Wheels Up Experience (UP) - 2021 Q2 - Quarterly Report

General Information Company Information & Filing Details This section provides the company's legal name, filing type, incorporation details, trading symbols, and SEC filing status - Registrant: WHEELS UP EXPERIENCE INC. (formerly Aspirational Consumer Lifestyle Corp.)[1] - Filing Type: Quarterly Report on Form 10-Q for the period ended June 30, 2021[1] Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Class A common stock, par value $0.0001 per share | UP | New York Stock Exchange | | Redeemable warrants, each whole warrant exercisable for one Class A common stock at an exercise price of $11.50 | UP WS | New York Stock Exchange | - As of August 17, 2021, there were 245,587,611 shares of Class A common stock issued and outstanding[4] Explanatory Note: Business Combination This section explains the post-quarter-end business combination where Aspirational Consumer Lifestyle Corp. domesticated as a Delaware corporation and changed its name to Wheels Up Experience Inc., concurrently consummating merger transactions with Wheels Up Partners Holdings LLC (WUP), with the report primarily reflecting Aspirational's information prior to this combination - On July 13, 2021, Aspirational Consumer Lifestyle Corp. completed its domestication as a Delaware corporation and changed its name to Wheels Up Experience Inc.[7] - Concurrently with the Domestication, Wheels Up consummated merger transactions with Wheels Up Partners Holdings LLC (WUP), collectively forming the Business Combination[9] - As a result of the Domestication, Aspirational's Class A and Class B ordinary shares converted into Wheels Up Class A common stock, and Aspirational warrants converted into Wheels Up warrants[8] - The report generally contains information about Aspirational prior to the closing of the Business Combination[10] Part I. Financial Information Item 1. Financial Statements This section presents the unaudited condensed financial statements for Aspirational Consumer Lifestyle Corp. for the periods ended June 30, 2021, and December 31, 2020, including the balance sheets, statements of operations, changes in shareholders' equity, and cash flows, along with comprehensive notes explaining the company's organization, significant accounting policies, and details of financial instruments and transactions Condensed Balance Sheets The condensed balance sheets show a decrease in total assets from $241.1 million at December 31, 2020, to $240.1 million at June 30, 2021, primarily due to a significant reduction in cash and prepaid expenses, partially offset by an increase in marketable securities held in the Trust Account, while total liabilities increased from $23.1 million to $37.0 million, driven by a rise in warrant liability and accrued expenses Condensed Balance Sheet Highlights | Metric | June 30, 2021 (Unaudited) | December 31, 2020 | Change | | :-------------------------------- | :-------------------------- | :------------------ | :----- | | Cash ($) | $28,673 | $719,926 | $(691,253) | | Total Current Assets ($) | $245,477 | $1,328,871 | $(1,083,394) | | Cash and marketable securities held in Trust Account ($) | $239,843,104 | $239,795,125 | $47,979 | | TOTAL ASSETS ($) | $240,088,581 | $241,123,996 | $(1,035,415) | | Total Current Liabilities ($) | $4,574,615 | $1,484,638 | $3,089,977 | | Warrant liability ($) | $24,041,268 | $13,272,784 | $10,768,484 | | Total Liabilities ($) | $37,007,004 | $23,148,543 | $13,858,461 | | Total Shareholders' (Deficit) Equity ($) | $(36,761,527) | $5,000,009 | $(41,761,536) | Condensed Statements of Operations For the three months ended June 30, 2021, the company reported a net loss of $6.7 million, primarily driven by a $6.3 million change in fair value of warrant liability and $0.5 million in operating and formation costs, while for the six months ended June 30, 2021, the net loss was $14.9 million, with the change in fair value of warrant liability accounting for $10.8 million and operating and formation costs for $4.2 million Condensed Statements of Operations Highlights | Metric | Three Months Ended June 30, 2021 ($) | Six Months Ended June 30, 2021 ($) | | :-------------------------------------- | :------------------------------- | :----------------------------- | | Operating and formation costs | $468,522 | $4,173,371 | | Loss from operations | $(468,522) | $(4,173,371) | | 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) | | Net loss | $(6,726,593) | $(14,893,876) | | Basic and diluted net loss per share, Non-redeemable ordinary shares | $(1.12) | $(2.24) | Condensed Statement of Changes in Shareholders' (Deficit) Equity The statement shows a significant decrease in total shareholders' equity from $5.0 million at January 1, 2021, to a deficit of $(36.8) million at June 30, 2021, primarily due to a measurement adjustment on redeemable ordinary shares of $(26.9) million and net losses of $(8.2) million for the three months ended March 31, 2021, and $(6.7) million for the three months ended June 30, 2021 Changes in Shareholders' (Deficit) Equity | Metric | January 1, 2021 ($) | March 31, 2021 ($) | June 30, 2021 ($) | | :-------------------------------------- | :-------------- | :------------- | :------------ | | Total Shareholders' Equity (Deficit) | $5,000,009 | $(30,032,258) | $(36,761,527) | | Measurement adjustment on redeemable Ordinary shares | N/A | $(26,864,984) | $(2,676) | | Net loss | N/A | $(8,167,283) | $(6,726,593) | Condensed Statement of Cash Flows For the six months ended June 30, 2021, net cash used in operating activities was $(0.9) million, primarily due to the net loss of $(14.9) million, partially offset by a non-cash adjustment for the change in fair value of warrant liability of $10.8 million and positive changes in operating assets and liabilities, with net cash provided by financing activities being $0.3 million from a related party promissory note, resulting in a net decrease in cash of $(0.7) million Condensed Statement of Cash Flows Highlights | Metric | Six Months Ended June 30, 2021 ($) | | :-------------------------------------- | :----------------------------- | | Net loss | $(14,893,876) | | Change in fair value of warrant liability | $10,768,484 | | Net cash used in operating activities | $(941,253) | | Proceeds from promissory note – related party | $250,000 | | Net cash provided by financing activities | $250,000 | | Net Change in Cash | $(691,253) | | Cash – Ending | $28,673 | Notes to Unaudited Condensed Financial Statements These notes provide detailed explanations for the unaudited condensed financial statements, covering the company's business operations, the recent business combination, significant accounting policies, and specific financial instruments like warrants and equity, also including disclosures on related party transactions, commitments, fair value measurements, and subsequent events NOTE 1. Description of Organization and Business Operations Aspirational Consumer Lifestyle Corp. was a blank check company formed in July 2020 to effect a business combination, completing its domestication to Delaware and changing its name to Wheels Up Experience Inc. on July 13, 2021, concurrently consummating a merger with Wheels Up Partners Holdings LLC (WUP), with this section detailing the conversion of shares and warrants as a result of the Business Combination and outlining the company's activities prior to the combination, including its Initial Public Offering and the establishment of a Trust Account - Aspirational Consumer Lifestyle Corp. was a blank check company incorporated on July 7, 2020, for the purpose of effecting a business combination[27] - On July 13, 2021, Aspirational completed its domestication to Delaware and changed its name to Wheels Up Experience Inc. and concurrently consummated a merger with Wheels Up Partners Holdings LLC (WUP)[29][31] - The Business Combination involved the conversion of Aspirational's Class A and Class B ordinary shares into Wheels Up Class A common stock and Aspirational warrants into Wheels Up warrants[30] - The company completed its Initial Public Offering on September 25, 2020, raising $225 million, with an additional $14.7 million from an over-allotment option, and placed $239.7 million into a Trust Account[38][40][43] NOTE 2. Summary of Significant Accounting Policies This note outlines the significant accounting policies, including the basis of presentation for the unaudited condensed financial statements in accordance with GAAP and SEC rules, highlighting the company's status as an "emerging growth company" under the JOBS Act, allowing for an extended transition period for new accounting standards, and covering key policies such as the use of estimates, cash and cash equivalents, marketable securities in the Trust Account, classification of Class A ordinary shares subject to redemption, warrant liability accounting, offering costs, income taxes, and net loss per ordinary share calculation - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and SEC regulations[45] - The Company is an emerging growth company and has elected to use the extended transition period for complying with new or revised financial accounting standards[47][48] - Class A ordinary shares subject to possible redemption are classified as temporary equity, and warrant liabilities are recorded at fair value with changes recognized in the statements of operations[55][57][60] - Net loss per ordinary share is computed using a two-class method, distinguishing between Redeemable Class A Ordinary Shares and Non-Redeemable Ordinary Shares[66][67] NOTE 3. Initial Public Offering The company sold 23,974,632 Units in its Initial Public Offering, including units from the underwriters' over-allotment option, at $10.00 per Unit, with each Unit comprising one Class A ordinary share and one-third of one redeemable warrant, exercisable at $11.50 per share - The Company sold 23,974,632 Units in its Initial Public Offering at $10.00 per Unit[77] - Each Unit consisted of one Class A ordinary share and one-third of one redeemable warrant, exercisable at $11.50 per share[77] NOTE 4. Private Placement The Sponsor purchased 4,333,333 Private Placement Warrants at $1.50 each, totaling $6.5 million, concurrently with the Initial Public Offering, with an additional 196,617 Private Placement Warrants sold to the Sponsor for $0.3 million due to the underwriters' over-allotment exercise, and these proceeds were added to the Trust Account, with the warrants exercisable for Class A ordinary shares at $11.50 per share - The Sponsor purchased 4,333,333 Private Placement Warrants at $1.50 each, totaling $6.5 million[78] - An additional 196,617 Private Placement Warrants were sold to the Sponsor for $0.3 million following the over-allotment option exercise[78] - Proceeds from Private Placement Warrants were added to the Trust Account, and each warrant is exercisable for one Class A ordinary share at $11.50[78] NOTE 5. Related Party Transactions This note details transactions with related parties, including the issuance of Founder Shares to the Sponsor, administrative and support services agreements with the Sponsor and its affiliate (Turmeric Capital), and promissory notes issued to the Sponsor, with the company incurring $57,532 in fees for administrative and support services for the six months ended June 30, 2021, and borrowing $250,000 from the Sponsor via promissory notes in March and April 2021 - The Sponsor received 6,468,750 Class B ordinary shares (Founder Shares), with 475,092 forfeited, resulting in 5,993,658 outstanding as of October 2, 2020[79] - The Company agreed to pay the Sponsor (and later Turmeric Capital, an affiliate) $10,000 per month for administrative services and Turmeric Capital Singapore Pte Ltd $10,000 per month for support services[81][84] - For the six months ended June 30, 2021, the Company incurred and paid $57,532 in fees for administrative and support services[85] - The Company issued promissory notes to the Sponsor in March and April 2021, borrowing an aggregate principal amount of $250,000 at 2.75% interest per annum[87][88] NOTE 6. Commitments This note outlines the company's commitments, including registration rights for holders of Founder Shares, Private Placement Warrants, and Working Capital Loans, detailing a deferred underwriting fee of $8.4 million payable upon completion of a Business Combination, advisory fees to Connaught (UK) Limited, and a $10 million transaction fee for advisory services related to the WUP business combination, with the company entering into an Amended and Restated Registration Rights Agreement and indemnification agreements with directors and officers post-Business Combination - Holders of Founder Shares, Private Placement Warrants, and Working Capital Loans are entitled to registration rights[92] - A deferred underwriting fee of $8,391,121 is payable to underwriters upon completion of a Business Combination[94] - The Company will pay a $10 million transaction fee for advisory services upon successful completion of the business combination with Wheels Up[97] - Post-Business Combination, Wheels Up entered into an Amended and Restated Registration Rights Agreement and indemnification agreements with its directors and executive officers[93][101] NOTE 7. Shareholders' Equity This note describes the company's authorized share capital, consisting of 5 million preference shares (none issued), 500 million Class A ordinary shares, and 50 million Class B ordinary shares, with 5,993,658 Class B ordinary shares outstanding as of June 30, 2021, and no Class A ordinary shares outstanding (excluding those subject to redemption), and Class B ordinary shares automatically convert to Class A ordinary shares upon a Business Combination, subject to anti-dilution adjustments - Authorized share capital includes 5 million preference shares, 500 million Class A ordinary shares, and 50 million Class B ordinary shares[102][103][104] - As of June 30, 2021, 5,993,658 Class B ordinary shares were issued and outstanding; no Class A ordinary shares were outstanding (excluding those subject to redemption)[103][104] - Class B ordinary shares convert to Class A ordinary shares on a one-for-one basis upon a Business Combination, with anti-dilution adjustments possible[106] NOTE 8. Warrants This note details the terms of Public Warrants and Private Placement Warrants, with Public Warrants becoming exercisable 30 days after a Business Combination or 12 months from the IPO closing, expiring five years post-combination, and the company may redeem Public Warrants under certain price conditions ($18.00 or $10.00 per Class A ordinary share), while Private Placement Warrants are identical but non-transferable for 30 days post-combination, exercisable on a cashless basis, and non-redeemable as long as held by initial purchasers or permitted transferees - Public Warrants become exercisable 30 days after a Business Combination or 12 months from IPO closing, expiring five years post-combination[109] - The Company may redeem outstanding Public Warrants if the Class A ordinary share price equals or exceeds $18.00 (at $0.01 per warrant) or $10.00 (at $0.10 per warrant, with cashless exercise option)[112][113][120] - Private Placement Warrants are identical to Public Warrants but are non-transferable for 30 days post-combination, exercisable on a cashless basis, and non-redeemable while held by initial purchasers or permitted transferees[117] NOTE 9. Fair Value Measurements This note describes the fair value measurement of financial assets and liabilities, particularly warrant liabilities, using a three-level hierarchy, with marketable securities held in the Trust Account classified as Level 1, Public Warrants classified as Level 1 due to observable market quotes, and Private Placement Warrants classified as Level 3, valued using a Monte Carlo simulation model with unobservable inputs, and the fair value of warrant liabilities increased from $13.3 million at January 1, 2021, to $24.0 million at June 30, 2021, primarily due to changes in valuation inputs - The Company uses a three-level fair value hierarchy for financial assets and liabilities[122] - Marketable securities in the Trust Account and Public Warrants are Level 1; Private Placement Warrants are Level 3, valued via Monte Carlo simulation[123][124] Fair Value of Warrant Liabilities | Metric | Fair value as of January 1, 2021 ($) | Fair value as of June 30, 2021 ($) | Change ($) | | :-------------------------------------- | :------------------------------- | :----------------------------- | :----- | | Private Placement Warrant Liability | $4,801,747 | $8,697,504 | $3,895,757 | | Public Warrant Liability | $8,471,037 | $15,343,764 | $6,872,727 | | Total Warrant Liabilities | $13,272,784 | $24,041,268 | $10,768,484 | NOTE 10. Subsequent Events The company evaluated subsequent events up to the financial statement issuance date and identified that on July 13, 2021, it consummated the previously announced merger pursuant to the Merger Agreement - On July 13, 2021, the Company consummated the previously announced merger pursuant to the Merger Agreement[130] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, reiterating its status as a blank check company, its recent business combination with WUP, and discussing financial performance for the three and six months ended June 30, 2021, highlighting net losses primarily due to changes in warrant liability fair value and operating costs, also covering liquidity, capital resources, off-balance sheet arrangements, contractual obligations, and critical accounting policies - The Company completed its business combination with WUP on July 13, 2021, and changed its name to Wheels Up Experience Inc., with its stock trading on NYSE under UP and UP WS[138] - For the three months ended June 30, 2021, the net loss was $6.7 million, driven by operating costs and a change in fair value of warrant liability[140] - For the six months ended June 30, 2021, the net loss was $14.9 million, primarily due to operating costs and a $10.8 million change in fair value of warrant liability[141] - Net cash used in operating activities for the six months ended June 30, 2021, was $0.9 million[147] - Upon consummation of the business combination, the Company received $656.1 million in PIPE investment proceeds and cash remaining in trust, net of redemptions and expenses, providing sufficient funds for 12 months of operations[152] Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk As of June 30, 2021, the company was not subject to any material market or interest rate risk, with funds in the Trust Account invested in short-term U.S. government obligations or money market funds, minimizing interest rate exposure - As of June 30, 2021, the Company was not subject to any material market or interest rate risk[165] - Funds in the Trust Account are invested in short-term U.S. government obligations or money market funds, limiting interest rate exposure[165] Item 4. Controls and Procedures As of June 30, 2021, the Chief Executive Officer concluded that the company's disclosure controls and procedures were not effective, with management identifying material weaknesses in internal controls related to the lack of controls to identify and record expenses requiring accrual accurately and issues leading to the restatement of financial statements concerning warrant accounting, and the company plans to enhance processes, access to accounting literature, and communication to address these weaknesses - As of June 30, 2021, disclosure controls and procedures were deemed not effective[167] - Material weaknesses identified include a lack of controls for accurate expense accrual and issues related to warrant accounting that led to a financial statement restatement[168][171] - Remediation plans include enhancing access to accounting literature, research materials, and increasing communication among personnel and third-party professionals[170] Part II. Other Information Item 1. Legal Proceedings The company reported no legal proceedings as of the filing date - No legal proceedings were reported[174] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in Amendment No. 1 to the company's Annual Report on Form 10-K/A filed on May 6, 2021 - No material changes to risk factors previously disclosed in the Annual Report on Form 10-K/A[175] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Initial Public Offering of 23,974,632 Units at $10.00 per Unit, generating $239.7 million, and the simultaneous private placement of 4,529,950 Private Placement Warrants to the Sponsor at $1.50 per warrant, generating $6.8 million, with the Private Placement Warrants being identical to Public Warrants but having transfer restrictions and cashless exercise provisions for initial purchasers, and a total of $239.7 million from these proceeds was placed in the Trust Account - The Initial Public Offering involved the sale of 23,974,632 Units at $10.00 per Unit, totaling $239.7 million[176] - A private placement of 4,529,950 Private Placement Warrants to the Sponsor at $1.50 per warrant generated $6.8 million[177] - Private Placement Warrants are subject to transfer restrictions and are exercisable on a cashless basis for initial purchasers[178] - $239.7 million of the gross proceeds was placed in the Trust Account[179] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[181] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable[182] Item 5. Other Information No other information was reported under this item - No other information was reported[183] Item 6. Exhibits This section lists the exhibits filed as part of or incorporated by reference into the Form 10-Q, including certifications from the CEO and CFO (Sarbanes-Oxley Act Sections 302 and 906) and XBRL-related documents - Exhibits include CEO and CFO certifications (Sarbanes-Oxley Act Sections 302 and 906) and XBRL documents[185] Part III. Signatures Signatures The report is duly signed on behalf of Wheels Up Experience Inc. (Successor to Aspirational Consumer Lifestyle Corp.) by Kenneth Dichter, Chief Executive Officer, and Eric Jacobs, Chief Financial Officer, on August 19, 2021 - The report was signed by Kenneth Dichter, CEO, and Eric Jacobs, CFO, on August 19, 2021[187]