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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023.
OR
oTRANSITION 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)
Delaware81-4777373
(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 ClassTrading SymbolName of Exchange on Which Registered
Class A Common Stock, $0.0001 par value per shareAPRNThe Nasdaq Stock Market 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 x   No o
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 x   No o
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 fileroAccelerated filerxSmaller reporting company xEmerging growth companyo
Non-accelerated filero
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o   No x
Indicate the number of shares outstanding of each class of the issuer’s common stock as of the latest practicable date.
ClassNumber of Shares Outstanding
Class A Common Stock, $0.0001 par value
7,696,606 shares outstanding as of October 31, 2023
Class B Common Stock, $0.0001 par value
0 shares outstanding as of October 31, 2023
Class C Capital Stock, $0.0001 par value
0 shares outstanding as of October 31, 2023



BLUE APRON HOLDINGS, INC.
TABLE OF CONTENTS
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 plans and expectations regarding our proposed acquisition by Wonder Group, Inc. (“Wonder”) pursuant to that certain Agreement and Plan of Merger, dated September 28, 2023 (the “Merger Agreement”), with Wonder and Basil Merger Corporation, a wholly owned subsidiary of Wonder, including our ability to consummate the proposed transaction on the anticipated timeframe or at all, and all related matters;
our ability to successfully execute our business without our fulfillment and production assets; our ability to successfully and efficiently transition our fulfillment and production assets to FreshRealm, Inc. (”FreshRealm”); the ability of FreshRealm to continue to fulfill our meal-kit products in a manner consistent with our brand standards, if at all; our ability to achieve the anticipated benefits of the FreshRealm Transaction (as defined below in Note 2, Summary of Significant Accounting Policies) for our stockholders;
if our proposed acquisition by Wonder does not close, the sufficiency of our cash resources and our ability to continue to operate as a going concern if we are unable to execute our business strategy and implement our new asset-light operating plan, including (a) our ability to (i) earn up to $4.0 million in additional cash consideration under the asset purchase agreement we entered into with FreshRealm in connection with the FreshRealm Transaction, $3.0 million of which we expect to receive in the fourth quarter of 2023, (ii) realize the benefit of the full $3.5 million promissory note issued in connection with the FreshRealm Transaction, and (iii) achieve the up to $17.5 million of volume-based rebates under the production and fulfillment agreement we entered into with FreshRealm, (b) the ability of FreshRealm to cost effectively price the production and fulfillment of our meal kits and other products, or (c) our ability, if we are unable to successfully implement our operating strategy, to recognize the benefits of our identified expense reductions, including our recent headcount reductions, or raise additional capital or funding, including through (i) the February 2023 ATM (as defined below in Item 2 - Sources of Liquidity) or otherwise, (ii) receiving all or a sufficient portion of the remaining $68.2 million due to us in connection with the $56.5 million private placement (of which $1.0 million has been received) and the $12.7 million gift card transaction with certain affiliates of Joseph N. Sanberg, or (iii) the disposition of some or all of the pledged securities securing the private placement obligation;
our ability, including the timing and extent, to successfully support the execution of our strategy; our ability to cost-effectively attract new customers and retain existing customers (including, on the one hand, our ability to execute our marketing strategy, or on the other hand, our ability to sustain any increase in demand we may experience); our ability to continue to expand our product offerings and distribution channels; our ability to sustain any increase in demand and/or ability to continue to execute
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operational efficiency practices, including managing our corporate workforce reduction implemented in December 2022 and July 2023, and the impact of our workforce reduction on executing our strategy;
our expectations regarding, and the stability of, our and FreshRealm's supply chain, including potential shortages, interruptions or continued increased costs in the supply or delivery of ingredients to FreshRealm, and parcel and freight carrier interruptions or delays and/or higher freight or fuel costs, as a result of inflation or otherwise;
our ability to respond to changes in consumer behaviors, tastes, and preferences that could lead to changes in demand, including as a result of, among other things, the impact of inflation or other macroeconomic factors, and to some extent, long-term impacts on consumer behavior and spending habits;
our ability to attract and retain qualified employees and personnel in sufficient numbers;
our ability to effectively compete;
our ability to maintain and grow the value of our brand and reputation;
our ability to execute one or more financing opportunities and/or other strategic transactions, if at all, and our ability to achieve the anticipated benefits of any such transactions for our shareholders:
any material challenges in employee recruiting and retention; any prolonged closures, or series of temporary closures, of one or more of the fulfillment centers operated by FreshRealm for our products, supply chain or carrier interruptions or delays, and any resulting need to cancel or shift customer orders;
our ability to achieve our environmental, social and corporate governance goals on our anticipated timeframe, if at all;
our reliance on FreshRealm to maintain food safety and prevent food-borne illness incidents and our susceptibility to supplier-initiated recalls;
our ability to comply with modified or new laws and regulations applying to our business, or the impact that such compliance may have on our business;
our vulnerability to adverse weather conditions, natural disasters, wars, and public health crises, including pandemics;
our ability to protect the security and integrity of our data and protect against data security risks and breaches; 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.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
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BLUE APRON HOLDINGS, INC.
Consolidated Balance Sheets
(In thousands, except share and per-share data)
(Unaudited)
September 30,
2023
December 31,
2022
ASSETS
CURRENT ASSETS:
Cash and cash equivalents$27,232 $33,476 
Accounts receivable, net77 556 
Inventories, net1,758 25,023 
Seller note receivable, net3,213  
Prepaid expenses and other current assets16,971 17,657 
Total current assets49,251 76,712 
Property and equipment, net5,623 57,186 
Operating lease right-of-use assets26,577 32,340 
Other noncurrent assets1,608 4,904 
TOTAL ASSETS$83,059 $171,142 
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable$36,473 $18,709 
Current portion of related party payables 3,000 
Accrued expenses and other current liabilities21,068 27,077 
Current portion of long-term debt 27,512 
Operating lease liabilities, current9,689 8,650 
Deferred revenue18,042 19,083 
Total current liabilities85,272 104,031 
Operating lease liabilities, long-term16,608 23,699 
Related party payables 2,500 
Other noncurrent liabilities6,844 7,191 
TOTAL LIABILITIES108,724 137,421 
Commitments and contingencies (Note 13)
STOCKHOLDERS’ EQUITY:
Class A common stock, par value of $0.0001 per share — 1,500,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 6,429,016 and 4,408,495 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
1 1 
Class B common stock, par value of $0.0001 per share — 175,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022
  
Class C capital stock, par value of $0.0001 per share — 500,000,000 shares authorized as of September 30, 2023 and December 31, 2022; 0 shares issued and outstanding as of September 30, 2023 and December 31, 2022
  
Additional paid-in capital840,381 810,512 
Accumulated deficit(866,047)(776,792)
TOTAL STOCKHOLDERS’ EQUITY(25,665)33,721 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$83,059 $171,142 
The accompanying notes are an integral part of these Consolidated Financial Statements.

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BLUE APRON HOLDINGS, INC.
Consolidated Statements of Operations
(In thousands, except share and per-share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net revenue$98,799 $109,665 $318,108 $351,653 
Operating expenses:
Cost of goods sold, excluding depreciation and amortization62,307 74,367 200,921 235,015 
Marketing9,287 17,291 33,371 66,981 
Product, technology, general and administrative32,100 37,646 102,265 120,785 
Depreciation and amortization792 5,478 8,194 16,604 
Other operating expense4,704  10,550  
Total operating expenses109,190 134,782 355,301 439,385 
Income (loss) from operations(10,391)(25,117)(37,193)(87,732)
Gain (loss) on extinguishment of debt  (1,850)650 
Gain (loss) on transaction  (48,554) 
Interest income (expense), net109 (821)(1,638)(2,824)
Other income (expense), net   2,033 
Income (loss) before income taxes(10,282)(25,938)(89,235)(87,873)
Benefit (provision) for income taxes(7)(11)(20)(76)
Net income (loss)$(10,289)$(25,949)$(89,255)$(87,949)
Net income (loss) per share attributable to Class A and Class B common stockholders:
Basic$(1.34)$(8.93)$(13.57)$(31.27)
Diluted$(1.34)$(8.93)$(13.57)$(31.27)
Weighted-average shares used to compute net income (loss) per share attributable to Class A and Class B common stockholders:
Basic7,671,3952,904,4286,579,2472,812,318 
Diluted7,671,3952,904,4286,579,2472,812,318 
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BLUE APRON HOLDINGS, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
Class A
Common Stock
Additional
Paid-In
Capital
Accumulated
Deficit
Total
Stockholders'
Equity
Shares Amount   
2023
Balance — December 31, 20224,408,495$1 $810,512 $(776,792)$33,721 
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings12,068— — 
Issuance of common stock from public equity offerings, net of issuance costs1,390,71116,471 — 16,471 
Share-based compensation— 1,355 — 1,355 
Net income (loss)— — (17,036)(17,036)
Balance — March 31, 20235,811,274$1 $828,338 $(793,828)$34,511 
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings21,438— 
Issuance of common stock from public equity offerings, net of issuance costs545,2443,432 — 3,432 
Share-based compensation— 1,009 — 1,009 
Issuance of warrant— 6,778 — 6,778 
Net income (loss)— — (61,930)(61,930)
Balance — June 30, 20236,377,956$1 $839,557 $(855,758)$(16,200)
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings51,060— — 
Share-based compensation— 824 — 824 
Net income (loss)— — (10,289)(10,289)
Balance — September 30, 20236,429,016$1 $840,381 $(866,047)$(25,665)
2022
Balance — December 31, 20212,641,200$ $746,567 $(666,514)$80,053 
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings10,082— 
Issuance of common stock upon exercise of warrants40,6714,096 — 4,096 
Issuance of common stock from private placements, net of issuance costs29,7624,809 — 4,809 
Share-based compensation— 2,233 — 2,233 
Cumulative effect adjustment related to the adoption of the leasing standard— — (545)(545)
Net income (loss)— — (38,674)(38,674)
Balance — March 31, 20222,721,715$ $757,705 $(705,733)$51,972 
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings15,957— — 
Issuance of common stock upon exercise of warrants19,611953 — 953 
Issuance of common stock from private placements, net of issuance costs142,36120,027 — 20,027 
Share-based compensation— 1,799 — 1,799 
Net income (loss)— — (23,326)(23,326)
Balance — June 30, 20222,899,644$ $780,484 $(729,059)$51,425 
Issuance of common stock upon exercise of stock options and vesting of restricted stock, net of tax withholdings13,342— — — 
Share-based compensation— 1,644 — 1,644 
Net income (loss)— — (25,949)(25,949)
Balance — September 30, 20222,912,986$ 782,128 (755,008)27,120 
The accompanying notes are an integral part of these Consolidated Financial Statements.
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BLUE APRON HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Nine Months Ended
September 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)$(89,255)$(87,949)
Adjustments to reconcile net income (loss) to net cash from (used in) operating activities:
Depreciation and amortization of property and equipment8,194 16,604 
Loss (gain) on disposal of property and equipment 135 
Loss on impairment1,662  
Loss (gain) on extinguishment of debt1,850 (650)
Loss (gain) on derecognition of warrant obligation (214)
Loss (gain) on transaction48,554  
Changes in fair value of warrant obligation (1,819)
Changes in reserves and allowances176 (183)
Share-based compensation3,061 5,384 
Non-cash interest expense742 597 
Changes in operating assets and liabilities:
Accounts receivable479 210 
Inventories(1,834)(5,623)
Prepaid expenses and other current assets404 (6,291)
Operating lease right-of-use assets5,563 (760)
Accounts payable17,749 1,028 
Current portion of related party payables(3,000)3,000 
Accrued expenses and other current liabilities(4,665)(3,774)
Operating lease liabilities(5,849)105 
Deferred revenue(1,041)12,908 
Related party payables(2,500)2,500 
Other noncurrent assets and liabilities3,248 (3,189)
Net cash from (used in) operating activities(16,462)(67,981)
CASH FLOWS FROM INVESTING ACTIVITIES:
Net proceeds from transaction23,558  
Purchases of property and equipment(3,206)(4,983)
Proceeds from sale of property and equipment171 166 
Net cash from (used in) investing activities20,523 (4,817)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from equity and warrant issuances20,354 25,500 
Net proceeds from debt issuance 28,200 
Repayments of debt(30,000)(30,625)
Payments of debt and equity issuance costs(625)(1,452)
Principal payments on financing lease obligations(73)(7)
Net cash from (used in) financing activities(10,344)21,616 
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(6,283)(51,182)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — Beginning of period34,656 83,597 
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — End of period$28,373 $32,415 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for income taxes, net of refunds$35 $65 
Cash paid for interest$922 $2,200 
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING INFORMATION:
Acquisition (disposal) of property and equipment financed under finance lease obligations$(214)$ 
Non-cash additions to property and equipment $(54)$299 
Purchases of property and equipment in Accounts payable and Accrued expenses
and other current liabilities
$84 $449 
The accompanying notes are an integral part of these Consolidated Financial Statements.
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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 or prepare those recipes.
In addition to meals, the Company sells a curated selection of cooking tools, utensils, pantry items, and add-on products for different culinary occasions, as well as non-subscription meal kits and wine products, through Blue Apron Market, its e-commerce market. Historically, the Company also sold wine through Blue Apron Wine, a direct-to-consumer wine delivery service (“Blue Apron Wine”). In October 2023, the Company announced its decision to wind down Blue Apron Wine, which the Company expects to complete in the fourth quarter of 2023.
Reverse Stock Split

On June 7, 2023, the Company effected a reverse stock split (the “Reverse Stock Split”) of its outstanding shares of Class A common stock, par value $0.0001 per share (the “Class A Common Stock”) at a ratio of 1-for-12 pursuant to a Certificate of Amendment to the Company’s Restated Certificate of Incorporation, as amended, filed with the Secretary of State of the State of Delaware. The Reverse Stock Split was reflected on the New York Stock Exchange (the “NYSE”), which was the stock exchange the Class A Common Stock was listed on at the time of the Reverse Stock Split, beginning with the opening of trading on June 8, 2023. Pursuant to the Reverse Stock Split, every 12 shares of the Company’s issued and outstanding Class A Common Stock were automatically converted into one issued and outstanding share of Class A Common Stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who would otherwise be entitled to a fractional share of Class A Common Stock were instead entitled to receive a cash payment in lieu of such fractional shares. The number of authorized shares of the Company’s Class A Common Stock under the Company’s Restated Certificate of Incorporation, as amended, remained unchanged at 1,500,000,000. The Reverse Stock Split affected all issued and outstanding shares of the Class A Common Stock, and the respective numbers of shares of Class A Common Stock underlying the Company’s outstanding stock options, outstanding restricted stock units, outstanding performance stock units, outstanding warrants and the Company’s equity incentive plans were proportionately adjusted. All historical share and per share amounts of Class A Common Stock included in the accompanying Consolidated Financial Statements have been retrospectively adjusted to give effect to the Reverse Stock Split for all periods presented.
Voluntary Transfer of Stock Listing to Nasdaq
On September 22, 2023, the Company voluntarily transferred its stock exchange listing to the Nasdaq Stock Market LLC (“Nasdaq”) from the NYSE. The Company's Class A Common Stock began trading on Nasdaq on September 25, 2023.
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 September 30, 2023 and December 31, 2022, results of operations for the three and nine months ended September 30, 2023 and 2022, and cash flows for the nine months ended September 30, 2023 and 2022. 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, 2022 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2023 (the “Annual
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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”).
Within the issuance of the Annual Report, the Company adopted Accounting Standards Update No. 2016-02, “Leases” (“ASC 842”) using the modified retrospective approach, resulting in an adoption effective date of January 1, 2022. As such, the adoption of this standard within the annual period of the twelve months ended December 31, 2022, resulted in the following adjustments to amounts previously presented in the Consolidated Financial Statements within quarterly filings under the prior lease standard (“ASC 840”):
ASC 840 AmountASC 842 AdjustmentNine Months Ended
September 30, 2022
(In thousands)
Consolidated Statement of Operations:
Product, technology, general & administrative$118,747 $2,038 $120,785 
Depreciation & amortization$16,218 $386 $16,604 
Interest income (expense), net$(4,621)$1,797 $(2,824)
ASC 840 AmountASC 842 AdjustmentNine Months Ended
September 30, 2022
(In thousands)
Cash Flows From Operating Activities:
Net income (loss)$(87,322)$(627)$(87,949)
Depreciation and amortization of property and equipment$16,218 $386 $16,604 
Prepaid expenses and other current assets$(6,188)$(103)$(6,291)
Operating lease right-of-use assets$ $(760)$(760)
Accrued expenses and other current liabilities$(4,296)$522 $(3,774)
Operating lease liabilities$ $105 $105 
Other noncurrent assets and liabilities$(3,828)$639 $(3,189)
Cash Flows From Financing Activities:
Principal payments on financing lease obligations$(120)$113 $(7)
Liquidity and Going Concern Evaluation
Under Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company is required to evaluate whether there is substantial doubt regarding its ability to continue as a going concern each reporting period, including interim periods.
In this evaluation, management considered the conditions and events that could raise substantial doubt about the Company's ability to continue as a going concern within twelve months of the issuance date of this Quarterly Report on Form 10-Q, and considered the Company's current financial condition and liquidity sources, including current funds available, forecasted future cash flows, and the Company's conditional and unconditional obligations before such date.
The Company has a history of significant net losses, including $89.3 million and $87.9 million for the nine months ended September 30, 2023, and 2022, respectively, and operating cash flows of $(16.5) million and $(68.0) million for the nine months ended September 30, 2023, and 2022, respectively. As of September 30, 2023, the Company had a
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working capital deficit of $47.7 million and an accumulated deficit of $866.0 million. Prior to the FreshRealm Transaction (as discussed below), the Company has historically funded its operations through financing activities, including raising equity and debt. The Company's current operating plan indicates it will continue to incur net losses and generate negative cash flows from operating activities for the next twelve months, and as of September 30, 2023, the Company had cash and cash equivalents of $27.2 million. These conditions and events in the aggregate raise substantial doubt regarding the Company's ability to continue as a going concern.
In an effort to alleviate the conditions that raise substantial doubt regarding the Company's ability to continue as a going concern, the Company entered into a strategic partnership with FreshRealm, Inc. (”FreshRealm”). On June 9, 2023 (the ”Closing Date”), the Company entered into definitive agreements with FreshRealm, pursuant to which, among other things, the Company sold its production and fulfillment operational infrastructure to FreshRealm, including, among other things, inventory, equipment, and related know-how and transferred related personnel relating to the Company's production and fulfillment operations. Concurrently, the Company executed a 10-year production and fulfillment agreement (as amended from time to time the ”Production and Fulfillment Agreement”) pursuant to which FreshRealm became the exclusive supplier of the Company's meal kits. The Company also subleased to FreshRealm the Company's fulfillment facilities located in Linden, New Jersey and Richmond, California (the “Facilities” and such transactions, together with the related transactions contemplated thereby, the “FreshRealm Transaction”). As consideration for the FreshRealm Transaction, on the Closing Date, the Company received approximately $23.6 million of net cash proceeds upfront and is eligible to receive up to $25.0 million of additional value primarily through a cash earnout if the Company achieves certain financial and cost-savings milestones within specified time periods and future volume-based rebates if the Company reaches specified thresholds and achieves financial targets based on volume of purchases of certain products from FreshRealm under the Production and Fulfillment Agreement. With a portion of the proceeds from the FreshRealm Transaction, the Company also repaid its remaining outstanding senior secured notes in full. See Note 3 for further discussion regarding the FreshRealm Transaction.

With the completion of the FreshRealm Transaction, the Company has further streamlined its cost structure and reduced its negative operating cash flows. The current operating plans of the Company's management are focused on continuing to optimize the Company's cost structure and grow its revenues in order to earn the volume-based rebates on future meal-kit volumes and new product initiatives as well as the Earnout (as defined below), and to thereby achieve the Company's goal of profitability.

Additionally, on September 28, 2023, the Company entered into that certain Agreement and Plan of Merger (the “Merger Agreement”) with Wonder Group, Inc., a Delaware corporation (“Wonder” or “Parent”), and Basil Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”). The Merger Agreement provides for the acquisition of the Company by Parent through a cash tender offer (the “Offer”) by Purchaser for all of the Company’s issued and outstanding shares of the Class A common stock at a price of $13.00 per share of Class A Common Stock, net to the stockholder in cash, without interest and less any applicable tax withholding (the “Offer Price”), which constitute all of the issued and outstanding Class A Common Stock, Class B common stock, par value $0.0001 per share, and Class C capital stock, par value $0.0001 per share (collectively the "Common Stock"). Following the completion of the Offer, and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into the Company (the “Merger”), with the Company surviving as a wholly-owned subsidiary of Parent, pursuant to the procedure provided for under Section 251(h) of the Delaware General Corporation Law (the “DGCL”), without any stockholder approvals. The Merger will be effected as soon as practicable following the time of acceptance for purchase by Purchaser of shares of Common Stock validly tendered (and not validly withdrawn) pursuant to the Offer (the “Acceptance Time”). See Note 3 for further discussion regarding the Merger Agreement.

The Company’s ability to continue as a going concern is dependent upon the Company’s ability to implement its operating plan on its anticipated timeline, as well as its ability to successfully consummate the Merger. Although management continues to pursue its plans, there can be no assurance that the Company will be successful in executing on its operating plan or that the Merger will be consummated in a timely manner or at all.
Additionally, as of the date of this Quarterly Report on Form 10-Q, the remaining $55.5 million owed under the RJB Purchase Agreement (as defined in Note 14) due from an affiliate of Joseph N. Sanberg, an existing stockholder of the Company, remains unfunded, as well as the remaining $12.7 million owed from an affiliate of Sanberg under the Sponsorship Gift Cards Agreement (as defined in Note 16). An affiliate of Sanberg has granted the Company a security interest in equity shares of certain privately-held issuers (the “Pledged Shares”) as collateral for the RJB Purchase Agreement, which it has the right to foreclose on and take ownership.
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The Company's Consolidated Financial Statements do not include any adjustments that may result from the outcome of this uncertainty and have been prepared assuming the Company will 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 Blue Torch warrant obligation (as defined in Note 18), 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.
Smaller Reporting Company Status
The Company is a “smaller reporting company,” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and therefore qualifies for reduced disclosure requirements for smaller reporting companies.
3. Strategic Transactions

Merger Agreement with Wonder

On September 28, 2023, the Company entered into the Merger Agreement with Wonder and Purchaser. The Merger Agreement provides for the acquisition of the Company by Parent through the Offer by Purchaser for all of the Company’s issued and outstanding shares of Class A Common Stock, which constitutes all of the Company’s issued and outstanding shares of Common Stock at the Offer Price.

The board of directors of the Company (the “board of directors”) unanimously (i) determined and declared that it is in the best interests of the Company and its stockholders that the Company enter into the Merger Agreement and consummate the Merger and that the Company’s stockholders accept the Offer and tender their shares of Common Stock pursuant to the Offer, in each case on the terms and subject to the conditions set forth in the Merger Agreement; (ii) approved and declared the advisability of the Merger Agreement, the Offer, the Merger and the other transactions contemplated by the Merger Agreement; (iii) declared that the terms of the Offer and the Merger are fair to the Company and its stockholders; and (iv) resolved to recommend that the Company’s stockholders accept the Offer and tender their shares of Common Stock pursuant to the Offer.

Pursuant to the Merger Agreement, on October 13, 2023 Purchaser commenced (within the meaning of Rule 14d-2 under the Exchange Act) the Offer to purchase any and all issued and outstanding shares of Class A Common Stock, which constitutes all of the issued and outstanding shares of Common Stock, for a price per share of Common Stock equal to the Offer Price. The Offer shall initially remain open for 20 business days, subject to possible extension on the terms set forth in the Merger Agreement. The parties currently expect the Offer and the Merger to be completed in the fourth quarter of 2023.

Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each outstanding share of Common Stock, other than (i) shares of Common Stock held by the Company, Parent, Purchaser, or any wholly-owned subsidiary of Parent (other than Purchaser) or any wholly-owned subsidiary of the Company, (ii) irrevocably accepted for purchase in the Offer by the Purchaser or (iii) shares of Common Stock that are held by stockholders who are entitled to and properly demand appraisal for such shares of Common Stock in accordance with Section 262 of the DGCL, will be automatically converted into the right to receive the Offer Price from Purchaser (the “Merger Consideration”).

Pursuant to the Merger Agreement: (a) as of immediately prior to the Effective Time, each then-outstanding and unexercised option to purchase shares of Common Stock (each, a “Company Stock Option”) shall vest (to the extent unvested) in full and automatically be cancelled and converted into the right to receive from the Company following the Merger an amount of cash equal to the product of (i) the total number of shares of Common Stock then underlying such Company Stock Option multiplied by (ii) the excess, if any, of the Merger Consideration over the exercise price per share
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of such Company Stock Option, without any interest thereon. In the event that the exercise price of any such Company Stock Option is equal to or greater than the Merger Consideration, such Company Stock Option shall be cancelled, without any consideration being payable in respect thereof, and have no further force or effect; (b) as of immediately prior to the Effective Time, (i) each restricted stock unit with respect to shares of Common Stock which vests solely on the continued performance of services (each, a “Company RSU”) that is then outstanding shall vest in full (to the extent unvested), and (ii) (A) each such vested Company RSU and (B) each restricted stock unit with respect to any shares of Common Stock which vests based on the achievement of one or more performance metrics and the continued performance of service (each, a “Company PSU”) that is then outstanding and vested (including any such Company PSU that becomes vested as a result of any applicable performance-vesting condition becoming satisfied in connection with the Merger) shall, in each case, automatically be cancelled and converted into the right to receive from the Company following the Merger an amount of cash equal to the product of (1) the total number of shares of Common Stock then underlying such vested Company RSU or vested Company PSU, as applicable, multiplied by (2) the Merger Consideration. Any Company PSU that is not vested (and does not become vested in connection with the Merger) as of immediately prior to the Effective Time shall be cancelled, without any consideration being payable in respect thereof, and have no further force or effect; and (c) as of immediately prior to the Acceptance Time, each warrant to purchase shares of Common Stock issued by the Company (such warrants, other than that certain Class A Common Stock Purchase Warrant issued by the Company to FreshRealm (such warrant, the “Supplier Warrant”), the "Company Warrants"), that is then-outstanding, and unexercised shall automatically, in accordance with such specified Company Warrant’s terms and with no further action by the Company or the holder thereof, automatically terminate and be cancelled and of no further force or effect and for no consideration.

Purchaser’s obligation to accept shares of Common Stock tendered in the Offer is subject to customary closing conditions, including (i) that, immediately prior to the expiration of the Offer, the number of shares of Common Stock validly tendered and not validly withdrawn (excluding shares tendered pursuant to guaranteed delivery procedures that have not yet been “received,” as such term is defined by Section 251(h)(6)(f) of the DGCL), together with any shares of Common Stock owned by Purchaser, Parent or any wholly-owned subsidiary of Parent, does not equal at least one share more than one-half of all shares of Common Stock then outstanding; (ii) the accuracy of the representations and warranties of the Company contained in the Merger Agreement, subject to customary thresholds and exceptions; (iii) the Company’s compliance with, and performance of, in all material respects its covenants and agreements contained in the Merger Agreement; (iv) since the date of the Merger Agreement, the absence of a Company Material Adverse Effect (as defined in the Merger Agreement); and (v) the other customary conditions set forth in Annex I to the Merger Agreement under certain circumstances.

Following the completion of the Offer, and subject to the terms and conditions of the Merger Agreement, the parties shall consummate the Merger, with the Company surviving as a wholly-owned subsidiary of Parent, pursuant to the procedure provided for under Section 251(h) of the DGCL, without any stockholder approvals. The Merger will be effected at the Acceptance Time.

The Merger Agreement contains customary representations and warranties from both the Company, on the one hand, and Parent and Purchaser, on the other hand. The Company has agreed, among other things, to use commercially reasonable efforts to operate its business in the ordinary course until the Acceptance Time and to not engage in specific types of transactions during such period. The Company has also agreed to customary non-solicitation restrictions, including not to solicit or initiate alternative acquisition proposals from third parties and engage in discussions or negotiations with third parties regarding acquisition proposals, or change the recommendation of the board of directors to the Company’s stockholders regarding the Offer, in each case except in certain circumstances as permitted by the Merger Agreement.

The Merger Agreement contains customary termination rights for both Parent and Purchaser, on the one hand, and the Company, on the other hand, including, among others, for failure to consummate the Offer on or before February 28, 2024. If the Merger Agreement is terminated under certain circumstances specified in the Merger Agreement (including under specified circumstances in connection with the Company’s entry into an agreement with respect to a Superior Proposal (as defined in the Merger Agreement) or the board of directors' change of recommendation in favor of the Offer), the Company will be required to pay Parent a termination fee of $3.1 million. The parties to the Merger Agreement are also entitled to specifically enforce the terms and provisions of the Merger Agreement under certain circumstances.

For additional information related to the Merger Agreement, refer to the Company’s Solicitation/Recommendation Statement on the Schedule 14D-9 filed by the Company on October 13, 2023 (as it may be further amended or supplemented from time to time, the “Schedule 14D-9”). Please also see “Item 1A. Risk Factors–- Risks Related to the Pending Transaction with Wonder” of this Quarterly Report on Form 10-Q.

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Tender and Support Agreement

On September 28, 2023, and in connection with execution of the Merger Agreement, Parent and Purchaser entered into a Tender and Support Agreement (the “Support Agreement”) with FreshRealm, who beneficially owned approximately 16.5% of the outstanding shares of Class A Common Stock as of September 27, 2023. Pursuant to the Support Agreement, FreshRealm agreed, among other things, (i) to tender all of the shares of Class A Common Stock held by FreshRealm (the “Subject Shares”) in the Offer following exercise of the Supplier Warrant in accordance with the terms of the Support Agreement, subject to certain exemptions (including the termination of the Merger Agreement), (ii) to vote against, among other things, other proposals to acquire the Company, and (iii) to certain other restrictions on its ability to take actions with respect to the Company and its shares of Class A Common Stock. On October 11, 2023, FreshRealm exercised in full the Supplier Warrant to purchase 1,268,574 shares of Class A Common Stock. FreshRealm paid the exercise price on a cashless basis, resulting in the Company withholding 984 shares of the Subject Shares to pay the exercise price and issuing the remaining 1,267,590 shares of Class A Common Stock to FreshRealm. No fractional shares were issued. See the “The Supplier Warrant” section below for additional information related to the Supplier Warrant.

FreshRealm Transaction

On May 15, 2023, the Company entered into a non-binding letter of intent with FreshRealm, which contemplated FreshRealm’s acquisition of the fulfillment equipment and other production assets of the Company and the Company’s entry into an expanded commercial relationship with FreshRealm.

On the Closing Date, the Company entered into definitive agreements with FreshRealm, pursuant to which, among other things, the Company sold its production and fulfillment operational infrastructure to FreshRealm, and concurrently executed the ten year Production and Fulfillment Agreement under which FreshRealm became the exclusive supplier of the Company’s meal kits.

Asset Purchase Agreement
On the Closing Date, the Company, Blue Apron, LLC, the Company’s wholly owned subsidiary (“Blue Apron”), and FreshRealm entered into an asset purchase agreement (the “Asset Purchase Agreement”), pursuant to which FreshRealm purchased certain assets of the Company relating to the Company’s production and fulfillment operations (the “P&F Business”) conducted by the Company at its Facilities.
Pursuant to the Asset Purchase Agreement, on the Closing Date, (i) Blue Apron transferred to FreshRealm various assets used in the P&F Business including, among others, certain of Blue Apron’s inventory and consumable supplies and the rights under warranties and indemnities related thereto, identified transferred contracts (the “Transferred Contracts”), furnishings and equipment at the Facilities, including certain operating and finance leases, permits, books and records relating to the P&F Business, and intellectual property, including certain know-how, business IT systems and any implied goodwill arising out of such assets or the P&F Business (such assets, the “Purchased Assets”), other than the assets set forth in clause (ii); (ii) Blue Apron retained various assets including certain of Blue Apron’s prepaid expenses, intellectual property, excluded contracts, the assets relating to Blue Apron Wine, the Company’s e-commerce marketplace business, and other assets unrelated to the P&F Business, including assets relating to the Company’s culinary, marketing and digital product, and customer service operations (such assets, the “Excluded Assets”); (iii) FreshRealm assumed certain liabilities, including liabilities relating to the ownership or use of the Purchased Assets after the closing of the FreshRealm Transaction, the employment of the Relevant Team Employees (as defined in the Asset Purchase Agreement) after the Closing Date, and obligations under the Transferred Contracts; and (iv) Blue Apron retained certain liabilities, including trade payables in connection with the P&F Business prior to the Closing Date, liabilities relating to operation of the P&F Business prior to the Closing Date, and liabilities relating to the Excluded Assets.
The Company determined that the assets sold and transferred and the assigned liabilities (collectively the “Disposal Group”) did not constitute a component and did not meet the criteria for discontinued operation under ASC 205-20 as no discrete financial information is available for the Disposal Group with no cash flows that can be clearly distinguished for financial reporting purposes from the rest of Company. The Company concluded that the Disposal Group constitutes a business as it contains inputs and processes for producing outputs and, as such, the Company accounted for the sale as a disposal of a business under ASC 810-10. As of May 15, 2023, the Disposal Group met the criteria for classification as held for sale under ASC 360 with the Disposal Group subsequently being disposed of by sale on the Closing Date. The Disposal Group consisted of the following assets and liabilities:
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Disposal Group
(In thousands)
Sold Assets
     Inventories, net$24,990 
     Furnishings and equipment44,874 
     Operating lease right-of-use assets481 
     Finance lease right-of-use assets463 
          Total Sold Assets$70,808 
Assigned Liabilities
     Operating lease liabilities, current158 
     Finance lease liabilities, current93 
     Operating lease liabilities, long-term314 
     Finance lease liabilities, long-term381 
     PTO accrual - relevant Team Employees1,442 
          Total Assigned Liabilities$2,388 
Total Disposal Group$68,420 
As consideration for the FreshRealm Transaction, on the Closing Date, FreshRealm paid to Blue Apron an amount in cash equal to $28.5 million (the “Base Sale Price”), less $3.5 million, which was paid to Blue Apron in the form of the Seller Note (as defined and described in Note 5), less an amount equal to all vacation time, sick time and other paid time off accrued by Relevant Team Employees (the “PTO Credit“) in connection with the FreshRealm Transaction. Under the Asset Purchase Agreement, FreshRealm is obligated to pay to Blue Apron an aggregate of up to $4.0 million of additional cash consideration, including $3.0 million as a result of, as of September 30, 2023 (the “First Earnout Calculation Date”), Blue Apron having achieved certain financial and cost-savings milestones and being in compliance in all material respects with its obligations under the Transition Services Agreement (as defined below), and $1.0 million if Blue Apron has achieved the aforementioned financial and cost-savings milestones and also remains in compliance with its obligations under the Transition Services Agreement as of December 31, 2023 (the ”Second Earnout Calculation Date” and, together with the First Earnout Calculation Date, the “Earnout”). No later than 30 days following each applicable Earnout Calculation Date, Blue Apron will deliver to FreshRealm a written statement setting forth in reasonable detail its determination of whether the Earnout has been achieved. After receipt of such written statement, FreshRealm shall have 30 days to review such written statement and, if approved, the Earnout will be paid by FreshRealm to Blue Apron within 5 business days following the final determination and approval of the written statement.
On October 27, 2023, Blue Apron delivered the written statement following the First Earnout Calculation Date and expects to earn the first $3.0 million of the Earnout in the fourth quarter of 2023.
The Company determined the total net consideration to be equal to the Base Sale Price, minus the face amount of the Seller Note, plus the seller note receivable, net, minus the PTO Credit, minus the value of the Supplier Warrant (as described below).

Purchase Consideration
(In thousands)
Base purchase price$28,500 
Seller note principal(3,500)
Seller note receivable, net3,086 
PTO credit - Relevant Team Employees(1,442)
Warrant(6,778)
Total Purchase consideration$19,866 

For the nine months ended September 30, 2023, the Company recognized a loss on the FreshRealm Transaction of $48.6 million, which is recorded in Loss on transaction in the accompanying consolidated statement of operations.
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Loss on transaction
(In thousands)
Total purchase consideration$19,866 
Total disposal group(68,420)
Net loss recognized on Transaction$(48,554)
Production and Fulfillment Agreement
In connection with the execution of the Asset Purchase Agreement, Blue Apron and FreshRealm entered into the Production and Fulfillment Agreement, pursuant to which Blue Apron granted FreshRealm an exclusive right to produce and fulfill all Exclusive Products (as defined in the Production and Fulfillment Agreement) at any FreshRealm facility for sale to Blue Apron (the “Exclusive Right”), including certain individual meal recipe/SKUs that comprise prepped and unprepped ingredients, fresh and/or frozen meals and/or current or future food products that are similar to the Products (as defined in the Production and Fulfillment Agreement). The Exclusive Right does not apply to Blue Apron’s non-food products, individual food or beverage ingredients, pantry items sold on the Market or Wine portion of its website or mobile applications as of the Closing Date. The Exclusive Right does not extend to non-Blue Apron products produced by any future acquirer of Blue Apron. In the event that Blue Apron acquires a third party, the exclusivity does not apply to any meal-kit or food products of such third party for a twenty-four (24) month period, during which time FreshRealm and Blue Apron will negotiate mutually agreeable terms for the production and fulfillment of such acquired products. Blue Apron and FreshRealm intend to expand the portfolio of recipe and meal kit products, which would be subject to the Exclusive Right. In the event that Blue Apron desires to develop a new category of food products that is not excluded from the Exclusive Right, FreshRealm has the first right to develop such new category of products, and if FreshRealm does not accept such right to develop, the exclusivity would not apply and the Company would be able to develop such category.
The Production and Fulfillment Agreement also provides for up to $17.5 million of volume-based rebates during the term of the Production and Fulfillment Agreement. Blue Apron can earn these rebates based on the volume of purchases of certain products under the Production and Fulfillment Agreement above specified thresholds, as well as the achievement of certain financial targets by Blue Apron. To earn these rebates, Blue Apron must pay for the relevant products. The volume-based rebates represent a potential future gain that is contingent upon the Company (i) increasing its purchase volume from FreshRealm and (ii) achieving positive adjusted EBITDA. As the volume-based rebates act to ensure that the Company continues to purchase a substantive volume of products from FreshRealm (i.e., ensure that the interests of the Company and FreshRealm are aligned through 2025), the Company determined that the volume-based rebates relate to the ongoing future relationship with FreshRealm, and not the FreshRealm Transaction, and thus should be excluded from the measurement of the consideration. For the three and nine months ended September 30, 2023, no volume-based rebates were earned.
The initial term of the Production and Fulfillment Agreement is 10 years and will automatically renew for additional 2-year periods unless terminated by either party in accordance with such party’s termination rights. Following any early termination or expiration of the Production and Fulfillment Agreement, the Production and Fulfillment Agreement will continue to be in full force and effect for a period of 18 months after such termination or expiration, with the exception of the Exclusive Right, during which, among other things, Blue Apron and FreshRealm will work in good faith on a transition plan and Blue Apron will plan reductions of use of FreshRealm for manufacturing products.
Subleases
In connection with the execution of the Asset Purchase Agreement, Blue Apron and FreshRealm entered into sublease agreements for the Facilities (the “Sublease Agreements”). The term of the subleases commenced on the Closing Date.
The Richmond, California sublease (the “CA Sublease”) will expire on the earlier to occur of (i) the Triggering Date (as defined in the CA Sublease), or (ii) December 31, 2024. The CA Sublease contemplates an assignment of Blue Apron’s interest in the underlying prime lease to FreshRealm.
The Linden, New Jersey sublease (the “NJ Sublease” and together with the CA Sublease, the “Subleases”) will expire on December 31, 2024, unless the Triggering Date (as defined in the NJ Sublease) occurs, in which event the term shall be extended until August 31, 2026. The NJ Sublease contemplates potential extensions of the NJ Sublease term and/or an assignment of Blue Apron’s interest in the underlying Prime Lease (as defined in the NJ Sublease) to FreshRealm.
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The Subleases are classified as operating leases, and as the Company is not relieved of its primary obligations under the prime leases, the Company will continue to account for the prime leases as it did before the commencement of the Subleases and will continue to assess the ROU Assets for impairment. Additionally, the Company will recognize sublease income in its consolidated statement of operations over the respective sublease terms on a straight-line basis. See Note 8 for further discussion on leases.

The Supplier Warrant

In connection with the execution of the Asset Purchase Agreement, and in consideration for the FreshRealm Transaction, the Company simultaneously issued to FreshRealm a warrant (the “Supplier Warrant”) to purchase 1,268,574 shares of the Company’s Class A Common Stock, at an exercise price of $0.01 per share, which represented 19.99% of the Company’s outstanding Class A Common Stock as of the Closing Date. In connection with the Merger Agreement, on October 11, 2023, FreshRealm exercised in full the Supplier Warrant to purchase 1,268,574 shares of Class A Common Stock. FreshRealm paid the exercise price on a cashless basis, resulting in the Company withholding 984 shares of the Subject Shares to pay the exercise price and issuing the remaining 1,267,590 shares of Class A Common Stock to FreshRealm. No fractional shares were issued.

Prior to the 7th anniversary of the Closing Date of the FreshRealm Transaction, the Supplier Warrant was exercisable at any time on or after the earlier to occur of (i) the expiration of the Standstill/Lock-up Period (as defined below), or any exception during the Standstill/Lock-up Period and (ii) the delisting of the Class A Common Stock from the NYSE; provided that if the Class A Common Stock was concurrently listed on another Trading Market (as defined in the Supplier Warrant) within ninety (90) days after such delisting, the Supplier Warrant would not have become exercisable pursuant to clause (ii). Subject to the terms of the Supplier Warrant, the number of shares issuable upon exercise of the Supplier Warrant and the exercise price would have been subject to adjustment in certain events, including (i) dividends or distributions of shares of Class A Common Stock, (ii) splits, subdivisions, combinations and certain reclassifications of shares of Class A Common Stock, or (iii) distributions of assets other than Class A Common Stock.

Pursuant to the terms of the Supplier Warrant, the Company would not have effected the exercise of the Supplier Warrant, and the holder would not have been entitled to exercise any portion of the Supplier Warrant, that, upon giving effect to such exercise, the aggregate number of shares of Class A Common Stock beneficially owned by the holder (together with its affiliates) would have exceeded 19.99% of the number of shares of Class A Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Supplier Warrant, which percentage may have been changed at the holders election to a lower percentage upon 61 days’ notice to the Company, subject to the terms of the Supplier Warrant.

In addition, pursuant to the terms of the Supplier Warrant, the holder will not, and will not cause any direct or indirect affiliate to, for a period beginning on the issuance date of the Supplier Warrant and ending 18 months after the issuance date of the Supplier Warrant (the “Standstill/Lock-up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, the Subject Shares, (ii) enter into any hedging, swap or other agreement or transaction that would transfer, in whole or in part, any of the economic consequences of the Subject Shares, whether any such transaction described in clauses (i) or (ii) is to be settled by delivery of the Subject Shares, in cash or otherwise, (iii) make any demand for or exercise any right under the registration rights agreement between the Company and FreshRealm with respect to the Subject Shares or otherwise with respect to the registration of the Subject Shares, or (iv) publicly disclose the intention to do any of the foregoing, except as permitted by certain exceptions set forth in the Supplier Warrant.

The Company assessed the classification of the Supplier Warrant as either equity-classified or liability-classified instruments based on the specific terms and applicable authoritative guidance in ASC 480 and ASC 815. The Supplier Warrant did not meet the criteria for ASC 480 or ASC 815-40 liability accounting. As the Supplier Warrant was considered indexed to the Company’s own stock and meets the requirements for equity classification, the Company accounted for the Supplier Warrant as an equity instrument.

The Company initially measured the Supplier Warrant within equity at fair value and did not subsequently remeasure the equity instrument. As of the Closing Date, the Supplier Warrant was valued at $6.8 million and was recorded to additional-paid-in capital. The Company utilized a Black-Scholes option pricing model to measure the fair value of the Supplier Warrant, using the following key assumptions:

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Expected volatility134.84 %
Risk-free interest rate3.84 %
Expected term (in years)7
Dividend yield0.00%

Expected Volatility — The expected volatility was derived from the average historical stock volatility of the Company over the expected term prior to June 9, 2023.

Risk‑Free Interest Rate — The risk‑free interest rate was based on the daily par yield curve rate per U.S. Treasury for constant maturity notes with terms approximately equal to the expected term.

Expected Term — The expected term represents the period that the Supplier Warrant was expected to be outstanding based on the contractual terms.

Dividend Yield — The expected dividend was zero as the Company has not paid and does not anticipate paying any dividends in the foreseeable future.

Transition Services Agreement

The Company also entered into a transition services agreement (the “Transition Services Agreement”) with FreshRealm, pursuant to which the Company will be paid to provide certain services to FreshRealm to facilitate the transition of the operations of the P&F Business to FreshRealm (such services, the “P&F Services”). The obligations of Blue Apron to provide the P&F Services shall terminate with respect to each P&F Service on the earlier of (i) the applicable Transition Date, which means initially September 30, 2023, subject to extension as mutually agreed to by the parties and provided that specific P&F Services may have specific Transition Dates, and (ii) the transition of the applicable operations or P&F Services to FreshRealm, in each case subject to further extension. In accordance with the Transition Services Agreement, the P&F Services being performed by the Company for FreshRealm are being charged to FreshRealm at cost (equal to pass-through charges and the estimated cost of personnel time and effort to perform the transition services), which the Company determined to, in all material respects, approximate fair value. The Company will recognize revenue under the Transition Services Agreement as services are provided to FreshRealm and any pass-through charges will be recorded as reduction to the relevant expenses.

Technology License Agreement

In connection with the execution of the Asset Purchase Agreement, the Company and FreshRealm entered into a technology license agreement (the “Technology License Agreement”), pursuant to which the Company licensed certain software and technology to FreshRealm to enable FreshRealm to perform its obligations under the Production and Fulfillment Agreement. The Technology License Agreement provides an exclusive license to the software for Blue Apron’s warehouse management system and a non-exclusive license to source code for certain other Blue Apron software used in connection with Blue Apron’s direct-to-consumer business, solely for the purpose of enabling the warehouse management system. In addition, Blue Apron received a non-exclusive license to intellectual property rights that were sold to FreshRealm in accordance with the Asset Purchase Agreement. The Technology License Agreement has certain limitations on the use of the intellectual property rights licensed to Blue Apron to prevent use of those intellectual property rights to compete with FreshRealm.

There was no consideration for the technology licenses as these licenses are required in order for FreshRealm to be able to perform its obligations under the Production and Fulfillment Agreement.

As software was not part of the Disposal Group, the Company assessed the remaining software for impairment under ASC 350-40 and determined there were indicators of impairment present related to certain internal-use capitalized software used in P&F Business. As there is no future utility for such internal-use capitalized software, the Company recorded a $1.7 million impairment loss in Other operating expense during the nine months ended September 30, 2023, representing the remaining carrying value of these assets.

Retail License Agreement

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    In connection with the execution of the Asset Purchase Agreement, the Company and FreshRealm entered into a retail license agreement (the “Retail License Agreement”), pursuant to which the Company granted an exclusive license under certain of the Company’s trademarks and certain other specified intellectual property rights, in connection with the manufacturing, packaging, marketing, promotion, sale, and distribution of ready-to-heat, ready-to-cook and ready-to-eat meals, meal kits, and related food items and food products (the “Retail Products”) in the United States through specified sales channels other than specified direct-to-consumer channels. In addition, the Company granted FreshRealm a non-exclusive license to use the licensed intellectual property in sales presentations, business development collateral, and marketing and advertising materials related to the Retail Products. The Retail License Agreement also granted FreshRealm specified rights to sublicense the licenses for purposes of production and fulfillment of the Retail Products in the United States. Under the Retail License Agreement, FreshRealm pays certain royalties to the Company. The royalties must be spent to promote the Retail Products, although, during the term of the Retail License Agreement, a smaller proportion of the royalties must be so spent and the remainder of the royalties will be credited or paid to the Company.

In addition, the Retail License Agreement grants FreshRealm a right of first refusal to obtain rights with respect to (i) new names, trademarks, or other branding assets for use in connection with Retail Products or (ii) sale of Retail Products in territories outside of the United States.             

The initial term of the Retail License Agreement is 10 years and will automatically renew for additional 2 year periods unless terminated by either party in accordance with such party’s termination rights.

The Company determined that the royalties relate to the ongoing future relationship with FreshRealm and is not consideration for the sale of the Disposal Group. As such, the Company did not record any amounts related to the royalties for the three and nine months ended September 30, 2023 as no Retail Products were sold in the period.

4. Inventories, Net
Inventories, net consist of the following:
September 30,
2023
December 31,
2022
(In thousands)
Fulfillment$11 $2,315 
Product1,747 22,708 
Inventories, net$1,758 $25,023 
Product inventory primarily consists of bulk and prepped food, containers, pre-made meals, 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.
Following the completion of the FreshRealm Transaction, on the Closing Date, the Company sold and transferred all of its product and fulfillment inventory related to its meal kits to FreshRealm.
5. Seller Note Receivable, Net
As part of the consideration for the FreshRealm Transaction, on the Closing Date, and as a security for certain of Blue Apron’s indemnification obligations under the Asset Purchase Agreement, the Company and FreshRealm entered into a promissory note in the amount of $3.5 million (the “Seller Note”). Under the Seller Note, FreshRealm is entitled to set-off any indemnifiable losses pursuant to indemnification claims under the Asset Purchase Agreement against its payment obligations under the Seller Note, which will mature and become payable to the Company on June 9, 2024. The Seller Note has an interest rate of 1.5% per annum, accruing as of the Closing Date.
As the Seller Note has a stated interest rate that is not a market interest rate, the Company discounted the Seller Note to reflect the fair value market rate as of the Closing Date. Based on a market rate of 13.42% consisting of an 8.25% prime rate and a 5.17% risk-free rate per the U.S. Treasury, the Company determined the present value of the Seller Note face amount to be $3.1 million on the Closing Date. The Company is accreting the $0.4 million discount over the one-year life of the Seller Note using the effective interest rate method. As of September 30, 2023, the unaccreted discount was $0.3 million.
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6. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
September 30,
2023
December 31,
2022
(In thousands)
Prepaid insurance$5,056 $8,241 
Other current assets11,915 9,416 
Prepaid expenses and other current assets$16,971 $17,657 
7. Restricted Cash
Restricted cash reflects pledged cash deposited into savings accounts that is used as security primarily for fulfillment centers and office space leases.
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:
September 30,
2023
December 31,
2022
(in thousands)
Cash and cash equivalents$27,232 $33,476 
Restricted cash included in Prepaid expenses and other current assets 111 
Restricted cash included in Other noncurrent assets1,141 1,069 
Total cash, cash equivalents, and restricted cash$28,373 $34,656 
September 30,
2022
December 31,
2021
(in thousands)
Cash and cash equivalents$30,977 $82,160 
Restricted cash included in Prepaid expenses and other current assets369 608 
Restricted cash included in Other noncurrent assets1,069 829 
Total cash, cash equivalents, and restricted cash$32,415 $83,597 
8. Leases
The Company leases fulfillment centers and office space under non‑cancelable operating lease arrangements that expire on various dates through 2027. These arrangements require the Company to pay certain operating expenses, such as taxes, repairs, and insurance, and contain renewal and escalation clauses. While certain leases contain renewal options, the Company has determined that its options to renew would not be reasonably certain in determining the expected lease terms, and therefore are not included as part of its right-of-use assets and lease liabilities. On the Closing Date, the Company entered into the Sublease Agreements with FreshRealm to sublease the Facilities to FreshRealm. Refer to Note 3 for additional information related to the Facilities. The Company has also entered into agreements to sublease its other fulfillment centers.
The following table summarizes the weighted-average remaining lease terms and weighted average discount rates:
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September 30,
2023
December 31,
2022
Weighted average remaining lease term:
Operating leases2.90 years3.55 years
Finance leases0.00 years4.61 years
Weighted average discount rate:
Operating leases16.21 %16.20 %
Finance leases %16.23 %
Lease cost consists of the following:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Operating lease cost$3,185$3,255$9,628$9,836
Finance lease cost:
Amortization of right-of-use assets$56$
Interest on lease liabilities5$33$6
Total lease cost
Sublease income(2,775)(920)$(4,516)$(3,055)
Net lease cost$410$2,340$5,201$6,787
The following table presents the lease-related assets and liabilities recorded on the Consolidated Balance Sheets:
September 30,
2023
December 31,
2022
(In thousands)
Operating leases:
Operating lease right-of use assets$26,577$32,340
Operating lease right-of use liabilities, current$9,689$8,650
Operating lease right-of use liabilities, non-current$16,608$23,699
Finance leases:
Property and equipment, net$$260
Accrued expenses and other current liabilities$$45
Other noncurrent liabilities$$225
Supplemental cash flow information and non-cash activity related to our operating leases are as follows:
Nine Months Ended
September 30,
20232022
(In thousands)
Operating cash flow information:
Cash paid for amounts included in the measurement of lease liabilities$9,920$9,796
Non-cash activity:
Right-of-use assets obtained in exchange for lease obligations$574$39,405
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9. Property and Equipment, Net
Property and equipment, net consists of the following:
September 30,
2023
December 31,
2022
(in thousands)
Computer equipment$6,330 $12,308 
Capitalized software28,332 28,831 
Fulfillment equipment54 51,639 
Furniture and fixtures450 2,757 
Leasehold improvements6,699 113,703 
Construction in process(1)
2,868 2,466 
Property and equipment, gross44,733 211,704 
Less: accumulated depreciation and amortization(39,110)(154,518)
Property and equipment, net$5,623 $57,186 
________________________
(1)Construction in process includes all costs capitalized related to projects that have not yet been placed in service.
Following the completion of the FreshRealm Transaction, on the Closing Date, the Company sold and transferred property and equipment related to the P&F Business to FreshRealm. See Note 3 for additional information.
In June 2023, the Company recorded an impairment loss of $1.7 million primarily related to abandoned internal-use capitalized software related to the P&F Business. See Note 3 for additional information.
10. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following:
September 30,
2023
December 31,
2022
(in thousands)
Accrued compensation$5,553 $9,653 
Accrued credits and refunds reserve1,120 1,053 
Accrued marketing expenses2,940 3,968 
Accrued shipping expenses44 2,132 
Accrued workers' compensation reserve2,944 4,260 
Other current liabilities8,467 6,011 
Accrued expenses and other current liabilities$21,068 $27,077 
11. Deferred Revenue
Deferred revenue consists of the following:
September 30,
2023
December 31,
2022
(in thousands)
Cash received prior to fulfillment$5,265 $4,940 
Gift cards, prepaid orders, and other12,777 14,143 
Deferred revenue$18,042 $19,083 
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 Sheets, and are recognized as revenue upon transfer of control of its products, and (ii) unredeemed
23

gift cards and other prepaid orders, which are included in Deferred revenue on the Consolidated Balance Sheets, and are recognized as revenue when gift cards are redeemed and the products are delivered. Certain gift cards are 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 $18.0 million and $19.1 million as of September 30, 2023 and December 31, 2022, respectively. During the nine months ended September 30, 2023, the Company recognized $6.8 million to Net revenue from the Deferred revenue as of December 31, 2022.
See Note 16 for further information regarding the March Sponsorship Gift Cards (as defined below) and May Sponsorship Gift Cards (as defined below).
12. Debt
2020 Term Loan and Amendment
On October 16, 2020, the Company entered into a financing agreement which provided for a senior secured term loan in the aggregate principal amount of $35.0 million (the “2020 Term Loan”). On May 5, 2021, the Company amended the financing agreement (the “May 2021 Amendment”), which modified certain provisions of the financing agreement. The 2020 Term Loan bore interest at a rate equal to LIBOR (subject to a 1.50% floor) plus 9.00% per annum, with the principal amount repayable in equal quarterly installments of $875,000 through December 31, 2022, and the remaining unpaid principal amount of the 2020 Term Loan due on March 31, 2023. The 2020 Term Loan was repaid in full on May 5, 2022 with the proceeds of the senior secured notes issued under the note purchase agreement described below.
Senior Secured Notes and March 2023 Extinguishment
On May 5, 2022 (the “issue date”), the Company entered into a note purchase and guarantee agreement (the “note purchase agreement”), which provided for, among other things, the issuance of $30.0 million in aggregate principal amount of senior secured notes due May 5, 2027 (the “senior secured notes”) at a purchase price equal to 94.00% thereof. The proceeds of the senior secured notes were used, together with cash on hand, to repay in full the outstanding amount under the 2020 Term Loan and pay fees and expenses in connection with the transactions contemplated by the note purchase agreement. The Company subsequently terminated its financing agreement, effective as of the issue date, which also resulted in the termination of the Blue Torch warrant obligation. See Note 18 for further discussion of the Blue Torch warrant obligation.
Note Purchase Agreement Amendment
On March 15, 2023, the Company entered into the note purchase agreement amendment which, among other things, accelerated the repayment of the senior secured notes due originally in May 2027 to an effective maturity of June 2023. The Company agreed to pay the full outstanding principal balance on the senior secured notes in four equal amortization installments of $7.5 million, with the first installment paid in connection with the signing of the note purchase agreement amendment, and with the final installment due on June 15, 2023, including any accrued and unpaid interest. Under the note purchase agreement amendment, the noteholder also agreed to reduce the minimum liquidity covenant amount, which was previously set at $25.0 million, to $17.5 million following the first amortization payment, and to $10.0 million following the first and second amortization payments, until the senior secured notes were repaid in full. Furthermore, conditioned upon the timely payment of all the amortization payments, the noteholder agreed to waive all prepayment premiums and a fee equal to 1.00% of the principal amount of the senior secured notes if the Company had failed to use commercially reasonable efforts to cause 90% of packaging for its meal kit boxes to be recyclable, reusable or compostable that would otherwise have been owed by the Company at maturity in May 2027. On June 9, 2023, the Company repaid its senior secured notes in full.
Note Purchase Agreement Amendment Debt Extinguishment
The Company evaluated the note purchase agreement amendment under ASC 470-50 regarding the modification of an existing debt instrument, 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 net carrying value of the existing debt derecognized and the amended debt instrument then initially recorded at fair value. The Company concluded that the modification was considered substantial and thus recorded a $1.9 million extinguishment loss for the nine months ended September 30, 2023 in the Consolidated Statement of Operations.
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Senior Secured Notes Terms and Covenants
After receiving a minimum specified bond rating after the issue date, as specified within the terms of the note purchase agreement, the senior secured notes bore interest at a rate equal to 8.875% per annum, which, prior to the note purchase agreement amendment, were payable in arrears on June 30 and December 31 of each calendar year. Prior to the note purchase agreement amendment, the senior secured notes amortized semi-annually in equal installments of $1.5 million beginning on December 31, 2025, with the remaining unpaid principal amount of the senior secured notes due on May 5, 2027.
The Company amortized deferred financing costs using the effective interest method over the life of the debt, in accordance with ASC 835-30, Imputation of Interest. The following table summarizes the presentation of the Company’s debt balances in the Consolidated Balance Sheets as of the date indicated below:
Senior secured notesDebt issuance costs, netNet
(In thousands)
December 31, 2022
Current portion of long-term debt$30,000 $(2,488)$27,512 
Long-term debt   
Total$30,000 $(2,488)$27,512 
13. Commitments and Contingencies

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 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.

Richmond, California Class Actions

The Company is a party to a class action lawsuit entitled Stevie A. Hayes v. Blue Apron, LLC (“Hayes”), that was filed in the California Superior Court in Contra Costa County under the California wage and hour laws on behalf of certain non-exempt employees in the Company's former Richmond, California fulfillment center. The Hayes class action complaint was filed on June 21, 2023, and alleges that during the time the Company operated the Richmond, California fulfillment center, the Company failed to pay minimum wages and overtime, provide required meal and rest breaks, provide wages due upon separation from employment, provide accurate wage statements, to non-exempt employees in violation of California law. On September 11, 2023, Hayes filed an additional Private Attorneys General Act complaint seeking damages under California Labor Code section 2699, et seq., for identical allegations made in the Hayes class action complaint. On July 27, 2023, the Company removed the Hayes class action complaint from the Contra Costa County state court to federal court in the Northern District of California based on the Class Action Fairness Act (“CAFA”). On August 11, 2023, Hayes filed a Motion for Remand, which the Company opposed. The Company is awaiting for the court to rule on the remand.

The Company is also a party to a second class action lawsuit entitled Cortez Mitchell v. Blue Apron, LLC (“Mitchell”), that was filed in the California Superior Court in Contra Costa County under the California wage and hour laws on behalf of certain non-exempt employees that worked for the Company and directly or indirectly for staffing agencies in the Company’s former Richmond, California fulfillment center. The Mitchell class action complaint was filed on August 25, 2023, and alleges nearly identical claims as the Hayes class action complaint for failure to pay minimum wages and overtime, provide required meal and rest breaks, provide wages due upon separation from employment, and failure to provide accurate wage statements, to non-exempt employees in violation of California law. In addition, the Mitchell class action complaint alleges a new cause of action for a failure to reimburse certain necessary business expenses. On September 15, 2023, Mitchell filed an additional Private Attorneys General Act complaint seeking damages under California Labor Code section 2699, et seq., for similar allegations made in the Mitchell class action complaint along with additional claims including but not limited to violations of sick leave, failure to pay vested vacation or paid time off, failure to provide a safe and healthful workplace, and unlawful agreements of criminal history inquiries. On October 6, 2023, the Company removed the Mitchell case from the Contra Costa County state court to federal court in the Northern District of California based on CAFA. Mitchell failed to file a Motion for Remand by the deadline of November 6, 2023 and, as a result, the Mitchell case will remain in federal court.
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The Company is in the preliminary stages of reviewing the allegations made in the Hayes and Mitchell class action complaints and believes that it has strong defenses and intends to vigorously defend against these lawsuits. As a result, the Company is currently unable to provide any assurances as to the ultimate outcome of these lawsuits or that an adverse resolution of these lawsuits would not have a material adverse effect on the Company's consolidated financial position or results of operations.

Legal Proceedings Related to the Merger

Additionally, on October 19, 2023, Damir Khamidullin, a purported stockholder of the Company, filed a complaint with the United States District Court for the Southern District of New York, captioned Damir Khamidullin vs. Blue Apron Holdings, Inc., Jennifer Carr-Smith, Beverly K. Carmichael, Linda Findley, Brenda Freeman, Elizabeth Huebner, and Amit Shah, Case No. 1:23-cv-09213 (the “Khamidullin complaint”). On October 24, 2023, Steven Weiss, a purported stockholder of the Company, filed a complaint with the United States District Court for the District of Delaware, captioned Steven Weiss v. Blue Apron Holdings, Inc., Jennifer Carr-Smith, Beverly K. Carmichael, Linda Findley, Brenda Freeman, Elizabeth Huebner, and Amit Shah, Case No. 1:23-cv-01208-UNA (the “Weiss complaint”). On October 25, 2023, Patrick Plumley, a purported stockholder of the Company, filed a complaint with the United States District Court for the District of Delaware, captioned Patrick Plumley v. Blue Apron Holdings, Inc., Jennifer Carr-Smith, Beverly K. Carmichael, Linda Findley, Brenda Freeman, Elizabeth Huebner, and Amit Shah, Case No. 1:23-cv-01214-UNA (the “Plumley complaint” and collectively with the Khamidullin complaint and the Weiss complaint, the “complaints”).

The complaints name as defendants the Company and each member of the board of directors. The complaints allege, among other things, that the defendants violated Sections 14(d), 14(e), and 20(a) of the Exchange Act and Rule 14d-9 promulgated thereunder by omitting and/or misrepresenting material facts related to the transaction from the Schedule 14D-9. The complaints seek, among other relief, (i) injunctive relief preventing the consummation of the Merger, (ii) recission of the Merger Agreement or rescissory damages, (iii) other damages purportedly incurred on account of the alleged omissions or misstatements, and (iv) an award of plaintiff’s costs and disbursements of the action, including attorneys’ and expert fees and expenses. In addition, the Plumley complaint seeks a declaration that the defendants violated Section 14(a) and/or 20(a) of the Exchange Act.

The Company also received (a) one demand letter on October 17, 2023, sent on behalf of Matthew Whitfield (the “Whitfield demand”), a purported stockholder of the Company; (b) one demand letter on October 18, 2023, sent on behalf of Richard Dabney (the “Dabney demand”), a purported stockholder of the Company; (c) two demand letters on October 19, 2023 sent on behalf of Jason Walton (the “Walton demand”) and Peter Salib (the “Salib demand”), respectively, and each a purported stockholder of the Company; (d) three demand letters on October 20, 2023 sent on behalf of Jorg Raue (the “Raue demand”), Scott Goley (the “Goley demand”) and Brad Nwosu (the “Nwosu demand”), respectively, and each a purported stockholder of the Company; (e) one demand letter on October 24, 2023 sent on behalf of Rita Brodt (the “Brodt demand”), a purported stockholder of the Company; (f) two demand letters on October 25, 2023 sent on behalf of Jordan Wilson (the “Wilson demand”) and Jordan Rosenblatt (the “Rosenblatt Demand”), respectively, and each a purported stockholder of the Company; (g) two demand letters on October 26, 2023 sent on behalf of Alfred Yarkony (the “Yarkony demand”) and Eric Sabatini (the “Sabatini demand”), respectively, and each a purported stockholder of the Company and (h) one demand letter on October 27, 2023 sent on behalf of Miriam Nathan (the “Nathan demand”), a purported stockholder of the Company. Each of the Whitfield demand, the Dabney demand, the Walton demand, the Salib demand, the Raue demand, the Goley demand, the Nwosu demand, the Brodt demand, the Wilson demand, the Rosenblatt demand, the Yarkony demand, the Sabatini demand and the Nathan demand alleges omissions of material information with respect to the transaction from the Schedule 14D-9 filed by the Company and demands that the Company promptly provide stockholders with additional disclosure. In addition, each of the Salib demand and Nathan demand includes a draft complaint, which contains allegations and requests for relief substantially consistent with those set forth in the complaints, and states an intention to file such complaint.

The Company also received one letter on October 26, 2023, sent on behalf of Richard Birnbaum (the “220 demand”), a purported stockholder of the Company, seeking to inspect certain books and records of the Company related to the Merger and related matters pursuant to Section 220 of the DGCL (and the aforementioned demands are collectively referred to herein as, the “demands”). The Company responded to the 220 demand on November 3, 2023. On November 8, 2023, Mr. Birnbaum filed a Section 220 action in the Court of Chancery of the State of Delaware, captioned Birnbaum v. Blue Apron Holdings, Inc., C.A. 2023-1132, together with a letter to the Court indicating that Mr. Birnbaum filed the action to preserve standing and does not seek to schedule proceedings at this time.
26


The outcome of the matters described above cannot be predicted with certainty. However, the Company believes that the allegations in the complaints and the demands are without merit. Additional demands may be made or complaints may be filed against the Company, the board of directors, Wonder and/or Purchaser in connection with the transactions contemplated by the Merger Agreement, the Schedule TO, together with the exhibits thereto, as it or they may be amended or supplemented from time to time, filed jointly by Wonder and Purchaser with the SEC on October 13, 2023, and the Schedule 14D-9. If such additional demands are made or complaints are filed, absent new or different allegations that are material, the Company, Parent and/or Purchaser will not necessarily announce such additional demands or complaints. As a result, the Company is currently unable to provide any assurances as to the ultimate outcome of the foregoing legal proceedings or that an adverse resolution of the legal proceedings would not have a material adverse effect on the Company's consolidated financial position or results of operations.

In addition, from time to time the Company may become involved in other 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 there are no ordinary course matters that will have a material adverse effect on its business, operating results, financial conditions, or cash flows. Regardless of the outcome, any such litigation and claims may have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
14. Stockholders’ Equity (Deficit)
Public Equity Offerings
During the nine months ended September 30, 2023, the Company issued and sold 1,935,955 shares of its Class A Common Stock via “at-the-market” equity offerings, resulting in $20.1 million of proceeds, net of commissions and offering costs. The Company did not issue and sell any shares of its Class A Common Stock via "at-the-market" equity offerings during the three months ended September 30, 2023.
RJB Private Placements
February 2022 Private Placement
On February 14, 2022, the Company entered into a purchase agreement with RJB Partners LLC (“RJB”), an affiliate of Joseph N. Sanberg, an existing stockholder of the Company, under which the Company agreed to issue and sell to RJB units consisting of Class A Common Stock and warrants to purchase shares of Class A Common Stock in a private placement (the “February 2022 Private Placement”) which closed concurrently with the execution of the purchase agreement for an aggregate purchase price of $5.0 million (or $168.00 per unit). In the aggregate, RJB received (i) 29,762 shares of Class A Common Stock, and (ii) warrants to purchase 41,667 shares of Class A Common Stock at exercise prices of $180.00 per share, $216.00 per share, and $240.00 per share, resulting in $4.8 million of proceeds, net of issuance costs.
The shares of Class A Common Stock and warrants were issued separately and constitute separate securities. The Company conducted an assessment of the classification of the warrants issued in the February 2022 Private Placement and, based on their terms, concluded the warrants were equity-classified. Accordingly, the net proceeds were recorded within Additional paid-in capital.
RJB Purchase Agreement
On April 29, 2022, the Company entered into a purchase agreement with RJB (the “RJB Purchase Agreement”). Under the agreement, the Company agreed to issue and sell 277,778 shares of Class A Common Stock for an aggregate purchase price of $40.0 million (or $144.00 per share), of which 138,889 shares of Class A Common Stock were issued and sold to an affiliate of Joseph N. Sanberg for an aggregate purchase price of $20.0 million concurrently with the execution of the agreement, and with the remainder to be issued and sold under a second closing (the "RJB Second Closing"), initially expected to close by May 30, 2022 or such other date as agreed to by the parties.
On August 7, 2022, the Company amended the RJB Purchase Agreement, pursuant to which RJB agreed to purchase from the Company at the RJB Second Closing (i) the 138,889 shares of Class A Common Stock remaining to be issued and sold under the initial RJB Purchase Agreement at a $60.00 price per share, instead of a price of $144.00 per share, and (ii) an additional 694,444 shares of Class A Common Stock at a price of $60.00 per share. Upon execution of the amendment, the RJB Second Closing comprised in the aggregate a purchase price of $50.0 million and 833,333 shares of Class A Common Stock to be issued and sold, as well as agreeing to extend the date of the second closing to on or before
27

August 31, 2022. In addition, pursuant to the amendment, Joseph N. Sanberg agreed to personally guarantee the payment of the aggregate purchase price.
On September 7, 2022, the Company further amended the RJB Purchase Agreement to extend the RJB Second Closing date to September 30, 2022 or such earlier date as may be agreed to by the Company and RJB, and to change the price per share to $67.80 for the purchase of the 833,333 shares of Class A Common Stock remaining to be sold and issued, for an aggregate purchase price of $56.5 million.
On November 6, 2022, the Company entered into an agreement with an affiliate of Joseph N. Sanberg, pursuant to which the affiliate (i) guaranteed the remaining amount to be funded under the RJB Second Closing and (ii) to secure its obligation to pay the remaining amount to be funded under the RJB Second Closing, granted the Company security interests of certain privately-held issuers, the certificates (if any) representing the Pledged Shares, and all dividends, distributions, cash, instruments and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares.
On December 14, 2022, an affiliate of Sanberg funded $1.0 million under the RJB Purchase Agreement, in exchange for which the Company issued and sold 14,749 shares of its Class A Common Stock, resulting in $0.6 million of proceeds, net of issuance costs. As of the date of this Quarterly Report on Form 10-Q, the remaining $55.5 million of the RJB Purchase Agreement remains unfunded. As such, the Company is permitted to exercise remedies in respect to the Pledged Shares, including foreclosing on the Pledged Shares.
Warrant Terms
Each equity-classified warrant issued by the Company has a term of seven years from the date of issuance. Each such warrant may only be exercised for cash, except in connection with certain fundamental transactions, and no fractional shares will be issued upon exercise of the warrants. The warrants are non-transferable, except in limited circumstances, and have not been and will not be listed or otherwise trade on any stock exchange. The number of shares issuable upon exercise of the warrants and the applicable exercise prices is subject to adjustment upon the occurrence of certain events. See Note 3 for additional information related to the Supplier Warrant.
As of September 30, 2023, the equity-classified warrants issued by the Company were as follows:
Exercise PriceIssuedExercisedOutstanding as of September 30, 2023
$0.01 1,268,5741,268,574
$180.00 543,810543,810
$216.00 271,905271,905
$240.00 135,952135,952
15. Share-based Compensation
The Company recognized share-based compensation for share-based awards in Cost of goods sold, excluding depreciation and amortization, and Product, technology, general and administrative expenses as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)(In thousands)
Cost of goods sold, excluding depreciation and amortization$ $ $ $2 
Product, technology, general and administrative815 1,507 3,061 5,382 
Total share-based compensation$815 $1,507 $3,061 $5,384 
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16. 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 as of the closing dates of the transactions discussed below, Joseph N. Sanberg and his affiliates met the definition of “related parties” per ASC 850, Related Party Disclosures.
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 previous growth strategy.
On May 5, 2022, the Company entered into an additional gift card sponsorship agreement with an affiliate of Joseph N. Sanberg (the “Sponsorship Gift Cards Agreement”), 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 (the “May Sponsorship Gift Cards”), at its sole discretion, in order to support its previous 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 its due date to September 19, 2022. As of the date of this Quarterly Report on Form 10-Q, the Sanberg affiliate has paid $5.8 million of its commitment under said agreement, with $12.7 million remaining to be paid.
Sustainability and Carbon Credit Agreement
On March 31, 2022, the Company entered into an 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 Scope 1, Scope 2, and Scope 3 emissions based upon its 2021 annual carbon footprint, for a purchase price of $6.0 million, which was to be paid in twenty-four equal monthly installments beginning on July 31, 2022.
On February 2, 2023, the Company and the affiliate terminated the Sustainability Agreement, which released the Company of its remaining payment obligation of $5.5 million. Under the terms of the termination agreement, the Company retained a number of carbon credits purchased for $0.5 million and paid to the Sanberg affiliate as of December 31, 2022. Such retained carbon credits are expected to offset the Company's estimated 2023 and 2024 Scope 1 and Scope 2 emissions. During the nine months ended September 30, 2023, the Company retired $0.2 million of carbon offsets, which were recognized in Product, technology, general and administrative expenses.
29

RJB Private Placements
See Note 14 for information regarding the February 2022 Private Placement and the RJB Purchase Agreement.
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
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)(In thousands)
Net revenue:
Feeding America bulk sale
$ $ $ $10,000 
March Sponsorship Gift Cards
$26 $2,563 $238 $3,046 
Cost of goods sold, excluding depreciation and amortization$17 $1,726 $153 $7,194 
Product, technology, general and administrative$ $ $208 $3,000 
17. Earnings per Share
Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period.
Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted-average number of common shares, including potential dilutive common shares assuming the dilutive effect of outstanding common stock options, restricted stock units, and warrants. For periods in which the Company has reported net loss, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, because dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Class AClass AClass AClass A
(In thousands, except share and per-share data)
Numerator: 
Net income (loss) attributable to common stockholders$(10,289)$(25,949)$(89,255)$(87,949)
Denominator:  
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—basic7,671,3952,904,4286,579,2472,812,318
Weighted-average shares used to compute net income (loss) per share attributable to common stockholders—diluted7,671,3952,904,4286,579,2472,812,318
Net income (loss) per share attributable to common stockholders—basic (1)
$(1.34)$(8.93)$(13.57)$(31.27)
Net income (loss) per share attributable to common stockholders—diluted (1)
$(1.34)$(8.93)$(13.57)$(31.27)
________________________
(1)Net income (loss) per share attributable to common stockholders — basic and net income (loss) per share attributable to common stockholders — diluted may not recalculate due to rounding.
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The following have been excluded from the computation of diluted net income (loss) per share attributable to common stockholders as their effect would have been antidilutive:
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Class AClass AClass AClass A
Stock options1,9152,5171,9912,742
Restricted stock units268,141195,471264,958198,233
Warrants951,667951,667951,667950,676
Total anti-dilutive securities1,221,7231,149,6551,218,6161,151,651
18. Fair Value Measurements
The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs are developed using market data, such as publicly available information about actual events or transactions, and reflect the assumptions that market participants would use when pricing the asset or liability. Unobservable inputs are inputs for which market data is not available and that are developed using the best information available about the assumptions that market participants would use when pricing the asset or liability.
The fair value hierarchy consists of the following three levels:
Level 1 — Quoted market prices in active markets for identical assets or liabilities.
Level 2 — Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3 — Unobservable inputs reflecting the reporting entity’s own assumptions or external inputs from inactive markets.
The Company uses observable market data when available, and minimizes the use of unobservable inputs when determining fair value. The Company did not measure any assets or liabilities at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.
Non-Financial Assets
Certain non-financial assets, such as long-lived assets, are only recorded at fair value if an impairment loss is recognized. Impairment losses recognized as of September 30, 2023 and December 31, 2022 were $1.7 million and $0.0 million, respectively. The following table presents non-financial assets that were measured and recorded at fair value on a non-recurring basis and the total impairment losses recorded on those assets. Non-recurring fair value measurements for the period ended September 30, 2023, included the following:
Nine Months Ended September 30, 2023
Carrying value before impairmentFair value
(Level 3)
Impairment Loss
Non-financial assets (in thousands)
Long-lived assets$1,662$$1,662
See Note 3 and Note 9 for further discussion on the long-lived assets impairment losses.
Warrant Obligation
In connection with the May 2021 Amendment as discussed in Note 12, the Company agreed to prospectively grant warrants (the “Blue Torch warrant obligation”) to the lenders, so long as the 2020 Term Loan remained outstanding. The Blue Torch 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 (Level 3 within the fair value hierarchy), and was remeasured as of each balance sheet date with changes in fair value recorded in Other income (expense), net in the Consolidated Statements of Operations. The
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amount of each warrant to be issued under the obligation set forth in the financing agreement was based upon 0.50% of the then-outstanding shares of the Company’s Class A Common Stock on a fully-diluted basis on the first day of each quarter, beginning on July 1, 2021, so long as the 2020 Term Loan remained outstanding. As such, the fair value of the Blue Torch warrant obligation was calculated using the estimated amount of warrants to be issued over the life of the financing agreement multiplied by the price of the Company’s Class A Common Stock as of the closing date of the May 2021 Amendment, less $0.01 per share to represent each warrant’s exercise price. The estimated amount of shares to be issued was derived from the Company’s estimate of shares of the Company’s Class A Common Stock on a fully-diluted basis over the life of the financing agreement.
On May 5, 2022, the Company fully repaid the 2020 Term Loan with the proceeds of its senior secured notes and cash on hand and terminated its financing agreement effective as of the same date, which also resulted in the termination of the warrant obligation. As of May 5, 2022, all warrants that had been issued under the Blue Torch warrant obligation had been exercised in full, resulting in no liability-classified warrants outstanding.
The following table summarizes the changes of the Blue Torch warrant obligation as of September 30, 2022 and December 31, 2021:
Balance as of December 31, 2021
Loss (gain) on
changes in stock
price
Loss (gain) on changes in estimated
common stock on a fully-diluted basis
Exercise of warrantsDerecognitionBalance as of September 30, 2022
(In thousands)
Warrant obligation$9,589 $(1,971)$153 $(5,050)$(2,721)$ 

19. Restructuring Costs

In December 2022, the Company implemented a reduction in corporate personnel to better align internal resources with strategic priorities, which resulted in a reduction of approximately 10% of the Company’s total corporate workforce, inclusive of both current and vacant roles. As a result, during the three months ended December 31, 2022, the Company recorded $1.5 million in employee-related expenses in Other operating expense, primarily consisting of severance payments, substantially all of which resulted in cash expenditures in the first half of 2023.
In June 2023, the Company announced the planned departure of Irina Krechmer, the Company's former Chief Technology Officer. The board of directors approved a severance package for Ms. Krechmer on June 9, 2023. As a result, during the nine months ended September 30, 2023, the Company recorded $0.4 million in employee related expenses in Other operating expense, primarily consisting of severance payments, substantially all of which will result in cash expenditures in the second half of 2023 and first quarter of 2024.
In July 2023, the Company further executed its planned reduction in corporate personnel, which was previously planned in conjunction with the closing of the FreshRealm Transaction. As the Company executes its asset-light model, it is further streamlining its business to better match its resources to this structure. This reduction in corporate personnel resulted in a reduction of approximately 20% of the Company’s total corporate workforce. As a result, the Company incurred approximately $1.7 million in employee-related expenses, primarily consisting of severance payments, substantially all of which will result in cash expenditures in the second half of 2023 and first quarter of 2024.
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Employee-Related Costs
(in thousands)
Balance - December 31, 2022$1,295 
Cash payments(911)
Balance - March 31, 2023$384 
Charges408 
Cash payments(307)
Other(69)
Balance - June 30, 2023$416 
Charges1,693 
Cash payments(493)
Balance - September 30, 2023$1,616 

20. Subsequent Events

In October 2023, the Company announced its decision to wind down Blue Apron Wine, which the Company expects to complete in the fourth quarter of 2023. The wind down of Blue Apron Wine is not expected to have a material impact on the Company’s Consolidated Financial Statements.








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Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is meant to provide material information relevant to an assessment of the financial condition and results of operations of our company, including an evaluation of the amounts and certainty of cash flows from operations and from outside resources, so as to allow investors to better view our company from management’s perspective. You should read the following discussion of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on March 16, 2023. The following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in the section titled “Risk Factors” under Part II, Item 1A, below. In this discussion, we use certain financial measures that are considered non-GAAP financial measures under Securities and Exchange Commission rules. These rules require supplemental explanation and reconciliation, which is included elsewhere in this Quarterly Report on Form 10-Q. Investors should not consider non-GAAP financial measures in isolation from or in substitution for financial information presented in compliance with U.S. generally accepted accounting principles (“GAAP”). In the below discussion, we use the term basis points to refer to units of one-hundredth of one percent.
Unless otherwise indicated, all information in this Quarterly Report on Form 10-Q gives effect to a 1-for-12 reverse stock split of our Class A common stock that became effective on June 7, 2023, and all references to historical share and per share amounts give effect to the reverse stock split.
Overview
Blue Apron’s vision is Better Living Through Better Food™. Founded in 2012, we are on a mission to spark discovery, connection, and joy through cooking. We offer fresh, chef-designed recipes that empower our customers to embrace their culinary curiosity and challenge their abilities to see what a difference cooking quality food can make in their lives.
Our core product is the meal experience we help our customers create. These experiences extend from discovering new recipes, ingredients, and cooking techniques to preparing meals with families and loved ones to sharing photos and stories of culinary triumphs. Central to these experiences are the original recipes we design with fresh, seasonally-inspired produce and high-quality ingredients sent to our customers.
Central to our operations, we have developed an integrated network that employs technology and expertise across many disciplines. Our supply-demand coordination activities – demand planning, recipe creation, procurement, recipe merchandising, customer service, and marketing – drive our end-to-end value chain.
We currently offer our customers four weekly meal plans—a Two-Serving Signature Plan, a Two-Serving Vegetarian Plan, a Two-Serving Wellness Plan, and a Four-Serving Signature Plan. In addition, each week, customers can add unlimited Add-ons recipes to each order, which includes breakfast, appetizers, side dishes, desserts, à la carte proteins, and/or Heat & Eat meals, which are microwaveable meals that are ready in minutes.
Historically, we also sold wine, through Blue Apron Wine, our direct-to-consumer wine delivery service (“Blue Apron Wine”). In October 2023, the Company announced its decision to wind down Blue Apron Wine, which the Company expects to complete in the fourth quarter of 2023. Through Blue Apron Market, our e-commerce market, we sell a curated selection of cooking tools, utensils, pantry items, and add-on products for different culinary occasions, which are tested in our test kitchen and recommended by our culinary team. Our products are available to purchase through our website, mobile app, and beginning in the second quarter of 2022, third-party sales platforms for our meal kit products.

Reverse Stock Split

Following our 2023 Annual Meeting of Stockholders on June 7, 2023, our board of directors (the “board of directors”) determined to effect a reverse stock split at a ratio of 1-for-12 and, on June 7, 2023, we effected a reverse stock split (the “Reverse Stock Split”) of our outstanding shares of Class A common stock, par value $0.0001 per share (the “Class A Common Stock”) at a ratio of 1-for-12 pursuant to a Certificate of Amendment to our Restated Certificate of
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Incorporation, as amended, filed with the Secretary of State of the State of Delaware. The Reverse Stock Split was reflected on the NYSE, which was the exchange our Class A Common Stock was listed on at the time of the Reverse Stock Split, beginning with the opening of trading on June 8, 2023. Pursuant to the Reverse Stock Split, every 12 shares of our issued and outstanding Class A Common Stock were automatically converted into one issued and outstanding share of Class A Common Stock, without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders who would otherwise be entitled to a fractional share of Class A Common Stock were instead entitled to receive a cash payment in lieu of such fractional shares. The number of authorized shares of our Class A Common Stock under our Restated Certificate of Incorporation, as amended, remained unchanged at 1,500,000,000. The Reverse Stock Split affected all issued and outstanding shares of our Class A Common Stock, and the respective numbers of shares of Class A Common Stock underlying our outstanding stock options, outstanding restricted stock units, outstanding performance stock units, outstanding warrants and the Company’s equity incentive plans were proportionately adjusted.
Voluntary Transfer of Stock Listing to Nasdaq

On September 22, 2023, we voluntarily transferred our stock exchange listing to the Nasdaq Stock Market (“Nasdaq”) from the NYSE. Our Class A Common Stock began trading on Nasdaq on September 25, 2023.

Strategic Transactions
Pending Transaction with Wonder
On September 28, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Wonder Group, Inc., a Delaware corporation (“Wonder" or “Parent”), and Basil Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Parent (“Purchaser”). The Merger Agreement provides for our acquisition by Parent through a cash tender offer (the “Offer”) by Purchaser for all of our issued and outstanding shares of Class A Common Stock at a price of $13.00 per share of Common Stock, net to the stockholder in cash, without interest and less any applicable tax withholding (the “Offer Price”), which constitute all of the issued and outstanding Class A Common Stock, Class B common stock, par value $0.0001 per share, and Class C capital stock, par value per share $0.0001 (collectively, the “Common Stock”). Following the completion of the Offer, and subject to the terms and conditions of the Merger Agreement, Purchaser will merge with and into us (the “Merger”), with us surviving as a wholly-owned subsidiary of Parent, pursuant to the procedure provided for under Section 251(h) of the Delaware General Corporation Law (the “DGCL”), without any stockholder approvals. The Merger will be effected as soon as practicable following the time of acceptance for purchase by Purchaser of shares of Common Stock validly tendered (and not validly withdrawn) pursuant to the Offer (the “Acceptance Time”).
For additional information related to the Merger Agreement, refer to our Solicitation/Recommendation Statement on the Schedule 14D-9 filed by us on October 13, 2023 (as it may be further amended or supplemented from time to time, the “Schedule 14D-9”). Please also see “Item 1A. Risk Factors–- Risks Related to the Pending Transaction with Wonder” of this Quarterly Report on Form 10-Q.
FreshRealm Transaction
On June 9, 2023 (the “Closing Date”), we entered into definitive agreements with FreshRealm, Inc. (”FreshRealm”), pursuant to which, among other things, we sold our production and fulfillment operational infrastructure to FreshRealm, including, among other things, inventory equipment and related know-how, and transferred related personnel relating to our production and fulfillment operations (the “P&F Business”). Concurrently, we executed a 10-year production and fulfillment agreement (as amended from time to time, the “Production and Fulfillment Agreement”), pursuant to which FreshRealm became the exclusive supplier of our meal kits. We also subleased to FreshRealm our fulfillment facilities located in Linden, New Jersey and Richmond, California (the “Facilities” and such transactions, together with the related transactions contemplated thereby, the “FreshRealm Transaction”). On the Closing Date, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with FreshRealm, pursuant to which FreshRealm purchased certain of our assets relating to the P&F Business at the Facilities, including, among others, our meal kit inventory and consumable supplies, identified transferred contracts, furnishings and equipment at the Facilities, intellectual property, including certain know-how and the transfer of related personnel. We received an amount in cash equal to $28.5 million, less $3.5 million, which was paid to us in the form of a seller note (the “Seller Note”), less $1.4 million related to all vacation time, sick time and other paid time off accrued by certain personnel related to the P&F Business. We are eligible to receive up to an additional $4.0 million in cash consideration if we achieve certain financial and cost-savings milestones and are in compliance with the Transition Services Agreement (as defined above in Note 3 of the Consolidated Financial Statements), $3.0 million of which we expect to receive in the fourth quarter of 2023.
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Under the Production and Fulfillment Agreement, we are also eligible to earn up to $17.5 million of volume-based rebates based on the volume of purchases of certain products, including new product launches, above specified target thresholds, as well as the achievement of certain financial targets by us during the term of the Production and Fulfillment Agreement.

Our consolidated financial statements and the results of operations have not materially changed as a result of the FreshRealm Transaction as we continue to sell our products, with the only change being that FreshRealm is now the exclusive supplier of our products.
See Note 3 to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information about the Merger Agreement and FreshRealm Transaction.
Key Financial and Operating Metrics
We use the following key financial and operating metrics to evaluate our business and operations, measure our performance, identify trends affecting our business, project our future performance, and make strategic decisions. You should read the key financial and operating metrics in conjunction with the following discussion of our results of operations and financial condition together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(In thousands)
Net revenue$98,799$109,665$318,108$351,653
Net income (loss)$(10,289)$(25,949)$(89,255)$(87,949)
Adjusted EBITDA$(4,080)$(18,132)$(15,388)$(65,744)
Net cash from (used in) operating activities$(1,786)$(20,809)$(16,462)$(67,981)
Free cash flow$(2,760)$(22,807)$(19,668)$(72,964)
Three Months Ended
September 30,
2023
June 30,
2023
March 31,
2023
December 31,
2022
September 30,
2022
Orders (in thousands)
1,236 1,403 1,608 1,460 1,548 
Customers (in thousands)
238 267 326 298 323 
Average Order Value$79.66 $75.66 $70.27 $73.15 $70.83 
Orders per Customer5.2 5.3 4.9 4.9 4.8 
Average Revenue per Customer$413 $397 $346 $358 $340 
Orders
We define Orders as the number of paid orders by our Customers across our meal, wine, and market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms in any reporting period, inclusive of orders that may have eventually been refunded or credited to customers. Orders, together with Average Order Value, is an indicator of the net revenue we expect to recognize in a given period. We view Orders delivered as a key indicator of our scale and financial performance, however Orders has limitations as a financial and operating metric as it does not reflect the product mix chosen by our Customers or the purchasing behavior of our customers. Because of these and other limitations, we consider, and you should consider, Orders in conjunction with our other metrics, including net revenue, net income (loss), adjusted EBITDA, net cash from (used in) operating activities, free cash flow, Average Order Value, and Orders per Customer.
Customers
We determine our number of Customers by counting the total number of individual customers who have paid for at least one Order from Blue Apron across our meal, wine, or market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms in a given reporting period. For example, the
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number of Customers in the three months ended September 30, 2023 was determined based on the total number of individual customers who paid for at least one Order across our meal, wine, or market products in the quarter ended September 30, 2023, including sales made on third-party sales platforms. We view the number of Customers as a key indicator of our scale and financial performance, however Customers has limitations as a financial and operating metric as it does not reflect the product mix chosen by our customers, Order frequency, or the purchasing behavior of our Customers. Because of these and other limitations, we consider, and you should consider, Customers in conjunction with our other metrics, including net revenue, net income (loss), adjusted EBITDA, net cash from (used in) operating activities, free cash flow, Orders per Customer, and Average Revenue per Customer.
Average Order Value
We define Average Order Value as our net revenue from our meal, wine, and market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms, in a given reporting period divided by the number of Orders in that period. We view Average Order Value as a key indicator of the mix of our product offerings chosen by our customers, the mix of promotional discounts, and the purchasing behavior of our customers.
Orders per Customer
We define Orders per Customer as the number of Orders in a given reporting period divided by the number of Customers in that period. We view Orders per Customer as a key indicator of our customers’ purchasing patterns, including their repeat purchase behavior.
Average Revenue per Customer
We define Average Revenue per Customer as our net revenue from our meal, wine, and market products sold on our e-commerce platforms and, beginning in the second quarter of 2022, through third-party sales platforms in a given reporting period divided by the number of Customers in that period. We view Average Revenue per Customer as a key indicator of our customers’ purchasing patterns, including their repeat purchase behavior.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure defined by us as net income (loss) before interest income (expense), net, other operating expense, gain (loss) on extinguishment of debt, gain (loss) on transaction, other income (expense), net, benefit (provision) for income taxes, depreciation and amortization, and share-based compensation expense. We have presented adjusted EBITDA in this Quarterly Report on Form 10-Q because it is a key measure used by our management and board of directors to understand and evaluate our operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business. Accordingly, we believe that adjusted EBITDA provides useful information in understanding and evaluating our operating results. Please see “Non-GAAP Financial Measures” for a discussion of the use of non-GAAP financial measures and for a reconciliation of adjusted EBITDA to net income (loss), the most directly comparable measure calculated in accordance with GAAP.
Free Cash Flow
Free cash flow is a non-GAAP financial measure defined by us as net cash from (used in) operating activities less purchases of property and equipment. We have presented free cash flow in this Quarterly Report on Form 10-Q because it is used by our management and board of directors as an indicator of the amount of cash we generate or use and to evaluate our ability to satisfy current and future obligations and to fund future business opportunities. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our ability to satisfy our financial obligations and pursue business opportunities, and allowing for greater transparency with respect to a key financial metric used by our management in their financial and operational decision-making. Free cash flow is not a measure of cash available for discretionary expenditures since we have certain non-discretionary obligations such as debt repayments or finance lease obligations that are not deducted from the measure. Additionally, other companies, including companies in our industry, may calculate free cash flow differently, which reduces its usefulness as a comparative measure. Please see “Non-GAAP Financial Measures” for a discussion of the use of non-GAAP financial measures and for a reconciliation of free cash flow to net cash from (used in) operating activities, the most directly comparable measure calculated in accordance with GAAP.
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Components of Our Results of Operations
Net Revenue
We generate net revenue primarily from the sale of meals to customers through our Two‑Serving and Four-Serving Plans, as well as our Add-On, premium, customization, and other up-sell offerings. We also generate net revenue through sales of Blue Apron Wine, sales on Blue Apron Market, sales of meal kits on third-party sales platforms, and to a more limited extent, through enterprise bulk sales on an ad hoc basis. We generally derive substantially all of our net revenue from sales of our meal kit boxes through our direct-to-consumer platform. We deduct promotional discounts, actual customer credits and refunds as well as customer credits and refunds expected to be issued to determine net revenue. Customers who receive a damaged meal or wine order or are dissatisfied with a meal or wine order and contact us within seven days of receipt of the order may receive a full or partial refund, full or partial credit against future purchase, or replacement, at our sole discretion. Credits only remain available for customers who maintain a valid account with us. Customers who return an unused, undamaged Blue Apron Market product within 30 days of receipt receive a full refund.
Our business is seasonal in nature and, as a result, our revenue and expenses and associated revenue trends fluctuate from quarter to quarter. We anticipate that the first quarter of each year will generally represent our strongest quarter in terms of customer engagement. Conversely, during the summer months and the end of year holidays, when people are vacationing more often or have less predictable weekly routines, we generally anticipate lower customer engagement. However, seasonal trends may be masked and impacted by marketing investments. We also anticipate that our net revenue will be impacted by the execution of strategic priorities, including our ability to develop and execute product expansion initiatives, pricing updates, as well as the timing and extent of the sale and issuance of gift cards and the associated revenue upon the redemption of those gift cards, which generally occurs within one year of gift card issuance. Net revenue will also be impacted by gift card breakage revenue, which is our estimate of the portion of our gift card balance not expected to be redeemed. During 2022, we entered into various agreements and amendments to such agreements with related parties under which we ultimately agreed to issue $27.5 million (net of promotional discounts) of gift cards, which may result in higher levels of gift card breakage revenue and which may inflate net revenue or mask seasonal trends in future periods. As of the date of this Quarterly Report on Form 10-Q, $12.7 million of gift card proceeds from the related party have not been funded, and no gift cards have yet been issued against those amounts. See Note 16 to the accompanying consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.
In addition, our net revenue is impacted by our marketing strategies, including the timing and amount of paid advertising and promotional activity. As part of the execution of our strategic priorities, we significantly increased marketing expenses toward the end of the fourth quarter of 2021 and throughout most of 2022. However, in December 2022, we announced that we were focused on driving towards profitability in the future and have significantly reduced marketing expenses in 2023, which is expected to negatively impact customers and net revenue in 2023. Our ability to grow net revenue and increase marketing expenses in the future are dependent upon our ability to implement our operating plan on our planned timeline and the sufficiency of our cash resources.
Credit card charges are recorded in deferred revenue until the criteria for revenue recognition have been met. Because we generally charge credit cards in advance of shipment and, historically, customers have most frequently requested delivery of their meals earlier in the week, our deferred revenue balance at the end of a financial reporting period may fluctuate significantly based on the day of the week on which that period ends. Consequently, large changes in deferred revenue at any particular time are not meaningful indicators of our financial results or future net revenue trends.
Cost of Goods Sold, excluding Depreciation and Amortization
Cost of goods sold, excluding depreciation and amortization, consists of product and fulfillment costs. Product costs include the cost of food, packaging for food that is portioned prior to delivery to customers, labor and related personnel costs incurred to portion food for our meals, inbound shipping costs, and cost of products sold through Blue Apron Wine and Blue Apron Market. Fulfillment costs consist of costs incurred in the shipping and handling of inventory including the shipping costs to our customers, labor and related personnel costs related to receiving, inspecting, warehousing, picking inventory, and preparing customer orders for shipment, and the cost of packaging materials and shipping supplies. As noted above, our business is seasonal in nature and, as a result we anticipate that the third quarter of each year will generally reflect higher levels of cost of goods sold, excluding depreciation and amortization, due to higher packaging and shipping costs due to warmer temperatures.
As of June 9, 2023, the production and fulfillment of our meal-kits is exclusively supplied by FreshRealm. Pursuant to the Production and Fulfillment Agreement, until September 1, 2023, we paid FreshRealm a price for our meal kits equal to the actual cost to FreshRealm for the products and fulfillment services. Commencing on September 1, 2023,
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we began paying FreshRealm a price equal to the sum of (A) the Recipe Ingredient Cost; (B) the NPI Product Price; (C) the Fulfillment Cost; (D) the EOL Quarterly Surcharge; and (E) the FR Margin (each as defined in the Production and Fulfillment Agreement and such fee, the “FreshRealm Margin Fee”).
Over time, we expect such expenses to decrease as a percentage of net revenue as we realize the benefits we expect to receive from the FreshRealm Transaction, including from FreshRealm's economies of scale and, if earned, as we recognize the up to $17.5 million of volume-based rebates under the Product and Fulfillment Agreement, which are discussed in more detail above.
Marketing
Our marketing expenses consist primarily of costs incurred to acquire new customers, retain existing customers, and build our brand awareness through various online and offline paid channels, including digital and social media, television, direct mail, radio and podcasts, email, brand activations, and certain variable and fixed payments to strategic brand partnerships. Also included in marketing expenses are the costs of orders through our customer referral program, in which certain existing customers may invite others to receive a complimentary meal kit, as well as costs paid to third parties to market our products. The cost of the customer referral program is based on our costs incurred for fulfilling a complimentary meal delivery, including product and fulfillment costs.
As part of the execution of our strategic priorities in prior periods, we increased marketing expenses toward the end of the fourth quarter of 2021 and throughout most of 2022. However, in December 2022, we determined to significantly reduce marketing expenditures in 2023, and we expect marketing expenses to decrease meaningfully, both in absolute dollars and as a percentage of net revenue in 2023 compared to 2022, as we prioritize profitability and marketing efficiency. Our ability to increase marketing expenses in the future is dependent upon the sufficiency of our cash resources, including our ability to, if our proposed acquisition by Wonder does not close, (i) earn up to $4.0 million in additional cash consideration under the asset purchase agreement we entered into with FreshRealm in connection with the FreshRealm Transaction, $3.0 million of which we expect to receive in the fourth quarter of 2023, (ii) realize the benefit of the full $3.5 million promissory note issued in connection with the FreshRealm Transaction, and (iii) achieve the up to $17.5 million of volume-based rebates under the production and fulfillment agreement we entered into with FreshRealm, (b) the ability of FreshRealm to cost effectively price the production and fulfillment of our meal kits and other products, or (c) our ability, if we are unable to successfully implement our operating strategy, to recognize the benefits of our identified expense reductions, including our recent headcount reductions, or raise additional capital or funding, including through (i) our February 2023 ATM (as defined below) or otherwise, (ii) receiving all or a sufficient portion of the remaining $68.2 million due to us in connection with the $56.5 million private placement (of which $1.0 million has been received) and the $12.7 million gift card transaction with certain affiliates of Joseph N. Sanberg, or (iii) the disposition of some or all of the pledged securities securing the private placement obligation.

We anticipate that our marketing strategies, including the timing and extent of our marketing expenses, will be informed by the sufficiency of our cash resources, our strategic priorities, our ability to execute on our strategic priorities, the seasonal trends in our business, our marketing technology capabilities, and the competitive landscape of our market, and will fluctuate from quarter-to-quarter and have a significant impact on our quarterly results of operations. We also anticipate that our future marketing strategies and investments may continue to be impacted by macroeconomic and other factors.
Product, Technology, General and Administrative
Product, technology, general and administrative expenses (“PTGA”) consist of costs related to the development of our products and technology, general and administrative expenses, and overhead expenses, which include: payroll and related expenses for employees involved in the application, production, and maintenance of our platform and other technology infrastructure costs; payroll and related expenses for employees performing corporate and other managerial functions; facilities’ costs such as occupancy and rent costs for our corporate offices and fulfillment centers; professional fees; payment processing fees; the retirement of carbon offsets; and other general corporate and administrative costs.

On June 9, 2023, FreshRealm purchased certain assets of ours relating to our production and fulfillment operations conducted at the Facilities, including PTGA expenses related to the P&F Business. Under the Production and Fulfillment Agreement, we will incur an annual baseline PTGA fee, which represents operating overhead costs allocated to us by FreshRealm. Commencing on January 1, 2024 and continuing thereafter until the end of the term of the Production and Fulfillment Agreement, the annual baseline PTGA fee will be reduced by approximately $10.0 million, subject to annual adjustments in accordance with an inflationary index.