BUSINESS ACQUISITION

6 Months Ended

Jun. 26, 2022

Business Combination and Asset Acquisition [Abstract]

On September 7, 2021, the Company closed its acquisition of Spyce, a Boston-based restaurant company powered by automation technology. The Company acquired 100% of the stock of Spyce via a merger. The purpose of the acquisition is to allow the Company to serve its food with even better quality, consistency and efficiency in its restaurants via automation. Pursuant to the merger agreement, upon closing of the acquisition, the Company issued 1,843,493 shares of Class S stock (the “Class S Shares”) worth approximately $37.5 million, of which $6.8 million is considered post-business combination compensation expense, see Note 10 for details, and subject to certain vesting requirements of certain Spyce employees. In connection with the Company’s IPO, the Class S Shares converted into 1,316,763 shares of common stock pursuant to a formula based on the Reference Price, which such shares were then reclassified into shares of Class A common stock. Additionally, the Company paid off approximately $3.5 million of certain indebtedness and transaction expenses of Spyce. Furthermore, certain former equity holders of Spyce may receive up to an aggregate of 714,285 additional shares of Class A Common Stock contingent on the achievement of certain performance milestones between the closing date and June 30, 2026, as well as true-up cash payments as described in Note 3. The acquisition of Spyce was not significant pursuant to Rule 3-05 of Regulation S-X.

The following allocation of the purchase price and the estimated transaction costs is preliminary due to the finalization of taxes and is based on information available to the Company’s management at the time the consolidated financial statements were prepared. Accordingly, the allocation is subject to change and the impact of such changes may be material (in thousands):


Fair value of assets acquired	As of September 7, 2021
Restricted cash	203
Property and equipment, net	707
Other assets	660
Developed technology	20,050
Goodwill	29,695
Total assets acquired	$	51,315

Fair value of liabilities assumed
Other liabilities	628
Total liabilities assumed	$	628
Total identifiable net assets	$	50,687

Fair value of consideration
Cash consideration, net of cash acquired	2,762
Closing third party expenses	781
Equity consideration	30,704
Contingent equity consideration	16,440
Total consideration	$	50,687

Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value of the intangibles assets was determined using a cost approach, which were based on the Company’s best estimate of recreating the developed technology acquired as part of the transaction. This includes estimates related to opportunity costs, developers profit, weighted average weight of return, and projected overhead. Use of different estimates and judgments could yield materially different results.

The Company’s consolidated financial statements for the thirteen and twenty-six weeks ended June 26, 2022 reflect results of operations of the newly acquired business. The Company accounted for this acquisition under the acquisition method in accordance with ASC Topic 805, Business Combinations. The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing restaurants and the workforce of Spyce. For tax purposes the acquisition was treated as a stock purchase, and as such any goodwill or other intangible assets recorded as a result of this transaction are not deductible for tax purposes.

Supplemental Pro Forma Information (unaudited)

The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition occurred on December 28, 2020.


	Thirteen weeks ended		Twenty-six weeks ended
(dollar amounts in thousands)	June 27, 2021		June 27, 2021
Revenue	$	86,522	$	148,073
Net loss attributable to Sweetgreen, Inc.	$	(27,401)	$	(58,345)

The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings.

These pro forma amounts have been calculated by applying the Company’s accounting policies.The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of December 28, 2020, nor are they indicative of results of operations that may occur in the future.