(1) Contract liability as of June 30, 2022 relates to customer prepayments and customer chargebacks. A contract liability is recognized when the Company receives payment in advance from a customer but the Company has not yet satisfied its performance obligation. In addition, certain of the Company’s contracts contain provisions that allow for a chargeback by the customer of the Company’s fee for selling the incremental service if the Consumer cancels such services within a specified period from the visit. Chargebacks are recognized as a reduction of revenue, in the period such visit occurs, using an estimate derived from historical information regarding Consumer cancelations of specific services as well as real-time information provided by the customer. Chargeback estimates have historically been presented as a reduction to accounts receivables, net, in the consolidated balance sheets as the contractual right of offset existed, however, the amount is presented as liability as of June 30, 2022 given there were no outstanding receivables from the customer at the end of the period.

Legacy EJY, Inc. 10-Q