Related Party Transactions

9 Months Ended

Sep. 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

March and May Sponsorship Gift Cards

On March 11, 2022, the Company entered into a gift card sponsorship agreement 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 (the “March Sponsorship Gift Cards”), at the Company’s sole discretion, in order to support its growth strategy.

On May 5, 2022, the Company entered into the 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 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.

On September 7, 2022, the Sponsorship Gift Cards Agreement was further amended to reduce the net sponsorship fee to $18.5 million and extend the due date to September 19, 2022. As of the date of this Quarterly Report on Form 10-Q, the Sanberg affiliate has paid $5.6 million of its commitment under said agreement, with $12.9 million remaining to be paid.

Accounting Recognition

As the Company concluded the remaining amount to be paid under the Sponsorship Gift Cards Agreement 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 $12.9 million receivable was 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 three months ended March 31, 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

See Notes 2, 11, and 16 for further discussion of the RJB Private Placement and Findley Private Placement during the nine months ended September 30, 2022.

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					Nine Months Ended
	September 30,					September 30,
	2022		2021		2022		2021
	(In thousands)
Net revenue:
Feeding America bulk sale	$	-	$	-	$	10,000	$	-
March Sponsorship Gift Cards	$	2,563	$	-	$	3,046	$	-
Cost of goods sold, excluding depreciation and amortization	$	1,726	$	-	$	7,194	$	-
Product, technology, general and administrative	$	-	$	-	$	3,000	$	-