Related Party Transactions
|3 Months Ended|
Mar. 31, 2022
|Related Party Transactions [Abstract]|
|Related Party Transactions||
Note 10 – Related Party Transactions
The Company has numerous transactions with the pre-IPO Member and pre-IPO Parent and its affiliates. The significant related party transactions consist of borrowings from and payments to the Member and other related parties under common control of the Parent.
In September 2017, the Parent entered into a management services agreement with TPG Growth III Management, LLC (“TPG”), which was an affiliate of the Parent, to pay TPG an annual fee of $750 for management services provided to the Company. In June 2018, TPG assigned the management services agreement to H&W Investco Management LLC (“H&W Investco”), which is beneficially owned by a member of the Company’s board of directors. During the three months ended March 31, 2022 and 2021, the Company recorded approximately $0 and $192, respectively, of management fees included within SG&A expenses for services received from H&W Investco, including reimbursement for reasonable out-of-pocket expenses. The management services agreement was terminated following the IPO in July 2021.
During 2020, the Company provided net funds to an affiliate of the Parent aggregating $1,456, which was recorded as a reduction to member's equity. During the three months ended March 31, 2021, the Parent repaid $2 of the receivable. The aggregate receivable from the Parent at March 31, 2021 was $1,454.
In March 2021, the Company recorded a distribution to the Parent of $10,600, which the Parent used to fund a note payable under a debt financing obligation in connection with the acquisition of Rumble. The Company earned interest at the rate of 11% per annum on the receivable from the Parent. In connection with the Reorganization Transactions, the Parent merged with and into the Member. XPO Inc. recorded $10,600 receivable from shareholder, as the Rumble seller is a shareholder of XPO Inc., for the debt financing provided to the Rumble seller.
The Company’s Chief Executive Officer is the sole owner of ICI, which previously provided unsecured loans to the Company, which loaned the funds to franchisees to purchase a franchise territory or to setup a studio. The Company recorded notes payable to ICI and notes receivable from the franchisees resulting from these transactions. The notes from ICI to the Company accrued interest at the time the loan was made, which was recorded as interest expense. The notes receivable begin to accrue interest 45 days after the issuance to the franchisee. At March 31, 2022 and December 31, 2021, the Company had recorded $98 and $96 of notes receivable, respectively. The notes payable were repaid in 2021. The Company recognized $3 of interest income in the three months ended March 31, 2022 and 2021, and $0 and $3 of interest expense for the three months ended March 31, 2022 and 2021, respectively.
In September 2019, the Company entered into a five-year building lease agreement, expiring August 31, 2024, with Von Karman Production LLC, which is owned by the Company’s Chief Executive Officer. Pursuant to the lease, the Company is obligated to pay monthly rent of $25 for the initial twelve months of the lease term with subsequent 3% annual rent increases. During the three months ended March 31, 2022 and 2021, the Company recorded expense related to this lease of $80.
The Company earns revenues and has accounts receivable and notes receivables from franchisees who are also shareholders of or officers of the Company. Revenues from these affiliates, primarily related to franchise revenue, marketing fund revenue and merchandise revenue, were $263 and $294 for the three months ended March 31, 2022 and 2021, respectively. Included in accounts receivable as of March 31, 2022 and December 31, 2021, is $316 and $320, respectively, for such sales. At March 31, 2022 and December 31, 2021, notes receivable from franchisees includes $601 and $294 and notes receivable from franchisees, net of current portion includes $1,744 and $1,744, respectively, related to financing provided to these affiliates.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef