Legacy EJY, Inc. - Annual Report: 2021 (Form 10-K)

As used in this Annual Report on Form (the “Report”), unless the context requires otherwise, and regardless of capitalization, references to

We started with a simple question, “What if the best of the retail store experience could come to you?” Over the last eight years, we created, built and optimized the Mobile Store, a new channel that pairs the convenience of online shopping with the personal touch of an retail experience in the comfort of end customer’s (the “Consumer”) homes. We are reinventing the retail experience and by leveraging innovative technologies, working with leading global telecommunication and technology companies, and developing a passionate and caring workforce.

Our mobile retail sales team (“Experts”), led by their managers (“Captains”), provide everything that is provided by a store in the comfort of a home including activation and demonstration of the products we deliver. We assist Consumers in evaluating and selecting a wide range of accessories, media subscriptions, device protection, broadband and other services. We will also assist in the and upgrade of products. We strive to deliver products with or frequency.

We have contractual partnerships, commercial relationships and/or authorized dealer agreements with leading telecommunications and technology companies (such arrangements, “Business Partnerships”), including AT&T in the US, (British Telecom) in the UK, Rogers in Canada and Apple in select US cities (such companies, “Customers” or “Business Partners”). We provide the experience to our Business Partners’ Consumers. Enjoy delivers a broad assortment of telecommunications and technology products and accessories for our Business Partners. As of December 31, 2021, our top two Business Partners in the U.S. and the U.K. accounted for 62% and 15% of our revenue, respectively. We expect the percentage of these two Business Partners as a portion of our revenue to decline over time as our partner relationships expand. A loss of or reduction in business from, or consolidation of, these or any other major Business Partners could have an adverse effect on our business, financial condition, financial performance and prospects.

Over the last two decades, eCommerce has upended the traditional physical retail model, shifting commerce from stores to Digital channels brought the shopping experience to the doorstep, enabling customers to buy and receive their purchases without ever having to leave the home. Fulfillment to the door has been made easier and faster than ever with technology companies achieving massive success through last-mile innovations.

However, the current eCommerce experience has one fundamental flaw: it ends with a package at the door. Brands lose the personal connection to their customers, their ability to provide advice and support, and their ability to upsell products and services as online retail continues to gain share. Meanwhile, physical stores continue to close worldwide as eCommerce displaces traditional retail. These trends indicate that in the decades to come there is a substantial opportunity to capitalize on the expanded demand for This is the power of Enjoy. We are taking the shopping journey through the door by providing a comprehensive experience in the place that matters the most—the home.

It is against this backdrop that we pioneered the Mobile Store, a new channel that combines the convenience of online shopping with the personal touch of an retail experience within the comfort of Consumers’ homes. With the Mobile Store, Enjoy provides a high-touch experience, with the support of a trained Expert, wherever is convenient for Consumers. Our platform is underpinned by highly sophisticated machine-learning technologies, resulting in high customer satisfaction and numerous new revenue opportunities for us and our Business Partners.

Our Mobile Stores provide the experience of a traditional physical store, but better. The quality of the retail experience is incredibly important to how Consumers determine overall satisfaction with brands and products. We bring the premium experience and the convenience of online shopping to the home. Throughout the experience, we set up and activate the Consumer’s product and provide a demonstration of key features. We also help Consumers evaluate and purchase a wide range of accessories, media sources, protection plans, broadband and other services, many of which are on a subscription basis. We also assist Consumers in the and upgrade of products, where applicable.

: In the fourth quarter of 2021, we launched Smart Last Mile in North America, which provides Enjoy’s Business Partners with an omni-channel solution to enable trusted at-home retail experiences and to-the-door deliveries. With Smart Last Mile, we expect to have more aggregate inventory, all forward deployed in our network, to address a larger share of our Business Partners’ customer demand.

Since our inception, we have been developing and leveraging the following key strengths of our robust market strategy, which we believe provide significant competitive advantages.

Our Business Partnerships are with some of the world’s leading consumer companies with a shared commitment to superior customer service. We believe that the fact that some of the world’s most iconic and valuable brands trust Enjoy with their Consumers is a testament to the high standards that we set for service excellence, and a reflection of the unique value that we provide.

Our team is not a group of contractors or freelancers; they are full-time employees empowered to react to unique circumstances. Our team is passionate about technology and continually focused on delivering world-class service.

Our platform was built from the ground up. Our business is custom-built to deliver millions of unique retail experiences to the home. Our technology stack was built by an experienced, engineering team from tech companies in Silicon Valley. The end product is a platform that is adaptable to the complexities of our unique business model, making it difficult to replicate. Powered by our proprietary application programming interfaces (APIs), we are integrated with our Business Partners and fully embedded into their online as well as select Business Partners’ call centers and stores.

We believe that we have found the solution on how to bring the best of the store to the comfort of the home. Our Mobile Store delivers and activates new products for free in the comfort of the home. Not only can Consumers skip the trip to the store, but they can also purchase additional products and services, such as accessories, subscriptions and upgrades, all within a single visit.

We believe we invented and optimized a retail channel through our Smart Last Mile platform that addresses specific pain points for our Business Partners and Consumers and enables at-home retail experiences and to-the-door deliveries. We have established Business Partnerships with

Our warehouses and vehicle fleet are fully leased to reduce capital outlay, and our inventory is 100% consigned, minimizing working capital requirements.We believe this asset-light model, coupled with our existing dynamic technology infrastructure, and our training and onboarding procedures allow us to effectively scale our business. Coupled with strong market dynamics in eCommerce, we believe we have the ability to add new Business Partners, expand our geographic footprint domestically and internationally and grow our market share quickly. Our executive team has experience building, growing, and transforming dynamic growth businesses and we believe this will enable our continued growth for many years.

Founder and CEO Ron Johnson, alongside Enjoy’s experienced and multidisciplinary leadership team, brings a proven track record, a deep expertise in building businesses through innovation, and a demonstrated ability to execute. Enjoy has a highly experienced team in place to pioneer a new future for Consumer retail experiences.

We began designing and developing our proprietary technology stack nearly from inception, as there was no technology solution that could bring the best of the store through the door of the Consumer.

We took a clean sheet of paper to reimagine a retail platform, taking the best of traditional retail and making it an entirely mobile experience. Developing the technology needed to enable a personalized experience to every Consumer is a significant challenge. Through years of development by our engineering team, we succeeded in custom building a proprietary platform that is dynamic, intelligent, and adaptable to the complexities of our unique business model.

Our Integration Platform enables integration of our experience with each of our Business Partners’ retail and/or sales channels using a combination of real-time APIs and live applications. Customers place orders directly via our Business Partners’ existing retail and/or sales channels by selecting Enjoy at checkout. Orders fulfilled by Enjoy can be directly managed from our Business Partners’ internal systems, including eCommerce, POS and/or CRM. The platform also offers a single live application to easily enable the Enjoy service offering.

We can implement new B2B (business to business) integrations in weeks by leveraging our accelerator tools, mappings and integration framework. Our platform manages complexity at scale with feature qualities that have positioned Enjoy for fast global expansion and scale.

Our Field Platform provides Experts and their Captains a host of tools to help them manage their days. Each step of an Expert’s day is guided with a native mobile app (Expert app) so they can focus on delivering highly personalized experiences to every Consumer. The Field Platform allows us to track in real time where each Expert is, what they are doing, how long the experience is taking, and how effective the experience has been.

Our Mobile Inventory Management Platform provides a real-time warehouse and logistics management application. The platform manages the movement of inventory, providing streamlined flows that enable Enjoy fulfillment teams to execute with incredible speed, accuracy, and efficiency. Moreover, our systems use a wealth of data—including demand, scheduling and route planning—to predict and prescribe what inventory to prepare for each visit. Our mobile inventory system will optimize committed inventory and additional inventory for incremental sales and provides insights on availability, routing flexibility, and many other use cases. It also packages the inventory into a pick and pack list that takes fulfillment operators through the warehouse in only one pass.

Our Smart Routing and Activity Assignment Algorithm is a proprietary algorithm that matches Experts and inventory with Consumer orders in real-time. This real-time predictive planning model maximizes daily revenue and provides the best experience for every Consumer’s needs by regularly routes and activities. The model generates routes and activities based on where every Expert is, where and when visits are scheduled, inventory availability, changing traffic conditions, and optimal times for Expert breaks.

Live Catalog is a proprietary merchandising platform (and app) available in select visits. It allows Experts to show Consumers all available inventory in the Expert’s vehicle at that moment. Consumers can browse and purchase the available inventory Consumers gain access to Live Catalog through a text from the Expert or a QR code scan during the visit. In addition, when a Consumer expresses interest in purchasing a product or service that is unavailable in the vehicle but available at the warehouse, we are able to capture this need via Live Catalog and schedule a future visit for that Consumer, reserving the inventory for that Consumer

Our technology is hosted on a third-party cloud computing infrastructure that can scale up quickly and efficiently. Our Development Operations Platform provides engineers with access to staging environments with the push of a button, allowing them to pick their mix of Enjoy-developed applications, features, and databases. This allows our engineers to build prototypes for full-scale major feature releases with alerting, reporting, automated tests, escalations, and feature flagging at the market and individual levels.

Our proprietary data platform delivers real-time data pipelines from all proprietary and nonproprietary systems. It maintains a central library of our data dictionary and definitions covering all aspects of our business.

: We expect to launch several strategic initiatives, including technology changes, to help mitigate future inventory challenges. Most importantly, we expect to have the ability to take future orders without currently possessing inventory just in time for the Fall 2022 new product introductions.

The experience represents a shift in the traditional retail model by bringing a personalized, convenient retail experience through the door and into the comfort of Consumers’ homes. We believe that our differentiated model limits the number of direct competitors. As such, rather than direct competitors, we have

We believe that our unique model, trust-oriented industry Business Partnerships and high service standards differentiate us from other service-oriented participants and provide us with an important competitive advantage.

We are committed to maintaining the highest standards of business conduct and ethics, and promoting a culture of integrity and accountability. Our Code of Business Conduct and Ethics (the “Code of Conduct”), which applies to each employee, officer, director, intern, contractor and agent who acts on our behalf, reinforces our core values and reflects the business practices and principles that support this commitment. Training on the Code of Conduct is mandatory upon employment. Highlights from our Code of Conduct include a policy for anyone who, acting in good faith, notifies us of a possible violation of the Code of Conduct, our policies or the law; a commitment to human rights; a conflicts of interest policy; a statement on environmental compliance; and a policy on international business laws, including laws prohibiting bribery, corruption or the conduct of business with specified individuals, companies or countries.

We also offer a wellness library comprised of country-specific supporting links to support mental, physical and financial well-being. Finally, we have programs that encompass occupational safety, emergency preparedness, occupational injury and illness, physical work, driver safety, dangerous goods handling and sanitation.

Given the nature of our field operations, following the onset of the pandemic, we instituted contactless procedures to ensure the safety of our Field Experts and Consumers. We previously implemented a robust testing, masking and temperature check program to prevent the spread of the virus, restricted travel, provided PPE and increased the sanitization of our facilities. We also instituted weekly meetings involving a cross-functional team, including key senior management, to ensure that related matters were addressed in a manner that was aligned with public health guidance and local regulations. As we continue to navigate through the evolving pandemic, we continue to evaluate ways to support the well-being of our employees in accordance with local laws and regulations and have dedicated internal teams that support our employees.

We operate in a regulated industry and are currently subject to, and may in the future become subject to, a wide variety of laws and regulations in the United States and other jurisdictions. These laws, regulations, and standards govern issues such as Internet and eCommerce, labor and employment, commissions and fees, anti-discrimination, payments, gift cards, whistleblowing and worker confidentiality obligations, product liability, environmental protection, personal injury, intellectual property, Consumer protection and warnings, marketing, taxation, privacy, data security, competition, unionizing and collective action, arbitration agreements and class action waiver provisions, terms of service, mobile application and website accessibility, money transmittal, and background checks. These regulations are often complex and subject to varying interpretations, in many cases due to their lack of specificity, and as a result, their application in practice may change or develop over time through judicial decisions or as new guidance or interpretations are provided by regulatory and governing bodies, such as federal, state, and local administrative agencies. For a discussion of the various risks we face from regulation and compliance matters, see “”.

Legacy Enjoy was incorporated in the state of Delaware in May 2014 and is headquartered in Palo Alto, California. Our telephone number is (888) Our website is .

We make available, free of charge through our website, our annual reports on Form quarterly reports on Form and current reports on Form and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.

The impact of the ongoing pandemic is severe, widespread, and continues to evolve. The pandemic and related government and private sector responsive actions have already affected the broader economies and financial markets, triggering an economic downturn, which has at points adversely affected, and could again adversely affect demand for our services. It is impossible to predict all effects and the ultimate impact of the pandemic, as the situation continues to rapidly evolve. The pandemic has disrupted the global supply chain and the preventative and protective measures currently in place, or which may be instituted

or in the future, such as quarantines, business limitations and shutdowns, and travel restrictions, may interfere with the ability to deliver services to Consumers. If our ability to provide services are restricted or shut down, our revenue could be negatively impacted.

In addition, in response to the pandemic, we are requiring or have required our employees to work remotely, and it is possible that this could have a negative impact on the execution of our business plans and operations. If a natural disaster, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working may pose increased risks to our information technology assets, data and also result in consumer privacy and fraud concerns.

Our results of operations may be materially affected by adverse conditions in the capital markets and the economy generally, both in the United States and internationally, as a result of the pandemic. Uncertainty in the economy, including the impact of inflation, could adversely impact consumer purchases of discretionary items across the consumer electronics market. We have also seen significant and rapid shifts in consumer purchasing behavior as this pandemic has evolved, particularly as it relates to what may be perceived as “essential” versus items.” Our business was materially impacted by in several ways. Typically, Consumer interactions occur within the Consumer’s home. Social distancing protocols changed the way we interact with the Consumer and our visits fell to zero in the early stages of the pandemic. Depending on the geography, during certain periods we had no visits and these visits remained significantly below levels throughout the pandemic. In addition, the Company furloughed employees in the U.K. beginning in April 2020 through August 2020 and again starting January 2021 through August 2021. These factors negatively impacted both Daily Mobile Store counts and Daily Revenue per Mobile store. To protect our employees and Consumers we implemented a variety of programs to provide masks, cleaning supplies and other protocols that remain in place. The Company cannot at this time predict the specific extent, duration, or full impact that the outbreak will have on our financial condition and operations. The full impact of the outbreak on management estimates and the financial performance of the Company may depend on future developments, including the duration and spread of the outbreak, including new variants and their resistance to vaccines and related governmental advisories and restrictions. In addition, the Company could see some limitations on employee resources that would otherwise be focused on operations, including but not limited to sickness of employees or their families, desire for employees to avoid contact with groups of people, and increased reliance on working from home. It is also difficult to predict how our business might be impacted by changing consumer spending patterns as a result of the pandemic. Factors that could affect consumers’ willingness to make discretionary purchases include, among others: general business conditions, levels of employment, interest rates, tax rates, the availability of consumer credit, consumer confidence in future economic conditions and stimulus checks and risks, inflation, or the public perception of risks related to epidemics or pandemics like In the event of a prolonged economic downturn or acute recession, consumer spending habits could be adversely affected, and we could experience lower than expected revenue, net income, and Adjusted EBITDA.

If we fail to address the risks and difficulties that we face, including those associated with the challenges listed above as well as those described elsewhere in this “” section, our business, financial condition, and results of operations could be adversely affected. Further, because we have limited historical financial data and operate in a rapidly evolving market, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, and results of operations could be adversely affected.

There is also increased focus, including by Consumers, investors, employees and other stakeholders, as well as by governmental and organizations, on social, environmental and sustainability matters.

In connection with the preparation of our financial statements, material weaknesses in our internal control over financial reporting were identified as of December 31, 2019 and remain as of December 31, 2021. 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. The material weaknesses identified are as follows:

Our business and operating results are subject to global economic conditions and their impact on consumer discretionary spending, particularly in the consumer electronics market. One of the factors that may negatively influence consumer spending on consumer electronics is economic downturns, including economic recessions or depressions, high levels of unemployment, higher consumer debt levels, inflation rates, reductions in net worth, and declines in asset values and related market uncertainty, home foreclosures and reductions in home values, fluctuating interest rates and credit availability, fluctuating fuel and other energy costs, fluctuating commodity prices and general uncertainty regarding the overall future political and economic environment. Many of these factors have occurred, and may continue to become more prevalent, as a result of the pandemic. Economic conditions in certain regions may also be affected by natural disasters, such as earthquakes, hurricanes,

wildfires, and threats to public health, such as the current outbreak of pandemic. Consumer purchases of new electronics may decline during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence.

Our future success will depend in part on the continued service of our founders, senior management team, key technical employees, and other highly skilled employees, including Ron Johnson, our and Chief Executive Officer, and on our ability to continue to identify, hire, develop, motivate, compensate appropriately, train and retain talented employees. We may not be able to retain the services of any of our employees or other members of senior management in the future. Also, all of our U.S.-based employees, including our senior management team and Mr. Johnson, work for us on an basis, and there is no assurance that any such employee will remain with us. Our competitors may be successful in recruiting and hiring members of our senior 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 employees, 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 its plans and strategies, our business, financial condition, and results of operations could be adversely affected.

Our business could be adversely impacted by increases in labor costs, both domestically and internationally, including increases triggered by regulatory actions regarding wages, scheduling and benefits; increased health care and workers’ compensation insurance costs; increased wages and costs of other benefits necessary to attract and retain high quality employees with the right skill sets and increased wages, benefits and costs related to the pandemic. The growth of our business can make it increasingly difficult to locate and hire sufficient numbers of employees, to maintain an effective system of internal controls and to train employees worldwide to deliver a consistently high-quality product and Consumer experience, which could materially harm our business and results of operations. Additionally, while our employees are not unionized, if they were to become unionized, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could increase our costs, change our employee culture, decrease our operational flexibility and disrupt our business, which could adversely affect our operating efficiency. Further, our responses to any union organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results.

The markets in which we operate are intensely competitive and are characterized by shifting user preferences, fragmentation, and frequent introductions of new services and offerings. Our Business Partners do not currently depend on a local, sales team, and the development of their own sales team, rather than their reliance on us, could negatively affect our business. As we continue to expand our presence internationally, we will also face competition in these markets. In addition, we compete with traditional brick and mortar retailers with regard to capturing consumer attention. Changing traditional retail habits is difficult, and if Business Partners and consumers do not embrace the transition to local, delivery as we expect, our business, financial condition, and results of operations could be adversely affected.

We also depend on our ability to provide Consumers with a wide range of services related to products provided from qualified Business Partners and suppliers in a timely and efficient manner. Our inability to obtain products from suppliers in sufficient quantities, or at all, could adversely affect our product offerings and our business and impact our financial forecasts and guidance. Political and economic instability, global or regional adverse conditions, such as pandemics or other disease outbreaks or natural disasters, the financial stability of suppliers, suppliers’ ability to meet our standards, labor problems experienced by suppliers, the availability or cost of raw materials, merchandise quality issues, currency exchange rates, trade tariff developments, transport availability and cost, including import-related taxes, transport security, inflation and other factors relating to our suppliers are beyond our control. As an example, the ongoing pandemic could adversely impact supplier facilities and operations due to factory closures and risks of labor shortages, among other things, which may adversely affect our business, financial condition and results of operations.

In jurisdictions where our industry does not have regulations establishing standards for background checks, we decide on the scope of our background checks and the cadence with which we conduct such background checks. By choosing background checks that may be less thorough in scope than we are permitted to conduct under applicable law or regulation, or by failing to run additional background checks after Experts are we may face negative publicity or become subject to litigation in the future.

Illegal, improper, or otherwise inappropriate activities by employees, particularly Experts, have occurred, and in the future may occur, which could adversely affect our brand, business, financial condition, and results of operations. While we have implemented various measures intended to anticipate, identify, and address the risk of these types of activities and what we believe to be the best practices to safeguard the health, safety and security of our team members, independent contractors, Consumers and others at our visits, these measures may not adequately address or prevent all illegal, improper, or otherwise inappropriate activity by these parties from occurring and such conduct could expose us to liability, including through litigation, or adversely affect our brand or reputation. If these policies, procedures and programs are not adequate, or team members do not receive related adequate training or do not follow these policies, procedures and programs for any reason, the consequences may be harmful to us, which could impair our operations and cause us to incur significant legal liability or fines, and negatively impact our commercial partnerships. In addition, negative public opinion could result from actual or alleged conduct by team members.

We may in the future be, named as a defendant in lawsuits, claims and other legal proceedings that arise in the ordinary course of our business based on alleged acts of misconduct by team members, including Experts on visits as well as motor vehicle accidents involving our Experts. These actions may seek, among other things, compensation for alleged personal injury, sexual harassment, workplace misconduct, wage and hour claims and other employment-related damages, negligence or gross negligence, punitive damages, consequential damages, and civil penalties or other losses or injunctive or declaratory relief. The outcome of any allegations, lawsuits, claims or legal proceedings is inherently uncertain and could result in significant costs, damage to our brands or reputation and diversion of management’s attention from our business. Our insurance may not cover, or may be insufficient to cover, any legal liability or fines that we incur for health, safety or security incidents

Domain names generally are regulated by internet regulatory bodies, and the regulation of domain names is subject to change. Regulatory bodies have and may continue to establish additional domains, appoint additional domain name registrars or modify the requirements for holding domain names. We may not be able to, or it may not be cost effective to, acquire or maintain all domain names that utilize the name “Enjoy” in all of the countries in which we currently conduct or intend to conduct business. If we lose the ability to use a domain name, we could incur significant additional expenses to market our products within that country, including the development of new branding. This could substantially harm our business, results of operations, financial condition and prospects.

Third parties may in the future assert that we have infringed or misappropriated their trademarks, copyrights, confidential know how, trade secrets, patents or other intellectual property rights. We cannot predict whether any such assertions or claims arising from such assertions will substantially harm our business and results of operations, whether or not they are successful. If we are forced to defend against any infringement or other claims relating to the trademarks, copyright, confidential know how, trade secrets, patents or other intellectual property rights of third parties, whether they are with or without merit or are determined in our favor, we may face costly litigation or diversion of technical and management personnel. Furthermore, the outcome of a dispute may be that we would need to cease use of some portion of our technology or trademarks, develop technology, engage in pay damages, costs or monetary settlements or enter into royalty or licensing agreements. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to us, or at all. Any such assertions or litigation could adversely affect our business, results of operations, financial condition and prospects.

We use open source software in our platform and expect to use open source software in the future. The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. By the terms of certain open source licenses, we could be required to release the source code of our proprietary software and to make our proprietary software available under open source licenses if we combine our proprietary software with open source software in a certain manner. In the event that portions of our proprietary software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, to all or a portion of our technologies, or otherwise to be limited in the use or licensing of our technologies, each of which could reduce or eliminate the value of our technologies and services. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Many of the risks associated with usage of open source software cannot be eliminated and could negatively affect our business and operating results.

The experience is in our view a nascent industry model and developing. We are subject to a wide range of evolving federal, state, and local laws and regulations, many of which may have limited to no interpretation precedent as it relates to our business model.

It is often challenging to predict the commencement or outcome of such disputes and inquiries with certainty. Regardless of the outcome, these can have an adverse impact on our business due to legal costs, diversion of management resources, and other factors. Determining reserves for any litigation is a complex and fact-intensive process that is subject to judgment calls. It is possible that a resolution of one or more such proceedings could require us to make substantial payments to satisfy judgments, fines or penalties or to settle claims or proceedings, any of which could harm our business. These proceedings could also result in reputational harm, criminal sanctions, consent decrees or orders preventing us from offering certain products or services, requiring a change in our business practices in costly ways or requiring development of or otherwise altered products or technologies. Litigation and other claims and regulatory proceedings against us could result in unexpected expenses and liabilities, which could have an adverse effect on our business, results of operations, financial condition and prospects.

We are subject to general business regulations and laws as well as federal and state regulations and laws specifically governing the Internet and eCommerce. Existing and future laws and regulations may impede the growth of the Internet, eCommerce or other online services, and increase the cost of providing online services. These regulations and laws may cover sweepstakes, taxation, tariffs, user privacy, data security, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, broadband residential Internet access and the characteristics and quality of services. It is not clear how existing laws governing issues such as property ownership, sales, use and other taxes, libel and personal privacy apply to the Internet and Unfavorable resolution of these issues may harm our business and results of operations.

released a set of “Standard Contractual Clauses” (“SCCs”) that are designed to be a valid mechanism to facilitate personal information transfers out of the EEA to these jurisdictions. Currently, these Standard Contractual Clauses are a valid mechanism to transfer personal information outside of the EEA, but there exists some uncertainty regarding whether the SCCs will remain a valid mechanism. Additionally, the SCCs impose additional compliance burdens, such as conducting transfer impact assessments to determine whether additional security measures are necessary to protect the personal data.

Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and continue to increase. These threats are becoming increasingly difficult to detect. These threats come from a variety of sources, including traditional computer “hackers,” threat actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), attacks (such as credential stuffing), personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats. Ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products and services) or the third-party information technology systems that support us and our services. Additionally, due to the ongoing pandemic, certain functional areas of our workforce remain in a remote work environment and outside of our corporate network security protection boundaries, which imposes additional risks to our business, including increased risk of industrial espionage, phishing and other cybersecurity attacks, and unauthorized dissemination of proprietary or confidential information. Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies.

Additionally, defending against claims or litigation based on any security incident, regardless of their merit, could be costly and divert management’s attention. We cannot be certain that our insurance coverage will be adequate for data handling or data security costs or liabilities actually incurred, that insurance will continue to be available to us on commercially reasonable terms or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or requirements, could have an adverse effect on our reputation, commercial relationships, business, financial condition, and results of operations. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations.

As of December 31, 2021, we had accumulated $551.0 million and $429.1 million of federal and state net operating loss carryforwards (“NOLs”), respectively, available to reduce future taxable income, portions of which will begin to expire in 2034 for federal and 2024 for state tax purposes. It is possible that we will not generate taxable income in time to use certain of our NOLs before their expiration, or at all. Net operating losses incurred in taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal net operating losses in taxable years beginning after December 31, 2020 is limited to 80% of current year taxable income. Under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, (the “Code”), if a corporation undergoes an “ownership change,” the corporation’s ability to use its NOLs and other tax attributes, including R&D tax credits, to offset its post-change income or taxes may be limited. In general, an “ownership change” occurs if there is a cumulative change in our ownership by “5 percent stockholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Our ability to use NOLs and other tax attributes to reduce future taxable income and liabilities may be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future. In addition, for state income tax purposes, the extent to which states will conform to the federal laws is uncertain and there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

Furthermore, Section 22 of the Securities Act of 1933, as amended (the “Securities Act”) creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Certificate of Incorporation provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, when a provision in the certificate of incorporation requires such filing, there is no guarantee that courts of appeal will affirm the enforceability of such provisions or that state trial courts hearing such suits will continue to enforce such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

Pursuant to the Amended and Restated Registration Rights Agreement, dated October 15, 2021, by and among Enjoy, Marquee Raine Acquisition Sponsor LP (the “Sponsor”), the independent directors of MRAC, certain shareholders of Legacy Enjoy and certain of their respective affiliates (the “Registration Rights Agreement”) and our bylaws, the Sponsor and certain of our stockholders are contractually restricted from selling or transferring any of its shares of common stock (the Shares”) (not including the shares of our common stock issued in that certain private placement in the aggregate amount of $80 million, consummated substantially concurrently with the closing of the Transactions on October 15, 2021 (the “Closing”), pursuant to those certain subscription agreements with MRAC (the “Subscription Agreements”), and subject to the conditions set forth therein, pursuant to which the subscribers purchased 8 million shares of common stock at a purchase price of $10.00 per share (the “PIPE Investment”). Such restrictions began at the Closing and end (i) for certain holders of our common stock, the date that is 180 days after the Closing, except with respect to the shares of our common stock issued to certain holders of our convertible notes to which such restrictions have lapsed following the

effectiveness of our resale Form registration statement, (ii) for holders of private placement warrants, the date that is 30 days after Closing and (iii) for the sponsor shares, the date on which the last reported sale price of our common stock equals or exceeds $12.00 per share (as adjusted for share splits, share capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any day period commencing at least 150 days from Closing.

The shares held by the Sponsor and certain of our stockholders may be sold after the expiration of the applicable period under the Registration Rights Agreement and our Bylaws. As restrictions on resale end, the sale or possibility of sale of these shares could have the effect of increasing the volatility in the market price of our common stock, which price could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

Certain 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 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 management of the business, which could adversely affect our business, financial condition, and results of operations.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our common stock that is held by equals or exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1 billion in debt in the prior three-year period or (iv) December 31, 2025.

Additionally, we qualify as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held by exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by equals or exceeds $700 million as of the end of that 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.

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 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.

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 security holders, subject to certain restrictions on transfer until the termination of applicable periods, could increase the volatility of the market price of common stock or adversely affect the market price of common stock.

Accounting Standards Codification 815, Derivatives and Hedging, provides for the of the fair value of such derivatives at each balance sheet date, with a resulting gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our consolidated financial statements and results of operations may fluctuate quarterly, based on factors which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.

holder if holders of at least 65% of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock (at a ratio different than initially provided), shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant. For further information regarding our warrants, please see “Note 9, , of the notes to the consolidated financial statements included under “Part II, Item 8. Financial Statements and Supplementary Data” elsewhere in this Report.

We have the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of our common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 period ending on the third trading day prior to the date on which we give proper notice of such redemption and provided certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (a) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (b) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (c) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.

In addition, we may redeem your warrants after they become exercisable for a number of shares of common stock determined based on the redemption date and the fair market value of our common stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are in which case, you would lose any potential embedded value from a subsequent increase in the value of our common stock had your warrants remained outstanding.

We have warrants outstanding to purchase an aggregate of 15,660,396 shares of common stock. Pursuant to the 2021 Equity Incentive Plan (the “2021 Plan”) and the Employee Stock Purchase Plan (“ESPP”), we may issue an aggregate of up to 13,666,020 shares of common stock, which amount may be subject to increase from time to time. We may also issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or repayment of outstanding indebtedness, without stockholder approval, in a number of circumstances. The issuance of additional shares or other equity securities of equal or senior rank would have the following effects:

factors, many of which are outside of our control. As a result, comparing our results of operations on a basis may not be meaningful. In addition to other risk factors described elsewhere in this “” section, factors that may contribute to the variability of our quarterly and annual results include:

The information required has been previously disclosed in our Current Report on Form filed with the SEC on October 22, 2021.

Enjoy started with a simple question, “What if the best of the store could come to you?” Over the last eight years we built and optimized our Mobile Store, a new channel that pairs the convenience of online shopping with the personal touch of an retail experience brought together in the comfort of Consumers’ homes.

Over the past twenty five years, eCommerce has disrupted the retail industry in virtually every category, shifting commerce from physical stores to the home. While eCommerce channels greatly expanded choices and increased convenience with fulfillment to customers’ doorsteps, they have not addressed the importance of an interactive shopping experience that customers desire for premium products, such as technology. Enjoy provides and activation, and also assists customers in purchasing hardware, accessories, and subscription services in the comfort of the home. This Mobile Store shopping experience creates a unique and deep retail experience for Consumers that does not exist with traditional retail channels. We further believe that this represents the next disruption in the consumer shopping experience.

We maintain multi-year contractual relationships with leading telecommunications and technology companies, which are our Customers. Our revenue stems from a variety of service, and delivery fees that are paid to us by our Customers. During a visit from our Mobile Store, the Consumer pays for products and services directly to our Customers via secure mobile devices. On confirmation of the purchase, our Customers then remit our fees directly to us.

Enjoy delivers a broad assortment of telecommunications and technology products and accessories, which are provided by our Customers. Our Experts provide activation and demonstration of the products we deliver. We assist Consumers in evaluating and selecting a myriad of accessories, media sources, protection, broadband, and other services. We also assist in the and upgrade of our customers’ products. We strive to deliver our customers’ products with or frequency, matching the speed of traditional eCommerce channels but with an experience.

Consumers initiate their purchase on our Customers’ eCommerce sites, service centers or retail locations. The Consumer selects delivery and a delivery window. Consumer orders flow seamlessly from our Customers’ eCommerce sites to Enjoy via deeply integrated technology platforms. This results in near-zero Consumer acquisition costs for Enjoy.

Our Experts are central to the retail experience we provide for Consumers. Our Experts are 100% Enjoy employees and have the skills and training to be deeply knowledgeable about the products and services that we offer. We believe our Experts bring a world-class and deeply engaging shopping experience to Consumers.

We believe Enjoy is positioned to benefit from several long-term trends that will continue to expand the demand for These trends include but may not be limited to (1) the growth in online shopping and the need for speed and convenience, (2) a more mobile workforce, which includes increased telecommuting and

work-from-home arrangements, all of which have been accelerated by the pandemic, (3) increasingly connected homes enabled by technology and telecommunications and (4) the rapid expansion of subscription-based services delivered through online channels.

We rely on consumer discretionary spending and may be adversely affected by economic downturns and other macroeconomic conditions or trends. Our business and operating results are subject to global economic conditions and their impact on consumer discretionary spending. Some of the factors that may negatively influence consumer spending include high levels of unemployment, higher consumer debt levels, reductions in net worth, and declines in asset values and related market uncertainty, fluctuating commodity prices, inflation and general uncertainty regarding the overall future political and economic environment. Consumer purchases of technology may decline during periods of economic uncertainty, when disposable income is reduced or when there is a reduction in consumer confidence. Such economic uncertainty may slow the rate at which individuals choose to purchase new technology, upgrade existing technology or purchase services, subscriptions or accessories.

Our business is affected by online shopping behavior and growth of eCommerce. Our revenue stems primarily from online purchases originating at our Customers’ websites or customer service centers. The global online shopping market is large and growing as a percentage of global retail purchases. Consumers are diversifying their purchases for delivery at home, and the pandemic has accelerated this trend. With consumers wary of buying they have increased demand for new product categories purchased online and delivered to their homes. Consumers are also increasing their purchases of at home services through online channels. Although there has been an increased demand in eCommerce business in the marketplace, safety protocols materially reduced the percent of our indoor Consumer engagements, which negatively impacted our business.

Our business is affected by changes in consumer behavior and lifestyles at home and work and the role that mobile technology plays in enabling these changes. Mobile technology has grown rapidly over the past four decades and reliance on smartphones is predicted to increase as more features become available. Smartphone and mobile technology represent the primary product categories in our revenues. Furthermore, work-from-home and remote-work have been growing steadily. While the pandemic has dramatically increased work-from-home arrangements over the past year, the underlying trends towards a more flexible work environments and telecommuting suggest that these trends will continue. Studies suggest flexible work environments create a more productive and happier workforce. Advancements in technology have allowed remote workers to collaborate in increasingly effective ways. These trends are likely to accelerate

Our business is affected by upgrade cycles in smartphone and consumer technology. Consumer trends in the length of the average replacement cycle for technology are linked to advancements in performance and features of these devices. Our Customers produce or sell leading brands and are quick to bring innovations to market.

In addition to our base fee earned from our Customers for delivery and setup of products, our revenues are affected by digital subscription services and device protection plans purchased by Consumers. Digital subscription services such as news, music, movies, gaming apps and entertainment have been growing as consumers have shifted their consumption behaviors from traditional sources of content to online and formats. Our business is also affected by consumer adoption of device protection plans and other support services provided by our Customers. We believe that the growth in subscription services driven by both consumer adoption rates and new services will continue.

We carry consigned inventory provided by our Customers. This inventory is either manufactured or procured by our Customers and delivered to our warehouses. We cannot

We have experienced and expect to continue to experience seasonal fluctuations in sales due to the spending patterns of Consumers. Our revenue has generally been lowest in the first and second calendar quarters due to lower consumer demand following the fourth quarter holiday season and because of the decline in sales that typically occurs in anticipation of the introduction of new or enhanced smartphone and consumer technology, which usually take place in the third calendar quarter and which tend to drive sales in that quarter and the following quarter. Further, our revenue tends to be higher in the third and fourth calendar quarter due to seasonal sales such as “Black Friday” and “Cyber Monday,” as Consumers tend to make higher purchases during the holiday season. Our revenue for the second calendar quarter is generally the lowest of the year followed by the first calendar quarter.

Marquee Raine Acquisition Corp. (“MRAC” and, after the Domestication as described below, “New Enjoy”), our predecessor, a Cayman Islands exempted company, entered into an Agreement and Plan of Merger, dated as of April 28, 2021 and amended on July 23, 2021 and September 13, 2021 (the “Merger Agreement”), by and among MRAC, MRAC Merger Sub Corp., a Delaware corporation and a direct wholly owned subsidiary of MRAC (“Merger Sub”), and Enjoy Technology Operating Corp. (f/k/a Enjoy Technology Inc.), a Delaware corporation (“ Legacy Enjoy”). We refer to the transactions contemplated by the Merger Agreement as the ”Merger” and together with the Domestication (as defined below) as the “Transactions”.

In April 2021, to induce one of its stockholders, LCH Enjoir L.P. (“LCH”), to surrender to Enjoy certain of its rights in connection with the Merger, Enjoy entered into the Stockholder Contribution Agreement with Ron Johnson and the Stock Issuance Agreement with LCH. Pursuant to the Stockholder

Our business was materially impacted by in several ways. Typically, Consumer interactions occur within their home. Social distancing protocols changed the way we interact with Consumers and our visits fell to zero in the early stages of the pandemic. Depending on the geography during certain periods we had no visits and these visits remained significantly below levels throughout 2020 and 2021. In addition, the Company furloughed employees in the U.K. beginning in April 2020 through August 2020 and again starting January 2021 through August 2021. These factors negatively impacted both Daily Mobile Store counts and Daily Revenue Per Mobile Store, as defined below. To protect our employees and Consumers, we implemented a variety of protocols to provide masks, cleaning supplies and other protocols that remain in place.

The Company cannot at this time predict the specific extent, duration, or full impact that the pandemic will have on our financial condition and operations. The full impact of the pandemic on management estimates and the financial performance of the Company may depend on future developments, including the duration and spread of the outbreak including new variants and related governmental advisories and restrictions and the effectiveness of the vaccine. In addition, the Company could see some limitations on employee resources that would otherwise be focused on operations, including but not limited to sickness of employees or their families, desire for employees to avoid contact with groups of people, and increased reliance on working from home.

In April 2021, the Company entered into a convertible unsecured subordinated loan agreement to borrow up to $75.0 million (the “2021 Convertible Loan”) from new investors, certain existing investors and executives. The 2021 Convertible Loan was senior in right of payment to the convertible unsecured subordinated loan agreement entered into by Enjoy in October 2020 to borrow up to $50.0 million from certain existing investors and executives (the “2020 Convertible Loan”), but expressly subordinated in right of payment to that certain first lien term loan agreement with Blue Torch Finance, LLC, as administrative agent and collateral agent, and certain affiliates of Blue Torch Capital LP, as lenders, to borrow a first lien term loan in an aggregate principal amount of $37.0 million (the “Blue Torch Loan”). The 2021 Convertible Loan had several conversion options, including an optional conversion upon maturity and automatic conversion upon a merger with a special purpose acquisition company (“SPAC Transaction”). If a SPAC Transaction occurred on or prior to the maturity date and prior to payment in full of the principal amount, then the outstanding principal amount of the 2021 Convertible Loan and all accrued and unpaid interest will automatically convert into fully paid and nonassessable shares of our common stock immediately prior to the Closing at a price per share equal to 80% of the value assigned to each share of Legacy Enjoy common stock. The 2021 Convertible Loan incurred interest at 8% per annum and matures in April 2022. The 2021 Convertible Loan was converted to shares of common stock upon Closing.

In June 2021, the Company granted restricted stock units (“June 2021 RSUs”) underlying approximately 2 million shares of the Company’s common stock under the 2014 Equity Incentive Plan. The June 2021 RSUs vest upon satisfaction of both service and performance-based vesting requirements. The service-based vesting requirements are satisfied as to 25% of the June 2021 RSUs on the first anniversary of the vesting commencement date, and the remaining 75% vesting in substantially equal quarterly installments for three years thereafter, subject to continued service through each vesting date. The performance-based vesting conditions were satisfied upon Closing.

In December 2021, the Company granted restricted stock units (“December 2021 RSUs”) underlying approximately 4.4 million shares of the Company’s common stock under the 2021 Equity Incentive Plan. The December 2021 RSUs vest upon the satisfaction of service-based vesting conditions either: a) 25% vesting on the first anniversary of the vesting commencement date, and the remaining 75% vesting in substantially equal quarterly installments for three years thereafter; b) vesting on each of the first three anniversaries of the vesting commencement date; or c) awards vest in substantially equal quarterly installments for four years following the vesting start date, all subject to continued service through each vesting date.

Daily Mobile Stores represent the number of Mobile Stores we operate on a given day. This is calculated by dividing the total number of visit-serving Expert shifts in a given reporting period by the number of calendar days in that period. A visit-serving Expert shift is defined as an Expert that is scheduled to serve Consumers on a given day. We believe this is the primary measure of scale and growth of our retail footprint.

Daily Revenue Per Mobile Store is defined as the average daily revenue generated per Daily Mobile Store. This metric is calculated by dividing the revenue generated in a given reporting period by the product of Daily Mobile Stores and the number of days in that given reporting period. We believe growth in Daily Revenue Per Mobile Store is a key driver for increasing the Company’s profitability.

Mobile Store Profit (Loss) is a measure prepared in accordance with GAAP and is defined as revenue less cost of revenue. Mobile Store Margin is Mobile Store Profit (Loss) as a percentage of revenue. We view this metric as an important measure of business performance as it captures Mobile Store profitability and provides comparability across reporting periods.

Segment Income (Loss) is defined as revenue less cost of revenue, operational expenses directly related to each segment and excludes certain corporate expenses. We view this metric as an important measure of business performance as it captures Mobile Store and segment profitability and provides comparability across reporting periods.

Adjusted EBITDA is defined as net loss adjusted for interest, taxes, depreciation and amortization, stock-based compensation expense and certain expenses not considered a core part of our operations. Adjusted EBITDA provides a basis for comparison of our business operations between current, past

and future periods by excluding items that we do not believe are indicative of our core operating performance. Adjusted EBITDA is a measure. Refer to the “section below for further discussion.

Revenue consists of service fees paid to us by our Customers for bringing their products and services to Consumers. These fees are comprised of fixed service fees per visit and variable fees based on the sale of accessories, solutions and subscription services. The composition of these fees and the rate of services paid vary by Customer per the terms of our contracts with them. Our fees are reduced by chargebacks and consigned inventory that is lost, damaged or stolen. Chargebacks are based upon Consumer cancellation of services and subscriptions within a timeframe.

Operations and technology expenses primarily consist of technology, facility and overhead costs directly related to the operation of our Mobile Stores. This includes lease and operating expenses for our warehouses, inventory management and storage, facility supplies, Experts recruiting fees, Experts training costs, and depreciation expense. We also include costs for employees who directly or indirectly support our Experts, including supervisory and operations management, inventory management, fulfillment, recruiting and research and development costs. We expect operations and technology expenses to increase in future periods to support our growth, including bringing on additional warehouse facilities and continuing to invest in technology improvements to support the selling experience for Consumers, selling tools for our sales professionals and to drive efficiency in our operations. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments. We expect these expenses to decrease as a percentage of revenue over the next several years.

Loss on convertible loans for the years ended December 31, 2021 and 2020 was $27.3 million and $42.9 million respectively, due to the adjustment based on the fair value of the long-term convertible loans, which were entered into during both 2021 and 2020.

Management believes there is substantial doubt about our ability to continue as a going concern as our present cashflows from operations will not enable us to meet our obligations over the next 12 months. Maintaining our ongoing operations is dependent on our ability to obtain additional financing and generate sufficient cash flow to meet our obligations on a timely basis. If we are unable to generate positive operating cash flows, additional debt and equity financings may be necessary to sustain future operations, including to meet any longer-term expected future cash requirements and obligations beyond the next 12 months. Such additional debt or equity financing may not be available to us on favorable terms, if at all. As the impact of the pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs. The pandemic has negatively impacted the global economy and created significant volatility and disruption of financial markets. An extended period of economic disruption could materially affect our business, results of operations, ability to meet debt covenants, access to sources of liquidity and financial condition.

During the year ended December 31, 2021, operating activities used $174.6 million of cash, resulting from our net loss of $220.6 million, partially offset by net charges of $49.0 million and net cash used by changes in our operating assets and liabilities of $3.1 million. Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2021, consisted primarily of a $5.4 million increase in accounts receivable, a $1.4 million increase in prepaid expenses and other current assets, a $1.5 million increase in other assets, offset by increase of $3.2 million accounts payable and $2.0 million accrued expenses and other current liabilities. The increase in accounts receivable is primarily due to timing of collection of invoices during the fourth quarter of 2021. The increase in accrued expenses and other current liabilities is due to salaries and wages as a result of increased headcount, accrued taxes and timing of vendor payments. The increase in other assets is primarily associated with deposit payments for leased warehouse facilities and insurance.

During the year ended December 31, 2020, operating activities used $95.3 million of cash, resulting from our net loss of $157.8 million, partially offset by net cash provided by changes in our operating assets and liabilities of $12.9 million, and net charges of $49.6 million. Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2020, consisted primarily of a $8.4 million decrease in accounts receivable, net an increase in accrued expenses and other current liabilities of $7.6 million, offset by a $2.9 million increase in other assets. The decrease in accounts receivable is primarily due to timing of collection of invoices during the fourth quarter of 2020. The increase in accrued expenses and other current liabilities is due to salaries and wages as a result of increased headcount, accrued taxes and timing of vendor payments. The increase in other assets is primarily associated with deposit payments for leased warehouse facilities and insurance.

In October 2020, Legacy Enjoy entered into the 2020 Convertible Loan with certain existing investors and executives as lenders. This agreement was amended in December 2020 to increase the borrowing limit to $70 million. The 2020 Convertible Loan had several conversion options, including automatic conversion upon a qualified financing of at least $75.0 million, an optional conversion upon a financing, initial public offering and an optional conversion upon maturity. The 2020 Convertible Loan also carried a mandatory repayment feature upon a change of control. The 2020 Convertible Loan accrued interest at 14% and matured in May 2024. Legacy Enjoy elected to measure the 2020 Convertible Loan under the fair value option. Under the fair value option, convertible loans are measured at fair value in each reporting period until it was settled, with changes in the fair values being recognized in Legacy Enjoy’s consolidated statements of operations as income or expense. Debt issuance costs incurred in connection with convertible loans are expensed as incurred. As the 2020 Convertible Loan was carried at fair value in its entirety, further consideration of the embedded features in the 2020 Convertible Loan was not required.

In February 2021, Legacy Enjoy and its lenders agreed to an amendment to the 2020 Convertible Loan to specify the treatment of the 2020 Convertible Loan should Legacy Enjoy merge with a SPAC and subsequently become a publicly traded entity. As the substance of the transaction is a capital contribution from related parties, the resulting gain of $36.8 million was recorded to additional capital during the year ended December 31, 2021. The 2020 Convertible Loan was converted to shares of New Enjoy common stock upon Closing.

•

Revenue Recognition;

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Stock-based Compensation; and

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Fair value of Convertible Loans.

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Risk-Free Interest Rate. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

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Expected Term. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

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Expected Volatility. Expected volatility was determined based on similar companies’ stock volatility.

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Expected Dividend Yield. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

Item 8.

Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm (PCAOB ID 238)			6 5
Consolidated Balance Sheets as of December 31, 2021 and 2020			6 6
Consolidated Statements of Operations and Comprehensive Loss for the Years ended December 31, 2021 and 2020			6 7
Consolidated Statements of Stockholders’ Equity for the Years ended December 31, 2021 and 2020			6 8
Consolidated Statements of Cash Flows for the Years ended December 31, 2021 and 2020			6 9
Notes to Consolidated Financial Statements			70

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