Last10K.com

Blue Apron Holdings, Inc. (APRN) SEC Filing 10-Q Quarterly Report for the period ending Wednesday, June 30, 2021

Blue Apron Holdings, Inc.

CIK: 1701114 Ticker: APRN

Exhibit 99.1

Blue Apron Holdings, Inc. Reports Second Quarter 2021 Results

Key Highlights:

Second quarter 2021 net revenue of $124.0 million was in-line with the company’s guidance.(1)
Second quarter 2021 net loss was $18.6 million, inclusive of a non-cash charge of approximately $4.1 million, related to the May 2021 amendment to the company’s financing agreement. Excluding this charge, net loss outperformed the company’s guidance. (1)
Second quarter 2021 Adjusted EBITDA loss of $3.5 million exceeded the company’s guidance. (1)  
Key customer metrics continue to reflect the benefit of the company’s growth strategy, including the third consecutive quarterly record for Average Order Value.
Strengthened balance sheet and improved financial flexibility with $51.0 million of cash and cash equivalents at quarter-end inclusive of approximately $21.1 million in net proceeds from the June underwritten public equity offering.
oThe company had $18.6 million of cash net of debt as of June 30, 2021.
Continued advancement of product roadmap, including the launch of Butcher Bundles, Add-ons and Craft Burger, increasing the number of menu options from 30 in March 2021 to 43 in July 2021.

(1) Second quarter 2021 net revenue, net loss and Adjusted EBITDA reflect the benefit from the recognition of an approximately $2.0 million recovery of customer credits issued in the third quarter of 2020 related to a voluntary recall of onions supplied to the company.

New York, NY – August 3, 2021 – Blue Apron Holdings, Inc. (NYSE: APRN) announced today financial results for the quarter ended June 30, 2021.

“Blue Apron’s solid second quarter results reflect, in part, the benefits of the product roadmap focused on adding variety, flexibility and choice we established two years ago. This has allowed us to continue to attract and retain high-value customers,” said Linda Findley Kozlowski, Blue Apron’s President and Chief Executive Officer. “This was another quarter of strong performance for all our key customer metrics, particularly when considering the return of seasonality impacts. Our Average Order Value, Orders per Customer and Average Revenue per Customer continued to be at record or near-record quarterly levels in the second quarter even as consumers increasingly resumed activities they enjoyed pre-pandemic. The continued strength of Blue Apron’s key customer metrics demonstrates the benefits from our consistent expansion of the differentiated, high-quality products we offer. By providing more items at different price points for our customers to choose from, we are also driving strong Average Revenue per Customer growth, which again reached at least $330 in the second quarter, marking an approximate 25%, or $65, increase over the second quarter of 2019.”

Key Customer Metrics

Improvements in key customer metrics in the chart below reflect the company’s product initiatives, and targeted marketing investments as well as, to some degree, the benefit of changes in consumer behavior related to the pandemic in the second quarter of 2020, the impact of the onion recall recovery and other operating trends and seasonality.

1


The following information was filed by Blue Apron Holdings, Inc. (APRN) on Tuesday, August 3, 2021 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021.

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

Commission file number 001-38134

Blue Apron Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

    

81-4777373

(State or Other Jurisdiction of Incorporation or Organization)

(I.R.S. Employer Identification No.)

28 Liberty Street, New York, New York

10005

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code (347) 719-4312

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of Each Class

Trading Symbol

Name of Exchange on Which Registered

Class A Common Stock, $0.0001 par value per share

APRN

New York Stock Exchange LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer 

Accelerated filer 

Smaller reporting company 

Emerging growth company 

Non-accelerated filer  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No 

Indicate the number of shares outstanding of each class of the issuer’s common stock as of the latest practicable date.

Class

Number of Shares Outstanding

Class A Common Stock, $0.0001 par value

20,207,631 shares outstanding as of June 30, 2021

Class B Common Stock, $0.0001 par value

3,393,708 shares outstanding as of June 30, 2021

Class C Capital Stock, $0.0001 par value

0 shares outstanding as of June 30, 2021

BLUE APRON HOLDINGS, INC.

TABLE OF CONTENTS

    

 

PART I

FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements (unaudited)

4

Consolidated Balance Sheets

4

Consolidated Statements of Operations

5

Consolidated Statements of Stockholders’ Equity

6

Consolidated Statements of Cash Flows

7

Notes to Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

44

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

45

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

79

Item 3.

Defaults Upon Senior Securities

79

Item 4.

Mine Safety Disclosures

79

Item 5.

Other Information

79

Item 6.

Exhibits

80

SIGNATURES

81

1

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” or “continue,” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

our ability, including the timing and extent, to sufficiently manage costs and to fund investments in our operations from cash from operations and additional equity and/or debt financings in amounts necessary to maintain compliance with financial and other covenants under our indebtedness while continuing to support the execution of our growth strategy;
our expectations regarding our expenses and net revenue and our ability to grow adjusted EBITDA and to achieve or maintain profitability;
our ability, including the timing and extent, to successfully execute our growth strategy, cost-effectively attract new customers and retain existing customers, including our ability to sustain any increase in demand resulting from both our growth strategy and the COVID-19 (coronavirus) pandemic, and our ability to continue to expand our direct-to-consumer product offerings, and to continue to benefit from the implementation of operational efficiency practices;
changes in consumer behaviors that could lead to declines in demand, including as the COVID-19 pandemic’s impact on consumer behavior tapers;
our ability to attract and retain qualified employees and key personnel in sufficient numbers;
our ability to effectively compete;
our ability to maintain and grow the value of our brand and reputation;
any material and adverse impact of the COVID-19 pandemic on our operations and results, including as a result of our inability to meet demand due to insufficient labor, whether as a result of heightened absenteeism or challenges in recruiting and retention or otherwise, prolonged closures, or series of temporary closures, of one or more fulfillment centers, or supply chain or carrier interruptions or delays;
our expectations regarding, and the stability of, our supply chain, including potential shortages or interruptions in the supply or delivery of ingredients, as a result of COVID-19 or otherwise;

2

our ability to maintain food safety and prevent food-borne illness incidents and our susceptibility to supplier-initiated recalls;
general changes in consumer tastes and preferences or in consumer spending, including as a result of inflation, the COVID-19 pandemic’s impact on economic conditions or otherwise;
our ability to comply with modified or new laws and regulations applying to our business;
our vulnerability to adverse weather conditions, natural disasters, and public health crises, including pandemics; and
our ability to obtain and maintain intellectual property protection.

While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

3

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

BLUE APRON HOLDINGS, INC.

Consolidated Balance Sheets

(In thousands, except share and per-share data)

(Unaudited)

June 30, 

December 31, 

2021

2020

ASSETS

  

 

  

CURRENT ASSETS:

  

 

  

Cash and cash equivalents

$

50,990

$

44,122

Accounts receivable, net

 

107

 

116

Inventories, net

 

22,449

 

18,185

Prepaid expenses and other current assets

 

15,030

 

23,651

Total current assets

 

88,576

 

86,074

Property and equipment, net

 

116,961

 

125,208

Other noncurrent assets

 

1,792

 

4,053

TOTAL ASSETS

$

207,329

$

215,335

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

CURRENT LIABILITIES:

 

  

 

  

Accounts payable

$

39,959

$

23,691

Accrued expenses and other current liabilities

 

25,693

 

41,632

Current portion of long-term debt

3,500

3,500

Deferred revenue

 

5,957

 

6,269

Total current liabilities

 

75,109

 

75,092

Long-term debt

27,078

28,747

Facility financing obligation

35,930

35,957

Other noncurrent liabilities

 

12,735

 

11,564

TOTAL LIABILITIES

 

150,852

 

151,360

Commitments and contingencies (Note 10)

 

  

 

  

STOCKHOLDERS’ EQUITY:

 

  

 

  

Class A common stock, par value of $0.0001 per share — 1,500,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 20,207,631 and 14,365,664 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

2

1

Class B common stock, par value of $0.0001 per share — 175,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 3,393,708 and 3,493,791 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

1

 

1

Class C capital stock, par value of $0.0001 per share — 500,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020

Additional paid-in capital

 

668,915

 

642,106

Accumulated deficit

 

(612,441)

 

(578,133)

TOTAL STOCKHOLDERS’ EQUITY

 

56,477

 

63,975

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

207,329

$

215,335

The accompanying notes are an integral part of these Consolidated Financial Statements.

4

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Operations

(In thousands, except share and per-share data)

(Unaudited)

Three Months Ended

Six Months Ended

June 30, 

June 30, 

2021

    

2020

    

2021

    

2020

Net revenue

$

124,010

$

131,040

$

253,716

$

232,897

Operating expenses:

Cost of goods sold, excluding depreciation and amortization

 

77,585

 

77,868

 

159,177

 

138,506

Marketing

 

16,316

 

11,561

 

36,256

 

26,593

Product, technology, general and administrative

 

36,802

 

32,493

 

73,353

 

66,710

Depreciation and amortization

5,612

6,175

11,232

12,928

Other operating expense

269

3,467

Total operating expenses

 

136,315

 

128,366

 

280,018

 

248,204

Income (loss) from operations

 

(12,305)

 

2,674

 

(26,302)

 

(15,307)

Gain (loss) on extinguishment of debt

(4,089)

(4,089)

Interest income (expense), net

(2,731)

(1,541)

(4,439)

(3,696)

Other income (expense), net

 

548

 

 

548

 

Income (loss) before income taxes

 

(18,577)

 

1,133

 

(34,282)

 

(19,003)

Benefit (provision) for income taxes

 

(10)

 

(19)

 

(26)

 

(28)

Net income (loss)

$

(18,587)

$

1,114

$

(34,308)

$

(19,031)

Net income (loss) per share attributable to Class A and Class B common stockholders:

Basic

$

(0.98)

$

0.08

$

(1.86)

$

(1.42)

Diluted

$

(0.98)

$

0.08

$

(1.86)

$

(1.42)

Weighted-average shares used to compute net income (loss) per share attributable to Class A and Class B common stockholders:

Basic

18,876,600

13,432,872

18,410,729

13,369,338

Diluted

18,876,600

13,999,755

18,410,729

13,369,338

The accompanying notes are an integral part of these Consolidated Financial Statements.

5

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)

(Unaudited)

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-In

Accumulated

Stockholders'

 

Shares

 

Amount

Shares

 

Amount

Capital

 

Deficit

 

Equity

2021

Balance — December 31, 2020

 

14,365,664

$

1

3,493,791

$

1

$

642,106

$

(578,133)

$

63,975

Conversion from Class B to Class A common stock

100,000

0

(100,000)

(0)

Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings

191,595

0

0

Share-based compensation

2,366

2,366

Net income (loss)

(15,721)

(15,721)

Balance — March 31, 2021

 

14,657,259

$

1

3,393,791

$

1

$

644,472

$

(593,854)

$

50,620

Conversion from Class B to Class A common stock

83

0

(83)

(0)

Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings

138,389

0

0

Issuance of common stock, net of offering costs

5,411,900

1

21,143

21,144

Share-based compensation

3,300

3,300

Net income (loss)

(18,587)

(18,587)

Balance — June 30, 2021

20,207,631

$

2

3,393,708

$

1

$

668,915

$

(612,441)

$

56,477

2020

Balance — December 31, 2019

 

7,799,093

$

1

5,464,196

$

1

$

599,976

$

(531,979)

$

67,999

Conversion from Class B to Class A common stock

1,835,947

0

(1,835,947)

(0)

Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings

92,243

0

25,999

0

486

486

Share-based compensation

2,321

2,321

Net income (loss)

(20,145)

(20,145)

Balance — March 31, 2020

 

9,727,283

$

1

3,654,248

$

1

$

602,783

$

(552,124)

$

50,661

Conversion from Class B to Class A common stock

101

0

(101)

(0)

Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings

159,260

0

0

Share-based compensation

2,094

2,094

Net income (loss)

1,114

1,114

Balance — June 30, 2020

 

9,886,644

$

1

3,654,147

$

1

$

604,877

$

(551,010)

$

53,869

The accompanying notes are an integral part of these Consolidated Financial Statements.

6

BLUE APRON HOLDINGS, INC.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

Six Months Ended

June 30, 

2021

    

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

(34,308)

$

(19,031)

Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:

Depreciation and amortization of property and equipment

 

11,232

 

12,928

Loss (gain) on build-to-suit accounting derecognition

(4,936)

Loss on impairment

7,603

Loss on extinguishment of debt

4,089

Change in fair value of warrant obligation

(548)

Changes in reserves and allowances

 

132

 

(493)

Share-based compensation

 

5,465

 

4,249

Non-cash interest expense

807

364

Changes in operating assets and liabilities:

Accounts receivable

 

9

 

39

Inventories

 

(4,719)

 

4,590

Prepaid expenses and other current assets

 

8,439

 

(1,623)

Accounts payable

 

16,515

 

2,341

Accrued expenses and other current liabilities

 

(19,110)

 

(5,370)

Deferred revenue

 

(312)

 

846

Other noncurrent assets and liabilities

 

1,431

 

1,562

Net cash from (used in) operating activities

 

(10,878)

 

3,069

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

 

(3,009)

 

(2,840)

Proceeds from sale of property and equipment

1,302

113

Net cash from (used in) investing activities

 

(1,707)

 

(2,727)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock, net of offering costs

21,144

Receipt of funds held in escrow

5,000

Release of funds held in escrow

(5,000)

Repayments of debt

(1,750)

Payments of debt issuance costs

(145)

Proceeds from exercise of stock options

 

 

483

Principal payments on capital lease obligations

 

(77)

 

(117)

Net cash from (used in) financing activities

 

19,172

 

366

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

 

6,587

 

708

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period

 

45,842

 

46,443

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period

$

52,429

$

47,151

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid for income taxes

$

60

$

60

Cash paid for interest

$

3,494

$

3,552

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:

Acquisition (disposal) of property and equipment financed under capital lease obligations

$

$

(565)

Non-cash additions to property and equipment

$

223

$

168

Purchases of property and equipment in Accounts payable and Accrued expenses and other current liabilities

$

265

$

279

The accompanying notes are an integral part of these Consolidated Financial Statements.

7

BLUE APRON HOLDINGS, INC.

Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

When used in these notes, Blue Apron Holdings, Inc. and its subsidiaries are collectively referred to as the “Company.”

The Company designs original recipes with fresh, seasonally-inspired produce and high-quality ingredients, which are sent directly to customers for them to prepare, cook, and enjoy. The Company creates meal experiences around original recipes every week based on what’s in-season with farming partners and other suppliers. Customers can choose which recipes they would like to receive in a given week, and the Company delivers those recipes to their doorsteps along with the pre-portioned ingredients required to cook those recipes.

In addition to meals, the Company sells wine through Blue Apron Wine, a direct-to-consumer wine delivery service. The Company also sells a curated selection of cooking tools, utensils, pantry items, and add-on products for different culinary occasions through Blue Apron Market, its e-commerce market.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The unaudited interim Consolidated Financial Statements (the “Consolidated Financial Statements”) have been prepared on the same basis as the audited Consolidated Financial Statements, and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and December 31, 2020, results of operations for the three months and six months ended June 30, 2021 and 2020, and cash flows for the six months ended June 30, 2021 and 2020. These unaudited Consolidated Financial Statements should be read in conjunction with the Company’s audited Consolidated Financial Statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2021 (the “Annual Report”). There have been no material changes in the Company's significant accounting policies from those that were disclosed in Note 2, Summary of Significant Accounting Policies, included in the Annual Report, except those additional significant policies as described within the accompanying notes to the Consolidated Financial Statements.

The accompanying Consolidated Financial Statements include the accounts of Blue Apron Holdings, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The Company prepares its Consolidated Financial Statements and related disclosures in conformity with accounting principles generally accepted in the United States (“GAAP”).

Liquidity and Going Concern Evaluation

As of June 30, 2021, the Company had cash and cash equivalents of $51.0 million and total outstanding debt of $30.6 million, net of unamortized debt issuance costs, of which $27.1 million was classified as long-term debt and $3.5 million was classified as the current portion of long-term debt. On October 16, 2020 (the “effective date”), the Company entered into a financing agreement which provided for a senior secured term loan in the aggregate principal amount of $35.0 million that matures in March 2023 (the “2020 Term Loan”). The proceeds of the 2020 Term Loan were used, together with cash on hand, to repay in full the outstanding indebtedness under the Company’s revolving credit facility and to pay fees and expenses in connection with the transactions contemplated by the 2020 Term Loan. The Company terminated the revolving credit facility effective as of the closing of the 2020 Term Loan.

On March 18, 2021, the Company’s aggregate liquidity balance, as calculated under the terms of the 2020 Term Loan, fell below the required $20.0 million balance, as described below, giving rise to an event of default in respect of

8

the 2020 Term Loan. The Company’s aggregate liquidity balance returned to an amount in excess of $20.0 million the following day, and the agent and the lenders waived the event of default on March 30, 2021.

On May 5, 2021, the Company amended the financing agreement relating to the 2020 Term Loan (the “Amendment”), which modified certain provisions of the financing agreement, as well as provided for a $5.0 million term loan that was funded into an escrow account (the “2021 Term Loan”). See Note 9 for further discussion of the Amendment.

On June 18, 2021, the Company completed an underwritten public offering (the “June 2021 offering”), pursuant to its universal shelf registration statement filed with the SEC on April 29, 2020, of 5,411,900 shares of the Company’s Class A common stock, including the 705,900 shares issuable upon the underwriter’s exercise of its option to purchase additional shares, resulting in $21.1 million of proceeds, net of underwriting discounts and commissions and offering costs.

Pursuant to the Amendment, the net proceeds of the June 2021 offering were not subject to the mandatory prepayment provision of the 2020 Term Loan. However, the Amendment required that the 2021 Term Loan be released in full from escrow to the lenders upon completion of the June 2021 offering. The Company also repaid $0.5 million of the $1.0 million closing fee charged under the Amendment, which (i) bore interest at the same rate as of the 2021 Term Loan, and (ii) 50% of which was forgiven because the 2021 Term Loan was repaid within 60 days after the closing date of the Amendment.

As of June 30, 2021, the 2020 Term Loan bore interest at a rate equal to LIBOR (subject to a 1.50% floor) plus 9.00% per annum. The principal amount of the 2020 Term Loan is repayable in equal quarterly installments of $875,000 through December 31, 2022, with the remaining unpaid principal amount of the 2020 Term Loan repayable on March 31, 2023.

The 2020 Term Loan contains restrictive covenants, financial covenants, and affirmative and financial reporting covenants restricting the Company and the Company’s subsidiaries’ activities. As of June 30, 2021, the financial covenants included a requirement to maintain a minimum aggregate liquidity balance of $20.0 million at all times and a minimum subscription count (defined in the 2020 Term Loan as the number of all active customers on the Company’s internal account list) of 300,000 on any determination date occurring between the effective date and December 31, 2021, and 320,000 on any determination date occurring thereafter. As of June 30, 2021, the Company was in compliance with all of the covenants under the 2020 Term Loan.

The Company has a history of net losses including $34.3 million and $19.0 million for the six months ended June 30, 2021 and 2020, respectively, and operating cash flows of $(10.9) million and $3.1 million for the six months ended June 30, 2021 and 2020. In addition, the Company has experienced significant negative trends in its net revenue. While year-over-year trends in net revenue have generally improved in recent periods, that improvement is, in part, due to changes in consumer behaviors as a result of the COVID-19 pandemic, and by the continued execution of the Company’s growth strategy. These positive trends may not continue at current levels, and could decline in future periods as restrictions related to COVID-19 continue to be lifted and as vaccines have become more widely available throughout the United States or if the Company is unable to sustain the revenue growth resulting from its growth strategy.

The Company is continuing to pursue its growth strategy to drive customer and revenue growth through product innovation, partnerships, and marketing investment. The Company’s ability, including the timing and extent, to successfully execute its growth strategy is inherently uncertain and is dependent on continued sufficiency of cash resources, and its ability to implement the initiatives and deliver the results as forecasted, among other factors. Due to this uncertainty, if the Company is unable to sufficiently deliver results from its growth strategy, manage liquidity and/or to cost effectively attract new customers and retain existing customers, the Company may not be able to maintain compliance with the minimum liquidity and minimum subscription count covenants in future periods which may result in an event of default under the Company’s 2020 Term Loan. In the event the Company does not have sufficient cash resources upon an event of default, if the Company were unable to obtain a waiver or successfully renegotiate the terms of its 2020 Term Loan with its lenders, and the lenders enforced one or more of their rights upon default, the Company would be unable to meet its current obligations.

9

If the Company is unable to sufficiently execute its growth strategy, the Company believes it has a plan to effectively manage liquidity and customer acquisition and retention in order to maintain compliance with its debt covenants. This includes implementing operational process driven changes to more cost-effectively source the products the Company offers, significant expense reductions in areas identified by the Company in product, technology, general and administrative costs and capital expenditures to achieve savings and reinvest in the business. This plan further includes modifying and balancing the Company’s marketing investments, as needed, to maintain the minimum subscription covenant, while also maintaining sufficient cash to meet the minimum liquidity covenant.

A significant portion of the Company’s costs are discretionary in nature and, if needed, the Company has the ability to reduce or delay spending in order to reduce expenses and improve liquidity. While reductions in spending, particularly in marketing and capital expenditures, may negatively impact net revenue, the Company plans to execute such reductions to the extent needed to comply with its debt covenants. The Company has previously demonstrated an ability to implement various cost reduction initiatives, including workforce reductions and other cost optimizing initiatives.

Based on the current facts and circumstances, the additional financial flexibility provided through the June 2021 offering discussed above, the Company’s financial planning process, and its historical ability to implement cost reductions and adjust marketing strategies, the Company believes it is probable it can effectively manage liquidity and subscription count in order to maintain compliance with the financial covenants under its 2020 Term Loan for at least the next 12 months. As a result, the Company has concluded that, after consideration of management’s plan, it has sufficient liquidity to meet its obligations within one year after the issuance date of the Consolidated Financial Statements, and it does not have substantial doubt about its ability to continue as a going concern.

Use of Estimates

In preparing its Consolidated Financial Statements in accordance with GAAP, the Company is required to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, and expenses, and disclosure of contingent assets and liabilities which are reported in the Consolidated Financial Statements and accompanying disclosures. The accounting estimates that require the most difficult and subjective judgments include revenue recognition, inventory valuation, leases, the fair value of share-based awards, the fair value of the warrant obligation, recoverability of long-lived assets, and the recognition and measurement of contingencies. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from the Company’s estimates and assumptions.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. The Company may take advantage of these exemptions until the Company is no longer an emerging growth company. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards, and as a result of this election, its financial statements may not be comparable to companies that comply with public company effective dates. The Company may take advantage of these exemptions up until December 31, 2022 (the last day of the fiscal year following the fifth anniversary of the initial public offering, or the “IPO”), or such earlier time that it is no longer an emerging growth company. The Company would cease to be an emerging growth company if it has more than $1.07 billion in annual revenue, has more than $700.0 million in market value of its stock held by non-affiliates, or it issues more than $1.0 billion of non-convertible debt securities over a three-year period.

10

Smaller Reporting Company Status

The Company is a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, and therefore qualifies for reduced disclosure requirements for smaller reporting companies.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued its standard on lease accounting, Accounting Standards Update No. 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases. Subsequent to February 2016, the FASB issued ASU No. 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842): Amendments to SEC Paragraphs Pursuant to the Staff Announcement at the July 20, 2017 EITF Meeting and Rescission of Prior SEC Staff Announcements and Observer Comments, ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, ASU No. 2019-01, Leases (Topic 842): Codification Improvements, ASU 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, and ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, to improve and clarify certain aspects of ASU No. 2016-02, as well as to defer its effective date for certain entities. For the Company, the new standard is effective for annual periods beginning January 1, 2022, and interim periods beginning January 1, 2023. Upon adoption of this standard, the Company expects to recognize, on a discounted basis, its minimum commitments under non-cancelable operating leases on the Consolidated Balance Sheets resulting in the recording of right-of-use assets and lease obligations. The Company is currently evaluating any additional impacts this guidance will have on its Consolidated Financial Statements.

In August 2018, the FASB issued Accounting Standards Update No. 2018-15 (“ASU 2018-15”), Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The standard is intended to clarify the accounting for implementation costs of a hosting arrangement that is a service contract. For the Company, the amendments in ASU 2018-15 are effective for annual periods beginning January 1, 2021, and interim periods beginning January 1, 2022. The Company is evaluating the impact this new guidance may have on its Consolidated Financial Statements.

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (“ASU 2019-12”), Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The standard is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, as well as improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. For the Company, the amendments in ASU 2019-12 are effective for annual periods beginning January 1, 2022, and interim periods beginning January 1, 2023. The Company is evaluating the impact this new guidance may have on its Consolidated Financial Statements.

In March 2020, the FASB issued Accounting Standards Update No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another rate that is expected to be discontinued. The guidance was effective upon issuance, and may be applied prospectively through December 31, 2022. The application of the guidance is not expected to have a material impact on the Company’s Consolidated Financial Statements.

11

3. Inventories, Net

Inventories, net consist of the following:

June 30, 

December 31, 

2021

    

2020

(In thousands)

Fulfillment

$

2,296

$

3,366

Product

 

20,153

 

14,819

Inventories, net

$

22,449

$

18,185

Product inventory primarily consists of bulk and prepped food, containers, products available for resale, and wine products. Fulfillment inventory consists of packaging used for shipping and handling. Product and fulfillment inventories are recognized as components of Cost of goods sold, excluding depreciation and amortization in the accompanying Consolidated Statements of Operations when sold.

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

June 30, 

December 31, 

2021

    

2020

(In thousands)

Insurance proceeds receivable

$

1,100

$

11,250

Prepaid insurance

7,319

7,092

Other current assets

 

6,611

 

5,309

Prepaid expenses and other current assets

$

15,030

$

23,651

Estimated insurance proceeds recoveries are reflected as assets in the Company’s Consolidated Balance Sheets when it is determined that the recovery of such amounts is probable, and the amount can be reasonably determined.

5. Restricted Cash

Restricted cash reflects pledged cash deposited into savings accounts that is used as security primarily for fulfillment centers and office space leases, and as of December 31, 2019, cash held in escrow related to a pending legal judgment that was returned to the Company in the second quarter of 2020 following final resolution of the case.

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts reported in the Consolidated Statements of Cash Flows:

June 30, 

December 31, 

2021

    

2020

(in thousands)

Cash and cash equivalents

$

50,990

$

44,122

Restricted cash included in Prepaid expenses and other current assets

536

610

Restricted cash included in Other noncurrent assets

903

1,110

Total cash, cash equivalents, and restricted cash

$

52,429

$

45,842

June 30, 

December 31, 

2020

    

2019

(in thousands)

Cash and cash equivalents

$

45,430

$

43,531

Restricted cash included in Prepaid expenses and other current assets

611

Restricted cash included in Other noncurrent assets

1,110

2,912

Total cash, cash equivalents, and restricted cash

$

47,151

$

46,443

12

6. Property and Equipment, Net

Property and equipment, net consists of the following:

June 30, 

December 31, 

2021

    

2020

    

(In thousands)

Computer equipment

$

11,376

 

$

11,110

 

Capitalized software

22,556

 

21,318

 

Fulfillment equipment

52,306

 

51,096

 

Furniture and fixtures

3,408

 

3,408

 

Leasehold improvements

33,252

 

32,969

 

Buildings(1)

114,877

114,877

Construction in process

1,430

 

1,442

 

Property and equipment, gross

239,205

 

236,220

 

Less: accumulated depreciation and amortization

(122,244)

 

(111,012)

 

Property and equipment, net

$

116,961

$

125,208

(1)Buildings includes a build-to-suit lease arrangement in Linden, New Jersey where the Company is considered the owner for accounting purposes, and as of June 30, 2021 and December 31, 2020, contains $31.3 million of the capitalized fair value of the building, $80.8 million of costs incurred directly by the Company relating to this arrangement, and $2.8 million of capitalized interest for related construction projects.

Fairfield Lease Termination

In October 2017, the Company performed a review of its real estate needs and decided to no longer pursue its planned build-out of the Fairfield facility and as a result, pursued potential alternatives for the leased Fairfield property. On March 30, 2020 (the “termination date”), the Company terminated the lease, effective immediately, for its Fairfield facility (the “Fairfield lease termination”). In connection with the Fairfield lease termination, the Company agreed to a termination fee in the amount of $1.5 million, recognized upon the termination date and paid in the second quarter of 2020, which released the Company from all future minimum lease payments related to this facility in the amount of $32.9 million, which otherwise would have expired in 2028.

For accounting purposes, the Company had been deemed to be the owner of this arrangement and followed build-to-suit accounting. Therefore, the Company had capitalized the fair value of the building and direct construction costs incurred and recorded a corresponding facility financing obligation. Prior to the lease termination, the net carrying value of the build-to-suit assets totaled $31.1 million, the facility financing obligation totaled $35.7 million, and the Company had deferred rent of $1.8 million. Accordingly, as of the termination date, the Company derecognized the net carrying value of the build-to-suit assets and liabilities and the deferred rent balance. As a result, the Company recorded a non-cash gain of $4.9 million, net of the lease termination fee, in Other operating expense during the first quarter of 2020.

Impairment Charges on Long-Lived Assets

In February 2020, the Company announced the closure of its fulfillment center in Arlington, Texas and the consolidation of production volume from the Arlington, Texas fulfillment center to the Company’s fulfillment centers in Linden, New Jersey and Richmond, California in order to more efficiently continue to service the Company’s national footprint while also enabling the Company to redirect financial resources into other parts of the business, including growth initiatives.

The Company concluded that this change in operations represented a triggering event with respect to its long-lived assets at the Arlington fulfillment center and therefore performed an impairment test in accordance with Accounting Standards Codification (“ASC”) 360, Property, Plant, and Equipment. The carrying amount of the Company’s long-lived assets at the Arlington fulfillment center was $11.5 million and the fair value was $4.1 million as of the impairment date, resulting in an impairment of $7.4 million, primarily consisting of leasehold improvements and

13

equipment, recorded in Other operating expense during the first quarter of 2020. The Company recorded an impairment charge on an additional piece of equipment at the Arlington fulfillment center of $0.2 million in Other operating expense during the second quarter of 2020. The fair value was primarily determined based on estimated market prices of the assets and represented a Level 3 valuation in the fair value hierarchy.

In May 2020, the transition of production volume to the Linden and Richmond fulfillment centers was completed, with the Company’s Arlington fulfillment center equipment primarily having been relocated to the Company’s other fulfillment centers. The Company temporarily reopened its Arlington fulfillment center beginning in January 2021 to leverage existing assets to meet forecasted demand while continuing to implement operating efficiencies at its other fulfillment centers. In April 2021, the Company closed down the temporary Arlington fulfillment center, with all production volume consolidated at its other fulfillment centers. The closure of the Arlington fulfillment center after its temporary reopening did not have a material impact on the Company’s Consolidated Financial Statements. Additionally, in May 2021, the Company entered into an agreement to sublease the remainder of its Arlington fulfillment center. The sublease continues through the duration of the Company’s existing lease for the fulfillment center and entitles the Company to future minimum sublease payments of approximately $2.6 million as of June 30, 2021. The Company has non-cancelable future minimum lease payments of approximately $1.6 million to the original lessor of the fulfillment center as of June 30, 2021.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

June 30, 

December 31, 

2021

    

2020

    

(In thousands)

Accrued compensation

$

9,356

$

17,189

Accrued credits and refunds reserve

 

1,224

 

1,547

Accrued legal settlements

12,250

Accrued marketing expenses

2,440

2,006

Accrued shipping expenses

 

1,556

 

2,060

Other current liabilities

 

11,117

 

6,580

Accrued expenses and other current liabilities

$

25,693

$

41,632

Accrued legal settlements reflect contingencies for which the Company has concluded the loss is probable and reasonably estimable. As of December 31, 2020, the Company determined that insurance recovery was probable related to $11.3 million of a legal settlement and recognized the full recovery amount in Prepaid expenses and other current assets as of December 31, 2020. The insurance proceeds receivable was recovered in full by the Company in the second quarter of 2021 following final resolution of the case. See Note 10 for further discussion of the accrued legal settlements.

8. Deferred Revenue

Deferred revenue consists of the following:

June 30, 

December 31, 

    

2021

2020

    

(In thousands)

Cash received prior to fulfillment

$

3,814

$

1,550

Gift cards, prepaid orders, and other

2,143

4,719

Deferred revenue

$

5,957

$

6,269

Under ASC 606, Revenue from Contracts with Customers, the Company has two types of contractual liabilities: (i) cash collections from its customers prior to delivery of products purchased, which are included in Deferred revenue on the Consolidated Balance Sheet, and are recognized as revenue upon transfer of control of its products, and (ii) unredeemed gift cards and other prepaid orders, which are included in Deferred revenue on the Consolidated Balance Sheet, and are recognized as revenue when gift cards are redeemed and the products are delivered. Certain gift cards are

14

not expected to be redeemed, also known as breakage, and are recognized as revenue over the expected redemption period, subject to requirements to remit balances to governmental agencies.

Contractual liabilities included in Deferred revenue on the Consolidated Balance Sheets were $6.0 million and $6.3 million as of June 30, 2021 and December 31, 2020, respectively. During the six months ended June 30, 2021, the Company recognized $4.8 million to Net revenue from the Deferred revenue at December 31, 2020.

9. Debt

In August 2016, the Company entered into the revolving credit facility with a maximum amount available to borrow of $150.0 million. The borrower under the revolving credit facility was the Company’s wholly-owned subsidiary, Blue Apron, LLC. Between 2017 and 2020, the Company amended and refinanced the revolving credit facility to, among other things, reduce the aggregate lender commitments to $55.0 million and extend the final maturity date to August 2021.

On October 16, 2020, the Company entered into a financing agreement which provided for the 2020 Term Loan. The proceeds of the 2020 Term Loan were used, together with cash on hand, to repay in full the outstanding indebtedness of $43.8 million under the revolving credit facility, and to pay fees and expenses in connection with the transactions contemplated by the 2020 Term Loan. The Company terminated the revolving credit facility effective as of the closing of the 2020 Term Loan.

On May 5, 2021 (the “closing date”), the Company amended the financing agreement relating to the 2020 Term Loan. Among other things, the Amendment:

(i)provided a $5.0 million term loan (the “2021 Term Loan”), which bore interest at a rate equal to LIBOR (subject to a 1.50% floor) plus 10.00% per annum and matured at the same time as the 2020 Term Loan, on March 31, 2023. The 2021 Term Loan was prepayable and did not require periodic principal payments;
(ii)increased the interest rate margin on the 2020 Term Loan by 1.00% per annum, resulting in the 2020 Term Loan bearing interest, from and after the closing date, at a rate equal to LIBOR (subject to a 1.50% floor) plus 9.00% per annum;
(iii)waived the requirement that the borrower prepay the 2020 Term Loan with 50% of the proceeds of equity issuances, provided that the waiver expired upon the earlier of (i) such time as the cumulative net proceeds from equity issuances of the borrower otherwise requiring such prepayment exceed $30.0 million (calculated net of the prepayment of the 2021 Term Loan described below) or (ii) 60 days after the closing date;
(iv)required that the borrower prepay the 2021 Term Loan with 100% of the proceeds of equity issuances (in addition to the other mandatory prepayment provisions applicable to the 2020 Term Loan, which also applied to the 2021 Term Loan); and
(v)reduced the minimum liquidity covenant from $20.0 million at all times to $15.0 million at all times until the earlier of (i) May 15, 2022, and (ii) the date on which the 2021 Term Loan and all accrued and unpaid interest thereon is repaid in full.

The proceeds of the 2021 Term Loan were held in an escrow account and were considered qualified cash for purposes of the minimum liquidity covenant.

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Pursuant to the amendment, the net proceeds of the June 2021 offering (discussed in Note 2) were not subject to the mandatory prepayment provision of the 2020 Term Loan. However, the amendment required that the 2021 Term Loan be released in full from escrow to the lenders upon completion of the June 2021 offering, upon which the minimum liquidity covenant was reset to $20.0 million at all times. The Company also repaid $0.5 million of the $1.0 million closing fee charged under the amendment, which (i) bore interest at the same rate as of the 2021 Term Loan, and (ii) 50% of which was forgiven because the 2021 Term Loan was repaid within 60 days after the Closing Date.

As of June 30, 2021, the 2020 Term Loan bore interest at a rate equal to LIBOR (subject to a 1.50% floor) plus 9.00% per annum. The principal amount of the 2020 Term Loan is repayable in equal quarterly installments of $875,000 through December 31, 2022, with the remaining unpaid principal amount of the 2020 Term Loan repayable on March 31, 2023. The Company is also obligated under the 2020 Term Loan to pay customary fees, including an anniversary fee equal to 1.00% of the average daily principal amount of the 2020 Term Loan outstanding over the past 12 months.

In connection with the amendment, the Company agreed to prospectively grant warrants (the “warrant obligation”) to the lenders. Under the terms of the warrant obligation, so long as the 2020 Term Loan remains outstanding, on the first day of each quarter beginning on or after July 1, 2021, the Company will issue a warrant to the lenders to purchase at an exercise price of $0.01 per share such number of shares of Class A common stock of the Company as equals 0.50% of the then outstanding shares of common stock of the Company, on a fully-diluted basis. Subject to limited exceptions, subsequent to their respective issuance date the number of shares issuable upon exercise of each warrant is subject to increase each time the Company issues or sells any shares of common stock, common stock equivalents, options, or convertible securities for a consideration per share (including upon exercise, exchange, or conversion) of less than the fair market value per share of the Class A common stock as of the applicable issuance date in accordance with the amendment. The warrants will expire five years after the applicable issuance date and will be exercisable on a cash basis or, at the election of the holder, on a cashless basis.

The warrant obligation was accounted for in accordance with ASC 815-40, Contracts in an Entity’s Own Equity, as a liability recognized at fair value as of the closing date, due to certain settlement provisions within the corresponding warrant obligation provisions under the financing agreement that do not meet the criteria to be classified in stockholders’ equity. The short-term portion of warrants to be issued under the warrant obligation were recorded within Accrued expenses and other current liabilities, and the long-term portion within Other noncurrent liabilities on the Consolidated Balance Sheets. The warrant obligation is remeasured to fair value at each balance sheet date, with changes in fair value recorded in Other income (expense), net in the Consolidated Statements of Operations.

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The Company evaluated the amendment of the financing agreement under ASC 470-50, which states that if the modification of the terms of an existing debt agreement is considered substantial, the transaction shall be accounted for as an extinguishment, with the amended debt instrument then initially recorded at fair value. The Company concluded that the modification was considered substantial, and qualified for extinguishment accounting under such guidance. Accordingly, the Company recorded a $4.1 million extinguishment loss in the Consolidated Statements of Operations, which consisted of (i) a $4.6 million loss related to the contemporaneous issuance of the warrant obligation, as discussed above, (ii) a $0.2 million loss related to fees paid on behalf of the lender, partially offset by (iii) a $0.5 million gain related to the difference between the fair value of the modified debt instrument and the net carrying value of the debt immediately before extinguishment.

In connection with the extinguishment of the 2020 Term Loan, the Company derecognized all related unamortized debt issuance costs, and simultaneously recorded additional debt issuance costs of $2.0 million within Long-term debt, which are being amortized using the effective interest method over the remaining term. The following table summarizes the presentation of the Company’s debt balances in the Consolidated Balance Sheets as of the dates indicated below:

June 30, 

December 31, 

2021

    

2020

(In thousands)

2020 Term Loan

32,375

34,125

Debt issuance costs, net

(1,797)

(1,878)

Total debt outstanding, net of debt issuance costs

30,578

32,247

Less: current portion of long-term debt

3,500

3,500

Long-term debt

$

27,078

$

28,747

The borrower under the 2020 Term Loan is the Company’s wholly-owned subsidiary, Blue Apron, LLC. The obligations under the 2020 Term Loan are guaranteed by Blue Apron Holdings, Inc. and its subsidiaries other than the borrower, and secured by substantially all of the assets of the borrower and the guarantors. The 2020 Term Loan contains certain restrictive covenants, financial covenants, and affirmative and financial reporting covenants restricting the Company and the Company’s subsidiaries’ activities. Restrictive covenants include limitations on the incurrence of indebtedness and liens, restrictions on affiliate transactions, restrictions on the sale or other disposition of collateral, and limitations on dividends and stock repurchases. The Company will be required to make mandatory prepayments under certain circumstances, and will have the option to make prepayments under the 2020 Term Loan subject to certain prepayment premiums through the first anniversary of the effective date. As of June 30, 2021, financial covenants included a requirement to maintain a minimum aggregate liquidity balance of $20.0 million at all times and a minimum subscription count (defined in the 2020 Term Loan as the number of all active customers on the Company’s internal account list) of 300,000 on any determination date occurring between the effective date and December 31, 2021, and 320,000 on any determination date occurring thereafter.

Non-compliance with the covenants under the 2020 Term Loan would result in an event of default upon which the lender could declare all outstanding principal and interest to be due and payable immediately and foreclose against the assets securing the borrowings. As of June 30, 2021, the Company was in compliance with all of the covenants under the 2020 Term Loan.

Facility Financing Obligation

As of June 30, 2021 and December 31, 2020, the Company had a facility financing obligation of $35.9 million and $36.0 million, respectively, related to the leased facility in Linden under the build-to-suit accounting guidance.

10. Commitments and Contingencies

Legal Proceedings

The Company records accruals for loss contingencies associated with legal matters when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. If the Company determines that a loss

17

is reasonably possible, the Company discloses the matter, and, if estimable, the amount or range of the possible loss in the notes to the Consolidated Financial Statements.

The Company was subject to a consolidated putative class action lawsuit in the U.S. District Court for the Eastern District of New York alleging federal securities law violations in connection with the Company’s IPO. The amended complaint alleged that the Company and certain current and former officers and directors made material misstatements or omissions in the Company’s registration statement and prospectus that caused the stock price to drop. Pursuant to a stipulated schedule entered by the parties, defendants filed a motion to dismiss the amended complaint on May 21, 2018. Plaintiffs filed a response on July 12, 2018 and defendants filed a reply on August 13, 2018. On April 22, 2020, the Court entered an order (i) denying the motion to dismiss insofar as Plaintiffs’ allegations pertained to certain of the disclosures in the registration statement and prospectus claimed by plaintiff, and (ii) narrowing the factual issues in the case. On August 11, 2020, the parties held a mediation after which they entered into a memorandum of understanding on August 14, 2020 regarding a proposed settlement. Discovery has been stayed since August 14, 2020. The Company entered into a stipulation and agreement of settlement to resolve the class action litigation on October 28, 2020, which was subsequently amended on November 12, 2020. Under the terms of the settlement, a payment of $13.3 million is to be made by the Company and/or its insurers in exchange for the release of claims against the defendants and other released parties by the lead plaintiff and all settlement class members and for the dismissal of the action with prejudice. The court granted preliminary approval of the settlement on February 1, 2021 and the Company paid $1.0 million of the settlement amount into escrow, with the remaining $12.3 million balance of the settlement funded by the Company’s insurers. The Company’s contribution to the settlement represented the portion of its insurance retention amount, less the $1.0 million which had been paid by the Company as of December 31, 2020 to cover legal fees relating to this case and the related cases described below, as well as the settlement of the state court action described below. The court granted final approval of the settlement on May 10, 2021, and the deadline to appeal the court’s final approval order has passed. The Company was also subject to two state putative class action lawsuits alleging federal securities law violations in connection with the IPO, which were substantially similar to the above-referenced federal court action. One of the state court action was originally filed in the New York Supreme Court, but was voluntarily dismissed by plaintiffs on September 15, 2020 and subsequently re-filed in the U.S. District Court for the Eastern District of New York on October 2, 2020. On December 2, 2020, the Company settled this lawsuit, which did not have a material impact on the Company’s Consolidated Financial Statements. The second state lawsuit was voluntarily dismissed on May 12, 2021.

In June 2020, certain of the Company’s current and former officers and directors were named as defendants in a shareholder derivative action filed in the Eastern District of New York, captioned Jeffrey Peters v. Matthew B. Salzberg, et al., 1:20-cv-02627. The complaint sought contribution from the officer and director defendants for any damages that the Company may incur as a result of the above-referenced class action lawsuit, attorneys’ fees, and other costs, as well as an order directing the Company to reform and improve its corporate governance and internal procedures to comply with applicable laws. On September 11, 2020, this case was stayed pending resolution of the federal securities case. On June 16, 2021, the plaintiff filed a notice of voluntary dismissal requesting that the court to dismiss the action without prejudice and retain jurisdiction of the action solely for the purpose of adjudicating the plaintiff’s counsel’s anticipated application for an award of attorney’s fees and reimbursement of expenses in connection with purportedly mooted claims asserted by the plaintiff in the action. On June 22, 2021, the court dismissed the action but retained jurisdiction of the action solely for the purpose of adjudicating the plaintiff’s counsel’s anticipated application for fees and expenses. On July 28, 2021, the Company and plaintiff’s counsel reached an agreement concerning plaintiff’s counsel’s claim for fees and costs without the need for court intervention.

In addition, from time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. Although the results of such litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on its business, operating results, financial condition or cash flows.

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11. Share-based Compensation

The Company recognized share-based compensation for share-based awards in Cost of goods sold, excluding depreciation and amortization, and Product, technology, general and administrative expenses as follows:

Three Months Ended

June 30, 

2021

  

2020

(In thousands)

Cost of goods sold, excluding depreciation and amortization

$

14

$

27

Product, technology, general and administrative

3,132

1,982

Total share-based compensation

$

3,146

$

2,009

Six Months Ended

June 30, 

2021

  

2020

(In thousands)

Cost of goods sold, excluding depreciation and amortization

$

30

$

57

Product, technology, general and administrative

5,435

4,192

Total share-based compensation

$

5,465

$

4,249

In February 2021, the Company granted 1,190,250 shares of performance-based restricted stock units for its Class A common stock to certain employees, including the Company’s executive officers. Such units are subject to vesting conditions that are tied to the achievement of certain stock price targets and time-based requirements beginning February 25, 2021 and continuing through February 25, 2024. As this grant was determined to include a market condition, the Company utilized the Monte Carlo simulation valuation model to value the grant. The total grant date fair value was $8.7 million, and will be recognized on a straight-line basis over the derived service periods, which range from 0.99 to 2.99 years, as determined by the Monte Carlo simulation valuation model.

12. Earnings per Share

Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period.

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted-average number of common shares, including potential dilutive common shares assuming the dilutive effect of outstanding common stock options and restricted stock units. For periods in which the Company has reported net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

The rights, including the liquidation and dividend rights, of the Class A common stock, Class B common stock, and Class C capital stock are substantially the same, other than voting rights. For the three months and six months ended June 30, 2021 and 2020, the Company did not have any outstanding shares of Class C capital stock.

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Three Months Ended June 30, 

2021

2020

 

Class A

  

Class B

Class A

Class B

(In thousands, except share and per-share data)

Numerator:

  

 

  

Net income (loss) attributable to common stockholders

$

(15,245)

$

(3,342)

$

811

$

303

Denominator:

 

 

 

 

Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—basic

 

15,482,841

3,393,759

 

9,778,697

3,654,175