Related party transactions	9 Months Ended
Sep. 30, 2022
Related Party Transactions [Abstract]
Related party transactions	Related party transactions As discussed in Note 1—Nature of the business and basis of presentation, due to the repurchase of the Company’s shares from two primary directors that occurred in October 6, 2020, the Company no longer considers these two directors as related parties from October 6, 2020 onward. Group Training, a related party, is owned by certain existing stockholders that are executive officers and directors of the Company, through which they operate three F45 studios in the United States. During the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million of franchise revenue related to fees under the management service agreement. During the three and nine months ended September 30, 2021, the Company recognized less than $0.1 million of franchise revenue related to fees under the management service agreement. With respect to these transactions, the Company has presented the revenue recognized during these periods in franchise revenue and the related expenses in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022 and December 31, 2021, the Company had receivables related to fees under this management service agreement and operation of the studios of $1.0 million and $0.7 million, respectively. These amounts are included in due from related parties on the condensed consolidated balance sheets. On July 24, 2022, the owners of Group Training agreed to terminate the related franchise agreements and transfer the assets of, and all rights to, the ownership and operation of the aforementioned studios in exchange for termination of the outstanding receivable balance of $1.0 million pursuant to the terms of the Separation Agreement with Adam Gilchrist. On October 26, 2022, the transfer of assets and termination of outstanding receivable balance was completed. During the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million of franchise revenue and equipment and merchandise revenue from studios owned by Messrs. Wahlberg and Raymond. During the three and nine months ended September 30, 2021, the Company recognized less than $0.1 million of franchise revenue and equipment and merchandise revenue from studios owned by Messrs. Wahlberg and Raymond. With respect to these transactions, the Company has presented the revenue recognized during these periods in franchise revenue and equipment and merchandise revenue and the related expenses in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022 and December 31, 2021, the Company had less than $0.1 million of outstanding receivables from these studios. These amounts are included in due from related parties on the condensed consolidated balance sheets. During the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million of franchise revenue from studios owned by an entity in which an existing stockholder that is an executive officer and director of the Company holds a 10% ownership interest. During the three and nine months ended September 30, 2021, the Company recognized less than $0.1 million of franchise revenue from studios owned by an entity in which an existing stockholder that is an executive officer and director of the Company holds a 10% ownership interest. With respect to these transactions, the Company has presented the revenue recognized during these periods in franchise revenue and equipment and merchandise revenue. As of September 30, 2022 and December 31, 2021, the Company had less than $0.1 million of outstanding receivables from these studios, respectively. These amounts are included in due from related parties on the condensed consolidated balance sheets. During the three and nine months ended September 30, 2022, the Company incurred expenses totaling approximately $2.5 million and $6.9 million, respectively, in connection with certain shipping and logistic services from a third-party vendor that is owned by an immediate family member of an executive officer of the Company. During the three and nine months ended September 30, 2021, the Company incurred expenses totaling approximately $1.6 million and $3.7 million, respectively, in connection with certain shipping and logistic services from a third-party vendor that is owned by an immediate family member of an executive officer of the Company. As of September 30, 2022 and December 31, 2021, the Company had approximately $2.1 million and $1.3 million, respectively, of outstanding payables to the third-party vendor. These amounts are included in accounts payable and accrued expenses on the condensed consolidated balance sheets. During the three and nine months ended September 30, 2022, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million from three studios owned by employees. During the three and nine months ended September 30, 2021, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million from two studios owned by employees. The Company has presented the expenses incurred during these periods in cost of equipment and merchandise revenue in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022, the Company had no receivables outstanding related to this revenue. As of December 31, 2021, the Company had receivables outstanding related to this revenue of less than $0.1 million. These amounts are included in due from related parties on the condensed consolidated balance sheets. During the nine months ended September 30, 2022, the Company entered into employment agreements with an existing franchisee under a development agreement with the Company to open approximately 87 studios. As a result, the Company has determined the development agreement and studios operating under ownership of these franchisees now represent related party transactions. During the three and nine months ended September 30, 2022, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million and $10.7 million, respectively, from studios under the development agreement. During the three and nine months ended September 30, 2021, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million and $0.2 million from studios under the development agreement. The Company has presented the expenses incurred during these periods in cost of equipment and merchandise revenue in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022 and December 31, 2021, the Company had receivables outstanding related to this revenue of $0.6 million and $0.7 million, respectively. These amounts are included in due from related parties on the condensed consolidated balance sheets. Transaction with LIIT LLC On June 23, 2020, the Company entered into an Asset Transfer and Licensing Agreement with LIIT LLC (“LIIT”) an entity wholly-owned by Adam Gilchrist (F45’s Co-Founder and former Chief Executive Officer). Pursuant to this agreement, F45 sold to LIIT certain at-home exercise equipment packages (including the intellectual property rights thereto) for $1.0 million payable on or before December 31, 2020. LIIT assumed all outstanding rights and obligations related to these exercise equipment packages from F45. In addition, pursuant to this agreement, LIIT received access to F45’s library of programming related to existing and future fitness content for the duration of the license period of 10 years. In exchange for this license, LIIT will pay F45 an annual license fee equal to the greater of (a) $1.0 million and (b) 6% of the annual gross revenue of LIIT, less any payments made by LIIT to third parties in connection with the sale of such exercise equipment packages payable annually on July 30. This agreement will expire on July 1, 2030, unless otherwise terminated upon mutual agreement of F45 and LIIT. Upon termination or expiration of this agreement, LIIT must: (i) immediately cease all use and application of the licensed intellectual property; (ii) promptly return to F45, or otherwise dispose of as F45 may instruct, all documents, databases, lists and materials (whether hard copy or electronic form) including any advertising and promotion material, labels, tags, packaging material, advertising and promotional matter and all other material relating to the licensed intellectual property in the possession or control of LIIT; and (iii) immediately cease to hold itself out as having any rights in relation to the licensed intellectual property from the date of termination. On July 24, 2022, the Company mutually agreed to execute documentation necessary to terminate the Asset Transfer and Licensing Agreement in exchange for termination of the outstanding receivable balance pursuant to the terms of the Separation Agreement with Adam Gilchrist. The termination of the outstanding receivable of $2.0 million is included in selling, general, and administrative expenses during the three and nine months ended September 30, 2022 The Company recognized $0.0 million and $0.5 million of revenue, respectively, and no cost of sales in conjunction with the transaction with LIIT LLC during the three and nine months ended September 30, 2022. The Company recognized $0.3 million and $0.8 million of revenue, respectively, and no cost of sales in conjunction with the transaction with LIIT LLC during the three and nine months ended September 30, 2021. The outstanding receivable balance as of December 31, 2021 was $1.5 million. Transaction with Club Franchise Group LLC On June 15, 2021, the Company entered into a long-term multi-unit studio agreement, with Club Franchise Group LLC (“Club Franchise”), an affiliate of KLIM. Pursuant to the term multi-unit studio agreement, the Company granted to Club Franchise the right to, and Club Franchise has agreed to, open at least 300 studios in certain territories in the U.S. over 36 months, with the first 150 studios to be open at least within 18 months of the date of the multi-unit studio agreement, or December 15, 2022. Club Franchise had 10 studios opened as of September 30, 2022 under the multi-unit studio agreement. Club Franchise is obligated to pay to the Company the same general fees as other franchisees in the U.S., and to enter into a franchise agreement in respect of each studio upon approval by the Company of the studio site. Consistent with some of the franchise agreements in the United States entered into since July 2019, Club Franchise is required to pay the Company a monthly franchise fee based on the greater of a fixed monthly franchise fee of $2,500 per month or 7% of gross monthly studio revenue, regardless of whether such studios are open. Club Franchise has also agreed to pay the Company an upfront establishment fee of $7,500,000 as follows: (i) $1,875,000 upon execution of the multi-unit studio agreement (which amount has been paid as of December 31, 2021); (ii) $1,875,000 by June 2022 (which amount has been paid as of June 30, 2022); (iii) $1,875,000 by December 2022; and (iv) $1,875,000 by December 2023. Club Franchise is required to pay monthly franchise fees to the Company in respect of additional studios with monthly franchise fees for 150 studios being payable by December 2022. With respect to the remaining 150 studios, the Company and Club Franchise have agreed to negotiate a payment schedule that provides for the monthly franchise fees in respect of such studios to commence no later than 12 months after the opening date of the relevant studio. Like other franchisees, Club Franchise is also obligated to pay the Company other fees, including fees related to marketing and equipment and merchandise, some of which the Company has agreed to provide at a discounted rate. The Company recognized $2.0 million and $6.3 million of franchise revenue in conjunction with the transaction with Club Franchise Group LLC during the three and nine months ended September 30, 2022, respectively. The Company recognized no franchise revenue in conjunction with the transaction with Club Franchise Group LLC during the three and nine months ended September 30, 2021. As of September 30, 2022, the Company had an outstanding receivable balance of $0.9 million related to Club Franchise and no outstanding receivable balance owed as of December 31, 2021. As of September 30, 2022 and December 31, 2021, the Company recognized less than $0.1 million and no unbilled receivable in other short-term assets on the condensed consolidated balance sheets, respectively. The Company recognized $8.3 million and $4.4 million of unbilled receivable in other long-term assets on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. Transaction with Club Sports Group, LLC On October 26, 2022, the Company entered into a Master Franchise Agreement (“MFA”) with Club Sports Group, LLC (“Club Sports”), an affiliate of KLIM, pursuant to which the Company granted Club Sports the master franchise rights for F45 in Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. In exchange, the Company will receive certain fees and royalties, including a percentage of the revenue generated by Club Sports. In accordance with the agreement, F45 will assign existing franchise agreement rights to approximately 103 studios previously signed by the Company. In anticipation of the signing of the MFA, Club Sports ordered F45 world packs to be sold to sub-franchisees. The Company recognized equipment revenue of $4.0 million during the three and nine months ended September 30, 2022 as a result of these orders.

Group Training, a related party, is owned by certain existing stockholders that are executive officers and directors of the Company, through which they operate three F45 studios in the United States. During the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million of franchise revenue related to fees under the management service agreement. During the three and nine months ended September 30, 2021, the Company recognized less than $0.1 million of franchise revenue related to fees under the management service agreement. With respect to these transactions, the Company has presented the revenue recognized during these periods in franchise revenue and the related expenses in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022 and December 31, 2021, the Company had receivables related to fees under this management service agreement and operation of the studios of $1.0 million and $0.7 million, respectively. These amounts are included in due from related parties on the condensed consolidated balance sheets. On July 24, 2022, the owners of Group Training agreed to terminate the related franchise agreements and transfer the assets of, and all rights to, the ownership and operation of the aforementioned studios in exchange for termination of the outstanding receivable balance of $1.0 million pursuant to the terms of the Separation Agreement with Adam Gilchrist. On October 26, 2022, the transfer of assets and termination of outstanding receivable balance was completed.

During the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million of franchise revenue and equipment and merchandise revenue from studios owned by Messrs. Wahlberg and Raymond. During the three and nine months ended September 30, 2021, the Company recognized less than $0.1 million of franchise revenue and equipment and merchandise revenue from studios owned by Messrs. Wahlberg and Raymond. With respect to these transactions, the Company has presented the revenue recognized during these periods in franchise revenue and equipment and merchandise revenue and the related expenses in selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022 and December 31, 2021, the Company had less than $0.1 million of outstanding receivables from these studios. These amounts are included in due from related parties on the condensed consolidated balance sheets.

During the three and nine months ended September 30, 2022, the Company recognized less than $0.1 million of franchise revenue from studios owned by an entity in which an existing stockholder that is an executive officer and director of the Company holds a 10% ownership interest. During the three and nine months ended September 30, 2021, the Company recognized less than $0.1 million of franchise revenue from studios owned by an entity in which an existing stockholder that is an executive officer and director of the Company holds a 10% ownership interest. With respect to these transactions, the Company has

presented the revenue recognized during these periods in franchise revenue and equipment and merchandise revenue. As of September 30, 2022 and December 31, 2021, the Company had less than $0.1 million of outstanding receivables from these studios, respectively. These amounts are included in due from related parties on the condensed consolidated balance sheets.

During the three and nine months ended September 30, 2022, the Company incurred expenses totaling approximately $2.5 million and $6.9 million, respectively, in connection with certain shipping and logistic services from a third-party vendor that is owned by an immediate family member of an executive officer of the Company. During the three and nine months ended September 30, 2021, the Company incurred expenses totaling approximately $1.6 million and $3.7 million, respectively, in connection with certain shipping and logistic services from a third-party vendor that is owned by an immediate family member of an executive officer of the Company. As of September 30, 2022 and December 31, 2021, the Company had approximately $2.1 million and $1.3 million, respectively, of outstanding payables to the third-party vendor. These amounts are included in accounts payable and accrued expenses on the condensed consolidated balance sheets.

During the three and nine months ended September 30, 2022, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million from three studios owned by employees. During the three and nine months ended September 30, 2021, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million from two studios owned by employees. The Company has presented the expenses incurred during these periods in cost of equipment and merchandise revenue in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022, the Company had no receivables outstanding related to this revenue. As of December 31, 2021, the Company had receivables outstanding related to this revenue of less than $0.1 million. These amounts are included in due from related parties on the condensed consolidated balance sheets.

During the nine months ended September 30, 2022, the Company entered into employment agreements with an existing franchisee under a development agreement with the Company to open approximately 87 studios. As a result, the Company has determined the development agreement and studios operating under ownership of these franchisees now represent related party transactions. During the three and nine months ended September 30, 2022, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million and $10.7 million, respectively, from studios under the development agreement. During the three and nine months ended September 30, 2021, the Company recognized franchise revenue and equipment and merchandise revenue totaling less than $0.1 million and $0.2 million from studios under the development agreement. The Company has presented the expenses incurred during these periods in cost of equipment and merchandise revenue in the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022 and December 31, 2021, the Company had receivables outstanding related to this revenue of $0.6 million and $0.7 million, respectively. These amounts are included in due from related parties on the condensed consolidated balance sheets.

LIIT LLC (“LIIT”) an entity wholly-owned by Adam Gilchrist (F45’s Co-Founder and former Chief Executive Officer). Pursuant to this agreement, F45 sold to LIIT certain at-home exercise equipment packages (including the intellectual property rights thereto) for $1.0 million payable on or before December 31, 2020. LIIT assumed all outstanding rights and obligations related to these exercise equipment packages from F45. In addition, pursuant to this agreement, LIIT received access to F45’s library of programming related to existing and future fitness content for the duration of the license period of 10 years. In exchange for this license, LIIT will pay F45 an annual license fee equal to the greater of (a) $1.0 million and (b) 6% of the annual gross revenue of LIIT, less any payments made by LIIT to third parties in connection with the sale of such exercise equipment packages payable annually on July 30. This agreement will expire on July 1, 2030, unless otherwise terminated upon mutual agreement of F45 and LIIT. Upon termination or expiration of this agreement, LIIT must: (i) immediately cease all use and

application of the licensed intellectual property; (ii) promptly return to F45, or otherwise dispose of as F45 may instruct, all documents, databases, lists and materials (whether hard copy or electronic form) including any advertising and promotion material, labels, tags, packaging material, advertising and promotional matter and all other material relating to the licensed intellectual property in the possession or control of LIIT; and (iii) immediately cease to hold itself out as having any rights in relation to the licensed intellectual property from the date of termination.

On July 24, 2022, the Company mutually agreed to execute documentation necessary to terminate the Asset Transfer and Licensing Agreement in exchange for termination of the outstanding receivable balance pursuant to the terms of the Separation Agreement with Adam Gilchrist. The termination of the outstanding receivable of $2.0 million is included in selling, general, and administrative expenses during the three and nine months ended September 30, 2022

The Company recognized $0.0 million and $0.5 million of revenue, respectively, and no cost of sales in conjunction with the transaction with LIIT LLC during the three and nine months ended September 30, 2022. The Company recognized $0.3 million and $0.8 million of revenue, respectively, and no cost of sales in conjunction with the transaction with LIIT LLC during the three and nine months ended September 30, 2021. The outstanding receivable balance as of December 31, 2021 was $1.5 million.

On June 15, 2021, the Company entered into a long-term multi-unit studio agreement, with Club Franchise Group LLC (“Club Franchise”), an affiliate of KLIM. Pursuant to the term multi-unit studio agreement, the Company granted to Club Franchise the right to, and Club Franchise has agreed to, open at least 300 studios in certain territories in the U.S. over 36 months, with the first 150 studios to be open at least within 18 months of the date of the multi-unit studio agreement, or December 15, 2022. Club Franchise had 10 studios opened as of September 30, 2022 under the multi-unit studio agreement.

Club Franchise is obligated to pay to the Company the same general fees as other franchisees in the U.S., and to enter into a franchise agreement in respect of each studio upon approval by the Company of the studio site. Consistent with some of the franchise agreements in the United States entered into since July 2019, Club Franchise is required to pay the Company a monthly franchise fee based on the greater of a fixed monthly franchise fee of $2,500 per month or 7% of gross monthly studio revenue, regardless of whether such studios are open. Club Franchise has also agreed to pay the Company an upfront establishment fee of $7,500,000 as follows: (i) $1,875,000 upon execution of the multi-unit studio agreement (which amount has been paid as of December 31, 2021); (ii) $1,875,000 by June 2022 (which amount has been paid as of June 30, 2022); (iii) $1,875,000 by December 2022; and (iv) $1,875,000 by December 2023. Club Franchise is required to pay monthly franchise fees to the Company in respect of additional studios with monthly franchise fees for 150 studios being payable by December 2022. With respect to the remaining 150 studios, the Company and Club Franchise have agreed to negotiate a payment schedule that provides for the monthly franchise fees in respect of such studios to commence no later than 12 months after the opening date of the relevant studio. Like other franchisees, Club Franchise is also obligated to pay the Company other fees, including fees related to marketing and equipment and merchandise, some of which the Company has agreed to provide at a discounted rate.

The Company recognized $2.0 million and $6.3 million of franchise revenue in conjunction with the transaction with Club Franchise Group LLC during the three and nine months ended September 30, 2022, respectively. The Company recognized no franchise revenue in conjunction with the transaction with Club Franchise Group LLC during the three and nine months ended September 30, 2021. As of September 30, 2022, the Company had an outstanding receivable balance of $0.9 million related to Club Franchise and no outstanding receivable balance owed as of December 31, 2021. As of September 30, 2022 and December 31, 2021, the Company recognized less than $0.1 million and no unbilled receivable in other short-term assets on the condensed consolidated balance sheets, respectively. The Company recognized $8.3 million and $4.4 million of unbilled receivable in other long-term assets on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively.

On October 26, 2022, the Company entered into a Master Franchise Agreement (“MFA”) with Club Sports Group, LLC (“Club Sports”), an affiliate of KLIM, pursuant to which the Company granted Club Sports the master franchise rights for F45 in Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. In exchange, the Company will receive certain fees and royalties, including a percentage of the revenue generated by Club Sports. In accordance with the agreement, F45 will assign existing franchise agreement rights to approximately 103 studios previously signed by the Company. In anticipation of the signing of the MFA, Club Sports ordered F45 world packs to be sold to sub-franchisees. The Company recognized equipment revenue of $4.0 million during the three and nine months ended September 30, 2022 as a result of these orders.