4.Related party transactions

Certain members of our Board of Directors market California avocados through Calavo pursuant to marketing agreements substantially similar to the marketing agreements that we enter into with other growers. During the three months ended July 31, 2018 and 2017, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $9.2 million and $12.3 million. During the nine months ended July 31, 2018 and 2017, the aggregate amount of avocados procured from entities owned or controlled by members of our Board of Directors was $11.2 million and $17.5 million. Amounts payable to these Board members were $1.9 million as of July 31, 2018. We did not have any amounts payable to these Board members as of October 31, 2017.

During the three months ended July 31, 2018 and 2017, we received $0.1 million as dividend income from Limoneira Company (Limoneira). During the nine months ended July 31, 2018 and 2017, we received $0.3 million as dividend income from Limoneira. In addition, we lease office space from Limoneira and paid rental expenses of $0.1 million for the three months ended July 31, 2018 and 2017. We paid to Limoneira rental expenses of $0.2 million for the nine months ended July 31, 2018 and 2017. Harold Edwards, who is a member of our Board of Directors, is the Chief Executive Officer of Limoneira Company. We have a 10% ownership interest in Limoneira. Additionally, our Chief Executive Officer is a member of the Limoneira Board of Directors.

We currently have a member of our Board of Directors who also serves as a partner in the law firm of TroyGould PC, which frequently represents Calavo as legal counsel. During each of the three months ended July 31, 2018 and 2017, Calavo Growers, Inc. paid fees totaling less than $0.1 million to TroyGould PC. During each of the nine months ended July 31, 2018 and 2017, Calavo Growers, Inc. paid fees totaling $0.1 million and $0.2 million to TroyGould PC.

In December 2014, Calavo formed a wholly owned subsidiary Calavo Growers De Mexico, S. de R.L. de C.V. (Calavo Sub). In July 2015, Calavo Sub entered into a Shareholder Agreement with Grupo Belo del Pacifico, S.A. de C.V., (Belo) a Mexican Company owned by Agricola Belher, and formed Agricola Don Memo, S.A. de C.V. (Don Memo). Belo and Calavo Sub have an equal one-half ownership interest in Don Memo. Pursuant to a management service agreement, Belo, through its officers and employees, has day-to-day power and authority to manage the operations. Belo is entitled to a management fee, as defined, which is payable annually in July of each year. Additionally, Calavo Sub is entitled to commission, for the sale of produce in the Mexican National Market, United States, Canada, and any other overseas market.

In January 2016, our unconsolidated subsidiary, Don Memo, entered into a loan agreement in the amount of $4.5 million with Bank of America, N.A. (BoA) proceeds of which were used by Don Memo to repay debt owed to Calavo. Also in January 2016, Calavo and BoA, entered into a Continuing and Unconditional Guaranty Agreement (the Guaranty). Under the terms of the Guaranty, Calavo unconditionally guarantees and promises to pay BoA any and all Indebtedness, as defined therein, of our unconsolidated subsidiary Don Memo to BoA. Belo has also entered into a similar guarantee with BoA. As of July 31, 2018, Don Memo was not in compliance with covenants related to this loan agreement with BoA. In August 2018, Don Memo obtained a waiver for this violation.

As of July 31, 2018 and October 31, 2017, we have an investment of $4.7 million and $4.6 million, representing Calavo Sub’s 50% ownership in Don Memo, which is included as an investment in unconsolidated entities on our balance sheet. We make advances to Don Memo for operating purposes, provide additional advances as shipments are made during the season, and return the proceeds from tomato sales under our marketing program to Don Memo, net of our commission and aforementioned advances. As of July 31, 2018 and October 31, 2017, we had outstanding advances of $2.5 million and $1.6 million to Don Memo. During the three months ended July 31, 2018 and 2017, we recorded $3.4 million and $4.3 million of expenses to Don Memo pursuant to our consignment agreement. During the nine months ended July 31, 2018 and 2017, we recorded $7.2 million and $5.0 million of expenses to Don Memo pursuant to our consignment agreement.

We had grower advances due from Belher of $2.0 million and $4.0 million as of July 31, 2018 and October 31, 2017, which are netted against the grower payable. In addition, we had infrastructure advances due from Belher of $0.4 million and $0.6 million as of July 31, 2018 and October 31, 2017. Of these infrastructure advances $0.2 million was recorded as receivable in prepaid and other current assets. The remaining $0.2 million of these infrastructure advances are recorded in other assets. During the three months ended July 31, 2018 and 2017, we recorded $1.5 million and $0.8 million of expenses to Belher pursuant to our consignment agreement. During the nine months ended July 31, 2018 and 2017, we recorded $14.1 million and $13.9 million of expenses to Belher pursuant to our consignment agreement.

In August 2015, we entered into Shareholder’s Agreement with various partners and created Avocados de Jalisco, S.A.P.I. de C.V. (“Avocados de Jalisco”). Avocados de Jalisco is a Mexican corporation created to engage in procuring, packing and selling avocados. This entity is approximately 83% owned by Calavo and is consolidated in our financial statements. Avocados de Jalisco built a packinghouse located in Jalisco, Mexico, which began operations in June of 2017. As of July 31, 2018 and October 31, 2017, we have made preseason advances of approximately $0.1 million to various partners of Avocados de Jalisco. During the three months ended July 31, 2018 and 2017, we purchased approximately $0.9 million and $1.7 million of avocados from the partners of Avocados de Jalisco. During the nine months ended July 31, 2018 and 2017, we purchased approximately $1.1 million and $1.7 million of avocados from the partners of Avocados de Jalisco. In January 2018, we transferred $1.0 million of interest to the Avocados de Jalisco noncontrolling members.

As of July 31, 2018 and October 31, 2017, we have an investment of $28.4 million in FreshRealm, LLC (“FreshRealm”). We record the amount of our investment in FreshRealm in “Investment in unconsolidated entities” on our Consolidated Condensed Balance Sheets and recognize losses in FreshRealm in “Income (loss) in unconsolidated entities” in our Consolidated Condensed Statement of Income. See Note 13 for additional information.

On July 3rd, 2018, we entered into a $2.5 million Promissory Note with FreshRealm. That note was repaid in full on July 31, 2018 in connection with the debt and equity financing described below.

Effective July 31, 2018, we entered into a Note and Membership Unit Purchase Agreement (“NMUPA”) with FreshRealm, pursuant to which we agreed to provide additional financing to FreshRealm, subject to certain terms and conditions. Pursuant to such NMUPA, we entered into a Subscription Agreement with FreshRealm, whereby we purchased $3.5 million of equity units in FreshRealm, on July 31, 2018. FreshRealm concurrently entered into subscription agreements with certain third-party investors for an additional $3.5 million of equity investments. As of July 31, 2018, our ownership percentage in FreshRealm was approximately 37%.

Additionally, pursuant to such NMUPA, we entered into a $12 million Senior Promissory Note and corresponding Security Agreement (collectively, the “Agreements”) with FreshRealm, effective August 10, 2018. Pursuant to the Agreements, the $12 million facility is available in two $6 million tranches. On August 10, 2018, we funded the first $6 million tranche to FreshRealm. The second $6 million tranche will be available to FreshRealm upon its attainment of least $17 million in gross revenues over any consecutive two calendar months (i.e. in aggregate). See Note 13 for further information.

Three officers and five members of our board of directors have investments in FreshRealm. In addition, as of July 31, 2018 and October 31, 2017, we have a loan to FreshRealm members of approximately $0.2 million and $0.3 million. In December 2017, our Chairman and Chief Executive Officer invested $1.5 million into FreshRealm. In January 2018, one of our non-executive directors invested $1.8 million into FreshRealm. In the second quarter of fiscal 2018, two of our non-executive directors invested $1.2 million into FreshRealm.

We provide storage services to FreshRealm from our New Jersey and Texas Value-Added Depots, and our RFG Riverside facility. We have received $0.1 million in storage services revenue from FreshRealm in the three months ended July 31, 2018. We have received $0.2 million in storage services revenue from FreshRealm in the nine months ended July 31, 2018. For the three months ended July 31, 2018 and 2017, RFG has sold $3.6 million and $2.1 million of products to FreshRealm. For the nine months ended July 31, 2018 and 2017, RFG has sold $7.4 million and $5.1 million of products to FreshRealm.

The previous owners of RFG, one of which is currently an officer of Calavo, have a majority ownership of certain entities that provide various services to RFG, specifically LIG Partners, LLC and THNC, LLC. One of RFG’s California operating facilities leases a building from LIG Partners, LLC (LIG) pursuant to an operating lease. RFG’s Texas operating facility leases a building from THNC, LLC (THNC) pursuant to an operating lease. See the following tables for the related party activity for the three and nine months ended July 31, 2018 and 2017:


	Three months ended July 31,
(in thousands)	2018		2017
Rent paid to LIG	$	139	$	138
Rent paid to THNC, LLC	$	199	$	199


	Nine months ended July 31,
(in thousands)	2018		2017
Rent paid to LIG	$	417	$	407
Rent paid to THNC, LLC	$	597	$	460