MARE RAIN References to the "Company," "Marquee Raine Acquisition Corp. " "our," "us" or "we" refer toMarquee Raine Acquisition Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "should," "could," "would," "expect," "plan," "anticipate," "believe," "estimate," "continue," or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSEC filings. Overview We are a blank check company incorporated as aCayman Islands exempted company onOctober 16, 2020 . We were formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (the "Business Combination"). We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies. OnApril 28, 2021 , the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") withMRAC Merger Sub Corp. , a wholly owned subsidiary of the Company ("Merger Sub") andEnjoy Technology Inc. ("Enjoy"). The Merger Agreement provides that, among other things, the following transactions will occur (together with the other transactions contemplated by the Merger Agreement, including the Domestication (as defined below), (the "Proposed Business Combination"): (i) at the closing of the Proposed Business Combination (the "Closing"), Merger Sub will merge with and into Enjoy, the separate corporate existence of Merger Sub will cease and Enjoy will be the surviving corporation and a wholly owned subsidiary of the Company (the "Merger"); (ii) as a result of the Merger, among other things, each outstanding share of common stock of Enjoy (other than shares subject to Enjoy equity awards, treasury shares and dissenting shares) will be cancelled in exchange for the right to receive a number of shares of New Enjoy Common Stock (as defined below) equal to (x) the sum of (i) the Base Purchase Price (as defined below), plus (ii) the aggregate exercise price of each outstanding option to purchase common stock of Enjoy, plus (iii) the aggregate exercise price of each outstanding warrant of Enjoy, divided by (y) the aggregate number of shares of Enjoy common stock that are outstanding on a fully diluted basis as of immediately prior to closing, determined in accordance with the terms of the Merger Agreement, divided by (z)$10.00 . The "Base Purchase Price" means the sum of (a)$1,028,738,000 , plus (b) 125% of the aggregate amount actually funded prior to the Closing in connection with an Excluded Financing (as defined below), up to a maximum aggregate amount equal to$60 million , plus (c) the aggregate amount actually funded prior to the Closing in connection with an Excluded Financing (to the extent in excess of the amounts set forth in clause (b) above), up to a maximum aggregate amount equal to$15 million . The Board of Directors of the Company (the "Board") unanimously (i) approved and declared advisable the Merger Agreement and the Business Combination and (ii) resolved to recommend approval of the Merger Agreement and related matters by the shareholders of the Company. The Merger Agreement may be terminated at any time prior to the Closing (i) by mutual written consent of the Company and Enjoy, (ii) by the Company or Enjoy, if certain approvals of the Company's shareholders, to the extent required under the Merger Agreement, are not obtained as set forth therein, (iii) by Enjoy if there is a Modification in Recommendation (as defined in the Merger Agreement), (iv) by the Company if certain approvals of the shareholders of Enjoy are not obtained within twenty-four hours after the execution and delivery of the Merger Agreement and (v) by either the Company or Enjoy in certain other circumstances set forth in the Merger Agreement, including (a) if any Governmental Authority (as defined in the Merger Agreement) shall have issued or otherwise entered a final, nonappealable order making consummation of the Merger illegal or otherwise preventing or prohibiting consummation of the Merger, (b) in the event of certain uncured breaches by the other party or (c) if the Closing has not occurred on or beforeOctober 28, 2021 . 19 -------------------------------------------------------------------------------- Table of Contents The Domestication Prior to the Closing, the Company will effect a deregistration under Cayman Islands Companies Law and a domestication underDelaware General Corporation Law, pursuant to which the Company's jurisdiction of incorporation will be changed from theCayman Islands to theState of Delaware (the "Domestication"). In connection with the Domestication, the Company, as the continuing entity in the Domestication, will be renamed "Enjoy Technology, Inc. " As used herein, "New Enjoy" refers to the Company after the Domestication, including after such change of name. In connection with the Domestication, (i) each of the Company's then issued and outstanding Class A ordinary shares, par value$0.0001 per share (the "MRAC Class A Ordinary Shares"), will convert automatically, on a one-for-one basis, into a share of common stock, par value$0.0001 per share of New Enjoy (after its Domestication) (the "New Enjoy Common Stock"), (ii) each of the Company's then issued and outstanding Class B ordinary shares, par value$0.0001 per share (the "MRAC Class B Ordinary Shares"), will convert automatically, on a one-for-one basis, into a share of New Enjoy Common Stock, (iii) each then issued and outstanding warrant will convert automatically into a warrant to acquire one share of New Enjoy Common Stock ("New Enjoy Warrant"), pursuant to the Warrant Agreement, datedDecember 17, 2020 , between the Company andContinental Stock Transfer & Trust Company , as warrant agent, and (iv) each then issued and outstanding unit of the Company will separate and convert automatically into one share of New Enjoy Common Stock and one-fourth of one New Enjoy Warrant. Subscription Agreements OnApril 28, 2021 , concurrently with the execution of the Merger Agreement, the Company entered into subscription agreements (the "Subscription Agreements") with certain investors (collectively, the "PIPE Investors "), pursuant to, and on the terms and subject to the conditions of which, thePIPE Investors have collectively subscribed for 8 million shares of the New Enjoy Common Stock for an aggregate purchase price equal to$80 million (the "PIPE Investment ").The PIPE Investment will be consummated substantially concurrently with the Closing. The Subscription Agreements will terminate with no further force and effect upon the earliest to occur of: (a) such date and time as the Merger Agreement is terminated in accordance with its terms; (b) the mutual written agreement of the parties to such Subscription Agreement or (c) October 28, 2021. Sponsor Agreement OnApril 28, 2021 , concurrently with the execution of the Merger Agreement, the Company entered into a letter agreement (the "Sponsor Agreement") with the Sponsor pursuant to which, among other things, in connection with the Closing, the Sponsor agreed to (i) waive certain anti-dilution rights set forth in the Company's amended and restated memorandum and articles of association that may result from the Business Combination and (ii) subject 1,121,250 shares of New Enjoy Common Stock to potential forfeiture in the event that the volume-weighted average closing price of New Enjoy Common Stock does not equal or exceed$15.00 on 20 out of any 30 consecutive trading days after consummation of the Business Combination and prior to and including the fifth (5th) anniversary of the Closing. Going Concern As ofJune 30, 2021 , we had approximately$878,000 in our operating bank account, and working deficit of approximately$3.8 million . Our liquidity needs to date have been satisfied through a contribution of$25,000 from Sponsor to cover for certain expenses in exchange for the issuance of the Founder Shares, the loan of approximately$128,000 from our Sponsor pursuant to the Note (see Note 4), and the proceeds from the consummation of the Private Placement not held in the Trust Account. We repaid the Note in full upon closing of the Initial Public Offering. In addition, in order to finance transaction costs in connection with a Business Combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, provide us the Working Capital Loans (see Note 4). As ofJune 30, 2021 andDecember 31, 2020 , there were no amounts outstanding under any Working Capital Loan. We have incurred and expect to continue to incur significant costs in pursuit of the proposed Business Combination. We cannot provide any assurance that financing will be available to it on commercially acceptable terms, if at all. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity. These conditions raise substantial doubt about our ability to continue as a going concern for the one year period from date that the financial statements are issued. There is no assurance that our plans to consummate the proposed Business Combination will be successful or otherwise whether a business combination will be successful during the Combination Period. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty. 20 -------------------------------------------------------------------------------- Table of Contents Results of Operations Our entire activity from inception throughJune 30, 2021 relates to our formation, the Initial Public Offering and, since the closing of the Initial Public Offering, a search for a Business Combination candidate. We will not be generating any operating revenues until the closing and completion of our Business Combination at the earliest. For the three months endedJune 30, 2021 , we had a net loss of approximately$3.0 million , which consisted of approximately$2.4 million of general and administrative expenses, and a loss of approximately$626,000 from changes in fair value of derivative warrant liabilities. For the six months endedJune 30, 2021 , we had net income of approximately$1.4 million , which consisted of a gain of approximately$7.2 million gain from changes in fair value of derivative warrant liabilities, which was partially offset by approximately$5.8 million of general and administrative expenses. Contractual Obligations Proposed Business Combination See discussion of obligations under agreements relating to the Proposed Business Combination above under "Proposed Business Combination." Registration and Shareholder Rights The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of working capital loans (and any Class A Ordinary Shares issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans) were entitled to registration rights pursuant to a registration and shareholder rights agreement signed upon completion of the Initial Public Offering. These holders were entitled to certain demand and "piggyback" registration rights. However, the registration and shareholder rights agreement provide that the Company will not permit any registration statement filed under the Securities Act to become effective until the termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements. Underwriting Agreement We granted the underwriter a 45-day option from the date of the final prospectus relating to the Initial Public Offering to purchase up to 4,875,000 additional Units to cover over-allotments, if any, at the Initial Public Offering price less the underwriting discounts and commissions. OnDecember 15, 2020 , the underwriter fully exercised its over-allotment option. The underwriter was entitled to an underwriting discount of$0.20 per unit, or approximately$7.5 million in the aggregate, paid upon the closing of the Initial Public Offering. The underwriter also reimbursed approximately$3.0 million to the Company to cover for expenses in connection with the Initial Public Offering. In addition,$0.35 per unit, or approximately$13.1 million in the aggregate will be payable to the underwriter for deferred underwriting commissions and$0.01 per unit, or approximately$0.5 million in the aggregate will be payable to the attorneys for deferred legal fees. The deferred fees will become payable to the underwriter and attorneys from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. Critical Accounting Policies The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following as our critical accounting policies: Derivative Warrant Liabilities We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to theFinancial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity" ("ASC 480") and FASB ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. 21 -------------------------------------------------------------------------------- Table of Contents The warrants issued in connection with the Initial Public Offering (the "Public Warrants") and the Private Placement Warrants are recognized as derivative warrant liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the unaudited condensed statements of operations. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants. The fair value of the Private Placement Warrants has been subsequently estimated based on the listed market price of the Public Warrants. Class A Ordinary Shares Subject to Possible Redemption Class A Ordinary Shares subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Conditionally redeemable Class A Ordinary Shares (including Class A Ordinary Shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, Class A Ordinary Shares are classified as shareholders' equity. Our Class A Ordinary Shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, atJune 30, 2021 andDecember 31, 2020 , 33,137,137 and 33,044,958 Class A Ordinary Shares subject to possible redemption are presented at redemption value as temporary equity, respectively, outside of the shareholders' equity section of the Company's unaudited condensed balance sheets. Net Income (Loss) per Ordinary Shares Net income (loss) per common share is computed by dividing net income by the weighted average number of shares of ordinary shares outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 15,660,417 shares of the Company's ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. Our unaudited condensed statements of operations include a presentation of income per share for ordinary shares subject to redemption in a manner similar to the two-class method of income per share. Net income (loss) per ordinary share, basic and diluted for Class A Ordinary Shares are calculated by dividing the interest income earned on cash, cash equivalents and investments held in the Trust Account, net of amounts available to be withdrawn from the Trust Account to pay the Company's income taxes, for the period presented, by the weighted average number of Class A Ordinary Shares outstanding for the period. Net income per ordinary share, basic and diluted for Class B Ordinary Shares is calculated by dividing the net income less income attributable to Class A Ordinary Shares, by the weighted average number of Class B Ordinary Shares outstanding for the period. Recent Issued Accounting Standards InAugust 2020 , the FASB issued Accounting Standard Update (the "ASU") No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under currentU.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. The Company early adopted the ASU onJanuary 1, 2021 . Adoption of the ASU did not impact the Company's financial position, results of operations or cash flows. Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements. Off-Balance Sheet Arrangements As ofJune 30, 2021 , we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K. 22 -------------------------------------------------------------------------------- Table of Contents JOBS Act The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an "emerging growth company" and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. As a result, the financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an "emerging growth company," we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor discussion and analysis) and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO's compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our Initial Public Offering or until we are no longer an "emerging growth company," whichever is earlier. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item. As ofJune 30, 2021 , we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested inU.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in directU.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. We have not engaged in any hedging activities since our inception and we do not expect to engage in any hedging activities with respect to the market risk to which we are exposed. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in theSEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter endedJune 30, 2021 , as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, and in light of the material weakness in internal controls for the prior quarterly period endedMarch 31, 2021 described below, our Chief Executive Officer and Chief Financial Officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective. Prior to the filing of our Annual Report on Form 10-K/A for the fiscal year endedDecember 31, 2020 filed on Mary 13, 2021, our internal control over financial reporting did not result in the proper accounting classification of certain of the Warrants we issued inDecember 2020 which, due to its impact on our financial statements, we determined to be a material weakness. This mistake in classification was brought to our attention only when theSEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies ("SPACs") datedApril 12, 2021 (the "SEC Statement"). The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our initial public offering inDecember 2020 . 23 -------------------------------------------------------------------------------- Table of Contents Changes in Internal Control over Financial Reporting In light of the restatement in the Company's Annual Report on Form 10-K/A filed with theSEC onMay 13, 2021 , we have sought to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements, which includes providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. As ofJune 30, 2021 , this has not been fully remediated. During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d(f) under the Exchange Act that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, other than as described herein.
© Edgar Online, source
