Related Party Transactions

6 Months Ended

Jun. 30, 2022

Related Party Transactions

Related Party Transactions

13. Related Party Transactions

Due to their status as beneficial owners of more than 10 percent (10%) of the voting power of the outstanding capital stock of the Company, Joseph N. Sanberg and his affiliates meet the definition of “related parties” per ASC 850, Related Party Disclosures.

Feeding America Bulk Sale

On June 23, 2022, the Company entered into a purchase agreement with Feeding America for a bulk purchase of meal kit boxes and other bulk product items (the “Feeding America bulk sale”) for an aggregate net purchase price of $10.0 million, funded by a donation from an affiliate of Joseph N. Sanberg.

Gift Card Sponsorship Agreements

On March 11, 2022, the Company entered into a gift card sponsorship agreement (the “March Sponsorship Gift Cards”) with an affiliate of Joseph N. Sanberg, pursuant to which such affiliate agreed to pay the Company a $9.0 million net sponsorship fee to support a marketing program through which the Company would distribute gift cards, at the Company’s sole discretion, in order to support its growth strategy.

On May 5, 2022, the Company entered into the May Sponsorship Gift Cards Agreement with an affiliate of Joseph N. Sanberg, pursuant to which such affiliate agreed to pay the Company a $20.0 million net sponsorship fee to support a marketing program through which the Company will distribute gift cards, at the Company’s sole discretion, in order to support its growth strategy. On August 7, 2022, the Company amended the May Sponsorship Gift Cards Agreement to extend the funding date to on or before August 31, 2022, and pursuant to which, Joseph N. Sanberg personally guaranteed his affiliate’s obligation. However, as the Company concluded the contract did not meet the

collectability criterion under ASC 606, Revenue from Contracts with Customers, as of the date of this Quarterly Report on Form 10-Q, the May Sponsorship Gift Cards were not recognized within the Consolidated Financial Statements.

ASC 105, Generally Accepted Accounting Principles (“ASC 105”), describes the decision-making framework when no guidance exists in GAAP for a particular transaction. Specifically, ASC 105 instructs companies to look for guidance for a similar transaction within GAAP and apply that guidance by analogy.

While these agreements are not considered contracts with a customer based on the terms thereof, the Company evaluated the terms of the agreements and, as these services are the output of the Company’s ordinary activities, has analogized to ASC 606, Revenue from Contracts with Customers, and more specifically, the recognition of the Company’s unredeemed gift cards and other prepaid orders. See Note 2 to the Consolidated Financial Statements of the Annual Report on Form 10-K for a description of the Company’s revenue recognition accounting policy.

Sustainability and Carbon Credit Agreement

On March 31, 2022, the Company entered into a Sustainability and Carbon Credit Agreement (the “Sustainability Agreement”) with an affiliate of Joseph N. Sanberg. Under the terms of the agreement, the Company purchased and subsequently retired $3.0 million of carbon offsets, which were recognized in Product, technology, general and administrative expenses during the six months ended June 30, 2022.

Such affiliate also performed the assessment of the Company’s 2021 annual carbon footprint that provided it with the basis for determining the amount of carbon offsets the Company needed to purchase. The fee for these services was waived as a condition of entering into the Sustainability Agreement.

On June 30, 2022, the Company entered into a statement of work under the Sustainability Agreement, through which the affiliate transferred to the Company a sufficient amount of carbon offsets for its estimated 2023 and 2024 emissions based upon its 2021 annual carbon footprint, for a purchase price of $6.0 million, which will be paid in twenty-four equal monthly installments beginning on July 31, 2022.

2022 Private Placements

On April 29, 2022, the Company entered into respective purchase agreements with RJB and Linda Findley, a director of the Company and its President and Chief Executive Officer, under which the Company agreed to issue and sell to RJB and Ms. Findley, respectively, shares of Class A common stock for respective aggregate purchase prices of $40.0 million and $0.5 million (or $12.00 per unit). Of the $40.0 million of Class A common stock purchased by RJB under the April Private Placements, $20.0 million closed concurrently with the execution of the purchase agreement. On August 7, 2022, the Company amended the RJB April 2022 Purchase Agreement, pursuant to which RJB agreed to purchase from the Company (i) the 1,666,667 shares of Class A common stock under the initial RJB April 2022 Purchase Agreement at a price of $5.00 per share, instead of $12.00 per share, and (ii) an additional 8,333,333 shares of Class A common stock at a price of $5.00 per share, for an aggregate purchase price of $50.0 million and 10,000,000 shares of Class A common stock in total, as well as agreeing to extend the date of the second closing to on or before August 31, 2022.

On February 14, 2022, the Company entered into a purchase agreement with RJB, under which the Company agreed to issue and sell to RJB units of Class A common stock and warrants to purchase shares of Class A common stock in the February 2022 Private Placement, for an aggregate purchase price of $5.0 million (or $14.00 per unit).

See Note 11 for further discussion of the April 2022 Private Placements and February 2022 Private Placement.

The following table summarizes the composition and amounts of the transactions in the Company’s Consolidated Statements of Operations involving its related parties:

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022		2021		2022		2021
	(In thousands)
Net revenue:
Feeding America bulk sale	$	10,000	$	-	$	10,000	$	-
March Sponsorship Gift Cards	$	442	$	-	$	442	$	-
Cost of goods sold, excluding depreciation and amortization	$	5,468	$	-	$	5,468	$	-
Product, technology, general and administrative	$	3,000	$	-	$	3,000	$	-