $10.0 million (the “Note”) from Ron Johnson, the chair of its board of directors and Chief Executive Officer, to help fund its operations as it pursues strategic alternatives, which has a scheduled maturity date of November 11, 2022 and will be repayable upon written demand of the holder at any time on or after such date. The Note was approved by the Audit Committee of the Company’s board of directors pursuant to the Company’s Related Party Transaction Policy. (See Note 17, “Subsequent Events and Related Party Transactions” for further details regarding the terms of the financing.) Additionally, in early May 2022, the Company received a $6.1 million customer prepayment for future services reasonably expected to be rendered over the course of May 2022, which is subject to adjustment for certain chargebacks and other adjustments. The Company is also seeking to obtain additional customer prepayments. There is no guarantee that we will be successful in our further negotiations or that any prepayments received will be adequate to support our current operations or provide sufficient cash flow to meet our obligations in the near term. We expect any such prepayments would negatively impact our cash flows in future periods for which our services have been prepaid.

The Company’s estimated cash and cash equivalents, which includes the $10 million of related party financing and $6.1 million of customer prepayments against second quarter sales, was $36.1 million as of May 12, 2022. The Company is in discussions with multiple financing sources to attempt to secure additional interim financing by early June 2022, which is needed to continue operations and fund other liquidity needs. In the absence of additional sources of liquidity, management anticipates that existing cash resources will not be sufficient to meet operating and liquidity needs beyond early June 2022. There is no assurance that management will be able to obtain additional liquidity or be successful in raising additional funds or that such required funds, if available, will be available on attractive terms or that they will not have a significant dilutive effect on our existing stockholders. In addition, we are unable to determine at this time whether any of these potential sources of liquidity will be adequate to support our operations or provide sufficient cash flows to us to meet our obligations as they become due and continue as a going concern. In the event we determine that additional sources of liquidity will not be available to us or will not allow us to meet our obligations as they become due, we may need to file a voluntary petition for relief under the United States Bankruptcy Code in order to implement a restructuring plan or liquidation.

On May 16, 2022, the Company announced that its board of directors had initiated a review of strategic alternatives, including a potential sale, merger or other strategic transaction, and of the Company's financing strategy. The Company is in the early stages of its strategic review and has not set a timetable for completion of the review process. There can be no assurance that the process will result in any transaction or strategic change at this time. The Company has retained Centerview Partners as its financial advisor to assist with the

11


 

strategic review and has also engaged global consulting firm AlixPartners to advise on the Company's finances during this review period. In the event we are not able to successfully consummate a strategic transaction, or obtain additional financing as discussed above, or will not be able to meet our obligations as they become due, we may need to file a voluntary petition for relief under the United States Bankruptcy Code in order to implement a restructuring plan or liquidation.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Other than the impact of the adoption of Accounting Standards Codification ("ASC") 842, Leases, as further discussed below, there have been no material changes to the Company’s significant accounting policies as of and for the three months ended March 31, 2022, as compared to the significant accounting policies described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021.

LeasesUnder ASC 842, a contract is or contains a lease when, (1) explicitly or implicitly identified assets have been identified in the contract and (2) the customer obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract. The Company will determine if an arrangement is a lease at inception of the contract. For all leases (finance and operating leases), as of the lease commencement date the Company recognizes a liability on the balance sheet for our obligation related to the lease and a corresponding asset representing our right to use the underlying asset over the period of use. Leases with an initial term of 12 months or less meet the definition of a short-term lease which, as a result of the Company's accounting policy election, are not recorded on the balance sheet; and the lease expense for these leases is recognized on a straight-line basis over the lease term.

The lease liability for each lease is recognized at lease commencement based on the present value of the lease payments not yet paid. The initial balance of the right-of-use asset (“ROU asset”) for each lease is recorded at the amount equal to the initial measurement of lease liability, adjusted for balances of prepaid rent, lease incentives received and initial direct costs incurred.

Total lease payments are discounted to present value using the more readily determinable of (i) the rate implicit in the lease or (ii) the Company’s incremental borrowing rate (which is the estimated rate the Company would be required to pay for a collateralized borrowing equal to the total lease payments over the term of the lease). Because the Company’s leases generally do not provide an implicit rate, the Company estimates its incremental borrowing rate using information available at the lease commencement date, including but not limited to our credit rating, lease term, and the currency in which the arrangement is denominated.

The Company's lease terms may include periods under options to extend (or not terminate the lease) when it is reasonably certain that we will exercise that option. The Company generally uses the base, non-cancelable lease term when determining the lease assets and liabilities. The Company includes the option to renew (or not terminate) in its determination of the lease term when the option is deemed to be reasonably assured to be exercised. The Company accounts for changes in the expected lease term as a modification of the original contract.

For operating leases, expense is generally recognized on a straight-line basis over the lease term. For any finance leases, interest on the lease liability is recognized using the effective interest method, while the right-of-use asset is amortized on a straight-line basis, from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.

See further discussion regarding the Company's accounting for leases following under "Recently Adopted Accounting Pronouncements."

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in 'Leases (Topic 840)'. ASU 2016-02 modified lease accounting for lessees by requiring recognition of right-of-use assets and lease liabilities for all leases, other than the leases that meet the definition of short-term leases, at

12


 

the option of the Company. The new lease accounting standard also requires enhanced disclosure about an entity's leasing arrangements, among other changes.

 

On January 1, 2022, the Company adopted the new lease accounting standard and recognized the cumulative effect of initially applying the guidance as an adjustment to the operating lease right-of-use assets and operating lease liabilities on its condensed consolidated balance sheet on January 1, 2022 without retrospective application to comparative periods. The Company's financial statements for the fiscal quarters and year ending December 31, 2022 and forward shall reflect the application of Topic 842.

 

Upon adoption:

the Company elected the package of practical expedients under Topic 842 which allows for not reassessing (1) whether existing contracts contain leases, (2) the lease classification for existing leases, and (3) whether existing initial direct costs meet the new definition;
the Company did not elect the use of hindsight to reassess lease term, or the practical expedient relating to accounting for land easements, which was not applicable to the Company;
the Company made an accounting policy election to not recognize right-of-use assets and lease liabilities that arise from short-term leases, which are defined as leases with a lease term of 12 months or less at the lease commencement date; and
the practical expedient in ASC Subtopic 842-10 to not separate non-lease components from lease components and instead account for each separate lease component and non-lease components associated with that lease component as a single lease component. The Company elected to apply this expedient to all classes of underlying assets.

 

Upon adoption, the Company recorded operating lease right-of-use assets and lease liabilities amounting to $43.6 million and $47.1 million, respectively, and corresponding reductions of $2.3 million to deferred rent, $1.2 million to lease incentive liability and $0.1 million to prepaid rent. The Company does not have any material finance leases. The adoption of the new lease accounting standard had no impact on cash provided by or used in operating, investing or financing activities in the Company’s condensed consolidated statements of cash flows.

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The amendments in the updated guidance simplify the accounting for income taxes by removing certain exceptions and improving consistent application of other areas of the topic by clarifying the guidance. The new guidance is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022. The adoption of the standard did not have a material impact on the Company's condensed consolidated financial statements.

In August 2020, the FASB issued ASU 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 changes how entities account for convertible instruments and contracts in an entity’s own equity and simplifies the accounting for convertible instruments by removing the Beneficial Conversion Feature (“BCF”) and Cash Conversion Feature (“CCF”) separation models required under the current guidance. ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for equity classification. Lastly, ASU 2020-06 changes the existing diluted earnings per share (“EPS”) calculation for convertible debt that contains a CCF and increases disclosure requirements for convertible instruments. The ASU is effective for public business entities that meet the definition of a SEC filer, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The adoption of the standard did not have a material impact on the Company's condensed consolidated financial statements.

13


 

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and has since issued various amendments. The guidance and related amendments modify the accounting for credit losses for most financial assets and require the use of an expected loss model replacing the currently used incurred loss method. Under this model, entities are required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The guidance is effective for the Company for the year beginning after December 15, 2022. The adoption of ASU 2016-13 is not expected to have a material impact on the Company’s condensed consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805)—Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU was issued to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the following: (1) recognition of an acquired contract liability; and (2) payment terms and their effect on subsequent revenue recognized by the acquirer. The amendments in this ASU require acquiring entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination, whereas current GAAP requires that the acquirer measures such assets and liabilities at fair value on the acquisition date. The guidance is effective for the Company for the year beginning after December 15, 2023, with early adoption permitted. The Company will apply the guidance in ASU 2021-08 on a prospective basis for business combinations occurring during the fiscal year in which the Company adopts the amendments.

3.
REVERSE RECAPITALIZATION

On the Closing Date, the Company and MRAC consummated the merger transaction contemplated by the Merger Agreement, following approval at an extraordinary general meeting of the shareholders of MRAC held on October 13, 2021.

In connection with the execution of the Merger Agreement, MRAC entered into subscription agreements (the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors”) pursuant to which the PIPE Investors agreed to purchase, in the aggregate, approximately 8 million shares of New Enjoy common stock at $10.00 per share for an aggregate commitment amount of approximately $80 million (the “PIPE Shares”). Pursuant to the Subscription Agreements, New Enjoy agreed to provide the PIPE Investors with certain registration rights with respect to the PIPE Shares. The PIPE investment was consummated substantially concurrently with the closing of the Merger.

On the Closing Date, certain investors purchased, in the aggregate, 5,500,906 shares of New Enjoy common stock (the “Backstop Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of approximately $55,009,060, pursuant to the backstop agreements, dated September 13, 2021 (the "Backstop Agreements"). Pursuant to the Backstop Agreements, New Enjoy agreed to provide certain registration rights to the Backstop Investors with respect to the Backstop Shares.

Immediately prior to the effective time of the Merger, (1) each share of Legacy Enjoy’s (a) Series A preferred stock, par value $0.00001 per share, (b) Series B preferred stock, par value $0.00001 per share, and (c) Series C preferred stock, par value $0.00001 per share (collectively, the “Enjoy Preferred Stock”), converted into one share of common stock, par value $0.00001 per share, of Legacy Enjoy and, together with Enjoy Preferred Stock, (the “Enjoy Capital Stock”) (2) all of the outstanding warrants to purchase shares of Enjoy Capital Stock were exercised in full, with the exception of the warrant to purchase 336,304 shares of Enjoy Preferred Stock held by TriplePoint Venture Growth BDC Corporation, which was converted into a warrant to purchase 115,875 shares of New Enjoy common stock at an exercise price of $6.90 per share.

At the time of the Merger, eligible Legacy Enjoy equity holders received or had the right to receive shares of MRAC’s Class A ordinary shares at a deemed value of $10.00 per share after giving effect to the exchange

14


 

ratio of approximately 0.34456 as defined in the Merger Agreement (“Exchange Ratio”). Accordingly, immediately after giving effect to the Merger, the Backstop investment and the PIPE investment, there were 119,621,866 shares of common stock and 15,776,292 warrants outstanding.

As a result of the Merger transaction, the Company raised gross proceeds of $171.0 million, including the contribution of net cash held in MRAC’s trust account from its initial public offering of $36.0 million as well as additional proceeds from the PIPE Investors and Backstop Investors. The net proceeds were $112.6 million after repayment of certain loans and transaction costs, of which $10.4 million was direct and incremental to the merger which was accounted for as contra-equity upon the Closing Date. All periods prior to the Merger have been retrospectively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Closing to reflect the reverse recapitalization.

4.
FAIR VALUE MEASUREMENTS

The following tables summarizes the Company’s assets and liabilities that are measured at fair value on a recurring basis in the condensed consolidated financial statements (in thousands):

 

 

 

Fair Value Measurements at March 31, 2022 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative warrant liabilities - Public

 

$

2,336

 

 

$

 

 

$

 

 

$

2,336

 

Derivative warrants liabilities - Private

 

 

 

 

 

1,579

 

 

 

 

 

 

1,579

 

Total financial liabilities

 

$

2,336

 

 

$

1,579

 

 

$

 

 

$

3,915

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2021 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative warrant liabilities - Public

 

$

3,924

 

 

$

 

 

$

 

 

$

3,924

 

Derivative warrants liabilities - Private

 

 

 

 

 

2,653

 

 

 

 

 

 

2,653

 

Total financial liabilities

 

$

3,924

 

 

$

2,653

 

 

$

 

 

$

6,577

 

 

The “public warrants” are the redeemable warrants (including those that underlie the units) that were offered and sold by MRAC in its initial public offering and the “private warrants” or “private placement warrants” are the warrants issued by MRAC pursuant to a private placement substantially concurrently with the consummation of MRAC’s initial public offering which were then assumed by the Company upon the Merger.

The estimated fair value of the public warrants is disclosed as a Level 1 fair value measurement as the public warrants are publicly traded. The estimated fair value of the private warrants is disclosed as a Level 2 fair value measurement as the key inputs to the valuation model are observable from the public warrants' listed price.

The carrying amounts of the Company’s cash and cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities.

As of March 31, 2022 and December 31, 2021, the Company had no transfers in or out of Level 3 of the fair value hierarchy of its assets measured at fair value.

The Company does not use derivative instruments to hedge its exposures to cash flow, market, or foreign currency risks. Management evaluates all of the Company’s financial instruments, including issued warrants to purchase MRAC’s Class A ordinary shares, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

15


 

All of the Company’s outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized as other expense, net in the consolidated statements of operations and comprehensive loss. The fair value of public warrants is measured based on the listed market price of such warrants. The fair value of the private placement warrants is estimated based on the listed market price of the public warrants.

5.
PROPERTY AND EQUIPMENT, NET

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

 

 

 

 

 

 

 

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Leasehold improvements

 

$

21,365

 

 

$

20,446

 

Furniture and fixtures

 

 

2,244

 

 

 

2,173

 

Office equipment

 

 

807

 

 

 

591

 

Computer equipment

 

 

107

 

 

 

107

 

Vehicles

 

 

66

 

 

 

66

 

Vehicle equipment

 

 

283

 

 

 

283

 

 

 

 

24,872

 

 

 

23,666

 

Less: accumulated depreciation

 

 

(8,500

)

 

 

(7,721

)

Property and equipment, net

 

$

16,372

 

 

$

15,945

 

 

Total depreciation expense related to property and equipment, net was $1.1 million and $0.9 million for the three months ended March 31, 2022 and 2021, respectively. There were no events or changes in circumstances which indicated that the carrying value of our long-lived asset groups may not be recoverable during the period ending March 31, 2022.

In the period following March 31, 2022, there has been a subsequent decline in our market capitalization, based on our publicly quoted share price. Further, on May 16, 2022 the Company announced that its board of directors has initiated a review of strategic alternatives, including a potential sale, merger or other strategic transaction (see Note 1). These events and changes in circumstances could indicate the carrying amount of our long-lived asset groups may not be recoverable and will require further testing to determine whether there is a potential impairment in subsequent reporting periods.

6.
INTANGIBLE ASSETS, NET

Intangible assets, net consist of the following (in thousands):

 

 

 

 

 

 

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Domain Name

 

$

1,500

 

 

 

1,500

 

Less: accumulated amortization

 

 

(658

)

 

 

(633

)

Intangible assets, net

 

$

842

 

 

$

867

 

 

Total amortization expense was $25 thousand each for the three months ended March 31, 2022 and 2021, respectively.

7.
LEASES

 

The Company leases real estate, vehicle fleet and some equipment in the U.S. and internationally. The Company's real estate leases, which are responsible for the majority of the Company's aggregate ROU asset

16


 

and liability balances, include leases for office space and other facilities. As of March 31, 2022, the Company's real estate and non-real estate leases have remaining lease terms ranging from 12 months to 6 years. Some of these leases contain options that allow the Company to extend or terminate the lease agreement. All of the Company's leases are classified as operating leases except for certain immaterial equipment finance leases.

The components of total lease expense related to operating leases are as follows (in thousands):

 

 

 

For the Three Months
Ended March 31, 2022

 

Operating lease cost

 

$

4,227

 

Variable lease cost

 

 

892

 

Short-term lease cost

 

 

1,814

 

 

 

$

6,933

 

 

 

Rent expense was $3.9 million for the three months ended March 31, 2021. The Company has updated the March 31, 2021 rent expense disclosure to include fleet vehicle lease expense that was previously inadvertently omitted.

The short-term lease cost disclosed above reasonably reflects the Company’s ongoing short-term lease commitments.

The following table provides balance sheet information related to the Company's operating leases (in thousands):

 

 

 

March 31,
2022

 

Assets

 

 

 

Operating lease right-of-use assets

 

$

40,144

 

 

 

 

 

Liabilities

 

 

 

Operating lease liabilities, current

 

$

14,467

 

Operating lease liabilities, non-current

 

 

29,193

 

Total operating lease liabilities

 

$

43,660

 

 

The following table provides supplemental cash flows information related to the Company's operating leases (in thousands):

 

 

 

For the Three Months
Ended March 31, 2022

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

Cash flow from financing activities

 

$

 

Cash flow from operating activities

 

 

4,371

 

Supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets:

 

 

 

Lease liabilities arising from obtaining new ROU assets during the period

 

 

937

 

Weighted average remaining lease term

 

 

3.51

 

Weighted average discount rate

 

 

4.18