(
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
☐ TRANSITION REPORT PURSUANT TO SECTION 13 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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(State or Other Jurisdiction of |
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| 98-1617611 (I.R.S. Employer Identification No.) | |||||
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601 West Suite 900, New York, New York | ||||||||
(Address of Principal Executive | 10001 (Zip Code) | |||||||
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Class A common stock, $0.0001 par value |
| UP |
| New York Stock Exchange | ||||||||||
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 |
| UP WS |
| New York Stock Exchange | ||||||||||
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| ☐ | Accelerated filer | ☐ | |||||||||||
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| Emerging Growth Company |
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EXPLANATORY NOTE
On July 13, 2021 (subsequent to the fiscal quarter ended June 30, 2021, the fiscal quarter to which this Quarterly Report on Form 10-Q (this “Report”) relates), as contemplated by the Merger Agreement and described in the section titled “Domestication Proposal” beginning on page 145 of the final prospectus and definitive proxy statement, dated June 23, 2021 (the “proxy statement/prospectus”) and filed on June 23, 2021 with the Securities and Exchange Commission (the “SEC”), Aspirational Consumer Lifestyle Corp. (“Aspirational”) filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which Aspirational was domesticated and continues as a Delaware corporation, changing its name to “Wheels Up Experience Inc.” (the “Domestication”).
As a result of and upon the effective time of the Domestication, among other things, (1) each of the then issued and outstanding Class A ordinary shares, par value $0.0001 per share, of Aspirational (the “Aspirational Class A ordinary shares”), automatically converted, on a one-for-one basis, into a share of Class A common stock, par value $0.0001 per share, of Wheels Up (the “Wheels Up Class A common stock”); (2) each of the then issued and outstanding Class B ordinary shares, par value $0.0001 per share, of Aspirational (“Aspirational Class B ordinary shares”), automatically converted, on a one-for-one basis, into a share of Wheels Up Class A common stock; (3) each of the then issued and outstanding redeemable warrants of Aspirational (the “Aspirational warrants”) automatically converted into a redeemable warrant to acquire one share of Wheels Up Class A common stock (the “Wheels Up warrants”); and (4) each of the then issued and outstanding units of Aspirational that had not been previously separated into the underlying Aspirational Class A ordinary shares and underlying Aspirational warrants upon the request of the holder thereof (the “Aspirational units”), were cancelled and entitled the holder thereof to one share of Wheels Up Class A common stock and one-third of one Wheels Up warrant. No fractional shares will be issued upon exercise of the Wheels Up warrants.
Concurrently, as contemplated by the Merger Agreement and described in the section titled “BCA Proposal” beginning on page 91 of the proxy statement/prospectus, Wheels Up consummated the merger transactions contemplated by the Merger Agreement, whereby (i) the Blockers simultaneously merged with and into the respective Blocker Merger Subs, with the Blockers surviving each merger as wholly owned subsidiaries of Aspirational (the “First Step Blocker Mergers”), (ii) thereafter, the surviving Blockers simultaneously merged with and into Blocker Sub, with Blocker Sub surviving each merger (the “Second Step Blocker Mergers”), and (iii) thereafter, Merger Sub merged with and into WUP, with WUP surviving the merger, with Aspirational as its managing member (the “Company Merger” and collectively with the First Step Blocker Mergers and the Second Step Blocker Mergers, the “Mergers” and, together with the Domestication, the “Business Combination”).
Unless stated otherwise, this report contains information about Aspirational before the Business Combination. This Report covers a period prior to the closing of the Business Combination. As a result, references in this report to “we,” “us,” “our,” or the “Company” refer to the registrant prior to the closing of the Business Combination, unless the context requires otherwise.
Except as otherwise expressly provided herein, the information in this Report does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
i
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
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| Notes to |
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| Other Information |
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| Item 2. |
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i
Risk Factors
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| | June 30 | | December 31, | ||
| | 2021 | | 2020 | ||
| | (Unaudited) | | | ||
ASSETS | | | |
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Current assets | | | |
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Cash | | $ | 28,673 | | $ | 719,926 |
Prepaid expenses | | | 216,804 | |
| 608,945 |
Total Current Assets | | | 245,477 | |
| 1,328,871 |
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Cash and marketable securities held in Trust Account | | | 239,843,104 | |
| 239,795,125 |
TOTAL ASSETS | | $ | 240,088,581 | | $ | 241,123,996 |
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LIABILITIES AND SHAREHOLDERS’ (DEFICIT) EQUITY | | | | |
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Current liability | | | | | | |
Accrued expenses | | $ | 3,952,132 | | $ | 1,112,155 |
Accrued offering costs | | | 372,483 | | | 372,483 |
Promissory note – related party | | | 250,000 | | | — |
Total Current Liabilities | | | 4,574,615 | | | 1,484,638 |
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Warrant liability | | | 24,041,268 | | | 13,272,784 |
Deferred underwriting fee payable | | | 8,391,121 | |
| 8,391,121 |
Total Liabilities | | | 37,007,004 | |
| 23,148,543 |
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Commitments (Note 6) | | | | |
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Class A ordinary shares subject to possible redemption, 23,974,632 and 21,293,210 shares at redemption value | | | 239,843,104 | |
| 212,975,444 |
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Shareholders’ (Deficit) Equity | | | | |
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Preference shares, $0.0001 par value; 5,000,000 shares authorized; NaN issued and outstanding | | | 0 | |
| 0 |
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; 0 and 2,681,422 shares issued and outstanding (excluding 23,974,632 and 21,293,210 shares subject to possible redemption) at June 30, 2021 and December 31, 2020, respectively | | | 0 | |
| 268 |
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 5,993,658 shares issued and outstanding at June 30, 2021 and December 31, 2020 | | | 599 | |
| 599 |
Additional paid-in capital | | | 0 | |
| 6,657,917 |
Accumulated deficit | | | (36,762,126) | |
| (1,658,775) |
Total Shareholders’ (Deficit) Equity | | | (36,761,527) | |
| 5,000,009 |
TOTAL LIABILITIES AND SHAREHOLDERS’(DEFICIT) EQUITY | | $ | 240,088,581 | | $ | 241,123,996 |
| June 30, 2022 (Unaudited) | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 426,984 | $ | 784,574 | |||||||
| Accounts receivable, net | 114,024 | 79,403 | |||||||||
| Other receivables | 12,111 | 8,061 | |||||||||
| Parts and supplies inventories, net | 12,355 | 9,410 | |||||||||
| Aircraft inventory | 30,464 | — | |||||||||
| Aircraft held for sale | 37,375 | 18,101 | |||||||||
| Prepaid expenses | 40,481 | 21,789 | |||||||||
| Other current assets | 18,144 | 11,736 | |||||||||
| Total current assets | 691,938 | 933,074 | |||||||||
| Property and equipment, net | 389,395 | 317,836 | |||||||||
| Operating lease right-of-use assets | 113,291 | 108,582 | |||||||||
| Goodwill | 528,327 | 437,398 | |||||||||
| Intangible assets, net | 154,666 | 146,959 | |||||||||
| Restricted cash | 27,432 | 2,148 | |||||||||
| Other non-current assets | 63,998 | 35,067 | |||||||||
| Total assets | $ | 1,969,047 | $ | 1,981,064 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 61,957 | $ | 43,672 | |||||||
| Accrued expenses | 124,073 | 107,153 | |||||||||
| Deferred revenue, current | 1,039,279 | 933,527 | |||||||||
| Operating lease liabilities, current | 28,378 | 31,617 | |||||||||
| Intangible liabilities, current | 2,000 | 2,000 | |||||||||
| Other current liabilities | 16,678 | 17,068 | |||||||||
| Total current liabilities | 1,272,365 | 1,135,037 | |||||||||
| Deferred revenue, non-current | 1,793 | 1,957 | |||||||||
| Operating lease liabilities, non-current | 90,801 | 83,461 | |||||||||
| Warrant liability | 4,508 | 10,268 | |||||||||
| Intangible liabilities, non-current | 13,083 | 14,083 | |||||||||
| Other non-current liabilities | 3,741 | 30 | |||||||||
| Total liabilities | 1,386,291 | 1,244,836 | |||||||||
| Commitments and contingencies (Note 11) | 0 | 0 | |||||||||
| Equity: | |||||||||||
| Class A common stock, $0.0001 par value; 2,500,000,000 authorized; 246,187,546 shares issued and 244,274,300 shares outstanding as of June 30, 2022; and 245,834,569 shares issued and outstanding as of December 31, 2021 | 25 | 25 | |||||||||
| Additional paid-in capital | 1,499,864 | 1,450,839 | |||||||||
| Accumulated deficit | (902,126) | (720,713) | |||||||||
| Accumulated other comprehensive loss | (8,318) | — | |||||||||
| Treasury stock, at cost, 1,913,246 and 0 shares, respectively | (6,689) | — | |||||||||
| Total Wheels Up Experience Inc. stockholders’ equity | 582,756 | 730,151 | |||||||||
| Non-controlling interests | — | 6,077 | |||||||||
| Total equity | 582,756 | 736,228 | |||||||||
| Total liabilities and equity | $ | 1,969,047 | $ | 1,981,064 | |||||||
(Unaudited)
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| | Three Months | | Six Months | ||
| | Ended | | Ended | ||
| | June 30, | | June 30, | ||
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| 2021 |
| 2021 | ||
Operating and formation costs | | $ | 468,522 | | $ | 4,173,371 |
Loss from operations | | | (468,522) |
| | (4,173,371) |
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Other income (expense): | | | |
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Interest earned on marketable securities held in Trust Account | | | 2,676 | | | 47,979 |
Change in fair value of warrant liability | ��� | | (6,260,747) |
| | (10,768,484) |
Other expense, net | | | (6,258,071) | | | (10,720,505) |
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Net loss | | $ | (6,726,593) | | $ | (14,893,876) |
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Basic and diluted weighted average shares outstanding, Class A ordinary shares subject to redemption | | | 23,974,632 | | | 22,620,218 |
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Basic and diluted net income per share, Class A ordinary shares subject to redemption | | $ | 0.00 | | $ | 0.00 |
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Basic and diluted weighted average shares outstanding, Non-redeemable ordinary shares(1) | | | 5,993,658 |
| | 6,663,340 |
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Basic and diluted net loss per share, Non-redeemable ordinary shares | | $ | (1.12) | | $ | (2.24) |
Three Months Ended June 30, Six Months Ended June 30, 2022 2021 2022 2021 Revenue $ 425,512 $ 285,580 $ 751,147 $ 547,237 Costs and expenses: Cost of revenue 408,898 255,188 741,656 489,695 Technology and development 14,606 8,025 25,797 15,049 Sales and marketing 33,688 17,895 56,931 33,689 General and administrative 46,973 15,786 85,877 33,955 Depreciation and amortization 16,134 13,482 30,362 27,313 Gain on sale of aircraft held for sale (663) — (2,634) — Total costs and expenses 519,636 310,376 937,989 599,701 Loss from operations (94,124) (24,796) (186,842) (52,464) Other income (expense): Change in fair value of warrant liability 2,129 — 5,760 — Interest income 405 6 482 18 Interest expense — (4,164) — (8,721) Other expense, net (850) — (880) — Total other income (expense) 1,684 (4,158) 5,362 (8,703) Loss before income taxes (92,440) (28,954) (181,480) (61,167) Income tax expense (320) — (320) — Net loss (92,760) (28,954) (181,800) (61,167) Less: Net loss attributable to non-controlling interests — (2,798) (387) (5,602) Net loss attributable to Wheels Up Experience Inc. $ (92,760) $ (26,156) $ (181,413) $ (55,565) Net loss per share of Class A common stock: Basic $ (0.38) $ (0.15) $ (0.74) $ (0.33) Diluted $ (0.38) $ (0.15) $ (0.74) $ (0.33) Weighted-average shares of Class A common stock outstanding: Basic 244,086,036 169,023,943 244,347,439 168,935,745 Diluted 244,086,036 169,023,943 244,347,439 168,935,745
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
(Unaudited)
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| | Class A Ordinary | | Class B Ordinary | | | Additional | | | | | | Total | ||||||
| | Shares | | Shares | | | Paid in | | | Accumulated | | | Shareholders’ | ||||||
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| Shares |
| | Amount |
| Shares |
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| | Capital |
| | Deficit |
| | Equity (Deficit) |
Balance – January 1, 2021 |
| 2,681,422 | | $ | 268 |
| 5,993,658 | | $ | 599 | | $ | 6,657,917 | | $ | (1,658,775) | | $ | 5,000,009 |
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Measurement adjustment on redeemable Ordinary shares |
| (2,681,422) | |
| (268) |
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| — | |
| (6,657,917) | |
| (20,206,799) | |
| (26,864,984) |
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Net loss | | — | | | — | | — | | | — | | | — | | | (8,167,283) | | | (8,167,283) |
Balance – March 31, 2021 | | — | | $ | — | | 5,993,658 | | $ | 599 | | $ | — | | $ | (30,032,857) | | $ | (30,032,258) |
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Measurement adjustment on redeemable Ordinary shares | | — | | | — | | — | | | — | | | — | | | (2,676) | | | (2,676) |
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Net loss |
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| — | |
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| (6,726,593) | |
| (6,726,593) |
Balance – June 30, 2021 |
| — | | $ | — |
| 5,993,658 | | $ | 599 | | $ | — | | $ | (36,762,126) | | $ | (36,761,527) |
COMPREHENSIVE LOSS
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net loss | $ | (92,760) | $ | (28,954) | $ | (181,800) | $ | (61,167) | |||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Foreign currency translation adjustments | (8,318) | — | (8,318) | — | |||||||||||||||||||
| Comprehensive loss | (101,078) | (28,954) | (190,118) | (61,167) | |||||||||||||||||||
| Less: Comprehensive loss attributable to non-controlling interests | — | (2,798) | (387) | (5,602) | |||||||||||||||||||
| Comprehensive loss attributable to Wheels Up Experience Inc. | $ | (101,078) | $ | (26,156) | $ | (189,731) | $ | (55,565) | |||||||||||||||
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(Unaudited)
EQUITY
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Cash Flows from Operating Activities: |
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Net loss | | $ | (14,893,876) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
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Change in fair value of warrant liability | | | 10,768,484 |
Interest earned on marketable securities held in Trust Account | |
| (47,979) |
Changes in operating assets and liabilities: | |
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Prepaid expenses | |
| 392,141 |
Accrued expenses | | | 2,839,977 |
Net cash used in operating activities | |
| (941,253) |
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Cash Flows from Financing Activities: | |
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Proceeds from promissory note – related party | |
| 250,000 |
Net cash provided by financing activities | |
| 250,000 |
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Net Change in Cash | |
| (691,253) |
Cash – Beginning | |
| 719,926 |
Cash – Ending | | $ | 28,673 |
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Non-Cash Investing and Financing Activities: | |
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Change in value of Class A ordinary shares subject to possible redemption | | $ | 26,867,660 |
Class A common stock Treasury stock Shares Amount Additional paid-in capital Accumulated
deficitAccumulated
other comprehensive lossShares Amount Non-controlling interests Total Balance as of December 31, 2021 245,834,569 $ 25 $ 1,450,839 $ (720,713) — — $ — $ 6,077 $ 736,228 Equity-based compensation — — 13,659 — — — — 8,895 22,554 Change in non-controlling interests allocation — — 11,743 — — — — (11,743) — Shares withheld for employee taxes on vested equity awards — — — — — 1,682,380 (6,107) — (6,107) Issuance of Class A common stock upon settlement of restricted stock units 76,732 — — — — — — — — Net loss — — — (88,653) — — — (387) (89,040) Balance as of March 31, 2022 245,911,301 $ 25 $ 1,476,241 $ (809,366) $ — 1,682,380 $ (6,107) $ 2,842 $ 663,635 Equity-based compensation — — 12,328 — — — — 8,453 20,781 Change in non-controlling interests allocation — — 11,295 — — — — (11,295) — Shares withheld for employee taxes on vested equity awards — — — — — 230,866 (582) — (582) Issuance of Class A common stock upon settlement of restricted stock units 276,245 — — — — — — — — Net loss — — — (92,760) — — — — (92,760) Foreign currency translation adjustments — — — — (8,318) — — — (8,318) Balance as of June 30, 2022 246,187,546 $ 25 $ 1,499,864 $ (902,126) $ (8,318) 1,913,246 $ (6,689) $ — $ 582,756
Unaudited, in thousands, except share data)
| Class A common stock | |||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional paid-in capital | Accumulated deficit | Non-controlling interests | Total | ||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 169,717,147 | $ | 17 | $ | 798,478 | $ | (530,693) | $ | 26,025 | $ | 293,827 | ||||||||||||||||||||||||
| Consideration issued for business combination | 3,968,900 | — | 30,172 | — | — | 30,172 | |||||||||||||||||||||||||||||
| Equity-based compensation | — | — | 1,160 | — | 254 | 1,414 | |||||||||||||||||||||||||||||
| Change in non-controlling interests allocation | — | — | (2,620) | — | 2,620 | — | |||||||||||||||||||||||||||||
| Net loss | — | — | — | (29,409) | (2,804) | (32,213) | |||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 173,686,047 | $ | 17 | $ | 827,190 | $ | (560,102) | $ | 26,095 | $ | 293,200 | ||||||||||||||||||||||||
| Equity-based compensation | — | — | 1,117 | — | 231 | 1,348 | |||||||||||||||||||||||||||||
| Change in non-controlling interests allocation | — | — | (3,106) | — | 3,106 | — | |||||||||||||||||||||||||||||
| Net loss | — | — | — | (26,156) | (2,798) | (28,954) | |||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | 173,686,047 | $ | 17 | $ | 825,201 | $ | (586,258) | $ | 26,634 | $ | 265,594 | ||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ | (181,800) | $ | (61,167) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 30,362 | 27,313 | |||||||||
| Amortization of deferred financing costs and debt discount | — | 618 | |||||||||
| Equity-based compensation | 43,335 | 2,762 | |||||||||
| Change in fair value of warrant liability | (5,760) | — | |||||||||
| Provision for expected credit losses | 200 | 498 | |||||||||
| Gain on sale of aircraft held for sale | (2,634) | — | |||||||||
| Changes in operating assets and liabilities, net of effects from acquisitions: | |||||||||||
| Accounts receivable | (17,394) | (1,461) | |||||||||
| Other receivables | (4,050) | (2,091) | |||||||||
| Parts and supplies inventories | (2,754) | (2,114) | |||||||||
| Aircraft inventory | (30,464) | — | |||||||||
| Prepaid expenses | (9,442) | 413 | |||||||||
| Other current assets | (520) | (678) | |||||||||
| Other non-current assets | (27,496) | (49) | |||||||||
| Operating lease liabilities, net | (563) | (504) | |||||||||
| Accounts payable | 9,345 | 14,158 | |||||||||
| Accrued expenses | (6,979) | (7,275) | |||||||||
| Other current liabilities | (655) | (508) | |||||||||
| Other non-current liabilities | (297) | 132 | |||||||||
| Deferred revenue | 67,391 | (88,958) | |||||||||
| Net cash used in operating activities | (140,175) | (118,911) | |||||||||
| INVESTING ACTIVITIES: | |||||||||||
| Purchases of property and equipment | (76,464) | (4,780) | |||||||||
| Purchases of aircraft held for sale | (43,774) | — | |||||||||
| Proceeds from sale of aircraft held for sale, net | 27,135 | — | |||||||||
| Acquisitions of businesses, net of cash acquired | (75,093) | 7,844 | |||||||||
| Capitalized software development costs | (12,901) | (5,732) | |||||||||
| Net cash used in investing activities | (181,097) | (2,668) | |||||||||
| FINANCING ACTIVITIES: | |||||||||||
| Purchases of shares for treasury | (6,689) | — | |||||||||
| Repayments of long-term debt | — | (29,250) | |||||||||
| Payments of deferred offering costs | — | (1,426) | |||||||||
| Repayment of loan to employee | — | 102 | |||||||||
| Net cash used in financing activities | (6,689) | (30,574) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (4,345) | — | |||||||||
| NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (332,306) | (152,153) | |||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD | 786,722 | 324,876 | |||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH END OF PERIOD | $ | 454,416 | $ | 172,723 | |||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||
| Non-cash consideration issued for business acquisition of Mountain Aviation, LLC | — | $ | 30,172 | ||||||||
JUNE 30, 2021
(Unaudited)
Aspirational Consumer Lifestyle Corp. (the “Company”), was a blank check company incorporated as a Cayman Islands exempted company on July 7, 2020. The Company was formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar business combination with 1 or more businesses.
Business Combination
As previously announced, Aspirational Consumer Lifestyle Corp. (“Aspirational” and, after the Domestication as described below, “Wheels
On July 13, 2021, as contemplated by In connection with the closing of the Merger Agreement, and described in the section titled “Domestication Proposal” beginning on page 145 of the final prospectus and definitive proxy statement, dated June 23, 2021 (the “proxy statement/prospectus”) and filed on June 23, 2021 with the Securities and Exchange Commission (the “SEC”), Aspirational filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which Aspirational was domesticated and continues as a Delaware corporation, changing its name to “Wheels Up Experience Inc.” (the “Domestication”).
As a result of and upon
On July 13, 2021, as contemplated by the Merger Agreement and described in the section titled “BCA Proposal” beginning on page 91 of the proxy statement/prospectus, Wheels Up consummated the merger transactions contemplated by the Merger Agreement, wherebyClosing Date, (i) the Blockers simultaneously merged with and into the respective Blocker Merger Subs, with the Blockers surviving each merger as wholly owned subsidiaries of AspirationalWheels Up (the “First Step Blocker Mergers”), (ii) thereafter, the surviving Blockers simultaneously merged with and into Blocker Sub, with Blocker Sub surviving each merger (the “Second Step Blocker Mergers”), and (iii) thereafter, Merger Sub merged with and into WUP, with WUP surviving the merger, with the CompanyWheels Up as its managing member (the “Company Merger” and collectively with the First Step Blocker Mergers and the Second Step Blocker Mergers, the “Mergers” and, together with the Domestication, the “Business Combination”) (See Note 3).
As a result of and upon the closing of the Mergers (the “Closing”), among other things, (i) all issued and outstanding equity interests of each Blocker (other than any such interests held in treasury or owned by such Blocker) as of immediately prior to the effective time of the First Step Blocker Mergers (the “First Step Blocker Effective Time”) were cancelled and converted into the right to receive in the aggregate (A) a number of shares of Wheels Up Class A common stock that is equal to the Exchange Ratio (as defined in the proxy statement/prospectus) multiplied by the aggregate number of WUP preferred interests held by such Blocker as of immediately prior to the First Step Blocker Effective Time and (B) any Earnout Shares (as defined below) that may be due and issuable pursuant to the
5
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Merger Agreement, and (ii) each outstanding WUP common interest and preferred interest (other than any WUP common interests subject to the WUP awards discussed below and the WUP preferred interests held by Blocker Sub) immediately prior to the First Step Blocker Effective Time was cancelled in exchange for the right to receive (A) a number of shares of Wheels Up Class A common stock that is equal to the Exchange Ratio and (B) any Earnout Shares that may be due and issuable pursuant to the Merger Agreement, which, in the case of all shares described in clauses (i) and (ii), together with the shares of Wheels Up Class A common stock reserved in respect of the awards described immediately below, in the aggregate equal an aggregate merger consideration of $1,885,000,000, in addition to a number of shares of Wheels Up Class A common stock that may be issued post-Closing if WUP Options (as defined below) were to be cash exercised and due to the conversion of any WUP Profits Interests (as defined below) for shares of Wheels Up Class A common stock at a level above the intrinsic value of the profits interests immediately after Closing based on a reference price per share of Wheels Up Class A common stock of $10.00, plus any Earnout Shares.
In addition, as a result of the Closing, (i) each option to purchase WUP common interests (the “WUP Options”) that was outstanding immediately prior to the effective time of the Company Merger was converted into the right to receive (as adjusted, including with respect to the applicable exercise price, based on the Exchange Ratio) an option related to the shares of Wheels Up Class A common stock, (ii) each award of WUP profits interests (the “WUP Profits Interests”) granted under any WUP incentive plan or granted directly in WUP that was outstanding immediately prior to the effective time of the Company Merger was converted into the right to receive (as adjusted based on the Exchange Ratio and to maintain the intrinsic value of such award) an award of profits interests of Wheels Up, which, upon vesting and, for members of senior management, subject to the expiration of the Lock-Up Period (as defined in the Registration Rights Agreement), are exchangeable for shares of Wheels Up Class A common stock, and (iii) each award of WUP restricted interests (the “WUP Restricted Interests”) granted under any WUP incentive plan was converted into the right to receive (as adjusted based on the Exchange Ratio) an award of restricted shares of Wheels Up Class A common stock, with substantially the same vesting and termination-related provisions as such WUP Restricted Interest.
Further, as a result of the Closing, existing WUP equityholders have the right to receive, including profits interests holders and restricted interest holders, but excluding option holders, through the issuance of Wheels Up EO Units (as defined in the Merger Agreement) that upon vesting may become exchangeable for, up to an aggregate of 9,000,000 additional shares of Wheels Up Class A common stock in 3 equal tranches which are issuable upon the achievement of share price thresholds for Wheels Up Class A common stock of $12.50, $15.00 and $17.50, respectively (such shares, the “Earnout Shares”).
Business Prior to the Business Combination
All activity through June 30, 2021, related to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below, and identifying a target company for a business combination and consummating the acquisition of Wheels Up Partners Holdings LLC, a Delaware limited liability company (see Note 6).
The registration statement for the Company’s Initial Public Offering was declared effective on September 22, 2020. On September 25, 2020 the Company consummated the Initial Public Offering of 22,500,000 units (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), at $10.00 per Unit, generating gross proceeds of $225,000,000 which is described in Note 3.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 4,333,333 warrants (the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to Aspirational Consumer Lifestyle Sponsor LLC (the “Sponsor”), generating gross proceeds of $6,500,000, which is described in Note 4.
Following the closing of the Initial Public Offering on September 25, 2020, an amount of $225,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds in the Trust Account to the Company’s shareholders, as described below.
6
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
On September 29, 2020, the underwriters notified the Company of their intent to partially exercise their over-allotment option for settlement on October 2, 2020. As such, on October 2, 2020, the Company consummated the sale of an additional 1,474,632 Units, at $10.00 per Unit, and the sale of an additional 196,617 Private Placement Warrants, at $1.50 per Private Placement Warrant, generating total gross proceeds of $15,041,246. A total of $14,746,320 of the net proceeds was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account on October 2, 2020 to $239,746,320 (see Note 9).
Transaction costs amounted to $13,763,667, consisting of $4,794,926 of underwriting fees, $8,391,121 of deferred underwriting fees and $577,619 of other offering costs.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
entire year. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
7
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Use of Estimates
The preparation of
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual Actual results could differ significantly from those estimates.
Cashestimates due to risks and Cash Equivalents
uncertainties, including uncertainty in the current economic environment due to the coronavirus pandemic, and any evolutions thereof (“COVID-19”). The Company considers all short-term investments with an original maturitymost significant estimates include, but are not limited to, the useful lives and residual values of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents asaircraft, the fair value of June 30, 2021financial assets and December 31, 2020.
Marketable Securities Held in Trust Account
At June 30, 2021liabilities, acquired intangible assets, goodwill, contingent consideration, and December 31, 2020, substantially allother assets and liabilities, sales and use tax, the estimated life of member relationships, the determination of the allowance for credit losses, impairment assessments, the determination of the valuation allowance for deferred tax assets heldand the incremental borrowing rate for leases.
Class A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s ordinary shares feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at June 30, 2021, Class A ordinary shares subject to possible redemption are presented as temporary equity, outside of the shareholders’ equity section of the Company’scondensed consolidated balance sheet.
The Company recognizes changessheets and the condensed consolidated statements of other comprehensive loss as a cumulative translation adjustment.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on the analysis, it was determined that there was no impairment to our long-lived assets. In addition, we performed an interim quantitative impairment assessment of goodwill on June 1, 2022, using a discounted cash flow approach, which did not result in impairment to goodwill.
| June 30, 2022 | December 31, 2021 | ||||||||||
| Aircraft | $ | 557,525 | $ | 482,848 | |||||||
| Software development costs | 49,520 | 35,818 | |||||||||
| Leasehold improvements | 9,023 | 12,584 | |||||||||
| Computer equipment | 2,441 | 2,147 | |||||||||
| Buildings and improvements | 1,425 | 1,424 | |||||||||
| Furniture and fixtures | 2,767 | 1,960 | |||||||||
| Tooling | 3,507 | 3,129 | |||||||||
| Vehicles | 1,514 | 1,142 | |||||||||
| 627,722 | 541,052 | ||||||||||
| Less: Accumulated depreciation and amortization | (238,327) | (223,216) | |||||||||
| Total | $ | 389,395 | $ | 317,836 | |||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Services transferred at a point in time: | |||||||||||||||||||||||
| Flights, net of discounts and incentives | $ | 284,071 | $ | 212,660 | $ | 520,434 | $ | 403,134 | |||||||||||||||
| Aircraft management | 58,307 | 47,594 | 116,356 | 96,017 | |||||||||||||||||||
| Other | 55,789 | 5,450 | 62,967 | 9,739 | |||||||||||||||||||
| Services transferred over time: | |||||||||||||||||||||||
| Memberships | 24,020 | 16,188 | 44,667 | 31,162 | |||||||||||||||||||
| Aircraft management | 2,411 | 2,361 | 4,868 | 4,818 | |||||||||||||||||||
| Other | 914 | 1,327 | 1,855 | 2,367 | |||||||||||||||||||
| Total | $ | 425,512 | $ | 285,580 | $ | 751,147 | $ | 547,237 | |||||||||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| Flights - Prepaid Blocks and jet cards | $ | 989,019 | $ | 876,750 | |||||||
| Memberships - annual dues | 42,886 | 47,069 | |||||||||
| Memberships - initiation fees | 3,785 | 4,072 | |||||||||
| Flights - credits | 5,190 | 6,633 | |||||||||
| Other | 192 | 960 | |||||||||
| Deferred revenue - total | 1,041,072 | 935,484 | |||||||||
| Less: Deferred revenue - current | (1,039,279) | (933,527) | |||||||||
| Deferred revenue - non-current | $ | 1,793 | $ | 1,957 | |||||||
| Deferred revenue - beginning balance | $ | 935,484 | |||
| Amounts deferred during the period | 702,882 | ||||
| Revenue recognized from amounts included in the deferred revenue beginning balance | (378,699) | ||||
| Revenue from current period sales | (218,595) | ||||
| Deferred revenue - ending balance | $ | 1,041,072 | |||
| Current assets | $ | 4,452 | |||
| Goodwill | 13,069 | ||||
| Other assets | 22,048 | ||||
| Total assets acquired | 39,569 | ||||
| Total liabilities assumed | (24,101) | ||||
| Net assets acquired | $ | 15,468 | |||
| Current assets | $ | 51,723 | |||
| Property and equipment, net | 2,012 | ||||
| Operating lease right-of-use assets | 2,960 | ||||
| Goodwill | 83,399 | ||||
| Intangible assets | 20,919 | ||||
| Restricted cash | 27,507 | ||||
| Other assets | 1,536 | ||||
| Total assets acquired | 190,056 | ||||
| Total liabilities assumed | (81,865) | ||||
| Net assets acquired | $ | 108,191 | |||
| Amount (In thousands) | Weighted-Average Amortization Period (Years) | ||||||||||
| Customer relationships | $ | 16,521 | 5.7 | ||||||||
| Backlog | 1,457 | 1.5 | |||||||||
| Trade name | 1,930 | 1.9 | |||||||||
| Developed technology | 1,011 | 5.8 | |||||||||
| Total acquired intangible assets | $ | 20,919 | 5.1 | ||||||||
8
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net revenue | $ | 425,512 | $ | 316,908 | $ | 788,966 | $ | 605,114 | |||||||||||||||
| Net loss | $ | (91,443) | $ | (27,450) | $ | (179,132) | $ | (61,477) | |||||||||||||||
| Net loss attributable to Wheels Up Experience Inc. | $ | (91,443) | $ | (24,798) | $ | (178,756) | $ | (55,846) | |||||||||||||||
| Net loss per share | $ | (0.37) | $ | (0.15) | $ | (0.73) | $ | (0.33) | |||||||||||||||
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNEgoodwill for the six months ended June 30, 2022, was as follows (in thousands):
| Balance as of December 31, 2021 | $ | 437,398 | |||
| Acquisition of Alante Air | 13,069 | ||||
| Acquisition of Air Partner | 83,399 | ||||
| Foreign currency translation adjustments | (5,539) | ||||
| Balance as of June 30, 2022 | $ | 528,327 | |||
| June 30, 2022 | |||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| Status | $ | 80,000 | $ | 19,644 | $ | 60,356 | |||||||||||
| Customer relationships | 89,880 | 19,081 | 70,799 | ||||||||||||||
| Non-competition agreement | 210 | 210 | — | ||||||||||||||
| Trade name | 16,015 | 6,761 | 9,254 | ||||||||||||||
| Developed technology | 20,480 | 7,831 | 12,649 | ||||||||||||||
| Leasehold interest - favorable | 600 | 69 | 531 | ||||||||||||||
| Backlog | 1,348 | 271 | 1,077 | ||||||||||||||
| Total | $ | 208,533 | $ | 53,867 | $ | 154,666 | |||||||||||
| December 31, 2021 | |||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| Status | $ | 80,000 | $ | 15,644 | $ | 64,356 | |||||||||||
| Customer relationships | 74,600 | 14,443 | 60,157 | ||||||||||||||
| Non-competition agreement | 210 | 209 | 1 | ||||||||||||||
| Trade name | 14,230 | 5,493 | 8,737 | ||||||||||||||
| Developed technology | 19,545 | 6,380 | 13,165 | ||||||||||||||
| Leasehold interest - favorable | 600 | 57 | 543 | ||||||||||||||
| Total | $ | 189,185 | $ | 42,226 | $ | 146,959 | |||||||||||
(Unaudited)
For issued or modified warrants that meet all
| June 30, 2022 | |||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| Intangible liabilities | $ | 20,000 | $ | 4,917 | $ | 15,083 | |||||||||||
| December 31, 2021 | |||||||||||||||||
| Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||
| Intangible liabilities | $ | 20,000 | $ | 3,917 | $ | 16,083 | |||||||||||
| Year ending December 31, | Intangible Assets | Intangible Liabilities | |||||||||
| 2022 | $ | 12,832 | $ | 1,000 | |||||||
| 2023 | 23,608 | 2,000 | |||||||||
| 2024 | 22,910 | 2,000 | |||||||||
| 2025 | 22,497 | 2,000 | |||||||||
| 2026 | 21,638 | 2,000 | |||||||||
| Thereafter | 51,181 | 6,083 | |||||||||
| Total | $ | 154,666 | $ | 15,083 | |||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| Cash and cash equivalents | $ | 426,984 | $ | 160,646 | |||||||
| Restricted cash | 27,432 | 12,077 | |||||||||
| Total | $ | 454,416 | $ | 172,723 | |||||||
| Level 1 - | Quoted prices, unadjusted, in active markets for identical assets or liabilities that can be accessed at the measurement date. | ||||
| Level 2 - | Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. | ||||
| Level 3 - | Unobservable inputs developed using our own estimates and assumptions, which reflect those that market participants would use in pricing the asset or liability. | ||||
| June 30, 2022 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 330,782 | $ | — | $ | — | $ | 330,782 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Warrant liability - Public Warrants | 2,877 | — | — | 2,877 | |||||||||||||||||||
| Warrant liability - Private Warrants | — | 1,631 | — | 1,631 | |||||||||||||||||||
| Total liabilities | $ | 2,877 | $ | 1,631 | $ | — | $ | 4,508 | |||||||||||||||
| December 31, 2021 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Fair Value | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 408,082 | $ | — | $ | — | $ | 408,082 | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Warrant liability - Public Warrants | 6,553 | — | — | 6,553 | |||||||||||||||||||
| Warrant liability - Private Warrants | — | 3,715 | — | 3,715 | |||||||||||||||||||
| Total liabilities | $ | 6,553 | $ | 3,715 | $ | — | $ | 10,268 | |||||||||||||||
| Public Warrants | Private Warrants | Total Warrant Liability | |||||||||||||||
| Fair value as of December 31, 2021 | $ | 6,553 | $ | 3,715 | $ | 10,268 | |||||||||||
| Change in fair value of warrant liability | (3,676) | (2,084) | (5,760) | ||||||||||||||
| Fair value as of June 30, 2022 | $ | 2,877 | $ | 1,631 | $ | 4,508 | |||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating lease costs | $ | 9,723 | $ | 9,703 | $ | 18,825 | $ | 17,257 | |||||||||||||||
| Short-term lease costs | 9,221 | 5,760 | 14,514 | 12,808 | |||||||||||||||||||
| Total lease costs | $ | 18,944 | $ | 15,463 | $ | 33,339 | $ | 30,065 | |||||||||||||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities: | |||||||||||
| Operating cash flows paid for operating leases | $ | 18,962 | $ | 17,711 | |||||||
| Right-of-use assets obtained in exchange for operating lease obligations | $ | 42,087 | $ | 64,518 | |||||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| Weighted-average remaining lease term (in years): | |||||||||||
| Operating leases | 6.0 | 6.4 | |||||||||
| Weighted-average discount rate: | |||||||||||
| Operating leases | 9.1 | % | 9.5 | % | |||||||
| Year ending December 31, | Operating Leases | ||||
| 2022 | $ | 19,301 | |||
| 2023 | 36,663 | ||||
| 2024 | 31,271 | ||||
| 2025 | 18,041 | ||||
| 2026 | 11,249 | ||||
| Thereafter | 42,484 | ||||
| Total lease payments | 159,009 | ||||
| Less: Imputed interest | (39,830) | ||||
| Total lease obligations | $ | 119,179 | |||
Offering Costs
Offering costs consist The RSUs granted under the 2022 Inducement Plan are subject to time-based vesting and will vest ratably on December 30, 2022, December 30, 2023 and December 30, 2024, respectively, in each case subject to Mr. Smith’s continued employment with Wheels Up through the vesting date.
| Number of WUP Profits Interests | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Outstanding WUP profits interests as of January 1, 2022 | 28,819 | $ | 0.42 | ||||||||
| Granted | — | — | |||||||||
| Exchanged | — | — | |||||||||
| Expired/forfeited | (6) | 0.24 | |||||||||
| Outstanding WUP profits interests as of June 30, 2022 | 28,813 | $ | 0.42 | ||||||||
| Number of WUP Profits Interests | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Non-vested WUP profits interests as of January 1, 2022 | 4,733 | $ | 0.35 | ||||||||
| Granted | — | — | |||||||||
| Vested | (2,362) | 0.34 | |||||||||
| Forfeited | (6) | 0.24 | |||||||||
| Non-vested WUP profits interests as of June 30, 2022 | 2,365 | $ | 0.37 | ||||||||
| Number of WUP Restricted Interests | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Non-vested WUP restricted interests as of January 1, 2022 | 4,662 | $ | 3.98 | ||||||||
| Granted | — | — | |||||||||
| Vested | (3,899) | 4.00 | |||||||||
| Forfeited | — | — | |||||||||
| Non-vested WUP restricted interests as of June 30, 2022 | 763 | $ | 3.91 | ||||||||
| Number of WUP Stock Options | Weighted- Average Exercise Price | Weighted-Average Grant Date Fair Value | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Outstanding WUP stock options as of January 1, 2022 | 15,713 | $ | 7.52 | $ | 1.19 | ||||||||||||
| Granted | — | — | — | ||||||||||||||
| Exercised | — | — | — | ||||||||||||||
| Forfeited | (691) | 7.55 | 1.12 | ||||||||||||||
| Expired | — | — | — | ||||||||||||||
| Outstanding WUP stock options as of June 30, 2022 | 15,022 | $ | 7.52 | $ | 1.19 | ||||||||||||
| Exercisable WUP stock options as of June 30, 2022 | 12,289 | $ | 7.42 | $ | 1.07 | ||||||||||||
| Number of WUP Stock Options | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Non-vested WUP stock options as of January 1, 2022 | 3,971 | $ | 1.63 | ||||||||
| Granted | — | — | |||||||||
| Vested | (990) | 1.34 | |||||||||
| Expired | — | — | |||||||||
| Forfeited | (248) | 1.64 | |||||||||
| Non-vested WUP stock options as of June 30, 2022 | 2,733 | $ | 1.73 | ||||||||
| Number of RSUs | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Non-vested RSUs as of January 1, 2022 | 8,411 | $ | 7.32 | ||||||||
Granted(1) | 13,637 | 3.38 | |||||||||
| Vested | (512) | 6.35 | |||||||||
| Forfeited | (1,923) | 6.23 | |||||||||
| Non-vested RSUs as of June 30, 2022 | 19,613 | $ | 4.42 | ||||||||
| Number of PSUs | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Non-vested PSUs as of January 1, 2022 | — | $ | — | ||||||||
Granted(1) | 1,149 | 2.13 | |||||||||
| Vested | — | — | |||||||||
| Forfeited | — | — | |||||||||
Non-vested PSUs as of June 30, 2022(2) | 1,149 | $ | 2.13 | ||||||||
| Number of Wheels Up Stock Options | Weighted- Average Exercise Price | Weighted-Average Grant Date Fair Value | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Outstanding Wheels Up stock options as of January 1, 2022 | 921 | $ | 10.00 | $ | 4.75 | ||||||||||||
| Granted | — | — | — | ||||||||||||||
| Exercised | — | — | — | ||||||||||||||
| Forfeited | — | — | — | ||||||||||||||
| Expired | — | — | — | ||||||||||||||
| Outstanding Wheels Up stock options as of June 30, 2022 | 921 | $ | 10.00 | $ | 4.75 | ||||||||||||
| Exercisable Wheels Up stock options as of June 30, 2022 | 307 | $ | 10.00 | $ | 4.75 | ||||||||||||
| Number of Wheels Up Stock Options | Weighted-Average Grant Date Fair Value | ||||||||||
| (in thousands) | |||||||||||
| Non-vested Wheels Up stock options as of January 1, 2022 | 768 | $ | 4.75 | ||||||||
| Granted | — | — | |||||||||
| Vested | (154) | 4.75 | |||||||||
| Expired | — | — | |||||||||
| Forfeited | — | — | |||||||||
| Non-vested Wheels Up stock options as of June 30, 2022 | 614 | $ | 4.75 | ||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Cost of revenue | $ | 3,307 | $ | 49 | $ | 7,739 | $ | 100 | |||||||||||||||
| Technology and development | 655 | 93 | 1,296 | 187 | |||||||||||||||||||
| Sales and marketing | 2,857 | 216 | 5,558 | 452 | |||||||||||||||||||
| General and administrative | 13,962 | 990 | 28,742 | 2,023 | |||||||||||||||||||
| Total equity-based compensation expense | $ | 20,781 | $ | 1,348 | $ | 43,335 | $ | 2,762 | |||||||||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||||||||||||||
Number of WUP common units held by Wheels Up(1) | 244,274,300 | 100.0 | % | 245,834,569 | 99.2 | % | |||||||||||||||||
Number of vested WUP profits interests attributable to non-controlling interests(2) | — | % | — | % | 2,045,995 | 0.8 | % | ||||||||||||||||
| Total WUP common units and vested WUP profits interests outstanding | 244,274,300 | 100.0 | % | 247,880,564 | 100.0 | % | |||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss attributable to Wheels Up Experience Inc. - basic and diluted | $ | (92,760) | $ | (26,156) | $ | (181,413) | $ | (55,565) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average shares of Class A common stock outstanding - basic and diluted | 244,086 | 169,024 | 244,347 | 168,936 | |||||||||||||||||||
| Basic and diluted net loss per share of Class A common stock | $ | (0.38) | $ | (0.15) | $ | (0.74) | $ | (0.33) | |||||||||||||||
period:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Warrants | 12,521,494 | — | 12,521,494 | — | |||||||||||||||||||
| Earnout Shares | 9,000,000 | — | 9,000,000 | — | |||||||||||||||||||
RSUs(1) | 22,574,086 | — | 22,574,086 | — | |||||||||||||||||||
| Stock options | 15,943,297 | 16,234,297 | 15,943,297 | 16,234,297 | |||||||||||||||||||
| Total anti-dilutive securities | 60,038,877 | 16,234,297 | 60,038,877 | 16,234,297 | |||||||||||||||||||
Income Taxes
The Company accounts for
ASC 740, “Income Taxes” (“ASC 740”) clarifies Accordingly, a full valuation allowance has been established on the accounting for uncertaintymajority of our net deferred tax assets in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were 0 unrecognized tax benefits and 0 amounts accrued for interest and penalties as of June 30, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. Thethe U.S.
The Company is considered an exempted Cayman Islands Companyeffects associated with the Global Intangible Low-Taxed Income (“GILTI”) provisions and is presently not subject to income taxes or incometreats the tax filing requirementseffects of GILTI as a current period expense in the Cayman Islands or the United States.
period incurred.
Net Loss per Ordinary Share
Net income (loss) per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. The Company has not considered the effect of the warrants sold in the Public Offering and Private Placement to purchase an aggregate of 12,521,494 shares in the calculation of diluted loss per share, since the inclusion of such warrants would be anti-dilutive.
The Company’s statements of operations includes a presentation of income (loss) per share for Redeemable Class A Ordinary Shares in a manner similar
Net loss per share, basic and diluted, for Non-Redeemable Class A and Class B Ordinary Shares is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to Redeemable Class A Ordinary Shares, by the weighted average number of non-redeemable ordinary shares outstanding for the period.
9
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Non-Redeemable Class A and Class B Ordinary Shares includes Founder Shares and non-redeemable ordinary shares as these shares do not have any redemption features. Non-Redeemable Class A and Class B Ordinary Shares participates in the income or loss on marketable securities based on non-redeemable ordinary shares’ proportionate interest.
| | | | | | |
| | Three Months | | Six Months | ||
| | Ended | | Ended | ||
| | June 30, | | June 30, | ||
| | 2021 | | 2021 | ||
Redeemable Class A Ordinary Shares | | | |
| | |
Numerator: Earnings allocable to Redeemable Class A Ordinary Shares | | | |
| | |
Interest earned on marketable securities held in Trust Account | | $ | 2,676 | | $ | 47,979 |
Net income allocable to shares subject to possible redemption | | $ | 2,676 | | $ | 47,979 |
Denominator: Weighted Average Redeemable Class A Ordinary Shares | |
| | |
|
|
Basic and diluted weighted average shares outstanding | |
| 23,974,632 | |
| 22,620,218 |
Basic and diluted net income per share | | $ | — | | $ | — |
Non-Redeemable Ordinary Shares | |
| | |
|
|
Numerator: Net Loss minus Net Earnings | |
| | |
|
|
Net loss | | $ | (6,726,593) | | $ | (14,893,876) |
Net loss allocable to Redeemable Class A Ordinary Shares | |
| (2,676) | |
| (47,979) |
Non-Redeemable Net Loss | | $ | (6,729,269) | | $ | (14,941,855) |
Denominator: Weighted Average Non-Redeemable Class A and Class B Ordinary Shares | |
| | |
|
|
Basic and diluted weighted average shares outstanding | |
| 5,993,658 | |
| 6,663,340 |
Basic and diluted net loss per share | | $ | (1.12) | | $ | (2.24) |
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity's Own Equity (Subtopic 815-40)(“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact of adoption of ASU 2020-06.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.
10
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold 23,974,632 Units, inclusive of 1,474,632 Units sold to the underwriters on October 2, 2020 upon the underwriters’ election to partially exercise their over-allotment option (see Note 9), at a purchase price of $10.00 per Unit. Each Unit consists of 1 Class A ordinary share and one-third of one redeemable warrant (“Public Warrant”).warrants. Each whole Public Warrantwarrant entitles the holder to purchase 1 share of Class A ordinary share at an exercise price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 4,333,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, for an aggregate purchase price of $6,500,000. On October 2, 2020, in connection with the underwriters’ election to partially exercise their over-allotment option, the Company sold an additional 196,617 Private Placement Warrants to the Sponsor, at a price of $1.50 per Private Placement Warrant, generating gross proceeds of $294,926. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. Each Private Placement Warrant is exercisable for 1 Class A ordinary sharecommon stock at a price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from the sale of theshare. The Public Warrants and Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On July 15, 2020, the Sponsor paid $25,000 to cover certain offering and formation costs of the Company in consideration for 6,468,750 Class B ordinary shares (the “Founder Shares”). The Founder Shares included an aggregate of up to 843,750 shares subject to forfeiture to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would equal 20% of the Company’s issued and outstanding ordinary shares after the Initial Public Offering. As a result of the underwriters’ election to partially exercise their over-allotment option on October 2, 2020, 475,092 Founder Shares were forfeited, resulting in an aggregate of 5,993,658 Founder Shares issued and outstanding as of October 2, 2020 (see Note 9), NaN of which are currently subject to forfeiture.
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and other similar transactions) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, amalgamation, share exchange, reorganization or other similar transaction that results in all of the Public Shareholders having the right to exchange their ordinary shares for cash, securities or other property.
Administrative Services and Support Services Agreements
The Company has agreed, commencing on September 23, 2020 to pay the Sponsor $10,000 per month for office space, administrative and support services (the “Administrative Services Agreement”). Such administrative services agreement was assigned from the Sponsor to Turmeric Capital, an affiliate of our Chief Executive Officer, on December 31, 2020. Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees.
11
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The Company has also agreed, commencing on September 23, 2020, to pay Turmeric Capital Singapore Pte Ltd, an affiliate of its Chief Executive Officer, $10,000 per month for support services, including accounting, book and record keeping and cash management services (the “Support Services Agreement”). Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees.
For the three months ended June 30, 2021, the Company did not incur fees for the services rendered under the Administrative Services Agreement and Support Services Agreement.
For the six months ended June 30, 2021, the Company incurred and paid an aggregate of $57,532, in fees for the services rendered under the Administrative Services Agreement and Support Services Agreement, including for certain services provided in 2020.
Promissory Note — Related Party
On July 15, 2020, the Company issued a promissory note (the “IPO Promissory Note”) to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The IPO Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2020 and (ii) the completion of the Initial Public Offering. The outstanding balance under the IPO Promissory Note of $100,349 was repaid at the closing of the Initial Public Offeringbecame exercisable on September 25, 2020.
On March 8, 2021, the Company issued a promissory note (the “Promissory Note”) to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal amount of $100,000. The Promissory Note is subject to interest of 2.75% per annum and payable on the earlier of (i) September 25, 2022 or (ii) the completion of a Business Combination.
On April 30, 2021, the Company issued a promissory note to the Sponsor, pursuant to which the Company borrowed an aggregate principal amount of $150,000. The promissory note is subject to interest of 2.75% per annum and payable on the earlier of (i) September 25, 2022 and (ii) the completion of a Business Combination.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into warrants at a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but 0 proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of June 30, 2021, the Company had 0 working capital loans outstanding.
12
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on September 25, 2020, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to Class A ordinary shares). The holders of these securities will be entitled to make up to 3 demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
On July 13, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, Wheels Up, the Sponsor, certain equityholders of WUP, Leo Austin, Neil Jacobs, Frank Newman and the other parties thereto entered into an Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”). The material terms of the Registration Rights Agreement are described in the section of the proxy statement/prospectus beginning on page 112 titled “BCA Proposal—Related Agreements—Amended and Restated Registration Rights Agreement.” Such description is qualified in its entirety by the text of the Registration Rights Agreement.
Underwriting Agreement
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,391,121, upon the partial exercise of the over-allotment, in the aggregate (see Note 9). The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Advisory Fee
Connaught (UK) Limited (“Connaught”), acted as the Company’s independent financial advisor in connection with the Initial Public Offering, for which it will receive customary fees. The Company has agreed to pay Connaught a fee in an amount equal to 10% of the underwriting commission payable to the underwriters. The fee to Connaught was paid in part at the closing of Initial Public Offering and will be paid in part at the closing of a Business Combination, in the same proportion as the non-deferred and deferred underwriting commission payable to the underwriters. The underwriters have agreed to reimburse the Company for the fee to Connaught as it becomes payable out of the underwriting commission.
Upon the successful completion of a Business Combination or the Company’s liquidation, the Company will also pay each of its independent directors $3,125 per month in the aggregate for his or her service to the Company. The fees will be deferred and become payable only upon the Company’s consummation of a Business Combination or the Company’s liquidation. The independent directors have waived their rights against the Trust Account with respect to such payment.
Advisory Services
On January 22, 2021, the Company entered into an agreement for advisory services in connection with its business combination with WUP. The advisory services covered by the agreement include the strategy, timing, negotiation of the terms of the business combination and other customary financial advisory services. Upon a successful business combination with Wheels Up, the Company will pay a transaction fee of $10,000,000. The agreement expires on January 21, 2022 and expressly waives the right of any claim against the assets in the Trust Account by the advisory services provider.
13
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
Seventh Amended and Restated Limited Liability Company Agreement of WUP
On July 13, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, the existing Sixth Amended and Restated Limited Liability Company Agreement of WUP was amended and restated in its entirety to become the Seventh Amended and Restated Limited Liability Company Agreement (the “A&R LLCA”). The material terms of the A&R LLCA are described in the section of the proxy statement/prospectus beginning on page 114 titled “BCA Proposal—Related Agreements—Seventh Amended and Restated Limited Liability Company Agreement of the Surviving Entity.” Such description is qualified in its entirety by the text of the A&R LLCA.
Indemnification Agreements
On July 13, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, Wheels Up entered, and expects to continue to enter into, indemnification agreements with its directors and executive officers. Each indemnification agreement provides for indemnification and advancement by Wheels Up of certain expenses and costs, if the basis of the indemnitee’s involvement was by reason of the fact that the indemnitee is or was a director, officer, employee or agent of Wheels Up or any of its subsidiaries or was serving at Wheels Up’s request in an official capacity for another entity, to the fullest extent permitted by the laws of the state of Delaware.
NOTE 7. SHAREHOLDERS’ EQUITY
Preference Shares — The Company is authorized to issue 5,000,000 preference shares with a par value of $0.0001. The Company’s Board of Directors will be authorized to fix the voting rights, if any, designations, powers, preferences, the relative, participating, optional or other special rights and any qualifications, limitations and restrictions thereof, applicable to the shares of each series. The Board of Directors will be able to, without shareholder approval, issue preferred shares with voting and other rights that could adversely affect the voting power and other rights of the holders of the ordinary shares and could have anti-takeover effects. At June 30, 2021, there were 0 preference shares issued or outstanding.
Class A Ordinary Shares — The Company is authorized to issue 500,000,000 Class A ordinary shares, with a par value of $0.0001 per share. Holders of Class A ordinary shares are entitled to 1 vote for each share. At June 30, 2021 and December 31, 2020, there were 0 and 2,681,422 Class A ordinary shares issued and outstanding, excluding 23,974,632 and 21,293,210 Class A ordinary shares subject to possible redemption, respectively.
Class B Ordinary Shares — The Company is authorized to issue 50,000,000 Class B ordinary shares, with a par value of $0.0001 per share. Holders of the Class B ordinary shares are entitled to 1 vote for each share. At June 30, 2021 and December 31, 2020, there were 5,993,658 Class B ordinary shares issued and outstanding.
Holders of Class A ordinary shares and holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s shareholders except as otherwise required by law.
The Class B ordinary shares will automatically convert into Class A ordinary shares at the time of a Business Combination or earlier at the option of the holder, on a 1-for-one basis, subject to adjustment for share sub-divisions, share dividends, rights issuances, consolidations, reorganizations, recapitalizations and the like. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which the Class B ordinary shares will convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the issued and outstanding Class B ordinary shares agree to waive such anti-dilution adjustment with respect to any such issuance or deemed issuance) so that the number of Class A ordinary shares issuable upon conversion of all Class B ordinary shares will equal, in the aggregate, on an as-converted basis, 20% of the sum of all ordinary shares issued and outstanding upon the completion of the Initial Public Offering plus all Class A ordinary shares and equity-linked securities issued or deemed issued in connection with a Business Combination, excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination.
14
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 8. WARRANTS
Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering. The Public Warrants willAspirational initial public offering, and expire five years from the completion of athe Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated
The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A ordinary shares issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of the Business Combination, and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A ordinary shares are, at the time of any exercise of a warrant, not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $18.00. Once the warrants become exercisable, the Company may redeem the outstanding warrants (except as described with respect to the Private Placement Warrants):
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify thecommon stock underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A ordinary share equals or exceeds $10.00. Once the warrants become exercisable, the Company may redeem the outstanding warrants:
15
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The exercise price and number of ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the eventand Private Warrants. As of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants willJune 30, 2022, there have not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Periodbeen any warrants exercised and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price to be determined in good faith by the Company’s Board of Directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
16
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
|
|
|
|
|
|
At June 30, 2021 and December 31, 2020, there were 7,991,544 Public Warrants and 4,529,950 Private Placement Warrants outstanding.
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| | | | | | | | |
| | | | June 30, | | December 31, | ||
Description |
| Level |
| 2021 |
| 2020 | ||
Assets: | |
| | | | | |
|
Marketable securities held in Trust Account |
| 1 | | $ | 239,843,104 | | $ | 239,795,125 |
| | | | | | | | |
Liabilities: | | | | | | | | |
Warrant Liability – Public Warrants | | 1 | | | 15,343,764 | | | 8,471,037 |
Warrant Liability – Private Placement Warrants | | 3 | | | 8,697,504 | | | 4,801,747 |
The Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying June 30, 2021 condensed balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
The Company established the initial fair value for the Warrants on September 25, 2020, the date of the Company’s Initial Public Offering, using a Monte Carlo simulation model for the Private Placement Warrants and the Public Warrants. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of one shareOn July 1, 2022, we granted approximately 2.1 million shares of Class A ordinary sharescommon stock, which were all granted in the form of RSUs to our new Chief Financial Officer, Todd Smith, under the 2022 Inducement Plan. The RSUs granted under the 2022 Inducement Plan will vest ratably on December 30, 2022, December 30, 2023 and one-fourth of one Public Warrant), (ii) the sale of Private Placement Warrants, and (iii) the issuance of Class B ordinary shares, first to the Warrants based on their fair values as determined at initial measurement, with the remaining proceeds allocated to Class A ordinary sharesDecember 30, 2024, respectively, in each case subject to possible redemption, Class A ordinary shares and Class B ordinary shares based on their relative fair values atMr. Smith’s continued employment with Wheels Up through the initial measurementvesting date. The Warrants were classified as Level 3 at the initial measurement date due to the use of unobservable inputs. The measurement of the Public Warrants as of June 30, 2021 and December 31, 2020 is classified as Level 1 due to the use of an observable market quote in an active market.
17
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
The key inputs into the Monte Carlo simulation model for the Private Placement Warrants at June 30, 2021 and December 31, 2020 is as follows:
| | | | | | | |
| | June 30, |
| December 31, |
| ||
Input |
| 2021 |
| 2020 | | ||
Risk-free interest rate | | | 0.87 | % | | 0.43 | % |
Expected term (years) |
| | 5.04 |
| | 5.49 | |
Expected volatility |
| | 28.7 | % | | 20.0 | % |
Exercise price | | $ | 11.50 | | $ | 11.50 | |
Fair value of Units | | $ | 9.98 | | $ | 9.97 | |
Probability of Acquisition | | | 95 | % | | 85 | % |
The following table presents the changes in the fair value of warrant liabilities:
| | | | | | | | | |
|
| Private Placement |
| Public |
| Warrant Liabilities | |||
Fair value as of January 1, 2021 | | $ | 4,801,747 | | $ | 8,471,037 | | $ | 13,272,784 |
Change in valuation inputs or other assumptions |
| | 3,895,757 |
| | 6,872,727 |
| | 10,768,484 |
Fair value as of June 30, 2021 | | $ | 8,697,504 | | $ | 15,343,764 | | $ | 24,041,268 |
18
WHEELS UP EXPERIENCE INC.
(Successor to ASPIRATIONAL CONSUMER LIFESTYLE CORP.)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(Unaudited)
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed consolidated financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
On July 13, 2021, the Company consummated the previously announced merger pursuant to the Merger Agreement.
19
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Aspirational Consumer Lifestyle Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Aspirational Consumer Lifestyle Sponsor LLC.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause Our actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in these forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” included in this Quarterly Report. Unless the forward-looking statements, please refercontext otherwise requires, references in this MD&A section to “Wheels Up”, “we,” “us,” “our,” and “the Company” are intended to mean the Risk Factors sectionbusiness and operations of Amendment No. 1 to the Company’s Annual Report on Form 10-K/A filed with the SEC on May 6, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Cayman Islands on July 7, 2020 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
The issuance of additional shares in a business combination:
20
Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:
Recent Developments
On July 13, 2021, we completed our previously announced business combination with WUP. Following the merger closing, the registrant changed its name from Aspirational Consumer Lifestyle Corp. to Wheels Up Experience Inc. and its classconsolidated subsidiaries.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net loss | $ | (92,760) | $ | (28,954) | $ | (181,800) | $ | (61,167) | |||||||||||||||
| Add back (deduct) | |||||||||||||||||||||||
| Interest expense | — | 4,164 | — | 8,721 | |||||||||||||||||||
| Interest income | (405) | (6) | (482) | (18) | |||||||||||||||||||
| Income tax expense | 320 | — | 320 | — | |||||||||||||||||||
| Other expense, net | 850 | — | 880 | — | |||||||||||||||||||
| Depreciation and amortization | 16,134 | 13,482 | 30,362 | 27,313 | |||||||||||||||||||
| Equity-based compensation expense | 20,781 | 1,348 | 43,335 | 2,762 | |||||||||||||||||||
Public company readiness expense(1) | — | 370 | — | 843 | |||||||||||||||||||
Acquisition and integration expense(2) | 7,511 | 1,116 | 11,345 | 4,374 | |||||||||||||||||||
Restructuring charges(3) | 2,809 | — | 5,483 | — | |||||||||||||||||||
| Change in fair value of warrant liability | (2,129) | — | (5,760) | — | |||||||||||||||||||
| Corporate headquarters relocation expense | — | — | — | 31 | |||||||||||||||||||
Adjusted EBITDA | $ | (46,889) | $ | (8,480) | $ | (96,317) | $ | (17,141) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | $ | 425,512 | $ | 285,580 | $ | 751,147 | $ | 547,237 | |||||||||||||||
| Less: Cost of revenue | (408,898) | (255,188) | (741,656) | (489,695) | |||||||||||||||||||
| Less: Depreciation and amortization | (16,134) | (13,482) | (30,362) | (27,313) | |||||||||||||||||||
| Gross profit (loss) | $ | 480 | $ | 16,910 | $ | (20,871) | $ | 30,229 | |||||||||||||||
Gross margin | 0.1 | % | 5.9 | % | (2.8) | % | 5.5 | % | |||||||||||||||
| Add back: | |||||||||||||||||||||||
| Depreciation and amortization | $ | 16,134 | $ | 13,482 | $ | 30,362 | $ | 27,313 | |||||||||||||||
| Equity-based compensation expense in cost of revenue | 3,307 | 49 | 7,739 | 100 | |||||||||||||||||||
| Acquisition and integration expense in cost of revenue | — | — | — | 1,010 | |||||||||||||||||||
Adjusted Contribution | $ | 19,921 | $ | 30,441 | $ | 17,230 | $ | 58,652 | |||||||||||||||
Adjusted Contribution Margin | 4.7 | % | 10.7 | % | 2.3 | % | 10.7 | % | |||||||||||||||
| As of June 30, | |||||||||||||||||
| 2022 | 2021 | % Change | |||||||||||||||
| Active Members | 12,667 | 10,515 | 20 | % | |||||||||||||
| Three Months Ended June 30, | |||||||||||||||||
| 2022 | 2021 | % Change | |||||||||||||||
| Active Users | 13,119 | 11,281 | 16 | % | |||||||||||||
| Live Flight Legs | 21,705 | 18,234 | 19 | % | |||||||||||||
| Flight revenue per Live Flight Leg | 13,088 | 11,663 | 12 | % | |||||||||||||
| Six Months Ended June 30, | |||||||||||||||||
| 2022 | 2021 | % Change | |||||||||||||||
| Live Flight Legs | 39,331 | 33,512 | 17 | % | |||||||||||||
| Flight revenue per Live Flight Leg | 13,232 | 12,030 | 10 | % | |||||||||||||
usage of our platform, and our growth in flight revenue.
| Three Months Ended June 30, | Change in | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Revenue | $ | 425,512 | $ | 285,580 | $ | 139,932 | 49 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | 408,898 | 255,188 | 153,710 | 60 | % | ||||||||||||||||||
| Technology and development | 14,606 | 8,025 | 6,581 | 82 | % | ||||||||||||||||||
| Sales and marketing | 33,688 | 17,895 | 15,793 | 88 | % | ||||||||||||||||||
| General and administrative | 46,973 | 15,786 | 31,187 | 198 | % | ||||||||||||||||||
| Depreciation and amortization | 16,134 | 13,482 | 2,652 | 20 | % | ||||||||||||||||||
| Gain on sale of aircraft held for sale | (663) | — | (663) | 100 | % | ||||||||||||||||||
| Total costs and expenses | 519,636 | 310,376 | 209,260 | 67 | % | ||||||||||||||||||
| Loss from operations | (94,124) | (24,796) | (69,328) | (280) | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Change in fair value of warrant liability | 2,129 | — | 2,129 | 100 | % | ||||||||||||||||||
| Interest income | 405 | 6 | 399 | ** | |||||||||||||||||||
| Interest expense | — | (4,164) | 4,164 | (100) | % | ||||||||||||||||||
| Other expense, net | (850) | — | (850) | 100 | % | ||||||||||||||||||
| Total other income (expense) | 1,684 | (4,158) | 5,842 | 141 | % | ||||||||||||||||||
| Loss before income taxes | (92,440) | (28,954) | (63,486) | (219) | % | ||||||||||||||||||
| Income tax expense | (320) | — | (320) | 100 | % | ||||||||||||||||||
| Net loss | (92,760) | (28,954) | (63,806) | (220) | % | ||||||||||||||||||
| Less: Net loss attributable to non-controlling interests | — | (2,798) | 2,798 | 100 | % | ||||||||||||||||||
| Net loss attributable to Wheels Up Experience Inc. | $ | (92,760) | $ | (26,156) | $ | (66,604) | (255) | % | |||||||||||||||
| Three Months Ended June 30, | Change in | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Membership | $ | 24,020 | $ | 16,188 | $ | 7,832 | 48 | % | |||||||||||||||
| Flight | 284,071 | 212,660 | 71,411 | 34 | % | ||||||||||||||||||
| Aircraft management | 60,718 | 49,955 | 10,763 | 22 | % | ||||||||||||||||||
| Other | 56,703 | 6,777 | 49,926 | 737 | % | ||||||||||||||||||
| Total | $ | 425,512 | $ | 285,580 | $ | 139,932 | 49 | % | |||||||||||||||
For the three months ended June 30, 2021 combined with an increased mix of Core members.
| Six Months Ended June 30, | Change in | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Revenue | $ | 751,147 | $ | 547,237 | $ | 203,910 | 37 | % | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | 741,656 | 489,695 | 251,961 | 51 | % | ||||||||||||||||||
| Technology and development | 25,797 | 15,049 | 10,748 | 71 | % | ||||||||||||||||||
| Sales and marketing | 56,931 | 33,689 | 23,242 | 69 | % | ||||||||||||||||||
| General and administrative | 85,877 | 33,955 | 51,922 | 153 | % | ||||||||||||||||||
| Depreciation and amortization | 30,362 | 27,313 | 3,049 | 11 | % | ||||||||||||||||||
| Gain on sale of aircraft held for sale | (2,634) | — | (2,634) | 100 | % | ||||||||||||||||||
| Total costs and expenses | 937,989 | 599,701 | 338,288 | 56 | % | ||||||||||||||||||
| Loss from operations | (186,842) | (52,464) | (134,378) | (256) | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Change in fair value of warrant liability | 5,760 | — | 5,760 | 100 | % | ||||||||||||||||||
| Interest income | 482 | 18 | 464 | ** | |||||||||||||||||||
| Interest expense | — | (8,721) | 8,721 | (100) | % | ||||||||||||||||||
| Other expense, net | (880) | — | (880) | 100 | % | ||||||||||||||||||
| Total other income (expense) | 5,362 | (8,703) | 14,065 | 162 | % | ||||||||||||||||||
| Loss before income taxes | (181,480) | (61,167) | (120,313) | (197) | % | ||||||||||||||||||
| Income tax expense | (320) | — | (320) | 100 | % | ||||||||||||||||||
| Net loss | (181,800) | (61,167) | (120,633) | (197) | % | ||||||||||||||||||
| Less: Net loss attributable to non-controlling interests | (387) | (5,602) | 5,215 | 93 | % | ||||||||||||||||||
| Net loss attributable to Wheels Up Experience Inc. | $ | (181,413) | $ | (55,565) | $ | (125,848) | (226) | % | |||||||||||||||
Forfollowing changes in membership revenue, flight revenue, aircraft management revenue and other revenue (in thousands, except percentages):
| Six Months Ended June 30, | Change in | ||||||||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||||||
| Membership | $ | 44,667 | $ | 31,162 | $ | 13,505 | 43 | % | |||||||||||||||
| Flight | 520,434 | 403,134 | 117,300 | 29 | % | ||||||||||||||||||
| Aircraft management | 121,224 | 100,835 | 20,389 | 20 | % | ||||||||||||||||||
| Other | 64,822 | 12,106 | 52,716 | 435 | % | ||||||||||||||||||
| Total | $ | 751,147 | $ | 547,237 | $ | 203,910 | 37 | % | |||||||||||||||
21
Liquidity and Capital Resources
UntilAir Partner. Flight revenue for the consummationsix months ended June 30, 2022 also includes $15.6 million of the Initial Public Offering, our only source of liquidity was an initial purchase of ordinary shares by the Sponsor and loans from our Sponsor.
On September 25, 2020,fuel surcharge revenue, which we consummated the Initial Public Offering of 22,500,000 Units, at a price of $10.00 per Unit, generating gross proceeds of $225,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,333,333 Private Placement Warrantsbegan collecting effective June 1, 2022. In addition, flight revenue increased due to the Sponsor at a priceacquisition of $1.50 per Private Placement Warrant generating gross proceedsAir Partner, which added $13.3 million for the six months ended June 30, 2022.
On October 2, 2020, in connection with the underwriter’s election to partially exercise of its over-allotment option, we consummated the sale of an additional 1,474,632 Unitsowner and the sale of an additional 196,617 Private Placement Warrants, generating total gross proceeds of $15,041,246.
Following the Initial Public Offering, the partial exercise of the over-allotment option by the underwriter and the sale of the Private Placement Warrants, a total of $239.7 million was placed in the Trust Account, and we had $1,861,552 of cash held outside of the Trust Account, after payment ofrechargeable costs related to operating aircraft under management, both of which stem from increased flight activity.
For the six months ended June 30, 2021, netwhich was primarily attributable to an increase in fuel prices.
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Net cash used in operating activities | $ | (140,175) | $ | (118,911) | |||||||
| Net cash used in investing activities | $ | (181,097) | $ | (2,668) | |||||||
| Net cash used in financing activities | $ | (6,689) | $ | (30,574) | |||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | $ | (4,345) | $ | — | |||||||
| Net decrease in cash, cash equivalents and restricted cash | $ | (332,306) | $ | (152,153) | |||||||
Ata $67.4 million decrease in deferred revenue attributable to a significant increase in Live Flight Legs. In addition, during the six months ended June 30, 2021,2022, we had marketable securities held in the Trust Accountsold $332.9 million of $239,843,104. We intendPrepaid Blocks compared to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
At June 30, 2021, we had $28,673 in cash held outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to (other than pursuant to the Promissory Note), loan us additional funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment.
On March 8, 2021 and April 30, 2021, Aspirational issued Promissory Notes to the Sponsor, pursuant to which Aspirational borrowed an aggregate principal amount of $100,000 and $150,000, respectively.
Upon the consummation of the business combination, the Company received $656.1$115.9 million in PIPE investment proceeds and cash remaining in trust, net of redemptions and expenses. This cash is available for working capital purposes and management has determined that we have sufficient funds to operate our business for the 12six months following the date of these financial statements.
22
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as ofended June 30, 2021. We do not participateThe increase in transactions that create relationships with unconsolidated entities or financial partnerships, often referredPrepaid Block purchases was primarily attributable to as variable interest entities, which would have been establishedthe growth of Active Members and a new program and pricing announcement in May 2022.
Contractual Obligations
We do not have any long-term debt, capital leasecontractual cash obligations under our operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000leases for office space, administrativecertain controlled aircraft, corporate headquarters, and support services, provided to the Company. We began incurring these feesoperational facilities, including aircraft hangars. For further information on September 23, 2020 and will continue to incur these fees monthly until the earlierour leases, see Note 12, Leases of the completionNotes to Condensed Consolidated Financial Statements included herein.
We have agreed, commencingyear ended December 31, 2021.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $8,391,121 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the termsSignificant Accounting Policies of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires managementNotes to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liability
We account for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the condensed balance sheet.
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Net Loss Per Ordinary Share
We apply the two-class method in calculating earnings per share. Net loss per ordinary share, basic and diluted for Class A ordinary shares subject to possible redemption is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number of Class A ordinary shares subject to possible redemption outstanding for the period. Net loss per ordinary share, basic and diluted for and non-redeemable ordinary shares is calculated by dividing net loss less income attributable to Class A ordinary shares subject to possible redemption, by the weighted average number of shares of non-redeemable ordinary shares outstanding for the period presented.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06 to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company is currently evaluating the impact of adoption of ASU 2020-06.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
foreign currency fluctuations.
Evaluation In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of Disclosure Controlsachieving the desired control objectives, and Procedures
management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rules 13a-15 and 15d-15Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer (our principal executive officer and principal financial officer) carried out an evaluation ofChief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2021.the end of the period covered by this Quarterly Report. Based upon theirthat evaluation, our Chief Executive Officer (our principal executive officer and principal financial officer)Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures (as definedare effective at a reasonable assurance level.
The SEC rules define a material weakness as a deficiency, or a combinationeffectiveness of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that aduring and after the conversions. The conversions were not in response to any identified significant deficiency or material misstatementweakness in our internal control over financial reporting.
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In light of these material weaknesses, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
Changes in Internal Control Over Financial Reporting
Thereabove, there were no changes in our internal control over financial reporting (as definedduring the quarter ended June 30, 2022, which were identified in Rules 13a-15(f)connection with management’s evaluation required by paragraph (d) of Rule 13a-15 and 15d-15(f)15d-15 under the Exchange Act) that occurred during the period covered by this reportAct, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the restatement of our financial statements described in our Annual Report as amended on Form 10-K/A filed with the SEC on May 6, 2021 had not yet been identified. Due solely to the events that led to the restatement of our financial statements, management identified a material weakness in internal controls related to the accounting for warrants issued in connection with our initial public offering, as described in Note 2 to the Notes to Consolidated Financial Statements entitled “Restatement of Previously Issued Financial Statements” of our Annual Report as amended on Form 10-K/A filed with the SEC on May 6, 2021.
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None.
PROCEEDINGS
ITEM
Factors that could cause our actual resultsFACTORS
exposure to regulatory enforcement action, increase our compliance costs, and adversely affect our business.
On September 25, 2020, we consummated our Initial Public Offering of 22,500,000 Units, and on October 2, 2020 sold 1,474,632 Units to the underwriters on upon the underwriters’ election to partially exercise their over-allotment option, at a price of $10.00 per Unit, generating total gross proceeds of $239,746,320. Each unit consist of one Class A ordinary share of the Company, par value $0.0001 per share, and one-third of one redeemable warrants of the Company. Each whole warrant entitles the holder thereof to purchase one Class A ordinary share for $11.50 per share, subject to adjustment. Credit Suisse acted as the sole book-running manager. The securities sold in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-248592). The registration statements became effective on September 22, 2020.
Simultaneously with the consummation of the Initial Public Offering, and the exercise of the over-allotment option in part and the sale of the Private Placement Warrants, we consummated a private placement of 4,333,333 and 196,617 Private Placement Warrants, respectively, to our Sponsor at a price of $1.50 per Private Placement Warrant, generating aggregate total proceeds of $6,794,926. Such securities were issued pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
Of the gross proceeds received from the Initial Public Offering including the partial exercise of the option to purchase additional Units, and the sale of the Private Placement Warrants, $239,746,320 was placed in the Trust Account.
We paid a total of $4,794,926 in underwriting discounts and commissions and $577,619 for other costs and expenses related to the Initial Public Offering. In addition, the underwriter agreed to defer $8,391,121 in underwriting discounts and commissions.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
PROCEEDS
SECURITIES
DISCLOSURES
None.
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EXHIBITS
| No. | Description of Exhibit | ||||||||
| 3.1 | |||||||||
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10.2† | |||||||||
10.3† | |||||||||
10.4† | |||||||||
| 31.1* | |||||||||
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101.INS |
| XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
101.SCH |
| XBRL Taxonomy Extension Schema Document | |||||||
101.CAL |
| XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
101.DEF |
| XBRL Taxonomy Extension Definition Linkbase Document | |||||||
101.LAB |
| XBRL Taxonomy Extension Label Linkbase Document | |||||||
101.PRE |
| XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
104 |
| Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||||||
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| * | Filed herewith | |||||||
| ** | Furnished herewith | |||||||
| † | Identifies each management contract or compensatory plan or arrangement. | |||||||
SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this reportQuarterly Report to be signed on its behalf by the undersigned, thereunto duly authorized.
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| WHEELS UP EXPERIENCE INC. | |||||||||
| Date: August | /s/ Kenneth Dichter | ||||||||
Name: | Kenneth Dichter | ||||||||
Title: | Chief Executive Officer | ||||||||
(Principal Executive Officer) | |||||||||
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| /s/ Todd Smith | ||||||||
| Date: August | Name: |
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| Title: | Chief Financial Officer | ||||||
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| (Principal Financial and Accounting Officer) | ||||||
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