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 and nine months ended September 30, 2021, the Company recorded approximately $63 and $462 of management fees included within selling, general and administrative 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 nine months ended September 30, 2021, the Parent repaid the balance of the receivable. The aggregate receivable from the Parent at September 30, 2021 was $0.

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. In July 2022, the Company entered into a settlement agreement with the Rumble sellers to resolve disputes related to the acquisition and related agreements. Under the terms of the settlement, the Company will prospectively reduce the interest rate on the debt financing provided to the Rumble sellers from 11% per annum to 7.5% per annum if payment is in cash or 10% per annum if payment is in payment in kind and extend the maturity date of the debt financing. In August 2022, the Rumble sellers borrowed an additional $3,300 under the debt financing agreement which was recorded as receivable from shareholder within equity. At September 30, 2022, the Company recorded $319 of interest in kind, which was recorded as an increase to receivable from shareholder within equity. In addition, the Company agreed to fund additional loans to the Rumble sellers under the existing debt financing agreement in an aggregate amount of $7,650 at various dates through July 2023.

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 September 30, 2022 and December 31, 2021, the Company had recorded $96 and $96 of notes receivable, respectively. The notes payable were repaid in 2021. The Company recognized $3 and $8 of interest income in the three and nine months ended September 30, 2022, respectively, and $3 and $9 in the three and nine months ended September 30, 2021. The Company did not record any interest expense for the three and nine months ended September 30, 2022, respectively. During the three and nine months ended September 30, 2021, the Company recorded $0 and $5 of interest expense, 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. The Company recorded expense related to this lease of $80 and $239 in the three and nine months ended September 30, 2022, respectively, and $78 and $233 in the three and nine months ended September 30, 2021, respectively. In September 2022, the Company's Chief Executive Officer sold the building to an unaffiliated third party. The Company entered into a building lease agreement with the new owner.

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, package and memberships revenue, and merchandise revenue, were $679 and $2,018 for the three and nine months ended September 30, 2022, respectively, and $612 and $1,210 for the three and nine months ended September 30, 2021, respectively. Included in accounts receivable as of September 30, 2022 and December 31, 2021, is $6 and $320, respectively, for such sales. At September 30, 2022 and December 31, 2021, notes receivable from franchisees includes $0 and $294 and notes receivable from franchisees, net of current portion includes $1,921 and $1,744, respectively, related to financing provided to these affiliates.