ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
(Address of principal executive offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer |
☒ | Smaller reporting company | ||||
Emerging growth company |
Page |
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PART I |
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Item 1. |
4 |
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Item 1A. |
11 |
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Item 1B. |
44 |
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Item 2. |
44 |
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Item 3. |
44 |
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Item 4. |
44 |
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PART II |
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Item 5. |
45 |
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Item 6. |
45 |
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Item 7. |
45 |
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Item 7A. |
63 |
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Item 8. |
64 |
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Item 9. |
100 |
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Item 9A. |
100 |
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Item 9B. |
103 |
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Item 9C. |
103 |
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PART III |
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Item 10. |
104 |
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Item 11. |
109 |
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Item 12. |
114 |
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Item 13. |
117 |
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Item 14. |
122 |
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PART IV |
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Item 15. |
123 |
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Item 16. |
125 |
• | “common stock” are to our Common Stock, $0.0001 par value per share; |
• | “Enjoy,” the “Company,” “we,” “us,” and “our,” and similar references refer to Legacy Enjoy or New Enjoy, as the context requires; |
• | “Legacy Enjoy” means Enjoy Technology Inc. prior to the completion of the Transactions (as defined herein) in October 2021; |
• | “management” or our “management team” are to our officers and directors; |
• | “MRAC” means the special purpose acquisition company, Marquee Raine Acquisition Corp.; |
• | “New Enjoy” are to Enjoy Technology, Inc. and its wholly owned subsidiaries following the completion of the Transactions; |
• | “public warrants” are to the redeemable warrants (including those that underlie the units) that were offered and sold by MRAC in its initial public offering and registered pursuant to the initial public offering registration statement or the redeemable warrants of Enjoy issued as a matter of law upon the conversion thereof at the time of the Domestication (as defined herein), as the context requires; and |
• | “warrants” are to our redeemable warrants, which includes the public warrants as well as the private placement warrants to the extent they are no longer held by the initial purchasers of the private placement warrants or their permitted transferees |
• | 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 manage our growth effectively; |
• | 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 and growth; |
• | our ability to maintain and enhance our products and brand, and to attract Consumers (as defined below); |
• | our ability to maintain or enhance current Customer (as defined below) and Consumer satisfaction and trust levels; |
• | our ability to manage, develop and refine our technology platform, including our Mobile Store (as defined below); |
• | our ability to recruit and maintain experienced and highly-skilled employees who provide the Enjoy experience to Consumers (“Experts”); |
• | the success of strategic relationships with third parties; and |
• | other risk factors described under Part I, Item 1A of this Report. |
• | The COVID-19 pandemic may continue to impact our key metrics and results of operations. |
• | 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. |
• | 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 future growth, and we may not be able to maintain or increase profitability in the future. |
• | 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 business will require significant amounts of capital to sustain operations and without adequate capital we may not be able to continue as a going concern. |
• | 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. |
• | 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. |
Item 1. |
Business. |
• | Traditional on-demand “to the door” delivery services; and |
• | Similar through the door services of traditional retailers and independent service providers. |
• | Near-zero Consumer acquisition cost; |
• | Operational efficiency and speed of delivery; |
• | Business Partnerships; |
• | Technological innovation; |
• | Ability to attract, train, and retain talent; |
• | Service standards and capabilities; |
• | Consumer experience; and |
• | Asset-light model. |
• | accurately forecast our revenue and plan our operating expenses; |
• | increase the number of and maintain existing multi-year contractual relationships with leading telecommunications and technology companies; |
• | increase the number of and retain existing Consumers and Experts that service Consumers; |
• | successfully compete with current and future competitors; |
• | successfully expand our business in existing markets and enter new markets and geographies; |
• | anticipate and respond to macroeconomic changes and changes in the markets in which we operate; |
• | maintain and enhance the value of our reputation and brand; |
• | adapt to rapidly evolving trends in the ways consumers interact with technology; |
• | avoid interruptions or disruptions in our services; |
• | develop a scalable, high-performance infrastructure that can efficiently and reliably handle increased demand, as well as the deployment of new features and services; |
• | hire, integrate, and retain talented technology, sales, customer service, and other personnel; |
• | effectively manage rapid growth in our personnel and operations; and |
• | effectively manage our costs related to Experts. |
• | We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient number of professionals with (i) an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) an appropriate level of knowledge and experience to establish effective processes and controls. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions. |
• | We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls were not sufficient to respond to changes to the risks of material misstatement to financial reporting. |
• | We did not design and maintain effective controls over the segregation of duties related to journal entries and account reconciliations. Specifically, certain personnel have the ability to both (i) create and post journal entries within our general ledger system and (ii) prepare and review account reconciliations. |
• | We did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of the financial statements. Specifically, we did not design and maintain: (i) program change management controls for all financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications and data to appropriate personnel; (iii) computer operations controls to ensure that critical batch jobs are monitored, and data backups are authorized and monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements. These IT deficiencies did not result in a misstatement to the financial statements, however, the deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness. |
• | We have hired, and will continue to hire, personnel with appropriate level of knowledge, training, and experience in accounting and finance to improve our financial accounting and reporting departments and our internal control over financial reporting. During the fourth quarter of 2021, we provided financial reporting and internal control training to enhance employees’ competence and experience required to fulfill their roles and responsibilities. |
• | During the fourth quarter of 2021, we initiated performing a risk assessment over our financial reporting and our internal control over financial reporting, including identification of financially relevant systems and business processes at the financial statement assertion level, and to identify controls to address the identified risks. We will continue to complete our risk assessment and enhance the design of existing controls, as well as implement new controls in future periods. |
• | We plan to design and implement controls over the preparation and review of journal entries and account reconciliations, including controls over the segregation of duties. We have begun to strengthen, and will continue to strengthen, controls related to segregation of duties related to financial accounting and reporting systems. |
• | We plan to design and implement IT general controls, including controls over the provisioning and monitoring of user access rights and privileges, change management processes and procedures, batch job and data backup authorization and monitoring, and program development approval and testing. |
• | build our brand and launch new commercial relationships; |
• | acquire new Consumers and increase repeat purchases from existing Consumers; |
• | develop new features to enhance the Consumer experience; |
• | increase the frequency with which new and repeat Consumers purchase products from our Customer’s sites through merchandising, data, analytics and technology; |
• | increase delivery speed and improve the delivery experience for Consumers through the continued build-out of our proprietary logistics network; |
• | continue to expand internationally; and |
• | opportunistically pursue strategic acquisitions. |
• | currency exchange restrictions or costs and exchange rate fluctuations; |
• | exposure to local economic or political instability, threatened or actual acts of terrorism and security concerns in general; |
• | compliance with various laws and regulatory requirements relating to anticorruption, antitrust or competition, economic sanctions, data content, privacy and data security, consumer protection, employment and labor laws, health and safety, and advertising and promotions; |
• | differences, inconsistent interpretations and changes in various laws and regulations, including international, national, state and provincial and local tax laws; |
• | weaker or uncertain enforcement of our contractual and intellectual property rights; |
• | preferences by local populations for local providers; |
• | slower adoption of the internet and mobile devices as advertising, broadcast and commerce mediums and the lack of appropriate infrastructure to support widespread internet and mobile device usage in those markets; |
• | our ability to support new technologies, including mobile devices, that may be more prevalent in certain global markets; |
• | difficulties in attracting and retaining qualified employees in certain international markets, as well as managing staffing and operations due to increased complexity, distance, time zones, language and cultural and employment law differences; and |
• | uncertainty regarding liability for services and content, including uncertainty as a result of local laws and lack of precedent. |
• | changes in tax laws, tax treaties, and regulations or the interpretation of them; |
• | changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; |
• | changes to our assessment of our ability to realize our deferred tax assets that are based on estimates of our future results, the feasibility of possible tax planning strategies, and the economic and political environments in which we do business; and |
• | the outcome of current and future tax audits, examinations or administrative appeals. |
• | changes in the industries in which we and our Business Partners operate; |
• | developments involving our competitors; |
• | changes in laws and regulations affecting our business; |
• | variations in our operating performance and the performance of our competitors in general; |
• | actual or anticipated fluctuations in our quarterly or annual operating results; |
• | publication of research reports by securities analysts about our Company or our competitors or our industry; |
• | the public’s reaction to our press releases, our other public announcements and our filings with the SEC; |
• | actions by stockholders, including the sale by the PIPE Investors (as defined herein) of any of their shares of our common stock; |
• | additions and departures of key personnel; |
• | commencement of, or involvement in, litigation involving our company; |
• | changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; |
• | the volume of shares of our common stock available for public sale; |
• | general economic and political conditions, such as the effects of the COVID-19 outbreak, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war, such as Russia’s invasion of Ukraine, or terrorism; and |
• | failure to comply with the requirements of Nasdaq. |
• | a limited availability of market quotations for our securities; |
• | reduced liquidity for our securities; |
• | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; or |
• | a decreased ability to issue additional securities or obtain additional financing in the future. |
• | existing stockholders’ proportionate ownership interest in us will decrease; |
• | the amount of cash available per share, including for payment of dividends in the future, may decrease; |
• | the relative voting strength of each previously outstanding common stock may be diminished; and |
• | the market price of the common stock may decline. |
• | our ability to attract and retain Business Partners and Consumers that utilize our services in a cost-effective manner; |
• | our ability to accurately forecast revenue and appropriately plan expenses; |
• | the effects of increased competition on our business; |
• | our ability to successfully expand in existing markets and successfully enter new markets; |
• | changes in consumer behavior with respect to in-home delivery and set up as well as related support services; |
• | increases in marketing, sales and other operating expenses that we may incur to grow and acquire new Consumers and establish new commercial relationships; |
• | the impact of worldwide economic conditions, including the resulting effect on consumer spending on consumer electronics; |
• | the impact of weather on our business; |
• | our ability to maintain an adequate rate of growth and effectively manage that growth; |
• | the effects of changes in search engine placement and prominence; |
• | our ability to keep pace with technology changes in our industry; |
• | the success of our sales and marketing efforts; |
• | the effects of negative publicity on our, and our Business Partners’, business, reputation, or brand; |
• | our ability to protect, maintain and enforce our intellectual property; |
• | costs associated with defending claims, including intellectual property infringement claims and related judgments or settlements; |
• | changes in governmental or other regulations affecting our business, including regulations regarding data privacy and security that may affect how we handle personal information; |
• | interruptions in service and any related impact on our business, reputation, or commercial relationships; |
• | the attraction and engagement of qualified employees and key personnel; |
• | our ability to choose and effectively manage third-party service providers; |
• | the effects of natural or human-made catastrophic events; |
• | the impact of a pandemic or an outbreak of disease or similar public health concern, such as the recent COVID-19 pandemic, or fear of such an event; |
• | the effectiveness of our internal control over financial reporting; |
• | the impact of payment processor costs and procedures; |
• | changes in the online payment transfer rate; and |
• | changes in our tax rates or exposure to additional tax liabilities. |
Item 1B. |
Unresolved Staff Comments. |
Item 2. |
Properties. |
Item 3. |
Legal Proceedings. |
Item 4. |
Mine Safety Disclosures. |
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Year Ended December 31, 2021 |
||||||||||||
North America |
Europe |
Consolidated |
||||||||||
Daily Mobile Stores |
496 | 137 | 633 | |||||||||
Daily Revenue Per Mobile Store |
$ | 378 | $ | 251 | $ | 351 | ||||||
Mobile Store Loss |
$ | (23,116 | ) | $ | (8,796 | ) | $ | (31,912 | ) | |||
Mobile Store Margin |
(33.8 | )% | (70.2 | )% | (39.4 | )% | ||||||
Segment Loss |
$ | (103,334 | ) | $ | (28,522 | ) | ||||||
Adjusted EBITDA |
$ | (166,510 | ) | |||||||||
Year Ended December 31, 2020 |
||||||||||||
North America |
Europe |
Consolidated |
||||||||||
Daily Mobile Stores |
334 | 130 | 464 | |||||||||
Daily Revenue Per Mobile Store |
$ | 382 | $ | 289 | $ | 356 | ||||||
Mobile Store Loss |
$ | (7,444 | ) | $ | (4,105 | ) | $ | (11,549 | ) | |||
Mobile Store Margin |
(16.0 | )% | (29.9 | )% | (19.1 | )% | ||||||
Segment Loss |
$ | (64,669 | ) | $ | (18,167 | ) | ||||||
Adjusted EBITDA |
$ | (106,552 | ) |
Year Ended December 31, 2021 |
||||||||||||||||
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
|||||||||||||
Daily Mobile Stores - Quarterly Average |
580 | 588 | 592 | 770 | ||||||||||||
North America |
428 | 438 | 466 | 650 | ||||||||||||
Europe |
152 | 150 | 126 | 120 | ||||||||||||
Daily Mobile Stores - Last Month of the Quarter Average |
590 | 595 | 603 | 859 | ||||||||||||
North America |
438 | 453 | 477 | 732 | ||||||||||||
Europe |
152 | 142 | 126 | 127 |
Year Ended December 31, 2020 |
||||||||||||||||
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
|||||||||||||
Daily Mobile Stores - Quarterly Average |
409 | 351 | 458 | 633 | ||||||||||||
North America |
291 | 274 | 316 | 452 | ||||||||||||
Europe |
118 | 77 | 142 | 181 | ||||||||||||
Daily Mobile Stores - Last Month of the Quarter Average |
337 | 393 | 511 | 695 | ||||||||||||
North America |
242 | 287 | 361 | 498 | ||||||||||||
Europe |
95 | 106 | 150 | 197 |
Years Ended December 31, |
Change |
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(dollars in thousands) |
2021 |
2020 |
$ |
% |
||||||||||||
Revenue |
$ | 80,998 | $ | 60,323 | $ | 20,675 | 34.3 | % | ||||||||
Operating expenses: |
||||||||||||||||
Cost of revenue* |
112,910 | 71,872 | $ | 41,038 | 57.1 | % | ||||||||||
Operations and technology* |
92,017 | 65,804 | $ | 26,213 | 39.8 | % | ||||||||||
General and administrative* |
57,915 | 34,274 | $ | 23,641 | 69.0 | % | ||||||||||
|
|
|
|
|
|
|||||||||||
Total operating expenses |
262,842 | 171,950 | $ | 90,892 | 52.9 | % | ||||||||||
|
|
|
|
|
|
|||||||||||
Loss from operations |
(181,844 | ) | (111,627 | ) | $ | (70,217 | ) | 62.9 | % | |||||||
Loss on convertible loans |
(27,338 | ) | (42,907 | ) | $ | 15,569 | (36.3 | )% | ||||||||
Interest expense |
(8,522 | ) | (2,003 | ) | $ | (6,519 | ) | 325.5 | % | |||||||
Interest income |
6 | 276 | $ | (270 | ) | (97.8 | )% | |||||||||
Other income (expense), net |
(2,993 | ) | (1,426 | ) | $ | (1,567 | ) | 109.9 | % | |||||||
|
|
|
|
|
|
|||||||||||
Loss before provision for income taxes |
(220,691 | ) | (157,687 | ) | $ | (63,004 | ) | 40.0 | % | |||||||
Provision for income taxes |
(82 | ) | 97 | $ | (179 | ) | (184.5 | )% | ||||||||
|
|
|
|
|
|
|||||||||||
Net loss |
(220,609 | ) | $ | (157,784 | ) | $ | (62,825 | ) | 39.8 | % | ||||||
|
|
|
|
|
|
* |
The Company reclassified certain costs within each of its operating expense line items in the consolidated statements of operations. Prior period amounts have been reclassified to conform to this presentation. These changes have no impact on the Company’s previously reported consolidated net loss or cash flows for the periods presented See Note 1 in Notes to the Consolidated Financial Statements included under “Part II, Item 8. Financial Statements and Supplementary Information” for further discussion. |
• | Is widely used by analysts, investors and competitors to measure a company’s operating performance; |
• | Is a financial measurement that is used by rating agencies, lenders, and other parties to evaluate our credit worthiness; and |
• | Is used by our management for various purposes, including as a measure of performance and as a basis for strategic planning and forecasting. |
Years Ended December 31, |
||||||||
(in thousands) |
2021 |
2020 |
||||||
Net loss |
$ | (220,609 | ) | $ | (157,784 | ) | ||
Add back: |
||||||||
Interest expense |
8,522 | 2,003 | ||||||
Other income (expense), net |
2,993 | 1,426 | ||||||
Provision/(benefit) for income taxes |
(82 | ) | 97 | |||||
Depreciation and amortization |
4,028 | 3,138 | ||||||
Stock-based compensation |
10,558 | 1,749 | ||||||
Loss on convertible loans |
27,338 | 42,907 | ||||||
Transaction-related costs (1) |
748 | 188 | ||||||
Deduct: |
||||||||
Interest income |
(6 | ) | (276 | ) | ||||
|
|
|
|
|||||
Adjusted EBITDA |
$ | (166,510 | ) | $ | (106,552 | ) | ||
|
|
|
|
(1) | Consists of accounting and consulting fees related to public company readiness that did not qualify for capitalization under GAAP. |
(in thousands) |
December 31, 2021 |
December 31, 2020 |
||||||
Cash and cash equivalents |
$ | 85,836 | $ | 58,452 | ||||
Restricted cash |
1,710 | 5,494 | ||||||
Accounts receivable, net |
9,977 | 4,544 |
Years Ended December 31, |
||||||||
(in thousands) |
2021 |
2020 |
||||||
Net cash used in operating activities |
$ | (174,618 | ) | $ | (95,342 | ) | ||
Net cash (used in) provided by investing activities |
(6,403 | ) | 14,498 | |||||
Net cash provided by financing activities |
204,648 | 78,427 | ||||||
Effect of exchange rate on cash, cash equivalents and restricted cash |
(27 | ) | 349 | |||||
|
|
|
|
|||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
$ | 23,600 | $ | (2,068 | ) | |||
|
|
|
|
• |
Revenue Recognition; |
• |
Stock-based Compensation; and |
• |
Fair value of Convertible Loans. |
• |
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. |
• |
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. |
• |
Expected Volatility. Expected volatility was determined based on similar companies’ stock volatility. |
• |
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. |
6 5 |
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6 6 |
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6 7 |
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6 8 |
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6 9 |
||||
70 |
December 31, |
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2021 |
2020 |
|||||||
ASSETS |
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Current assets: |
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Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
||||||||
Accounts receivable, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Intangible assets, net |
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Other assets |
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Total assets |
$ | $ | ||||||
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|||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | $ | ||||||
Accrued expenses and other current liabilities |
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Short-term debt |
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Total current liabilities |
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Long-term debt, net of discount |
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Long-term convertible loan, at fair value (related party carrying value of $ |
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Derivative warrant liabilities |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES (Note 17) |
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REDEEMABLE CONVERTIBLE PREFERRED STOCK |
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Redeemable convertible preferred stock, $ |
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STOCKHOLDERS’ DEFICIT |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Accumulated deficit |
( |
) | ( |
) | ||||
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Total stockholders’ deficit |
( |
) | ||||||
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Total liabilities, redeemable convertible preferred stock and stockholders’ deficit |
$ | $ | ||||||
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|
Years Ended December 31, |
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2021 |
2020 |
|||||||
Revenue |
$ | $ | ||||||
Operating expenses: |
||||||||
Cost of revenue |
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Operations and technology |
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General and administrative |
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Total operating expenses |
||||||||
|
|
|
|
|||||
Loss from operations |
( |
) | ( |
) | ||||
Loss on convertible loans |
( |
) | ( |
) | ||||
Interest expense |
( |
) | ( |
) | ||||
Interest income |
||||||||
Other expense, net |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Loss before provision for income taxes |
( |
) | ( |
) | ||||
Provision/(benefit) for income taxes |
( |
) | ||||||
|
|
|
|
|||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Other comprehensive loss, net of tax |
||||||||
Cumulative translation adjustment |
( |
) | ||||||
|
|
|
|
|||||
Total comprehensive loss |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Net loss per share, basic and diluted |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|||||
Weighted average shares used in computing net loss per share, basic and diluted |
||||||||
|
|
|
|
Redeemable Convertible Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Accumulated Other Comprehensive Income |
Accumulated Deficit |
Total Stockholders’ Deficit |
|||||||||||||||||||||||||||
Shares (1) |
Amount |
Shares (1) |
Amount |
|||||||||||||||||||||||||||||
Balances at December 31, 2019 |
$ | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||||||||||||
Issuance of common stock upon exercise of stock options |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of warrants |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustments |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balances at December 31, 2020 |
( |
) | ( |
) | ||||||||||||||||||||||||||||
Issuance of Series C redeemable convertible preferred stock (net of issuance costs) |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Conversion of redeemable convertible preferred stock into common stock in connection with the reverse recapitalization (Note 3) |
( |
) | ( |
) | — | — | ||||||||||||||||||||||||||
Conversion of convertible notes into common stock upon the reverse recapitalization (Note 3) |
— | — | — | — | ||||||||||||||||||||||||||||
Conversion of warrants into common stock upon the reverse capitalization (Note 3) |
— | — | — | — | — | — | — | |||||||||||||||||||||||||
Reclassification of preferred stock warrant liability upon the reverse recapitalization (Note 3) |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Recapitalization, backstop financing and PIPE financing, net of issuance costs (Note 3) |
— | — | — | — | ||||||||||||||||||||||||||||
Stockholder contribution of stock for inducement in connection with the reverse recapitalization (Note 3) |
— | — | ( |
) | — | — | — | — | — | |||||||||||||||||||||||
Stock issuance for inducement in connection with the reverse recapitalization (Note 3) |
— | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock upon exercise of stock options |
— | — | — | — | — | |||||||||||||||||||||||||||
Gain on extinguishment of convertible loan |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Stock-based compensation |
— | — | — | — | — | — | ||||||||||||||||||||||||||
Foreign currency translation adjustments |
— | — | — | — | — | ( |
) | — | ( |
) | ||||||||||||||||||||||
Net loss |
— | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||
Balances at December 31, 2021 |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||
(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. |
Years ended December 31, |
||||||||
2021 |
2020 |
|||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operations: |
||||||||
Depreciation and amortization |
||||||||
Loss on asset disposal |
||||||||
Stock-based compensation |
||||||||
Accretion of debt discount |
||||||||
Loss on extinguishment of debt related to derecognition of unamortized debt discount |
— | |||||||
Inducement expense in connection with the reverse recapitalization |
— | |||||||
Revaluation of warrants |
( |
) | ||||||
Foreign currency transaction (gain) loss |
( |
) | ||||||
Revaluation of convertible debt |
||||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
( |
) | ||||||
Prepaid expenses and other current assets |
( |
) | ( |
) | ||||
Other assets |
( |
) | ( |
) | ||||
Accounts payable |
( |
) | ||||||
Accrued expenses and other current liabilities |
||||||||
|
|
|
|
|||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Purchases of property and equipment |
( |
) | ( |
) | ||||
Maturities of short-term investments |
— | |||||||
|
|
|
|
|||||
Net cash (used in) provided by investing activities |
( |
) | ||||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from convertible loan |
||||||||
Proceeds from issuance of redeemable convertible preferred stock |
— | |||||||
Proceeds from reverse recapitalization, backstop financing and PIPE financing |
— | |||||||
Proceeds from exercises of stock options |
||||||||
Repayment of Blue Torch and PPP loans |
( |
) | — | |||||
Payment of transaction costs related to the Transactions |
( |
) | — | |||||
Payment of deferred financing costs |
— | ( |
) | |||||
Proceeds from issuance of Blue Torch loan and warrants |
— | |||||||
Proceeds from PPP loan |
— | |||||||
Payment of TriplePoint loan |
— | ( |
) | |||||
|
|
|
|
|||||
Net cash provided by financing activities |
||||||||
|
|
|
|
|||||
Effect of exchange rate on cash, cash equivalents and restricted cash |
( |
) | ||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
( |
) | ||||||
Cash, cash equivalents and restricted cash, beginning of year |
||||||||
|
|
|
|
|||||
Cash, cash equivalents and restricted cash, end of year |
$ | $ | ||||||
|
|
|
|
|||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the year for interest |
$ | $ | ||||||
Cash paid during the year for income taxes |
$ | $ | ||||||
Supplemental disclosure of non-cash financing activity: |
||||||||
Conversion of redeemable preferred stock to common stock |
$ | $ | — | |||||
Issuance of common stock related to convertible debt |
$ | $ | — | |||||
Reclassification of redeemable convertible preferred stock warrant liability to equity |
$ | $ | — | |||||
Deferred success fee |
$ | — | $ | |||||
Property and equipment, net included in accounts payable |
$ | $ | — | |||||
Non-cash interest |
$ | $ | ||||||
Gain on extinguishment of convertible loan |
$ | $ | — | |||||
Derivative warrant liabilities recognized upon the closing of the Transactions |
$ | $ | — |
1. |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
2. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
• | Impact of LIBOR Phase-Out phase-out to have a significant impact on the Company’s consolidated financial statements. |
• | Impact of COVID-19 COVID-19 was identified in late 2019 and spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic. Our business was materially impacted by COVID-19 in several ways. Typically, our Consumer interactions occur within their home. Social distancing protocols changed the way we interact with the Consumer and our in-home visits fell to zero in the early stages of the pandemic. Depending on the geography during certain periods we had no in-home visits and these in-home visits remained significantly below pre-COVID levels throughout 2020. To protect our employees and Consumers we implemented a variety of programs to provide masks, cleaning supplies and other protocols that remain in place. 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. |
December 31, |
||||||||
2021 |
2020 |
|||||||
Reconciliation of cash, cash equivalents and restricted cash: |
||||||||
Cash and cash equivalents |
$ | $ | ||||||
Restricted cash |
||||||||
|
|
|
|
|||||
Total cash, cash equivalents and restricted cash |
$ | $ | ||||||
|
|
|
|
Property and Equipment |
Useful Life | |
Office equipment |
||
Computer equipment |
||
Vehicles |
||
Vehicle equipment |
||
Leasehold improvements |
||
Furniture and fixtures |
• | Identification of the contract with a customer; |
• | Identification of the performance obligations in the contract; |
• | Determination of the transaction price; |
• | Allocation of the transaction price to the performance obligations in the contract; and |
• | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
Chargebacks |
||||
Balance as of January 1, 2020 |
$ | |||
Provision |
||||
Credits/payments made |
( |
) | ||
|
|
|||
Balance as of December 31, 2020 |
||||
Provision |
||||
Credits/payments made |
( |
) | ||
|
|
|||
Balance as of December 31, 2021 |
$ | |||
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Risk-free interest rate |
% | % | ||||||
Expected term (in years) |
||||||||
Expected volatility |
% | % | ||||||
Expected dividend yield |
% | — | % | |||||
Fair value of common stock |
$ | $ |
• | the package of practical expedients 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 practical expedient 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 by class of the underlying asset; and |
• | the practical expedient not to recognize right-of-use |
3. |
REVERSE RECAPITALIZATION |
Number of Shares |
||||
Common stock of MRAC, outstanding prior to Merger |
||||
Less redemption of MRAC shares |
( |
) | ||
Common stock of MRAC |
||||
Shares issued in PIPE financing |
||||
Shares issued in Backstop financing |
||||
Shares issued for deferred underwriting fees |
||||
Merger, PIPE financing, and Backstop financing shares |
||||
Legacy Enjoy shares |
||||
Total shares of common stock immediately after Merger |
||||
4. |
FAIR VALUE MEASUREMENTS |
Fair Value Measurements at December 31, 2021 Using: |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Liabilities: |
||||||||||||||||
Derivative warrant liabilities—Public |
$ | $ | $ | $ | ||||||||||||
Derivative warrants liabilities—Private |
||||||||||||||||
Total financial liabilities |
$ | $ | $ | $ | ||||||||||||
Fair Value Measurements at December 31, 2020 Using: |
||||||||||||||||
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||
Liabilities: |
||||||||||||||||
Redeemable convertible preferred stock warrant liability |
$ | $ | $ | $ | ||||||||||||
Convertible loan |
||||||||||||||||
Total financial liabilities |
$ | $ | $ | $ | ||||||||||||
Convertible Loans |
Redeemable Convertible Preferred Stock Warrant Liability |
|||||||
Balance at January 1, 2020 |
$ | $ | ||||||
Issuance of convertible loan |
||||||||
Change in fair value |
||||||||
Balance at December 31, 2020 |
||||||||
Debt extinguishment of convertible loans |
( |
) | ||||||
Proceeds from issuance of convertible loans |
||||||||
Change in fair value |
( |
) | ||||||
Warrant reclassification to equity |
( |
) | ||||||
Conversion of convertible loans |
( |
) | ||||||
Balance at December 31, 2021 |
$ | $ | ||||||
5. |
PROPERTY AND EQUIPMENT, NET |
December 31, |
||||||||
2021 |
2020 |
|||||||
Leasehold improvements |
$ | $ | ||||||
Furniture and fixtures |
||||||||
Office equipment |
||||||||
Computer equipment |
||||||||
Vehicles |
||||||||
Vehicle equipment |
— | |||||||
|
|
|
|
|||||
Less: accumulated depreciation |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Property and equipment, net |
$ | $ | ||||||
|
|
|
|
6. |
INTANGIBLE ASSETS, NET |
December 31, |
||||||||
2021 |
2020 |
|||||||
Domain Name |
$ | |||||||
Less: accumulated amortization |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Intangible assets, net |
$ | $ | ||||||
|
|
|
|
Years Ending December 31, |
||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
|
|
|||
Total estimated future amortization expense |
$ | |||
|
|
7. |
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
December 31, |
||||||||
2021 |
2020 |
|||||||
Accrued salaries and wages |
$ | $ | ||||||
Deferred rent |
||||||||
Accrued payables |
||||||||
Accrued tax |
||||||||
Accrued vacation and benefits |
||||||||
Accrued other |
||||||||
|
|
|
|
|||||
Total accrued expenses and other current liabilities |
$ | $ | ||||||
|
|
|
|
8. |
DEBT |
9. |
STOCK WARRANTS |
December 31, |
||||||||
2021 |
2020 |
|||||||
Public warrants |
$ | $ | ||||||
Private placement warrants |
||||||||
Redeemable convertible preferred stock warrant |
||||||||
|
|
|
|
|||||
Total warrant liabilities |
$ | $ | ||||||
|
|
|
|
• | in whole and not in part; |
• | at a price of $ |
• | upon a minimum of |
• | if, and only if, the last reported sale price of our common stock for any |
• | in whole and not in part; |
• | at $ |
• | if, and only if, the Reference Value equals or exceeds $ |
• | if the Reference Value is less than $ |
Balance at January 1, 2020 |
$ | |||
Change in fair value |
||||
|
|
|||
Balance at December 31, 2020 |
||||
Change in fair value |
( |
) | ||
Reclassification to equity |
( |
) | ||
|
|
|||
Balance at December 31, 2021 |
$ | |||
|
|
10. |
REDEEMABLE CONVERTIBLE PREFERRED STOCK |
Preferred Shares Authorized |
Preferred Shares Issued and Outstanding |
Issuance Price Per Share |
Conversion Price Per Share |
Carrying Value |
Liquidation Preference |
|||||||||||||||||||
Series Seed |
$ | $ | $ | $ | ||||||||||||||||||||
Series A |
||||||||||||||||||||||||
Series B |
||||||||||||||||||||||||
Series C |
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||
Total |
$ | $ | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
11. |
COMMON STOCK |
December 31, |
||||||||
2021 |
2020 |
|||||||
Conversion of redeemable convertible preferred stock |
||||||||
Exercise of public warrants and private placement warrants |
||||||||
Warrants to purchase redeemable convertible and common stock preferred stock |
||||||||
Awards outstanding under the equity incentive plans |
||||||||
Awards available for future grant under the equity incentive plans |
||||||||
Awards available for future grant under the employee stock purchase plan |
||||||||
|
|
|
|
|||||
Total |
||||||||
|
|
|
|
12. |
STOCK-BASED COMPENSATION |
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Cost of revenue |
$ | $ | ||||||
Operations and technology |
||||||||
General and administrative |
||||||||
|
|
|
|
|||||
Total stock-based compensation expense |
$ | $ | ||||||
|
|
|
|
Number of Shares |
Weighted Average Exercise Price |
Remaining Contractual Term (In Years) |
Aggregate Intrinsic Value |
|||||||||||||
Balance at January 1, 2020 |
$ | $ | ||||||||||||||
Options granted |
||||||||||||||||
Options exercised |
( |
) | ||||||||||||||
Options cancelled |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Balance at December 31, 2020 |
$ | |||||||||||||||
Options granted |
||||||||||||||||
Options exercised |
( |
) | ||||||||||||||
Options cancelled |
( |
) | ||||||||||||||
|
|
|||||||||||||||
Balance at December 31, 2021 |
$ | |||||||||||||||
|
|
|||||||||||||||
Options exercisable as of December 31, 2021 |
||||||||||||||||
|
|
|||||||||||||||
Vested and expected to vest—December 31, 2021 |
$ | |||||||||||||||
|
|
Number of RSUs |
Weighted- Average Grant Date Fair Value per Share |
|||||||
Balance at December 31, 2020 |
$ | |||||||
Granted |
||||||||
Released |
||||||||
Cancelled/forfeited |
( |
) | ||||||
|
|
|||||||
Balance at December 31, 2021 |
$ | |||||||
|
|
13. |
INCOME TAXES |
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Federal |
$ | ( |
) | $ | ( |
) | ||
Foreign |
||||||||
|
|
|
|
|||||
Loss before provision for income taxes |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Federal statutory rate |
% | % | ||||||
Effect of: |
||||||||
State statutory rate, net of federal tax benefit |
% | % | ||||||
Foreign tax |
% | ( |
)% | |||||
Change in valuation allowance |
( |
)% | ( |
)% | ||||
Loss on convertible loan |
( |
)% | ( |
)% | ||||
Warrants |
% | |||||||
Other |
( |
%) | ( |
)% | ||||
|
|
|
|
|||||
Total |
% | ( |
)% | |||||
|
|
|
|
Years Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Current provision: |
||||||||
Federal |
$ | $ | ||||||
State |
||||||||
Foreign |
||||||||
|
|
|
|
|||||
Total current provision |
||||||||
|
|
|
|
|||||
Deferred provision: |
||||||||
Federal |
||||||||
State |
||||||||
Foreign |
( |
) | ||||||
|
|
|
|
|||||
Total deferred provision/(benefit) |
( |
) | ||||||
|
|
|
|
|||||
Provision/(benefit) for income taxes |
$ | ( |
) | $ | ||||
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
Deferred tax assets: |
||||||||
Net operating loss carryforwards |
$ | $ | ||||||
Stock-based compensation |
||||||||
Accruals and reserves |
||||||||
Property and equipment |
||||||||
163(j) interest limitation |
||||||||
|
|
|
|
|||||
Total deferred tax asset before valuation allowance |
||||||||
|
|
|
|
|||||
Valuation allowance |
( |
) | ( |
) | ||||
|
|
|
|
|||||
Deferred tax assets, net of valuation allowance |
$ | $ | ||||||
|
|
|
|
Gross unrecognized tax benefits at January 1, 2020 |
$ | |||
Increase for tax positions during 2020 |
||||
|
|
|||
Gross unrecognized tax benefits at December 31, 2020 |
||||
Gross increase for tax positions during 2021 |
||||
Gross decrease for tax positions during 2021 |
( |
) | ||
|
|
|||
Gross unrecognized tax benefits at December 31, 2021 |
$ | |||
|
|
14. |
NET LOSS PER SHARE |
Year Ended December 31, |
||||||||
2021 |
2020 |
|||||||
Numerator: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Denominator: |
||||||||
Weighted-average common shares outstanding—basic and diluted |
||||||||
|
|
|
|
|||||
Net loss per share—basic and diluted |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
December 31, |
||||||||
2021 |
2020 |
|||||||
Conversion of redeemable convertible preferred stock |
— | |||||||
Public warrants and private placement warrants |
— | |||||||
Warrants to purchase redeemable convertible preferred stock |
||||||||
Options to purchase common stock |
||||||||
Restricted stock units |
— | |||||||
Conversion of convertible loan |
— | |||||||
|
|
|
|
|||||
Total common stock equivalents |
||||||||
|
|
|
|
15. |
SEGMENT INFORMATION |
• | North America: The North America segment consists of operations within the United States and Canada. |
• | Europe: The Europe segment consists of operations within the United Kingdom. |
For the Year Ended December 31, 2021 |
||||||||||||
North America |
Europe |
Total |
||||||||||
Revenue |
$ | $ | $ | |||||||||
Segment loss |
( |
) | ( |
) | ( |
) | ||||||
Unallocated corporate expenses: |
||||||||||||
Operations and technology |
( |
) | ||||||||||
General and administrative |
( |
) | ||||||||||
|
|
|||||||||||
Loss from operations |
$ | ( |
) | |||||||||
|
|
|||||||||||
For the Year Ended December 31, 2020 |
||||||||||||
North America |
Europe |
Total |
||||||||||
Revenue |
$ | $ | $ | |||||||||
Segment loss |
( |
) | ( |
) | ( |
) | ||||||
Unallocated corporate expenses: |
||||||||||||
Operations and technology |
( |
) | ||||||||||
General and administrative |
( |
) | ||||||||||
|
|
|||||||||||
Loss from operations |
$ | ( |
) | |||||||||
|
|
Year Ended December 31, |
||||||||
2021 |
2020 |
|||||||
United States |
% | % | ||||||
Canada |
% | % | ||||||
|
|
|
|
|||||
% | % | |||||||
|
|
|
|
As of December 31, |
||||||||
2021 |
2020 |
|||||||
North America |
$ | $ | ||||||
Europe |
||||||||
|
|
|
|
|||||
Total long-lived assets |
$ | $ | ||||||
|
|
|
|
16. |
EMPLOYEE BENEFIT PLANS |
17. |
COMMITMENTS AND CONTINGENCIES |
Years Ending December 31, |
||||
2022 |
$ | |||
2023 |
||||
2024 |
||||
2025 |
||||
2026 |
||||
Thereafter |
||||
|
|
|||
Total minimum lease payments |
$ | |||
|
|
Item 9. |
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure. |
Item 9A. |
Controls and Procedures. |
• | We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient number of professionals with (i) an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately, and (ii) an appropriate level of knowledge and experience to establish effective processes and controls. Additionally, the lack of a sufficient number of professionals resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of our financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in our finance and accounting functions. |
• | We did not design and maintain effective controls in response to the risks of material misstatement. Specifically, changes to existing controls or the implementation of new controls were not sufficient to respond to changes to the risks of material misstatement to financial reporting. |
• | We did not design and maintain effective controls over the segregation of duties related to journal entries and account reconciliations. Specifically, certain personnel have the ability to both (i) create and post journal entries within our general ledger system and (ii) prepare and review account reconciliations. |
• | We did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of the financial statements. Specifically, we did not design and maintain: (i) program change management controls for all financial systems to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and |
privileged access to financial applications and data to appropriate personnel; (iii) computer operations controls to ensure that critical batch jobs are monitored, and data backups are authorized and monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements. These IT deficiencies did not result in a misstatement to the financial statements, however, the deficiencies, when aggregated, could impact our ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected. Accordingly, management has determined these deficiencies in the aggregate constitute a material weakness. |
• | We have hired, and will continue to hire, personnel with appropriate level of knowledge, training, and experience in accounting and finance to improve our financial accounting and reporting departments and our internal control over financial reporting. During the fourth quarter of 2021, we provided financial reporting and internal control training to enhance employees’ competence and experience required to fulfill their roles and responsibilities. |
• | During the fourth quarter of 2021, we initiated performing a risk assessment over our financial reporting and our internal control over financial reporting, including identification of financially relevant systems and business processes at the financial statement assertion level, and to identify controls to address the identified risks. We will continue to complete our risk assessment and enhance the design of existing controls, as well as implement new controls in future periods. |
• | We plan to design and implement controls over the preparation and review of journal entries and account reconciliations, including controls over the segregation of duties. We have begun to strengthen, and will continue to strengthen, controls related to segregation of duties related to financial accounting and reporting systems. |
• | We plan to design and implement IT general controls, including controls over the provisioning and monitoring of user access rights and privileges, change management processes and procedures, batch job and data backup authorization and monitoring, and program development approval and testing. |
Item 9B. |
Other Information. |
Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
Item 10. |
Directors, Executive Officers and Corporate Governance. |
Name |
Age |
Position | ||
Executive Officers |
||||
Ron Johnson |
63 | Director, Co-Founder and Chief Executive Officer | ||
Fareed Khan |
56 | Chief Financial Officer | ||
Jonathan Mariner |
67 | Director, Chief Administrative Officer | ||
Tiffany N. Meriweather |
38 | Chief Legal Officer and Corporate Secretary | ||
Non-Employee Directors |
||||
Fred Harman (1)(3) |
61 | Director | ||
Thomas Ricketts (2) |
56 | Director | ||
Brett Varsov (3) |
46 | Director | ||
Salaam Coleman Smith (3) |
52 | Director | ||
Denise Young Smith (1)(2) |
55 | Director | ||
Gideon Yu (1) |
50 | Director |
(1) | Member of the Audit Committee |
(2) | Member of the Compensation Committee |
(3) | Member of the Nominating and Governance Committee |
• | appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered public accounting firm; |
• | discussing with our independent registered public accounting firm their independence from management; |
• | reviewing with our independent registered public accounting firm the scope and results of their audit; |
• | pre-approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm; |
• | overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; |
• | reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; and |
• | establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters. |
• | reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officers, evaluating the performance of our Chief Executive Officer in light of these goals and objectives and setting or making recommendations to the board of directors regarding the compensation of our Chief Executive Officer; |
• | reviewing and setting or making recommendations to our board of directors regarding the compensation of other executive officers; |
• | making recommendations to our board of directors regarding the compensation of our directors; |
• | reviewing and approving or making recommendations to our board of directors regarding our incentive compensation and equity-based plans and arrangements; and |
• | appointing and overseeing any compensation consultants. |
• | identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; |
• | recommending to our board of directors the nominees for election to our board of directors at annual meetings of our stockholders; |
• | overseeing an evaluation of our board of directors and its committees; and |
• | developing and recommending to our board of directors a set of corporate governance guidelines. |
Item 11. |
Executive Compensation. |
• | Ron Johnson, Co-Founder and Chief Executive Officer |
• | Fareed Khan, Chief Financial Officer |
• | Jonathan Mariner, Chief Administrative Officer |
• | Tiffany N. Meriweather, Chief Legal Officer and Corporate Secretary |
Name and Principal Position |
Year |
Salary ($) |
Bonus ($) |
Stock Awards ($) (1) |
Option Awards ($) (1) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
|||||||||||||||||||||||||||
Ron Johnson |
2021 | 57,600 | — | — | — | — | — | — | 57,600 | |||||||||||||||||||||||||||
Chief Executive Officer |
2020 | 49,920 | — | — | — | — | — | — | 49,920 | |||||||||||||||||||||||||||
Jonathan Mariner |
2021 | 600,000 | — | 5,162,808 | 1,878,261 | — | — | 60,000 | (2) |
7,701,069 | ||||||||||||||||||||||||||
Chief Administrative Officer |
2020 | 32,308 | — | — | — | — | — | 4,615 | (2) |
36,923 | ||||||||||||||||||||||||||
Fareed Khan |
2021 | 361,539 | — | 5,162,808 | 1,887,970 | — | — | — | 7,412,317 | |||||||||||||||||||||||||||
Chief Financial Officer |
2020 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Tiffany N. Meriweather |
2021 | 250,000 | 80,356 | (3) |
4,354,130 | 1,871,812 | — | — | — | 6,556,299 | ||||||||||||||||||||||||||
Chief Legal Officer and Corporate Secretary |
2020 | — | — | — | — | — | — | — | — |
(1) | Amounts reported in this column do not reflect the amounts actually received by our named executive officers. Instead, these amounts reflect the aggregate grant date fair value of each award granted to the named executive officers during |
2021, as computed in accordance with Accounting Standards Codification 718 using the assumptions described in Note 2 to Enjoy’s audited financial statements for the year ended December 31, 2021 included elsewhere in this Report under “Part II, Item 8. Financial Statements and Supplementary Data”. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. |
(2) | Beginning with the commencement of his employment in December 2020, Mr. Mariner has received a stipend of $5,000 per month, split evenly over each pay period. |
(3) | Ms. Meriweather received a one-time bonus in connection with the commencement of her employment. |
Option Awards |
Stock Awards |
|||||||||||||||||||||||||||
Name |
Grant Date |
Number of securities underlying un-exercised options (#) exercisable |
Number of securities underlying unexercised options (#) un-exercisable |
Option exercise price ($) |
Option expiration date |
Number of shares or units of stock that have not vested (#) |
Market value of shares or units of stock that have not vested ($) (1) |
|||||||||||||||||||||
Ron Johnson |
— | — | — | — | — | — | — | |||||||||||||||||||||
Jonathan Mariner |
2/18/21 | (2) |
103,365 | 310,102 | 8.31 | 2/18/2031 | — | — | ||||||||||||||||||||
6/30/21 | (3) |
— | — | — | 143,649 | 663,658 | ||||||||||||||||||||||
12/23/21 | (4) |
— | — | — | — | 531,166 | 2,453,987 | |||||||||||||||||||||
Fareed Khan |
2/18/21 | (5) |
— | 413,467 | 8.31 | 2/18/2031 | — | — | ||||||||||||||||||||
6/30/21 | (6) |
— | — | — | — | 191,532 | 884,878 | |||||||||||||||||||||
12/23/21 | (7) |
— | — | — | — | 531,166 | 2,453,987 | |||||||||||||||||||||
Tiffany N. Meriweather |
6/30/21 | (8) |
— | 344,555 | 10.02 | 6/30/2031 | — | — | ||||||||||||||||||||
6/30/21 | (9) |
— | — | — | — | 184,523 | 852,496 | |||||||||||||||||||||
12/23/21 | (10) |
— | — | — | — | 546,989 | 2,527,089 |
(1) | The amounts in this column were determined based on the closing market price of the Company’s common stock on December 31, 2021 of $4.62. |
(2) | Twenty-five percent of the shares subject to the stock option vested on December 1, 2021, the first anniversary of the vesting start date, and the remaining amount vests in equal monthly installments and will be fully vested on December 1, 2024, the fourth anniversary of the vesting start date, subject to continuous service through each vesting date. |
(3) | Twenty-five percent of the restricted stock units (“RSUs”) vested on December 1, 2021, with the remaining RSUs vesting in equal installments of 1/16th of the total number of RSUs quarterly thereafter, subject to continuous service through each vesting date. |
(4) | Twenty-five percent of the RSUs vested on December 10, 2021, with the remaining RSUs vesting in equal installments of 1/16th of total number of RSUs quarterly thereafter, subject to continuous service through each vesting date. |
(5) | Twenty-five percent of the shares subject to the stock option shall vest on January 25, 2022, the first anniversary of the vesting start date, and the remaining balance vests in equal monthly installments and will be fully vested on January 25, 2025, the fourth anniversary of the vesting start date, subject to continuous service through each vesting date. |
(6) | Twenty-five percent of the RSUs shall vest on January 25, 2022, with the remaining RSUs vesting in equal installments of 1/16th of the total number of RSUs quarterly thereafter, subject to continuous service through each vesting date. |
(7) | Twenty-five percent of the RSUs vested on December 10, 2021, with the remaining RSUs vesting in equal installments of 1/16th of the total number of RSUs quarterly thereafter, subject to continuous service through each vesting date. |
(8) | Twenty-five percent of the shares subject to the stock option shall vest on April 26, 2022, the first anniversary of the vesting start date, and the remaining balance vests in equal monthly installments and will be fully vested on April 26, 2025, the fourth anniversary of the vesting start date, subject to continuous service through each vesting date. |
(9) | Twenty-five percent of the RSUs shall vest on April 26, 2022, with the remaining RSUs vesting in equal installments of 1/16th of the total number of RSUs quarterly thereafter, subject to continuous service through each vesting date. |
(10) | Twenty-five percent of the RSUs shall vest on June 10, 2022, with the remaining RSUs vesting in equal installments of 1/16th of the total number of RSUs quarterly thereafter, subject to continuous service through each vesting date. |
Name |
Fees Earned or Paid in Cash ($) |
Stock Awards ($) (1) |
Total ($) |
|||||||||
Fred Harman |
15,897 | 158,821 | 174,717 | |||||||||
Thomas Ricketts |
15,897 | 158,821 | 174,717 | |||||||||
Brett Varsov |
15,897 | 158,821 | 174,717 | |||||||||
Salaam Coleman Smith |
18,016 | 158,821 | 176,837 | |||||||||
Denise Young Smith |
18,546 | 158,821 | 177,367 | |||||||||
Gideon Yu |
23,315 | 158,821 | 182,136 |
(1) | Amounts listed represent the aggregate grant date fair value of awards granted during the year referenced, computed in accordance with FASB ASC Topic 718, excluding the effect of estimated forfeitures. These amounts do not reflect the actual economic value that may be realized by the director. As of December 31, 2021, each of Fred Harman, Thomas Ricketts, Brett Varsov, Salaam Coleman Smith, Denise Young Smith and Gideon Yu had outstanding stock awards with respect to 34,677 shares. |
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
• | each person who is known to be the beneficial owner of more than 5% of our voting shares; |
• | each of our named executive officers and directors; and |
• | all of our executive officers and directors as a group. |
Name and Address of Beneficial Owner (1) |
Number of Shares |
% of Ownership |
||||||
5% or Greater Stockholders: |
||||||||
Entities affiliated with King Street Capital Management, L.P. (2) |
6,888,903 | 5.7 | % | |||||
Entities affiliated with Riverwood Capital (3) |
6,313,795 | 5.3 | % | |||||
LCH Enjoir L.P. (4) |
16,615,259 | 13.8 | % | |||||
Marquee Raine Acquisition Sponsor LP (5) |
15,585,417 | 13.0 | % | |||||
SCP Venture Fund I, L.P. (6) |
9,248,980 | 7.7 | % | |||||
Executive Officers and Directors: |
||||||||
Fred Harman (7) |
5,264,509 | 4.4 | % | |||||
Ron Johnson (8) |
19,615,172 | 16.3 | % | |||||
Fareed Khan (9) |
434,867 | * | ||||||
Jonathan Mariner (10) |
472,020 | * | ||||||
Tiffany N. Meriweather (11) |
148,141 | * | ||||||
Thomas Ricketts |
— | — | ||||||
Salaam Coleman Smith |
— | — | ||||||
Denise Young Smith |
— | — | ||||||
Brett Varsov |
— | — | ||||||
Gideon Yu (12) |
137,822 | * | ||||||
All directors and executive officers as a group (10 individuals) (13) |
26,072,521 | 21.7 | % | |||||
|
|
|
|
* | Less than one percent |
(1) | Unless otherwise noted, the business address of each of the following entities or individuals is c/o Enjoy Technology, Inc. 3240 Hillview Ave, Palo Alto, CA 94304. |
(2) | Based on a Schedule 13G filed on February 11, 2022 by King Street Capital Management, L.P. (“KSCM”), King Street Capital Management GP, L.L.C. (“KSCM GP”) and Brian J. Higgins, as of December 31, 2021, KSCM may be deemed to have beneficially owned, and to share voting and dispositive power over, a total of 6,888,903 shares of common stock and KSCM GP and Mr. Higgins may be deemed to have beneficially owned, and to share voting and dispositive power over, the common stock that may be deemed to have been beneficially owned by KSCM. The business address of KSCM, KSCM GP and Mr. Higgins is 299 Park Avenue, 40th Floor New York, NY 10171. |
(3) | Based on a Schedule 13G filed on February 15, 2022 by Riverwood Capital GP II Ltd. (“Riverwood GP”), Riverwood Capital II L.P. (“Riverwood LP”), Riverwood Capital Partners II L.P. (“RCP”) and Riverwood Capital Partners II (Parallel—B) L.P. (“RCP Parallel – B”), (i) RCP held 5,004,339 shares of common stock directly, (ii) RCP Parallel—B held 1,309,456 shares of common stock directly (together with RCP, “Riverwood Capital”) and (iii) Riverwood LP and Riverwood GP may be deemed to have voting and dispositive power over, and be deemed to be indirect beneficial owners of the common stock directly held by Riverwood Capital. The business address of Riverwood GP, Riverwood LP, RCP and RCP Parallel-B is 70 Willow Road, Suite 100, Menlo Park, CA 94025. |
(4) | LCH Partners GP L.P. is the general partner of LCH Enjoir L.P. (“LCH”) and LCH Partners Limited is the general partner of LCH Partners GP L.P. The management of LCH Partners Limited is controlled by a board of directors. The address of the entities and individuals mentioned in this footnote is 599 West Putnam Avenue, Greenwich, CT 06830. |
(5) | Based on Amendment No. 1 to Schedule 13G filed on February 8, 2022 by Marquee Raine Acquisition Sponsor LP (“Sponsor”), Marquee Raine Acquisition Sponsor GP Ltd. (“Marquee Raine GP”), Raine Holdings AIV LLC (“Raine Holdings AIV”), Raine SPAC Holdings LLC (“Raine SPAC Holdings”), Raine RR SPAC SPV I LLC (“Raine RR SPAC SPV I”), Ricketts SPAC Investment LLC (“Ricketts SPAC Investment”) and Marquee Sports Holdings SPAC 1, LLC (“Marquee Sports Holdings”), Marquee Raine GP is the general partner of Sponsor. Raine Holdings AIV is the sole member of Raine SPAC Holdings, which, in turn, is the sole member of Raine RR SPAC SPV I, which owns a 50% interest in each of Marquee Raine GP and Sponsor. Ricketts SPAC Investment is the manager of Marquee Sports Holdings, which owns a 50% interest in each of Marquee Raine GP and Sponsor. Each of the Reporting Persons named in this Schedule 13G disclaims beneficial ownership of the securities held directly or indirectly by such Reporting Persons, except to the extent of their respective pecuniary interests. The business address of each of the foregoing persons is 65 East 55th Street, 24th Floor New York, NY 10022. |
(6) | Based on a Schedule 13G filed on February 11, 2022 by Stamos Capital Partner, L.P. and Peter Stamos for beneficial ownership as of December 2021. SCP Venture GP I, LLC is the general partner of SCP Venture Fund I, L.P. (“SCP”), the sole member and manager of which is Stamos Capital Associates, LLC. The managing member of Stamos Capital Associates, LLC is Peter Stamos. As such, Mr. Stamos could be deemed to share voting control and investment power over shares that may be deemed to be beneficially owned by SCP. Mr. Stamos disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein. The principal business address for all entities and individuals affiliated with SCP is 2498 Sand Hill Road, Menlo Park, California 94025. |
(7) | Mr. Harman, a director for the Company, is a managing partner of Oak Investment Partners XIII, Limited Partnership, a Delaware limited partnership (“Oak”), and, as such, may be deemed to possess shared beneficial ownership of any shares of common stock held by Oak. The business address for Oak is 901 Main Avenue, Suite 600, Norwalk, CT 06851. Mr. Harman disclaims beneficial ownership of the shares held by Oak except to the extent of his pecuniary interest in the shares. |
(8) | Consists of (i) 1,555,673 shares of common stock held by The Johnson 2011 Trust, as nominee for The Johnson 2011 Irrevocable Children’s Trust, of which Mr. Johnson is a co-trustee, and (ii) 18,059,499 shares of common stock. |
(9) | Consists of (i) 137,821 shares subject to options exercisable within 60 days of March 21, 2022, 120,593 of which were vested as of March 21, 2022 and (ii) 297,046 shares issuable pursuant to restricted stock units (“RSUs”) that will vest and settle within 60 days of March 21, 2022. |
(10) | Consists of (i) 20,602 shares of common stock held as of March 21, 2022,(ii) 146,435 shares subject to option exercisable within 60 days of March 21, 2022, 129,207 of which were vested as of March 21, 2022, and (iii) 304,983 shares issuable pursuant to RSUs that will vest and settle within 60 days of March 21, 2022. |
(11) | Consists of (i) 86,137 shares subject to options exercisable within 60 days of March 21, 2022, none of which were vested as of March 21, 2022 and (ii) 62,004 shares issuable pursuant to RSUs that will vest and settle within 60 days of March 21, 2022. |
(12) | Consists of 137,822 shares of New Enjoy common stock issuable to Mr. Yu pursuant to vested options exercisable within 60 days of March 21, 2022. |
(13) | Consists of 25,893,827 shares of common stock and 178,694 shares issuable pursuant to options or RSUs that will vest and settle within 60 days of March 21, 2022. |
Plan category |
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
Weighted- average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future issuance under equity compensation plans |
|||||||||
Equity compensation plans approved by security holders (1) |
14,442,045 | $ | — | 10,487,870 | ||||||||
Equity compensation plans not approved by security holders |
— | $ | — | — | ||||||||
Total |
14,442,045 | $ | — | 10,487,870 | ||||||||
(1) | Includes shares of our common stock under our 2021 Plan and the ESPP. For a description of these plans, refer to Note 12 to the financial statements included in this Report under “Part II. Item 8. Financial Statements and Supplementary Data”. |
Item 13. |
Certain Relationships and Related Transactions, and Director Independence. |
Name |
Shares of Series C Preferred Stock |
Total Purchase Price |
||||||
LCH Enjoir L.P. (1) |
39,531,941 | $ | 149,999,997 |
(1) | LCH Enjoir L.P (“Catterton”) currently holds more than 5% of our capital stock. |
Name |
Shares of Series B Preferred Stock |
Total Purchase Price |
||||||
Ron Johnson (1) |
2,101,900 | $ | 5,000,000 | |||||
Entities affiliated with Oak Investment Partners (2) |
4,371,952 | $ | 10,399,999 | |||||
SCP Venture Fund I, L.P. |
11,875,737 | $ | 28,250,003 |
(1) | Ron Johnson is our chief executive officer, a member of the Company’s board of directors and currently holds more than 5% of our capital stock. |
(2) | Fred Harman is member of the Company’s board of directors and an affiliate of Oak Investment Partners XIII, Limited Partnership. Entities affiliated with Oak Investment Partners include Oak Investment Partners XIII, Limited Partnership. |
• | any person who is, or at any time during the applicable period was, one of Enjoy’s executive officers or directors; |
• | any person who is known by the post-combination company to be the beneficial owner of more than 5% of Enjoy voting stock; |
• | any immediate family member of any of the foregoing persons, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law sister-in-law |
• | any firm, corporation or other entity in which any of the foregoing persons is a partner or principal, or in a similar position, or in which such person has a 10% or greater beneficial ownership interest. Enjoy has policies and procedures designed to minimize potential conflicts of interest arising from any dealings it may have with its affiliates and to provide appropriate procedures for the disclosure of any real or potential conflicts of interest that may exist from time to time. Specifically, pursuant to its audit committee charter, the audit committee has the responsibility to review related party transactions. |
Item 14. |
Principal Accounting Fees and Services. |
Item 15. |
Exhibits, Financial Statement Schedules. |
1. | Financial Statements |
2. | Financial Statement Schedules |
3. | Exhibits |
31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||||
32.1** | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||||
32.2** | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||||
101.INS | Inline XBRL Instance Document—the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* | Filed herewith. |
** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, ae amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. |
# | Indicates management contract or compensatory plan. |
† | Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(b)(2). The Registrant agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request. |
Item 16. |
Form 10-K Summary |
ENJOY TECHNOLOGY, INC. | ||||||
Date: March 25, 2022 | By: | /s/ Fareed Khan | ||||
Name: Fareed Khan | ||||||
Title: Chief Financial Officer |
Name |
Title |
Date | ||
/s/ Ron Johnson Ron Johnson |
Director and Chief Executive Officer (Principal Executive Officer) |
March 25, 2022 | ||
/s/ Fareed Khan Fareed Khan |
Chief Financial Officer (Principal Financial and Accounting Officer) |
March 25, 2022 | ||
/s/ Jonathan Mariner Jonathan Mariner |
Director and Chief Administrative Officer | March 25, 2022 | ||
/s/ Fred Harman Fred Harman |
Director | March 25, 2022 | ||
/s/ Salaam Coleman Smith Salaam Coleman Smith |
Director | March 25, 2022 | ||
/s/ Thomas Ricketts Thomas Ricketts |
Director | March 25, 2022 | ||
/s/ Brett Varsov Brett Varsov |
Director | March 25, 2022 |
/s/ Denise Young Smith Denise Young Smith |
Director | March 25, 2022 | ||
/s/ Gideon Yu Gideon Yu |
Director | March 25, 2022 |
Exhibit 4.3
DESCRIPTION OF THE REGISTRANTS SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
The following description of the capital stock of Enjoy Technology, Inc. (the Company, we, us, and our) and certain provisions of our certificate of incorporation (the Certificate of Incorporation), bylaws (the Bylaws), and Warrant Agreement, dated December 17, 2020, between Marquee Raine Acquisition Corp. (MRAC) and Continental Stock Transfer & Trust Company, as warrant agent (the Warrant Agreement), are summaries and are qualified in their entirety by reference to the full text of the Certificate of Incorporation, Bylaws, and Warrant Agreement, copies of which have been filed with the Securities and Exchange Commission as exhibits to our Annual Report on Form 10-K, and applicable provisions of the General Corporation Law of the State of Delaware (the DGCL).
We have two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the Exchange Act): common stock, $0.0001 par value per share (common stock) and warrants to purchase shares of common stock (warrants). All shares of our common stock outstanding are fully paid and non-assessable. Capitalized terms used but not defined herein have the meanings set forth in the Annual Report on Form 10-K to which this description is an exhibit.
Authorized and Outstanding Stock
The Certificate of Incorporation authorizes the issuance of 510,000,000 shares, consisting of 500,000,000 shares of our common stock and 10,000,000 shares of preferred stock, $0.0001 par value per share (preferred stock).
Common Stock
Holders of our common stock are entitled to one vote for each share held on all matters to be voted on by stockholders. There is no cumulative voting with respect to the election of directors. Our stockholders are entitled to receive ratable dividends when, as and if declared by our board of directors out of funds legally available therefor. Holders of our common stock have no preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to our common stock. If our Company liquidates, dissolves or wind ups, our stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over our common stock.
Preferred Stock
The Certificate of Incorporation provides that shares of preferred stock may be issued from time to time in one or more series. Our board of directors are authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions, applicable to the shares of each series.
Warrants
Public Shareholders Warrants
Each whole warrant entitles the registered holder to purchase one share of our common stock at a price of $11.50 per share, subject to adjustment as discussed below, provided that we maintain the effectiveness of a registration statement under the Securities Act of 1933, as amended (the Securities Act), covering the issuance of our common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or we permit holders to exercise their warrants on a cashless basis under the circumstances specified in the Warrant Agreement) and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the Warrant Agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means only a whole warrant may be exercised at a given time by a warrant holder. No fractional warrants will be issued upon separation of the units, no cash will be paid in lieu of fractional warrants and only whole warrants will trade. The warrants will expire on October 15, 2026, five years after the completion of the Business Combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
We will not be obligated to deliver any shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares underlying the warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No warrant will be exercisable and we will not be obligated to issue a share upon exercise of a warrant unless the share issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant may have no value and expire worthless.
Redemption of Warrants for Cash
Once the warrants become exercisable, we may call the warrants for redemption:
| in whole and not in part; |
| at a price of $0.01 per warrant; |
| if, and only if, the last reported sale price of the shares of our common stock for any 20 trading days within a 30-trading day period ending three business days before we send to the notice of redemption to the warrant holders (which we refer to as the Reference Value) equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like). |
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.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. Any such exercise would not be done on a cashless basis and would require the exercising warrant holder to pay the exercise price for each warrant being exercised.
However, the price of the shares may fall below the $18.00 redemption trigger price (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) as well as the $11.50 (for whole shares) warrant exercise price after the redemption notice is issued.
Redemption of Warrants When the Price per Share Equals or Exceeds $10.00
Once the warrants become exercisable, we may redeem the outstanding warrants:
| in whole and not in part; |
| at $0.10 per warrant upon a minimum of 30 days prior written notice of redemption; provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive a number of shares determined by reference to the table below, based on the redemption date and the fair market value of our shares (as defined below); |
| if, and only if, the Reference Value (as defined above) equals or exceeds $10.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like); and |
| if the Reference Value is less than $18.00 per share (as adjusted for share splits, share dividends, reorganizations, recapitalizations and the like) the private placement warrants must also be concurrently called for redemption on the same terms as the outstanding public warrants, as described above. |
Beginning on the date the notice of redemption is given until the warrants are redeemed or exercised, holders may elect to exercise their warrants on a cashless basis. The numbers in the table below represent the number of shares of our common stock that a warrant holder will receive upon exercise in connection with a redemption by us pursuant to this redemption feature, based on the fair market value of the shares on the corresponding redemption date (assuming holders elect to exercise their warrants and such warrants are not redeemed for $0.10 per warrant), determined based on volume- weighted average price of the shares as reported during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants, and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below. We will provide our warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends.
The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a warrant or the exercise price of the warrant is adjusted as set forth under the heading Anti-dilution Adjustments below. If the number of shares issuable upon exercise of a warrant is adjusted, the adjusted share prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the exercise price of the warrant after such adjustment and the denominator of which is the price of the warrant immediately prior to such adjustment. In such an event, the number of shares in the table below shall be adjusted by multiplying such share amounts by a fraction, the numerator of which is the number of shares deliverable upon exercise of a warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a warrant as so adjusted. The number of shares in the table below shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a warrant.
Fair Market Value of Shares of New Enjoy Common Stock | ||||||||||||||||||||||||||||||||||||
Redemption Date (period to expiration of warrants) |
$10.00 | $11.00 | $12.00 | $13.00 | $14.00 | $15.00 | $16.00 | $17.00 | $18.00 | |||||||||||||||||||||||||||
60 months |
0.261 | 0.281 | 0.297 | 0.311 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
57 months |
0.257 | 0.277 | 0.294 | 0.310 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
54 months |
0.252 | 0.272 | 0.291 | 0.307 | 0.322 | 0.335 | 0.347 | 0.357 | 0.361 | |||||||||||||||||||||||||||
51 months |
0.246 | 0.268 | 0.287 | 0.304 | 0.320 | 0.333 | 0.346 | 0.357 | 0.361 | |||||||||||||||||||||||||||
48 months |
0.241 | 0.263 | 0.283 | 0.301 | 0.317 | 0.332 | 0.344 | 0.356 | 0.361 | |||||||||||||||||||||||||||
45 months |
0.235 | 0.258 | 0.279 | 0.298 | 0.315 | 0.330 | 0.343 | 0.356 | 0.361 | |||||||||||||||||||||||||||
42 months |
0.228 | 0.252 | 0.274 | 0.294 | 0.312 | 0.328 | 0.342 | 0.355 | 0.361 | |||||||||||||||||||||||||||
39 months |
0.221 | 0.246 | 0.269 | 0.290 | 0.309 | 0.325 | 0.340 | 0.354 | 0.361 | |||||||||||||||||||||||||||
36 months |
0.213 | 0.239 | 0.263 | 0.285 | 0.305 | 0.323 | 0.339 | 0.353 | 0.361 | |||||||||||||||||||||||||||
33 months |
0.205 | 0.232 | 0.257 | 0.280 | 0.301 | 0.320 | 0.337 | 0.352 | 0.361 | |||||||||||||||||||||||||||
30 months |
0.196 | 0.224 | 0.250 | 0.274 | 0.297 | 0.316 | 0.335 | 0.351 | 0.361 | |||||||||||||||||||||||||||
27 months |
0.185 | 0.214 | 0.242 | 0.268 | 0.291 | 0.313 | 0.332 | 0.350 | 0.361 | |||||||||||||||||||||||||||
24 months |
0.173 | 0.204 | 0.233 | 0.260 | 0.285 | 0.308 | 0.329 | 0.348 | 0.361 | |||||||||||||||||||||||||||
21 months |
0.161 | 0.193 | 0.223 | 0.252 | 0.279 | 0.304 | 0.326 | 0.347 | 0.361 | |||||||||||||||||||||||||||
18 months |
0.146 | 0.179 | 0.211 | 0.242 | 0.271 | 0.298 | 0.322 | 0.345 | 0.361 | |||||||||||||||||||||||||||
15 months |
0.130 | 0.164 | 0.197 | 0.230 | 0.262 | 0.291 | 0.317 | 0.342 | 0.361 | |||||||||||||||||||||||||||
12 months |
0.111 | 0.146 | 0.181 | 0.216 | 0.250 | 0.282 | 0.312 | 0.339 | 0.361 | |||||||||||||||||||||||||||
9 months |
0.090 | 0.125 | 0.162 | 0.199 | 0.237 | 0.272 | 0.305 | 0.336 | 0.361 | |||||||||||||||||||||||||||
6 months |
0.065 | 0.099 | 0.137 | 0.178 | 0.219 | 0.259 | 0.296 | 0.331 | 0.361 | |||||||||||||||||||||||||||
3 months |
0.034 | 0.065 | 0.104 | 0.150 | 0.197 | 0.243 | 0.286 | 0.326 | 0.361 | |||||||||||||||||||||||||||
0 months |
| | 0.042 | 0.115 | 0.179 | 0.233 | 0.281 | 0.323 | 0.361 |
The fair market value of our common stock shall mean the average last reported sale price of shares of our common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.
The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares to be issued for each warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year, as applicable. For example, if the volume-weighted average last reported sale price of the shares as reported during the 10 trading days ending on the third trading date prior to the date on which the notice of redemption is sent to the holders of the warrants is $11.00 per share, and at such time there are 57 months until the expiration of the warrants, we may choose to, pursuant to this redemption feature, redeem the warrants at a redemption price of 0.277 shares for each whole warrant. For example, if the volume weighted- average last reported sale price of the shares as reported during the 10 trading days ending on the third date prior to the date on which the notice of redemption is sent to the holders of the warrants is $13.50 per share, and at such time there are 38 months until the expiration of the warrants, we may choose to, pursuant to this redemption feature, redeem the warrants at a redemption price of 0.298 shares for each whole warrant.
No fractional shares of common stock will be issued upon redemption. If, upon redemption, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole number of the number of shares of common stock to be issued to the holder.
Redemption Procedures
A holder of a warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such persons affiliates), to the warrant agents actual knowledge, would beneficially own in excess of 9.8% (as specified by the holder) of the shares of our common stock issued and outstanding immediately after giving effect to such exercise.
Anti-dilution Adjustments
If the number of outstanding shares of our common stock is increased by a capitalization or share dividend payable in shares of our common stock, or by a split-up of shares or other similar event, then, on the effective date of such capitalization or share dividend, split-up or similar event, the number of shares of our common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares. A rights offering to holders of shares entitling holders to purchase shares at a price less than the historical fair market value (as defined below) will be deemed a share dividend of a number of shares equal to the product of (i) the number of shares actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for shares) and (ii) one minus the quotient of (x) the price per share paid in such rights offering and (y) the historical fair market value. For these purposes, (i) if the rights offering is for securities convertible into or exercisable for shares of our common stock, in determining the price payable for shares, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) historical fair market value means the volume-weighted average price of shares of our common stock as reported during the 10 trading day period ending on the trading day prior to the first date on which the shares trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if we, at any time while the warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to the holders of shares of our common stock on account of such shares (or other securities into which the warrants are convertible), other than (a) as described above (b) any cash dividends or cash distributions which, when combined on a per share basis with all other cash dividends and cash distributions paid on the shares during the 365-day period ending on the date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately reflect any other adjustments and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of shares issuable on exercise of each warrant) but only with respect to the amount of the aggregate cash dividends or cash distributions equal to or less than $0.50 per share, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share in respect of such event.
If the number of outstanding shares is decreased by a consolidation, combination, reverse share split or reclassification of shares or other similar event, then, on the effective date of such consolidation, combination, reverse share split, reclassification or similar event, the number of shares issuable on exercise of each warrant will be decreased in proportion to such decrease in outstanding shares.
Whenever the number of shares purchasable upon the exercise of the warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares purchasable upon the exercise of the warrants immediately prior to such adjustment and (y) the denominator of which will be the number of shares so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of our common stock (other than those described above or that solely affects the par value of such shares), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our outstanding shares), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the warrants and in lieu of the shares immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the warrants would have received if such holder had exercised their warrants immediately prior to such event. If less than 70% of the consideration receivable by the holders of shares in such a transaction is payable in the form of shares in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes value (as defined in the Warrant Agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the warrants when an extraordinary transaction occurs during the exercise period of the warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the warrants.
The warrants were issued in registered form under the Warrant Agreement. The Warrant Agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of the public warrants. You should review a copy of the Warrant Agreement for a complete description of the terms and conditions applicable to the warrants.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of shares and any voting rights until they exercise their warrants and receive shares. After the issuance of shares upon exercise of the warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number, the number of shares to be issued to the warrant holder.
Dividends
We have not paid any cash dividends to date and do not intend to pay cash dividends for the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends is within the discretion of our board of directors at such time.
Anti-Takeover Effects of Delaware Law and the Certificate of Incorporation
Some provisions of Delaware law, the Certificate of Incorporation and the Bylaws contain provisions that could make the following transactions more difficult: an acquisition of our Company by means of a tender offer; an acquisition of our Company by means of a proxy contest or otherwise; or the removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our Companys best interests, including transactions which provide for payment of a premium over the market price for our shares.
Stockholder Meetings
The Bylaws provide that a special meeting of stockholders may be called only by the chairman of the board, chief executive officer or president, or by a resolution adopted by a majority of the board of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals
The Bylaws establish advance notice procedures with respect to stockholder proposals to be brought before a stockholder meeting and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.
Elimination of Stockholder Action by Written Consent
The Certificate of Incorporation and the Bylaws do not permit stockholders to act by written consent without a meeting.
Staggered Board
Our board of directors is divided into three classes. The directors in each class shall serve for a three-year term, one class being elected each year by our stockholders. This system of electing and removing directors may tend to discourage a third-party from making a tender offer or otherwise attempting to obtain control of our Company, because it generally makes it more difficult for stockholders to replace a majority of the directors.
Removal of Directors
The Certificate of Incorporation provides that no member of the board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of at least a majority of the total voting power of all then-outstanding shares of capital stock then entitled to vote in the election of directors.
Stockholders Not Entitled to Cumulative Voting
The Certificate of Incorporation does not permit stockholders to cumulate their votes in the election of directors. Accordingly, the holders of a majority of the outstanding shares of our common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they choose, other than any directors that holders of our preferred stock may be entitled to elect.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the DGCL, which prohibits persons deemed to be interested stockholders from engaging in a business combination with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an interested stockholder is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporations voting stock. Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by our board of directors.
Choice of Forum
Our Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law: (A) any derivative action or proceeding brought on behalf of our Company; (B) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of our Company or any stockholder to our Company or our stockholders; (C) any action or proceeding asserting a claim against our Company or any current or former director, officer or other employee of our Company or any stockholder arising pursuant to any provision of the DGCL, the Certificate of Incorporation and the Bylaws (as each may be amended from time to time); (D) any action or proceeding to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws (including any right, obligation or remedy thereunder); (E) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware; and (F) any action asserting a claim against our Company or any director, officer or other employee of our Company or any stockholder, governed by the internal affairs doctrine, in all cases to the fullest extent permitted by law and subject to the courts having personal jurisdiction over the indispensable parties named as defendants. However, this provision will not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. The Certificate of Incorporation further provides that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant named in such complaint. Additionally, the Certificate of Incorporation provides that any person or entity holding, owning or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to these provisions.
Amendment of Certificate of Incorporation Provisions
The DGCL provides generally that the affirmative vote of a majority of the outstanding stock entitled to vote on amendments to a corporations certificate of incorporation or bylaws is required to approve such amendment, unless a corporations certificate of incorporation or bylaws, as the case may be, requires a greater percentage. The affirmative vote of the holders of at least 66 2/3% of the voting power of all then-outstanding common stock entitled to vote generally in the election of directors, voting together as a single class, is required to adopt, amend or repeal the Bylaws and the provisions in the Certificate of Incorporation related to Directors, Indemnification and Limitation on Liability of Directors, Forum Selection and Amendments.
The provisions of Delaware law, the Certificate of Incorporation and the Bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in the composition of our board of directors and management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to this provision. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers.
Listing of Securities
Our common stock and warrants are listed on the Nasdaq Capital Market under the symbols ENJY and ENJYW, respectively.
Transfer Agent and Warrant Agent
The transfer agent and warrant agent for our common stock and warrants, respectively, is Continental Stock Transfer & Trust Company. The transfer agents and warrant agents address is One State Street, 30th Floor, New York, New York, 10004.
Exhibit 10.13
LEASE
This lease (the Lease) is dated February 1, 2019, for reference purposes only, and is made and entered into between KELLY-GORDON COMPANY, INC., a California corporation (hereinafter referred to as Lessor), and ENJOY TECHNOLOGY, INC., a Delaware corporation (hereinafter referred to as Lessee).
1. Premises. Lessor hereby leases to Lessee and Lessee hereby leases from Lessor those certain Premises commonly known as 3240 Hillview Avenue located in Palo Alto, California (the Property) including a building consisting of 27,032 square feet (the Building) as shown on Exhibit A attached (collectively the Premises) including the right to the use of any shared common areas located in between the Building and adjacent buildings at no additional cost.
2. Use of Premises. The Premises shall be used only for the purpose of general office, administration, research and development, and any other legal uses related thereto. Lessee shall not use the Premises for any other purposes unless Lessor consents in writing to such use, such consent not to be unreasonably withheld, conditioned or delayed. Lessor represents and warrants that the above mentioned uses comply with the Stanford University Ground Lease, and Stanford University and applicable Palo Alto zoning requirements. Lessee shall have access to the Premises twenty four (24) hours per day, three hundred sixty five (365) days per year.
3. Term. The term of this Lease shall commence upon the earlier of (i) September 1, 2019 (provided the following conditions are satisfied: (a) Lessee has received a fully executed original of this Lease from Lessor; and (b) Lessee has been given possession of the Premises in Delivery Condition as defined in Paragraph 5 of this Lease); or (ii) the day on which Lessee opens the Premises for business (the earlier of said dates being referred to herein as the Commencement Date). The term of this Lease shall end on the date (the Expiration Date) that is the last day of the eighty fourth (84th) full calendar month following the Commencement Date unless extended or sooner terminated as provided herein.
Lessee shall have early access to the Premises upon the full execution of this Lease (without any obligation for the payment of Rent prior to the Commencement Date in accordance with the Base Rent Schedule in Paragraph 5) for the purpose of planning, designing and construction of Tenant Improvements (as defined in Paragraph 4 below). Tenant shall not interfere with the performance of Lessors Work in the event of such early access.
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4. Tenant Improvements. (a) Lessor shall pay to Lessee a tenant improvement allowance (the Allowance) in an amount equal to One Million Four Hundred Five Thousand Six Hundred Sixty Four Dollars ($1,405,664.00) based on Fifty Two Dollars per square foot, for the purpose of constructing Lessees tenant improvements in the Premises (Tenant Improvements). There shall be no deduction from the Allowance for the cost of any Lessors Work identified in Paragraph 5 and in Exhibit B. Such Allowance shall be used toward the hard costs, design fees and permitting costs associated with a mutually agreeable space plan approved by Lessor and Lessee in accordance with Paragraph 12 of this Lease (Lessees Work). The Allowance shall not be used for Lessees trade fixtures, equipment, furniture, movable furniture partitions or other personal property. Except for reasonable 3rd party review/inspection fees incurred by Lessor relating exclusively to the plans for or performance of Lessees Work (not to exceed $2,500.00 per project per calendar year), Lessee shall not be obligated to pay any review fees or supervisory fees to Lessor in connection with the performance of Lessees Work.
(b) Lessor will make payments to Lessee from the Allowance to reimburse Lessee for the costs Lessee incurs in constructing the Tenant Improvements. All payments of the Allowance shall be made on a progress payment basis (not more frequently than once per month) and only upon Lessees satisfaction of the following conditions (the Allowance Conditions): (i) receipt by Lessor of conditional mechanics lien releases for the current payment, and unconditional mechanics lien releases for previous payments, from Lessees general contractor and all subcontractors, labor suppliers and material suppliers for work performed by them at the Premises under contracts that are in excess of $5,000 to the date of such request; (ii) receipt by Lessor of any and all documentation reasonably required by Lessor detailing the work that has been completed and the materials and supplies used, including, without limitation, invoices, bills, or statements for the work completed and the materials and supplies used all through the date of such request; and (iii) Lessees general contractors certification of the work that has been completed and confirming that all work and materials billed for have been completed and installed in the Premises. In the event that Lessor fails to pay the Allowance (or any portion thereof) within the time and in the manner required hereunder, interest at the rate of ten percent (10%) per annum shall accrue on the unpaid portion thereof from the date payment was due until paid or otherwise recouped in full, and Lessee shall have the right to offset the unpaid amount (plus interest thereon as aforesaid) against any Rents coming due under this Lease.
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(c) Lessee may work with contractors and subcontractors of Lessees choice to complete the Tenant Improvements to be paid from the Allowance or paid by the Lessee. The selection of the general contractor for Lessees tenant improvements shall be subject to the Lessors approval which shall not be unreasonably withheld, conditioned or delayed. Lessor shall not be responsible for the system design or the equipment specified by Lessee or its general contractor. The Tenant Improvements will be constructed in full compliance with all applicable laws, regulations and requirements of the Ground Lease (as defined below), and current Building Codes.
5. Lessor Work and Delivery Condition. For purposes of this Lease, the term Delivery Condition shall mean that Lessor has (i) approved the plans and specifications for Lessees initial tenant improvements (as provided in Paragraph 12 of this Lease) and (ii) completed, at its sole cost, the work defined as Lessors Work (Lessors Work) on Exhibit B. There shall be no deduction from the Allowance for (a) the cost of any Lessors Work identified in this Paragraph 5 and in Exhibit B, and (b) any Lessor or professional review fees incurred by Lessor for the review of Lessees plans and specifications for Lessees tenant improvements.
6. Base Rent. As base rental (Base Rent) for the Premises, Lessee shall pay to Lessor by check or ACH the following amounts at the following address: 12241 Saratoga-Sunnyvale Road, Saratoga, California 95070, or such other place or places as Lessor may from time to time designate in writing to Lessee. Base Rent for the first four full calendar months of the term shall be free. Payment of Base Rent for the Premises shall commence in the fifth month of the term (following the Commencement Date as defined in Paragraph 3 of this Lease). The Base Rent shall be as set forth in the following Base Rent schedule.
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Base Rent:
Months | Base Rent | Total/Month | ||||
00-04 |
$0.00 per sq. ft./ per mo. | $ | 0.00 | |||
05-12 |
$4.90 per sq. ft./ per mo. | $ | 132,456.80 | |||
13-24 |
$5.05 per sq. ft./ per mo. | $ | 136,511.60 | |||
25-36 |
$5.20 per sq. ft./ per mo. | $ | 140,566.40 | |||
37-48 |
$5.35 per sq. ft./ per mo. | $ | 144,621.20 | |||
49-60 |
$5.51 per sq. ft./ per mo. | $ | 148,946.32 | |||
61-72 |
$5.68 per sq. ft./ per mo. | $ | 153,541.76 | |||
73-84 |
$5.85 per sq. ft./ per mo. | $ | 158,137.20 |
7. Operating Expenses and Property Taxes. Except as set forth below, commencing on the Commencement Date (as defined in Paragraph 3 of this Lease) Lessee shall be responsible to pay for all of Lessors costs incurred in owning, operating, managing, repairing and replacing the Property (provided any capital costs shall be amortized and included only in accordance with generally accepted accounting principles consistently applied), Building and Premises, including, without limitation, building operating expenses, taxes, landscaping, land lease charges, general maintenance, management fees and insurance (NNN Charges). The current estimated NNN Charges are set forth on Exhibit C. The NNN Charges do not include janitorial expenses and utilities for which Lessees is solely responsible at Lessees cost and expense, nor shall the NNN Charges include costs incurred by Lessor for structural and roof repairs, maintenance or replacement. Lessor will bill Lessee monthly for all NNN Charges. These expenses may change from time to time. The NNN Charges may include a management fee not to exceed 3% of Lessees Base Rent for the then current year. Lessee shall not be responsible for any increases in NNN Charges due to the addition of earthquake insurance if the same is not currently included in the estimate of NNN Charges attached as Exhibit C. Within sixty (60) days after the end of each calendar year, Lessor shall provide Lessee with an annual statement detailing the costs incurred by Lessor as NNN Charges. Lessee shall have the right to audit and challenge Lessors books and records pertaining to NNN Charges provided Lessee notifies Lessor within one hundred twenty (120) days after its receipt of Lessors annual statement of NNN Charges. Any such audit shall be performed by an independent auditor not compensated on a contingency fee basis (or by a trained employee of Lessee) at a mutually agreed time within two weeks after the date of Lessees audit notice at the offices of Lessor located in California. Lessor and Lessee shall each use their best efforts to cooperate with each other to resolve any discrepancies between Lessor and Lessee in the accounting of NNN charges. If this Lease expires or sooner terminates on a day other than
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the last day of a fiscal year, NNN Charges for such partial fiscal year shall be calculated based upon estimated NNN Charges for the entire twelve-month fiscal year, but shall be prorated on the basis by which the number of days from the commencement of such fiscal year to and including the expiration or sooner termination of this Lease bears to 365 (so that expenses for such items as taxes and insurance premiums that may be paid once or twice per year are prorated over an entire 12 month period). Notwithstanding the foregoing or anything to the contrary contained in this Lease, Lessee shall have no obligation to pay or reimburse Lessor for any NNN Charges that are fairly allocable to any period of time after the term of this Lease has ended and Lessee has surrendered possession of the Premises to Lessor.
8. Uses Prohibited. Lessee shall not use, or permit to be used, the Premises nor any part thereof for any purpose or purposes other than those purposes for which the Premises are leased pursuant to paragraph 2, without obtaining the prior written consent of Lessor (not to be unreasonably withheld, conditioned or delayed), and no use shall be made or permitted to be made of the Premises, nor acts done, which will cause a cancellation of any insurance policy covering the Premises, or any part thereof, unless Lessee shall agree to pay such increase in the rate or shall secure comparable insurance acceptable to Lessor (whose standard of acceptance shall be that of a reasonable person) covering the Premises, nor shall Lessee sell, or permit to be kept, used, or sold, in or about said Premises, any article which may be prohibited by the standard form of casualty insurance policies required under this Lease, unless Lessee shall secure a comparable policy of insurance acceptable to Lessor (whose standard of acceptance shall be that of a reasonable person) covering the Premises. Lessee shall not commit any public or private nuisance, nor shall Lessee allow the Premises to be used for any unlawful purpose.
9. Compliance with Governmental Regulations. Lessee shall, at Lessees sole cost and expense, comply with all requirements of all Municipal, State and Federal authorities now in force relating to Lessees use of the Premises or which may hereafter be in force, and shall faithfully observe in the use of the Premises all Municipal ordinances and State and Federal statutes now in force or which may hereafter be in force; provided, however, that except as provided in Paragraph 5, above, Lessee shall not be required to make any structural changes in the Premises in order to comply with any such law, regulation, requirement or order unless the same is required because of any alteration Lessee elects to make to the Premises, as a result of any permit Lessee obtains, or because of Lessees unique and specific use of the
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Premises (as opposed to office used by tenants in general). Notwithstanding the foregoing to the contrary, except as provided in Paragraph 5, above, Lessee shall not be required to make any such improvement or addition to the Premises unless such improvement or addition is required because of an alteration Lessee elects to make to the Premises, as a result of any permit Lessee obtains, or because of Lessees unique and specific use of the Premises (as opposed to office uses by tenants in general). Nothing in this Paragraph 9 shall be deemed to alter or limit Lessors obligation to complete the Lessors Work.
10. Quiet Enjoyment. Lessor, for itself, its successors and assigns, covenants represent and warrants to Lessee, its successors and assigns that:
(a) So long as Lessee shall not be in default (beyond applicable notice and cure periods) in the performance of any of the covenants or conditions to be performed by Lessee, Lessee may have, hold and enjoy the sole and exclusive use and enjoyment of the Premises, and any part thereof;
(b) Lessor will at all times save and hold Lessee free and harmless from any claim, demand, cause of action or other act relating to the title of the Premises, or any part thereof, or which interferes with or threatens to interfere with the quiet, peaceful and exclusive use and enjoyment of the Premises, or any part thereof, including but not limited to reasonable costs and attorneys fees incurred by the Lessee in defending any such interference or threatened interference therewith.
11. Building Condition. Except as expressly provided for herein, Lessor shall have no obligation to perform work to the Premises. Notwithstanding the foregoing, Lessor hereby represents and warrants that the operating systems of the Premises (including but not limited to the HVAC, electrical, roof, plumbing systems) shall be in good working condition for at least the first twelve (12) months of the term of this Lease and shall, at Lessors sole cost and expense, replace or repair any such systems if any problems occur; provided such problem was not been caused by the Lessee or the Lessees contractors. Lessor further represents and warrants that the Building has 600 amp electrical service.
12. Alterations and Additions. (a) Lessee shall control and shall be responsible for the construction of the initial tenant improvements constructed in the Premises. Lessee shall not make any alteration or addition to the Premises, or any part thereof, without the prior written consent of Lessor. Such consent shall not be unreasonably withheld, conditioned or delayed. Any permanent addition or alteration to the Premises, except movable equipment, furniture, trade fixtures, and any other property which can be
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removed without injury to the Premises (which shall remain the property of the Lessee), shall become the property of and belong to Lessor. Alterations and additions which are not to be deemed as trade fixtures shall include any improvements paid for by the Allowance, heating, lighting, electrical systems, air conditioning, partitioning, wall-to-wall carpeting, or any other installation which has become an integral and immovable part of the Premises. For purposes of clarity, server racks are specifically designated as moveable equipment owned by Lessee, however, Lessee shall restore the area upon removal of such server racks to its preexisting condition. Lessee agrees that it will not proceed to make such alterations or additions, after having obtained consent from Lessor to do so, until two (2) days after the receipt of such consent, in order that Lessor may post appropriate notices of non-responsibility for payment for Lessees improvements. Lessee shall at all times permit such notices to be posted and to remain posted until the completion of work. Notwithstanding the foregoing to the contrary, Lessee shall have the right to make interior, non-structural alterations or additions to the Premises (including but not limited to painting, replacement of carpeting and other alterations not requiring a governmentally issued permit) without obtaining the consent of Lessor, provided that such alterations or additions made during any calendar year do not have a cost in excess of Fifty Thousand Dollars ($50,000.00). Promptly upon request, Lessee will provide Lessor with lien waivers for all work performed under contacts valued in excess of $5,000.00. Lessee shall not be obligated to pay any review fees or supervisory fees to Lessor in connection with the performance of any Lessees Work, alterations or additions. Further, Lessee shall have the right to paint the exterior of the Building, subject to Lessors prior written approval, not to be unreasonably withheld, conditioned or delayed.
(b) Lessee shall prepare plans and specifications for Lessees initial tenant improvements (or any subsequent alterations or additions), at Lessees expense, and shall submit them to Lessor for approval, which approval shall not be unreasonably withheld, conditioned or delayed. Lessor shall then have a period of not more than seven (7) business days following such submittal (or, in the event of modifications, such re-submittal) in which to review and approve Lessees plans and specifications or state any objections to same in writing, and any such objections shall be reasonable in nature and stated in sufficient detail so as to allow necessary modification by Lessee. Lessee shall make necessary modifications to Lessees plans and specifications and shall resubmit same to Lessor within seven (7) business days after Lessees receipt of Lessors comments. Once accepted by Lessor in final form, the Lessees plans and specifications may be modified only with Lessors written approval, which will not be unreasonably withheld, conditioned or delayed, and Lessee shall be liable for any additional costs incurred as a result of any such change.
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(c) Any delay by Lessor in the review and approval or comment to Lessees plans and specifications for Tenants initial improvements (or any subsequent alterations or additions) beyond the time periods set forth in subparagraph (b) above shall result in a credit to Lessees Base Rent next coming due under this Lease in an amount equal to one (1) day of Base Rent for each day of Lessors delay.
13. Maintenance and Repairs.
(a) Except as otherwise provided herein below, Lessor shall at Lessors sole cost, keep and maintain the Property, Building, and Premises, including, but not limited to, the elevator serving the Premises, plumbing, electrical systems (excluding light bulbs and Lessees electrical leasehold improvements) heating and air conditioning systems (HVAC systems), parking areas and walks, any shrubbery and landscaping and landscape lighting between buildings in good condition and repair. At Lessors sole cost and expenses (without any reimbursement whatsoever from Lessee), Lessor agrees to maintain the roof and the structural integrity of the Building and Premises. Furthermore, notwithstanding anything to the contrary herein, Lessee will have no obligation to pay or reimburse Lessor for repaving, sealing, resurfacing, etc. the parking lot or driveway areas (Parking Area Maintenance). Lessee hereby waives all right to make repairs at Lessor s expense under the provisions of Section 1942 of the California Civil Code, and all rights provided for under Section 1941 of said Civil Code. At the termination of this lease, Lessee shall surrender the Premises to the Lessor in as good condition and repair as when received on the commencement of the term of the Existing Lease, ordinary wear and tear (however, ordinary wear and tear shall not include any damage or deterioration caused by Lessee that would have been prevented by good maintenance practice), damage by fire or the elements or acts of God, and damage resulting from Lessors acts or omissions, negligence or willful misconduct, and Lessor approved alterations excepted (unless Lessee is required to remove such alterations at the time Lessor approves such alterations).
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(b) Except for Lessors obligation for the roof and structural integrity of the Building and Premises, the Parking Area Maintenance and the expense sharing of paragraph (c) below, Lessee shall maintain the interior of the Premises in good condition and repair at Lessees sole cost and expense subject to ordinary wear and tear (however, ordinary wear and tear shall not include any damage or deterioration that would have been prevented by good maintenance practice).
(c) For the first twelve months of the of this term of this Lease, Lessor shall maintain the HVAC system at Lessors sole cost and expense; provided such problem has not been caused by the Lessee or the Lessees contractors. Beginning in month thirteen, Lessee shall be responsible for standard repair and maintenance of the HVAC system; provided, however, Lessor and Lessee shall each pay fifty percent (50%) of the cost of any major repairs to the HVAC system. As used herein the term major repairs shall mean repairs for which the cost of labor and materials are in excess of $1,500. If any HVAC system should fail beyond repair at any time during the term of this Lease, Lessor shall replace such item(s) and pro-rate the cost of the replacement over the useful life of the improvement (as defined by generally accepted accounting principles) and charge Lessee accordingly for the remaining months of the term of this Lease as additional rent.
(d) If Lessor fails to furnish or interrupts or terminates any required maintenance, repairs or services on the Premises (a Service Failure), which renders the Premises, or a material portion of the Premises, untenantable for a period in excess of five (5) consecutive days, then Lessee shall be entitled to receive an abatement of Base Rent payable hereunder during the period beginning on the 6th consecutive day of the Service Failure and ending on the day the service has been restored. If the entire Premises has not been rendered untenantable by the Service Failure, the amount of abatement that Lessee is entitled to receive shall be prorated based upon the percentage of the Premises rendered untenantable and not used by Lessee. If a Service Failure occurs for which Lessor is responsible and continues for one hundred eighty (180) consecutive calendar days after the service and is not being remedied by Lessor, then Lessee shall have the ongoing right to elect to terminate the Lease until such date as the Service Failure ends and service has been restored.
(e) Lessee will be responsible for the installation and maintenance of its own telephone system and security system and any upgrades to the existing fire alarm system. The existing fire alarm system shall be delivered to Tenant in good working condition.
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(f) Lessee shall be responsible for hiring its own janitorial company, at Lessees sole cost and expense, which will render janitorial services for the Premises.
(g) Notwithstanding anything to the contrary contained in this Lease, Lessor shall not be liable to Lessee for failure to make repairs as herein required unless Lessee has previously notified Lessor of the need for such repairs as to which Lessee is aware and Lessor has failed to complete said repairs within a reasonable time necessary to make such repair not exceeding thirty (30) days following receipt of Lessees notification (provided Rent payable under this Lease shall abate if Lessor fails to commence such repair within five (5) consecutive days after Lessors receipt of Lessees notification), Lessee may make such repair, and upon demand to Lessor and any Mortgagee (provided that Lessee has been given the name and address of such Mortgagee) Lessor shall pay Lessee the reasonable cost and expenses incurred by Lessee in making such repair. If Lessor fails to reimburse Lessee within fifteen (15) days of Lessors receipt of Lessees request, then following a second five (5) day notice to Lessor notifying Lessor (and its mortgagee of which Lessee has notice from Lessor pursuant to the notice provisions of this Lease) of Lessors failure to pay, Lessee may offset said amount against the next ensuing Base Rent and additional rent payment(s) due under this Lease, together with interest at the interest rate of ten percent (10% per annum.
14. Indemnification. Lessee hereby waives all claims against Lessor for damage to goods, wares and merchandise, and all other personal property, in, upon or about the Premises and for injuries to persons in or about the Premises, resulting from any cause other than the negligence or willful misconduct of Lessor, its agents, employees or invitees. Lessee will indemnify and hold Lessor harmless for and on account of any damage or injury to any person, goods, wares, merchandise, and all other personal property of any person that results from the negligence or willful misconduct of Lessee, its agents, employees or invitees. Lessor agrees to indemnify and hold Lessee harmless for any damage or injury to persons or property resulting from the negligence or willful misconduct of Lessor, its agents, employees or invitees.
15. Advertisements and Signs. Subject to all applicable laws and the Ground Lease, Lessee shall have the right to install exterior signage for its business at the Premises during the term of this Lease. Lessee will prepare signage drawings and submit them to the Lessor for Lessors prior review and written approval (not to be unreasonably withheld, conditioned or delayed). The size and shape of any such signage will be subject to the City of Palo Alto zoning and Stanford University regulations.
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16. Entry by Lessor. Lessee shall permit Lessor and its agents to enter into and upon the Premises during normal business hours, upon at least forty-eight (48) hours prior written notice by Lessor (which notice shall specify the reason for such access), and subject to Lessees prior written approval (not to be unreasonably withheld) and Lessees reasonable security requirements (except in the event of emergency) for the purpose of inspecting the same or for the purpose of maintaining the building in which the Premises are situated, or for the purpose of making repairs, alterations or additions to any other portion of said building, including the erection of scaffolding, props, or other mechanical devices, or for the purpose of posting notices of non-responsibility for alterations, additions or repairs, without any rebate of Rent to Lessee or damages for any loss of occupation or quiet enjoyment of the Premises thereby occasioned except as expressly provided herein; provided, however, (i) if such acts make the Premises substantially unusable for Lessees permitted use for a period in excess of five (5)calendar days then Lessee shall have the right to abate Base Rent beginning as of the date of such interference until such date as the Premises are again rendered usable by Lessee, and (ii) if such acts make the Premises substantially unusable for the purposes for which Lessee has leased the same for a period in excess of thirty (30) calendar days, Lessee, at Lessees sole option, shall have the ongoing right (until such date as the Premises are again rendered usable by Lessee) to terminate this Lease by giving written notice thereof to Lessor, and (iii) no such entry by Lessor shall, without the prior written consent of Lessee, materially interfere with the Lessees permitted uses and access to the Premises. Lessor understands that loss or termination of electrical power to the building could have damaging consequences for Lessee, and Lessor agrees to use commercially reasonable efforts to give not less than five (5) days prior written notice before electricity is shut off, reset, or otherwise interfered with by Lessor or its agents except in case of emergency. Lessee shall permit Lessor, and its agents, at any time within one hundred eighty (180) days prior to the expiration of this Lease, to place upon the Premises any usual or ordinary to let or to lease signs. Lessor and its agents may during said last mentioned period, at reasonable business hours and upon at least twenty four (24) hours prior written notice to Lessee and subject to Lessees reasonable security requirements, enter upon said Premises and exhibit the same to prospective tenants.
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17. Utilities. Lessee shall contract directly with the City of Palo Alto and any other applicable utility companies for all water, gas, heat, light, power and all other services supplied to the said Premises for Lessees use.
18. Subordination. Lessee agrees that this Lease may, at the option of Lessor, be subjected and subordinated to any mortgage or deed of trust held by an insurance company, savings bank or savings and loan institution which has been or shall be placed on the land or building of which the Premises form a part, provided that the holder of any such mortgage or deed of trust agrees in writing that this Lease shall not be terminated or Lessees possession disturbed by reason of a default under or foreclosure of such mortgage or deed of trust, and in the event of a sale, either private or public, under foreclosure proceedings, such sale shall be subject to Lessees right to continue in possession and undisturbed under this Lease so long as Lessee is not in default (beyond applicable notice and cure period). For the purpose of this paragraph, Lessee shall not be considered in default hereunder until all notices provided for herein have been given, and until the time allowed for the curing of any such default has expired. Lessor represents and warrants that there are no mortgages or deeds of trust encumbering the Premises or Building as of the date of this Lease. .
19. Damage or Destruction of Premises. In the event of any damage to or partial destruction of the Premises during the term of this Lease from any cause, Lessor shall forthwith repair the same, provided such repairs can be reasonably estimated to be completed within one hundred eighty (180) days under the laws and regulations of Federal, State, County or Municipal authorities, but such partial damage or destruction shall not make this Lease void or voidable except as hereinafter provided. Lessee shall be entitled to a proportionate reduction of Rent (which term shall be deemed to include all monthly base rental and NNN charges payable by Lessee under this Lease) while such repairs are being made, such proportionate reduction to be based upon the extent to which the damage and/or the making of such repairs shall interfere with the business carried on by Lessee in said Premises. If the necessary repairs cannot be reasonably estimated to be completed within one hundred eighty (180) calendar days, either Lessee or Lessor may terminate this Lease by giving written notice of termination to the other party. In the event that neither party so elects to terminate this Lease within fifteen (15) days after the date of such damage, Lessor shall make all necessary repairs as promptly as practical and within a reasonable time (within the 180 day
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period), this Lease to continue in full force and effect and the Rent to be proportionately rebated as provided hereinabove. With respect to any damage or destruction which Lessor is obligated to repair or may elect to repair under the terms of this paragraph, the provisions of Section 1932, subdivision 2, of the Civil Code of the State of California are waived by Lessee to the extent consistent with the provisions of this paragraph. The total destruction of the building constituting the Premises shall terminate this Lease unless the Lessor and Lessee agree otherwise within ninety (90) days after the date of destruction.
20. Assignment and Subletting. Lessee may not assign this Lease or sublet all or a portion of the Premises herein leased without obtaining the prior written consent of Lessor; provided, however, that upon written notification by Lessee to Lessor including the description of the portion proposed to be sublet or assigned, the identity and financial capability of the sub-Lessee or assignee, a description of the type of activity the sub-Lessee or assignee shall partake in, and the terms of said assignment or sublease, Lessor agrees that upon receipt of the above information, Lessor shall not unreasonably withhold, condition or delay its consent to any such assignment or subletting. Lessee acknowledges that the subletting or assignment of the Premises shall in no way absolve the Lessee from its liability with regard to the Rent payment for the entire Premises.
Notwithstanding the foregoing, Lessee shall have the right to assign this Lease or sublet the Premises to the following without the consent of the Lessor and without any sharing of excess rent: (a) the parent corporation of Lessee, (b) any subsidiary corporation of Lessee, (c) any entity in which Lessee, Lessees parent corporation or any subsidiary corporation of Lessee holds not less than fifty percent (50%) of the outstanding ownership interests, or (d) any corporation resulting from the consolidation, merger, sale or reorganization of the Lessee.
If any amounts paid by an assignee or sublessee are in excess of the base rent and additional rent payable by Lessee hereunder (or, in the case of sublease of a portion of the Premises, are in excess of the rent and additional rent reasonably allocable to such portion), after deducting Lessees reasonable costs, including but not limited to Lessees real estate commissions, reasonable marketing costs for the sublease or assignment of the Premises incurred by Lessee and reasonable attorney fees, then such excess shall be shared 50/50 between Lessor and Lessee. Payments will be made to Lessor as they are generated.
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21. Condemnation. If any part of the Premises shall be taken or purchased under the threat of condemnation by any public or quasi-public authority, or private corporation or individual, having the power of condemnation (Condemner) under any statue or right of eminent domain, and a part thereof remains which is usable by Lessee for the purposes for which Lessee has entered into this Lease, this Lease shall, as to the parts so taken, terminate as of the date title shall vest in the Condemner, and the Rent payable hereunder shall be proportionately adjusted so that the Lessee shall be required for the remained of the term to pay only such portion of the Rent as the value of the part remaining after such taking bears to the value of the entire Premises prior to such taking; but, in such event, either Lessor or Lessee shall have the option to terminate this Lease at the date when title to the part so taken vests in the Condemnor if the remaining portion of the Premises are not suitable for the conduct of Lessees business operations in Lessees reasonable business judgement. If all of the Premises or such part thereof be taken so that there does not remain a portion suitable by Lessee for the conduct of its business, this Lease shall thereupon automatically terminate. If a part or all of the Premises be taken, all compensation awarded upon such taking shall go to the Lessor and the Lessee shall have no claim thereto, except that Lessee shall have the right to any portion of the award made for (i) Lessees trade fixtures, (ii) the unamortized value of any Leasehold Improvements paid for by Lessee based on a percentage of the remaining lease term excluding any option period, (iii) Lessees award for moving and relocation expenses. The Lessees award would be that percentage of those expenses.
22. Insolvency or Bankruptcy. Either (a) the appointment of a receiver to take possession of all or substantially all of the assets of the Lessee, or (b) a general assignment by the Lessee for the benefit of its creditors, or (c) any action taken or suffered by the Lessee under any insolvency or bankruptcy act which shall not, in each case, be discharged within ninety (90) days, shall constitute a breach of this Lease by the Lessee. Upon the happening of any such event, this Lease shall terminate ten (10) calendar days after written notice of termination from Lessor to Lessee.
23. Default. In the event that Lessee fails to timely pay any payment due to Lessor hereunder, and such failure continues for five (5) days after Lessees receipt of a written notice of delinquency from Lessor, or Lessee materially breaches this Lease and does not remedy or cure said breach within a period of thirty (30) calendar days following written notification of breach given by Lessor to Lessee (or such longer
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time as may reasonably be required to cure such default, provided that Lessee continues to use diligent efforts to effect such cure at the earliest possible date), then Lessee shall be in default of this Lease (Default) and Lessor, in addition to other rights or remedies it may have under applicable laws, shall, subject to all applicable legal due process requirements, have the following remedies:
(a) Termination. In the event of any Default by Lessee (beyond applicable notice and cure periods), then in addition to any other remedies available to Lessor at law or in equity and under this Lease, Lessor shall have the immediate option to terminate this Lease and all rights of Lessee hereunder by giving written notice of such intention to terminate. In the event that Lessor shall elect to so terminate this Lease then Lessor may recover from Lessee:
(1) the worth at the time of award of any unpaid Rent and any other sums due and payable which have been earned at the time of such termination; plus
(2) the worth at the time of award of the amount by which the unpaid Rent and any other sums due and payable which would have been earned after termination until the time of award exceeds the amount of such rental loss Lessee proves could have been reasonably avoided; plus
(3) the worth at the time of award of the amount by which the unpaid Rent and any other sums due and payable for the balance of the term of this Lease after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided; plus
(4) any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessees failure to perform its obligations under this Lease or which in the ordinary course would be likely to result therefrom, including, without limitation, any costs or expenses incurred by Lessor (i) in retaking possession of the Premises; (ii) in maintaining, repairing, preserving, restoring, replacing, cleaning, the Premises or any portion thereof, including such acts for reletting to a new lessee or lessees; (iii) for leasing commissions; or (iv) for any other costs necessary or appropriate to relet the Premises; plus
(5) such reasonable attorneys fees incurred by Lessor as a result of a Default, and costs in the event suit is filed by Lessor to enforce such remedy; and plus
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(6) at Lessors election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable law. As used in subparagraphs (1) and (2) above, the worth at the time of award is computed by allowing interest at an annual rate equal to ten percent (10%) per annum or the maximum rate permitted by law, whichever is less. As used in subparagraph (3) above, the worth at the time of award is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award, plus one percent (1%). Lessee waives redemption or relief from forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or under any other present or future law, in the event Lessee is evicted or Lessor takes possession of the Premises by reason of any Default of Lessee hereunder.
(b) Continuation of Lease. In the event of any Default by Lessee, then in addition to any other remedies available to Lessor at law or in equity and under this Lease, Lessor shall have the remedy described in California Civil Code Section 1951.4 (Lessor may continue this Lease in effect after Lessees Default and abandonment and recover Rent as it becomes due, provided Lessee has the right to sublet or assign, subject only to reasonable limitations).
(c) Election to Terminate. No re-entry or taking of possession of the Premises by Lessor, shall be construed as an election to terminate this Lease unless a written notice of such intention is given to Lessee, the Premises is relet (however Lessee shall be liable for the losses sustained by Lessor after mitigation by such reletting), or unless the termination thereof is decreed by a court of competent jurisdiction.
(d) Notice Provisions. Lessee agrees that any notice given by Lessor pursuant to this paragraph 23 shall satisfy the requirements for notice under California Code of Civil Procedure Section 1161, and Lessor shall not be required to give any additional notice in order to be entitled to commence an unlawful detainer proceeding, provided that any such notice is prepared and served in accordance Code of Civil Procedure Section of 1161 (except that the time periods set forth herein shall replace the time periods set forth in Code of Civil Procedure Section 1161).
Lessor shall be in default under this Lease if Lessor fails to perform any of its obligations hereunder and such a failure is not cured for a period of thirty (30) calendar days after written notice thereof from Lessee to Lessor, unless Lessor begins the cure of such default within said thirty (30) day period and completes such default in a reasonable time period, subject to normal business practices, as mutually agreed upon between Lessor and Lessee. In the event of a default by Lessor under this Lease, Lessee may, in addition to any and all remedies available to it at law or in equity, terminate this Lease with immediate effect by giving written notice to Lessor.
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Lessee hereby acknowledges that late payment hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges. Accordingly, if any payment from Lessee shall not be received by Lessor within five (5) business days after Lessees receipt of written notice that such amount is overdue, then, without any requirement for further notice to Lessee as to such late payment, Lessee shall pay to Lessor a late charge equal to ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessees Default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder.
24. Insurance and Insurance Coverage
(a) Lessor covenants and agrees that it shall obtain and keep in force during the term hereof and any extension thereto, Special Causes of Loss form property insurance on the Building and improvements constituting the Premises as presently existing and as hereafter improved at the full insurable value of the Premises. Lessor and any lender of the Lessor shall be named loss payees as their interest appears. Lessee shall pay as additional rent its pro rata share of Lessors premium of property insurance as set forth in Exhibit C. The amount of coverage may increase from year to year subject to mutual agreement between Lessor and Lessee.
(b) Lessee, at its option, may obtain at its sole expense and keep in force during the term hereof and any extended term hereof, Special Causes of Loss form property insurance on all personal property, materials, supplies and fixtures owned by Lessee and located on or upon the Premises.
(c) During the term of this Lease and any extended term hereof, Lessee shall procure and maintain in full force and effect full and adequate public liability and property damage insurance insuring against liability of Lessee with respect to the Premises or arising out of the use or occupancy thereof. Adequate coverage under liability insurance shall not be less than $1,000,000 for any one occurrence, and $3,000,000, for aggregate limit. However, Lessee may increase these amounts of coverage at his option. Such policies of liability insurance shall name the Lessor, Lessee, Stanford University, its trustees, agents and employees and Lessors lender (after Lessees receipt of written notice of the identity of and contact information for such lender) as additional insured and shall be payable to all parties as to their respective interests.
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(d) All such insurance policies provided for herein and all renewals thereof and all bonds provided for herein shall be issued by good, responsible and standard companies having not less than A-VI as set forth in the most current issue of A.M. Bests Rating Guides. Lessee shall deliver to Lessor certificates of insurance and true and complete copies of any and all endorsements required herein for all insurance required to be maintained by Lessee hereunder at the time of execution of this Lease by Lessee. Lessor shall be named as an additional insured under the Lessees insurance policies required under Paragraph 13(c) above. Lessee shall, at least fifteen (15) days prior to expiration of each policy, furnish Lessor with certificates of renewal thereof. Each certificate shall expressly provide that such policies shall not be cancelable or otherwise subject to material modification except after thirty (30) days prior written notice to the parties named as additional insureds as required in this Lease (except for cancellation for nonpayment of premium, in which event cancellation shall not take effect until at least ten (10) days notice has been given to Lessor).
(e) In consideration of the agreements of the parties contained in this Lease, and notwithstanding any other provisions of this Lease to contrary, Lessor and Lessee hereby waive all rights of recovery against the other and the others agents, employees, contractors or approved sublessees or assigns, on account of loss and damage arising out of or incident to the perils covered by property insurance actually carried or required to be carried by such party under this Lease, regardless of the negligence or willful misconduct of Lessor or Lessee or their agents, employees, contractors and/or invitees. The parties shall have their respective insurance carriers waive such right of subrogation in the insurance policies to be maintained by the parties under this Lease.
25. Taxes and Assessments.
(a) Lessee shall pay before delinquency any and all taxes levied, assessed or imposed and which become payable during the term of this Lease upon Lessees fixtures, furniture, appliances and personal property installed or located in the Premises which property does not become the property of Lessor under paragraph 10.
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(b) As additional rental hereunder, Lessee shall pay its Share, before delinquency or thirty (30) days after notice from Lessor of the exact amount due, along with reasonable supporting backup documentation, whichever is later, of all real estate taxes and special assessment installments (real property taxes) levied and assessed against the Premises as they appear on the City and County tax bills during the term of this Lease, such real property taxes to be prorated to reflect the period from the commencement date of this Lease and the termination date of this Lease; provided, however, that Lessee may allow bonded special assessment to go to bond, and Lessees obligations hereunder shall be limited to payment of principal and interest installments there under prior to the delinquency thereof for the duration of this Lease. Notwithstanding the foregoing or anything to the contrary contained in this Lease, in no event shall Lessee be obligated to pay Lessees share of any (i) increases in real property taxes or assessments payable with respect to the Premises or Property as a result of a sale or other transfer of any leasehold or ownership interest in the Premises or Property by Kelly-Gordon Company, Inc., the Board of Trustees of The Leland Stanford Junior University, or any other fee owner, ground lessee of the Premises or Property or landlord under this Lease, (ii) estate, inheritance, gift or franchise taxes of Lessor or any federal, state or local income, sales or transfer tax, (iii) penalties and interest, other than those attributable to Lessees failure to comply timely with its obligations pursuant to this Lease, or (iv) increases in real property taxes (whether increases result from increased rate, valuation , or both) attributable to additional improvements to the building or land of which the building is a part unless constructed for Lessees primary benefit or for the common benefit of Lessee and other tenants in the surrounding project. Lessor will promptly advise Lessee of all notices, levies and assessments of real property taxes concerning the Premises and immediately upon receipt of the tax bill shall furnish Lessee with a copy of the tax bill. Lessee shall have the right, at its election, to contest any tax, levy or assessment which Lessee is required to pay hereunder, in whole or in part. Lessor covenants and agrees to execute all documents necessary to effectuate the purposes of this paragraph and to perfect Lessees rights of contest. If Lessee seeks a reduction or contests the real property taxes, the failure on Lessees part to pay the real property taxes shall not constitute a default under this Lease. All costs of such contests shall be borne by Lessee, and Lessee shall hold Lessor
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harmless from any costs, loss or damage caused thereby unless caused by Lessors negligent or willful misconduct In the event that Lessee chooses to allow special assessments to go to bond, the principal amounts of said assessment bonds, if any, outstanding and unpaid as of the date of the termination thereof shall become the obligation of Lessor and any interest due thereon shall be apportioned as of the date of termination.
(c) Nothing herein contained shall require Lessee to pay income or other tax imposed upon the rents received by Lessor hereunder or upon any other interest of Lessor in the Premises, except for such real and personal property taxes and assessments as are hereinabove set forth.
26. Zoning. Lessor represents and warrants to Lessee that at the time of execution of this Lease, the Premises are zoned for the uses and purposes for which the Premises are leased to Lessee hereunder. In the event that any law or ordinance shall be passed purporting to prohibit or restrict the use of the Premises by Lessee as set forth above, Lessor at its expense shall take such proceedings and institute such actions as may be reasonably necessary to attempt to have the law or ordinance declared invalid or not applicable to the Premises. In the event that such law or ordinance is not finally adjudged to be invalid or inapplicable and as a result of which Lessee is substantially restricted from using the Premises for the aforesaid uses and purposes, Lessee may at its option terminate this Lease.
27. Surrender of Lease. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subleases or subtenancies, or shall, at the option of Lessor, operate as an assignment to it of any or all such subleases or subtenancies.
28. Waiver. The waiver by Lessor or Lessee of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptance of Rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee of any term, covenant or condition of this Lease, other than failure of Lessee to pay the particular Rent so accepted, regardless of Lessors knowledge of such preceding breach at the time of acceptance of such rent. The payment of Rent hereunder by Lessee shall not be deemed a waiver of any preceding breach by Lessor of any term, covenant or condition of this Lease.
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29. Holding Over. Should the Lessee hold over possession of said Premises after the term of this Lease has terminated or after the termination of any extended term as provided herein, with Lessors consent, such holding over shall be deemed a tenancy from month to month and at a rental equivalent to one and one-half times the monthly base rental and 100% of the NNN charges payable hereunder as it shall be determined pursuant to the provisions contained herein for the last preceding month of the term of this Lease. In all other respects, said month to month tenancy shall be subject to the same terms, covenants and conditions as apply to the term of this Lease.
30. Stanford Ground Lease. This Lease is under and subject to the provisions of that certain lease (the Ground Lease) made and entered into as of May 1, 1962 by and between the Board of Trustees of The Leland Stanford Junior University, as ground Lessor, and Demmon-Hunter, Inc. as ground lessee, including without limitation the approval and consent to this Lease by said ground Lessor pursuant to paragraph 13 (a) of the Stanford Ground Lease. Lessor represents and warrants that, to the best of its current, actual knowledge, the Ground Lease is in full force and effect and that neither it nor Stanford are in default of any of their respective obligations of the Ground Lease. Lessor herein covenants and agrees to use its best efforts to obtain such consent to this Lease. The Ground Lessor and Ground Lessee will not willfully terminate the Ground Lease prior to the expiration or earlier termination of the Lease.
In the event the Stanford University approval has not been received within twenty (20) business days of Lessors written request to Stanford University for the approval of this Lease, Lessee and Lessor have the right to terminate this Lease and all obligations hereto, provided such termination occurs within thirty (30) calendar days of Lessors written notice to Lessee of Stanfords failure to approve this Lease.
31. Security Deposit. Upon the full execution of this Lease by Lessor and Lessee and following the delivery of a fully executed original of this Lease to Lessee, Lessee shall pay a cash Security Deposit to Lessor of $1,192,111.20 (equal to nine (9) months Base Rent) in the form of cash. Provided Lessee is not in default in the performance of any material condition hereunder beyond any applicable notice and cure periods, the Security Deposit shall be released on the following schedule: (i) $662,284.00 (equal to five (5) months Base Rent) shall be reimbursed to Lessee by Lessors check made payable and delivered to Lessee within ten (10) business days after the expiration of the twenty-fourth (24th) calendar month of the lease term (the First Reimbursement), and (ii) $397,370.40 (equal to three (3) months Base
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Rent) shall be reimbursed to Lessee by Lessors check made payable and delivered to Lessee within ten (10) business days after the expiration of the sixtieth (60th) calendar month of the lease term (the Second Reimbursement) as provided herein. In the alternative, in lieu of Lessors check as provided in clauses (i) and (ii) above, Lessee may elect by written notice to Lessor, to offset Base Rent for the total amount of the First Reimbursement or the Second Reimbursement. The balance of $132,456.80 (equal to one month of Base Rent) shall be held by Lessor and shall be released to Lessee upon the expiration of the original lease term. The security deposit shall be held by Lessor as security for the performance of the terms and conditions of this Lease to be performed by Lessee. If during the term of this Lease any sum owed by Lessee shall be unpaid and overdue beyond any applicable notice and cure period for Lessees default, then Lessor at its option may apply this security deposit to any portion or the entire unpaid sum. Should any portion or all of this security deposit be applied to any unpaid sum then Lessee upon written demand by Lessor will restore said security sum to its then original amount. Failure by Lessee to do so within fifteen (15) days after receipt of demand shall constitute a breach of this Lease. Lessor shall refund the entire remaining balance of the security deposit (or so much thereof as is not required to cure a default by Lessee under this Lease) at the end of the term of this Lease within the time required under California Law. If Lessee is in default beyond any applicable notice and cure period, Lessor can use the security deposit, or any portion of it, to cure the default or to compensate Lessor for all damage sustained by Lessor resulting from Lessees default. Lessors obligations with respect to the security deposit are those of a debtor and not a trustee. Lessor may maintain the security deposit separate and apart from Lessors general funds or may commingle the security deposit with Lessors general and other funds. Lessor shall not be required to pay Lessee interest on the security deposit.
32. Parking. Lessee shall have the right to the sole and exclusive use of ninety six (96) parking spaces at no additional charge within the designated parking area as depicted on Exhibit A. Lessee shall have the right to provide valet parking in the designated parking area and to stack cars to make the most of the parking area provided that the stacking of cars shall not inhibit the fire departments access to the Building.
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33. Surrender of The Premises. Upon termination of this Lease, Lessee shall deliver the Premises to Lessor broom clean, free of all debris and all personal property shall be removed from the Premises, and otherwise in the same condition as originally occupied by Lessee (including all permanent improvements installed in the Premises by Lessee at commencement), less normal wear and tear. Lessee shall not be responsible for the restoration of any improvements installed by any previous tenant or occupant of the Premises. At the time Lessee submits Lessees plans and specifications for future alterations or additional (not including the initial tenant improvements) to Lessor for approval, Lessor will notify Lessee in writing of any restoration obligations triggered by such alterations or additions and required by Lessee.
34. Hazardous Materials.
(a) Disclosure. Lessor (i) has not used or produced any hazardous substances on the property nor released any hazardous substances on or into the property, and (ii) has no knowledge or the use of any hazardous substances on the Premises or the presence or release of hazardous substances on or into the property.
(b) Indemnity by Lessee. Lessee shall indemnify, defend and hold Lessor harmless from any judgment, damages, losses , claims, actions, reasonable attorneys fees, consultants fees, costs or expenses which are directly caused by Lessees use, storage , disposal or release of hazardous materials in or about the Premises in violation of law. Lessee shall have no other liability to Lessor or any of its officers, agents or partners as a consequence of the presence of hazardous substances in or about the Premises or property.
(c) Indemnity by Lessor. Lessor shall indemnify, defend and hold Lessee and its directors, officers, employees and affiliates (collectively, Indemnified Parties) harmless against all claims, losses, liabilities, judgments, actions, or reasonable attorneys or consultants fees arising out of the presence or release of any hazardous substances on or in the property (other than hazardous substances which Lessee or any of its Indemnified Parties may locate or release on the property). Lessors obligations under this paragraph 32 shall survive the termination of this Lease.
35. Notices. All notices, demands or other writings required or permitted under this Agreement shall be deemed to have been given when made either personally, after being sent by U.S. certified mail, postage prepaid, or by nationally recognized overnight delivery service (such as UPS or Fed Ex) addressed to the parties as follows, or to such other address as to which notice shall have been so given:
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Lessor: Kelly-Gordon Company
12241 Saratoga-Sunnyvale Road
Saratoga, CA 95070
Lessee: Before the Commencement Date:
Enjoy Technology Inc.
171 Constitution Dr.
Menlo Park, CA 94025
Attention: Lease Administration
With a copy to: leaseadmin@enjoy.com
After the Commencement Date:
Enjoy Technology, Inc.
3240 Hillview Avenue
Palo Alto, CA 94304
Attention: Lease Administration
With a copy to: leaseadmin@enjoy.com
36. Attorneys Fees. Should any litigation be commenced between the parties hereto concerning the Premises, this Lease, or the rights and duties of either party in relation thereto, the prevailing party in such litigation shall be entitled, in addition to such other relief as may be granted, to a reasonable sum as and for its attorneys fees in such litigation or in a separate action brought for that purpose. Such costs, expenses, and fees shall be included in and made a part of the judgment recovered by the prevailing party, if any. The prevailing party is also entitled to any and all costs incurred in the collection of any judgment.
37. Governing Law. This Lease and the rights of the parties hereunder shall be governed by the laws of the State of California, without regard to any conflict of law rules.
38. Renewal Option. Provided Lessee is not in default in the performance of any material condition hereunder beyond any applicable notice and cure periods, Lessee shall have the option to extend this Lease for one (1), five (5)-year renewal period (an Extended Term) by notifying the Lessor in writing of Lessees exercise of the option, not less than six months nor more than twelve months prior to the expiration of the term of this Lease. The rental rate of the Extended Term shall be at a rate equal to ninety five percent (95%) of the then Fair Market Rental Rate for Office and R & D buildings within the Stanford Research Park that are comparable in location, size, quality and use as 3240 Hillview Avenue, Palo Alto. As used herein, the Fair Market Rental Rate for the Extended Term shall mean the Base Rent for
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comparable space at which non-equity tenants, as of the commencement of the lease term for the Extended Term, will be leasing non-sublease, non-equity, unencumbered space comparable in size, location and quality to the Premises for a comparable term, in other comparable buildings in the vicinity of the Building, taking into consideration the condition and value of existing tenant improvements in the Premises. The Fair Market Rental Rate shall include the periodic rental increases that would be included for space leased for the period of the Extended Term.
If Lessor and Lessee are unable to agree on the Fair Market Rental Rate for the Extended Term within thirty (30) days of receipt by Lessor of the Option Notice for the Extended Term, Lessor and Lessee each, at its cost and by giving notice to the other party, shall appoint a competent and impartial commercial real estate broker (hereinafter broker) with at least five (5) years full-time commercial real estate brokerage experience in the geographical area of the Premises to set the Fair Market Rental Rate for the Extended Term. If either Lessor or Lessee does not appoint a broker within ten (10) days after the other party has given notice of the name of its broker, the single broker appointed shall be the sole broker and shall set the Fair Market Rental Rate for the Extended Term. If two (2) brokers are appointed by Lessor and Lessee as stated in this paragraph, they shall meet promptly and attempt to set the Fair Market Rental Rate. If either of the first two (2) brokers fails to submit their opinion of the Fair Market Rental Rate within the time frames set forth below, then the single Fair Market Rental Rate submitted shall automatically be the initial monthly Base Rent for the Extended Term and shall be binding upon Lessor and Lessee. If the two (2) brokers are unable to agree within ten (10) days after the second broker has been appointed, they shall attempt to select a third broker, meeting the qualifications stated in this paragraph within ten (10) days after the last day the two (2) brokers are given to set the Fair Market Rental Rate. If the two (2) brokers are unable to agree on the third broker, either Lessor or Lessee by giving ten (10) days written notice to the other party, can apply to the Presiding Judge of the Superior Court of the county in which the Premises is located for the selection of a third broker who meets the qualifications stated in this paragraph. Lessor and Lessee each shall bear one-half (1/2) of the cost of appointing the third broker and of paying the third brokers fee. The third broker, however selected, shall be a person who has not previously acted in any capacity for either Lessor or Lessee. Within fifteen (15) days after the selection of the third broker, the third broker shall not be permitted to introduce any additional evidence of the Fair Market Rental Rate or re-
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compute same but shall be strictly limited to the selection of one of the two Fair Market Rental Rates submitted by the first two brokers as the Fair Market Rental Rate for the Extended Term. The determination of the Fair Market Rental Rate by the third broker shall be binding upon Lessor and Lessee. In no event shall the monthly Base Rent for any period of the Extended Term as determined, be less than the last monthly base rent charged during the original term of this Lease. Upon determination of the initial monthly Base Rent for the Extended Term pursuant to the terms outlined above, Lessor and Lessee shall immediately execute an appropriate amendment to the Lease documenting the new Base Rent. Lessee shall have no other right to further extend the initial term of the Lease unless Lessor and Lessee otherwise expressly agree in writing.
If Lessee timely and properly exercises this Option Lessee shall accept the Premises in its then As-Is condition and, accordingly, Lessor shall not be required to perform any additional improvements to the Premises.
This Option is personal to Lessee and may not be assigned, voluntarily or involuntarily; separate from or as part of the Lease, except to assignees falling under the terms of Paragraph 20, clauses 20(a), 20(b), 20(c), and 20(d).
39. Entire Agreement. This Lease and the exhibits attached hereto and documents referenced herein contain and constitute the entire understanding and agreement between Lessor and Lessee respecting the subject matter hereof, and supersede all prior agreements and understandings with respect thereto. Any agreement or representation respecting the Premises or the duties of either Lessor or Lessee in relation thereto not expressly set forth in this Lease is null and void. This Lease may be modified only in a writing signed by both Lessor and Lessee.
40. Intentionally Omitted.
41. Commission. Lessor shall be responsible for the payment of a leasing commission to Jones Lang LaSalle (the Lessees Broke) and CBRE (the Lessors Broker) pursuant to a separate written agreement between Lessor and Lessors Broker dated February 12, 2018. Except for Lessors Broker and Lessees Broker, Lessor and Lessee each warrant to the other that there are no brokers involved in this transaction and no other claims for brokers commissions or fees owing in connection with this Lease and each of Lessor and Lessee agree to indemnify the other against any such claims.
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42. Successors and Assigns. The covenants and conditions herein contained shall, subject to the provisions of paragraph 18 as to assignment and subletting, apply to and bind the heirs, successor , executors, administrators and assigns of all the parties hereto; and all of the parties hereto shall be jointly and severally liable hereunder.
43. Time. Time is hereby expressly declared to be of the essence of this Lease.
44. Miscellaneous. The headings in the Paragraphs of the Lease are for convenience only and do not in any way limit or amplify the terms and provisions of this Lease. Should any provision of this Lease prove to be invalid or illegal, such invalidity or illegality shall in no way affect, impair or invalidate any other provision hereof, and such remaining provisions shall remain in full force and effect. The language in all parts of this Lease shall in all cases be construed as a whole according to its fair meaning, and not strictly for or against either Lessor or Lessee. Lessor shall not become or be deemed a partner or a joint venturer of Lessee by reason of this Lease. This Lease may be executed in counterparts, each of which shall constitute an original and all of which together shall constitute one Lease. Faxed and/or emailed signatures hereon shall be deemed originals for all purposes. All exhibits to this Lease shall be deemed incorporated herein by the individual reference to each such exhibit, and shall be deemed a part of this Lease as though set forth in full in the body of the Lease.
45. OFAC Representation. For purposes hereof, List shall mean the Specially Designated Nationals and Blocked Persons List maintained by OFAC and/or on any other similar list maintained by OFAC pursuant to any authorizing statute, executive order or regulation, and OFAC shall mean the Office of Foreign Assets Control, Department of the Treasury. Each party represents and warrants to the other that (i) each Person owning a ten percent (10%) or greater interest in such party is (A) not currently identified on the List, and (B) is not a person with whom a citizen of the United States is prohibited to engage in transactions by any trade embargo, economic sanction, or other prohibition of United States law, regulation, or Executive Order of the President of the United States and (ii) each party has implemented procedures, and will consistently apply those procedures, to ensure the foregoing representations and warranties remain true and correct at all times. Each party shall comply with all requirements of law relating to money laundering, anti-terrorism, trade embargos and economic sanctions, now or hereafter in effect and shall use reasonable efforts to notify the other in writing if any of the forgoing representations, warranties or covenants are no longer true or have been breached or if such party has a reasonable basis to believe that they may no longer be true or have been breached. In addition, at the request of a party, the other party shall provide such information as may be requested by the requesting to determine the other partys compliance with the terms hereof.
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46. Accessibility. As of the Effective Date, there has been no inspection of the Premises by a Certified Access Specialist (CASp), as referenced in Section 1938 of the California Civil Code. A CASp can inspect the Premises and determine whether the Premises comply with all of the applicable construction-related accessibility standards under state law. Although state law does not require a CASp inspection of the Premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the Premises for the occupancy or potential occupancy of the lessee or tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of the CASp inspection. Lessee is hereby advised that any CASp inspection shall be at Lessees sole cost and expense and that any violation within the Premises shall be the responsibility of Lessee to correct, at Lessees sole cost and expense.
47. Confidentiality. Lessee acknowledges that the content of this Lease and any related documents are confidential information. Lessee shall keep and maintain such confidential information strictly confidential and shall not disclose such confidential information to any person or entity other than Lessees financial, tax, legal, leasing and space planning consultants or to potential acquirers or existing or potential investors. Notwithstanding the foregoing, Lessee shall incur no liability for disclosure of confidential information: (a) that is, or hereafter becomes, part of the public domain other than through a Default by Lessee of its obligations in this paragraph, (b) in response to subpoena in litigation, or (c) as otherwise necessary in connection with litigation or as required by law. For the avoidance of doubt, the fact that this Lease exists shall not constitute confidential information.
48. Waiver of Jury Trial. IN GRAFTON PARTNERS L.P. v. SUPERIOR COURT, 36 CAL.4TH 944 (2005), THE CALIFORNIA SUPREME COURT RULED THAT CONTRACTUAL, PRE-DISPUTE JURY TRIAL WAIVERS ARE UNENFORCEABLE. THE PARTIES, HOWEVER, ANTICIPATE THAT THE CALIFORNIA LEGISLATURE WILL ENACT LEGISLATION TO PERMIT SUCH WAIVERS IN CERTAIN CASES. IN ANTICIPATION OF SUCH LEGISLATION, TO THE EXTEND PERMITTED BY APPLICABLE
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LAW, THE PARTIES EACH WAIVE, AS OF THE EFFECTIVE DATE OF SUCH LEGISLATION AND TO THE EXTENT PERMITTED BYAPPLICABLE LEGAL REQUIREMENTS, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE AND AGREE THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
49. Right of First Offer. Lessee shall have the right of first offer (RFO) to lease any space that becomes available in the building located at 3260 Hillview Avenue, Palo Alto, California (the RFO Space). If during the term of the Lease Lessor elects to lease the RFO Space (other than by a renewal to a then-current tenant of such space) then Lessor shall first offer to lease the RFO Space to Lessee on terms and conditions that are commercially reasonable (in Lessors reasonable discretion) and in keeping with the lease of the Premises and the leases of other similar properties in the Stanford Research Park within which the Premises are located (the RFO Notice). The RFO Notice shall be in writing and will be specific as to the terms of the offer and the particular space being offered. If Lessee does not accept the Lessors RFO offer as set forth in the RFO Notice and execute a commercially reasonably amendment to this Lease within thirty (30) days after its receipt of the RFO Notice then Lessees RFO rights shall immediately be void and of no further force or effect with respect to the particular RFO Space described in the RFO Notice. Lessor shall thereafter have the right to move forward with a lease to the third party without any further obligation to offer to lease the particular RFO Space described in the RFO Notice to Lessee.
50. Roof Access. Lessee shall have access to the roof of the Building and the right to install, operate and maintain mechanical, electrical and telecommunications equipment (Equipment) on the roof of the Building or affixed to the parapet wall of the Building. Lessor shall have the right to approve the size and specific location of the Equipment. Such work shall not penetrate the roof or result in the installation of any anchor to the roof for the Equipment. Installation shall be done in accordance with any and all roof warranties (to the extent necessary for roof work). Upon the expiration or earlier termination of this Lease, Lessee shall at Lessees sole cost and expense remove the Equipment and all related equipment installed in the interior and exterior of the Premises.
[Signatures Appear on Following Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written, at Palo Alto, California.
LESSEE: | ||
ENJOY TECHNOLOGY, INC. | ||
a Delaware corporation | ||
By: | /s/ Ronald Johnson | |
Name: Ronald Johnson | ||
Its: CEO | ||
Dated: 1/25/2019 | ||
LESSOR: | ||
KELLY-GORDON COMPANY, INC., | ||
a California corporation | ||
By: | /s/ Brian J. Kelly | |
Name: Brian J. Kelly | ||
Its: President | ||
Dated: 2/1/2019 |
30
ACKNOWLEDGED AND AGREED: | ||
LESSEE: | ||
KELLY-GORDON COMPANY, INC., a California corporation | ||
By: | /s/ Brian J. Kelly |
Print Name: | Brian J. Kelly |
Its: | President | |
Dated: 2/1/2019 | ||
SUBTENANT: | ||
ENJOY TECHNOLOGY, INC., a Delaware corporation | ||
By: | /s/ Ronald Johnson |
Print Name: | Ronald Johnson |
Its: | CEO |
31
EXHIBIT A
A-1
A-2
EXHIBIT B
Lessors Work
In accordance with the provisions of Paragraph 5 of the Lease, Lessor, at Lessors sole cost and expense, shall address those items listed below.
A. | Lessors Work: Prior to the date possession of the Premises is delivered to Lessee, Lessor, at Lessors sole cost and expense, shall perform the following work listed below (without any deduction from the Allowance): |
1. | Lessor shall cause the base building systems serving the Premises (including the existing fire alarm system) to be in good condition and repair on the Anticipated Delivery Date, consistent with the customary building standards. |
2. | Lessor shall deliver the Premises in broom clean condition. |
3. | Lessor shall repair structural components as needed (e.g., roof structure, foundation, external and interior structural walls). |
4. | Lessor shall ensure that the Premises and the Building comply with all applicable laws as of the Commencement Date (including without limitation the Americans with Disabilities Act and any environmental or other regulations). Lessor represents that all ADA bathrooms, pathways, ramps, elevator, parking and associated signage was completed by Lessor, approved and signed off by the City on December 20, 2018. |
5. | Lessor represents that interior perimeter walls have been repaired and taped to ceiling height and that Lessor shall repair any damage to the exterior walls of the Building. |
6. | Lessor shall repair the existing penetrations to the floor on the second level of the Building. |
7. | Intentionally Omitted. |
8. | Lessor shall demolish the conference room on the second floor of the Building, including the two fire doors |
9. | Lessor represents that it has demolished the ceiling and that it shall demolish the walls in the lobby area to create a completely open entry to the Building. |
B-1
EXHIBIT C
3240 Hillview Avenue
EXPENSES January 2019 through December 2019
INSURANCE |
$ | 7,493 | ||
GARDNER |
$ | 6,840 | ||
HVAC |
$ | 3,136 | ||
TAXES |
$ | 60,461 | ||
LAND LEASE |
$ | 137,888 | ||
MANAGEMENT |
$ | 47,684 | ||
|
|
|||
TOTAL |
$ | 263,502 | ||
PER MONTH |
$ | 21,958 | ||
PER SQUARE FOOT |
$ | 0.81 |
C-1
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-261808) of Enjoy Technology, Inc. of our report dated March 25, 2022 relating to the financial statements, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
San Francisco, California
March 25, 2022
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ron Johnson, certify that:
1. | I have reviewed this Annual Report on Form 10-K (this report) of Enjoy Technology, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 25, 2022
/s/ Ron Johnson |
Name: Ron Johnson |
Title: Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Fareed Khan, certify that:
1. | I have reviewed this Annual Report on Form 10-K (this report) of Enjoy Technology, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 25, 2022
/s/ Fareed Khan |
Name: Fareed Khan |
Title: Chief Financial Officer (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C.
SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Ron Johnson, the Chief Executive Officer (Principal Executive Officer) of Enjoy Technology, Inc. (the Company), hereby certify, that, to my knowledge:
1. | The Annual Report on Form 10-K for the year ended December 31, 2021 (the Report) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: March 25, 2022
/s/ Ron Johnson |
Name: Ron Johnson |
Title: Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18
U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY
ACT OF 2002
Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, I, Fareed Khan, the Chief Financial Officer (Principal Financial Officer) of Enjoy Technology, Inc. (the Company), hereby certify, that, to my knowledge:
1. | The Annual Report on Form 10-K for the year ended December 31, 2021 (the Report) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: March 25, 2022
/s/ Fareed Khan |
Name: Fareed Khan |
Title: Chief Financial Officer (Principal Financial Officer) |