Wheels Up Experience Inc. (formerly Aspirational Consumer Lifestyle Corp.) — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. The statements reflect the pre-merger SPAC, not the operating results of Wheels Up Partners Holdings LLC (WUP). The business combination closed July 13, 2021, after quarter-end.
Financial results and position
| Metric | Q2 2021 | Six months ended June 30, 2021 |
|---|---|---|
| Operating revenue | None | None |
| Operating and formation costs | $468,522 | $4.17 million |
| Net loss | $6.73 million | $14.89 million |
| Change in warrant liability, expense | $6.26 million | $10.77 million |
| Operating cash flow | Not presented for the quarter; cash used was $941,253 for the six-month period |
The company was a blank-check company and had not begun operating or generating operating revenue. The Q2 and year-to-date losses were principally driven by non-cash increases in the fair value of warrant liabilities; trust-account interest income was $2,676 for Q2 and $47,979 year to date. Profit margins are not meaningful for this pre-combination entity. The filing provides no prior-year comparable operating period.
- At June 30: Cash outside the trust was $28,673; trust assets were $239.84 million. Prepaid expenses were $216,804.
- Liabilities: Total liabilities were $37.01 million, including $24.04 million of warrant liabilities, $8.39 million of deferred underwriting fees and $4.57 million of current liabilities. The company reported a $250,000 related-party promissory note and no long-term debt.
- Equity and redemption claims: $239.84 million of Class A shares were classified as temporary equity subject to possible redemption. Shareholders’ deficit was $36.76 million.
- Cash flows: Six-month operating cash use of $941,253, partly offset by $250,000 of related-party note proceeds, reduced outside-trust cash from $719,926 to $28,673.
Material changes, transaction and outlook
The warrant liability rose from $13.27 million at December 31, 2020 to $24.04 million at June 30, 2021, producing a substantial non-cash expense. The filing does not provide a prior-year comparable income statement. On July 13, 2021, Aspirational domesticated in Delaware, became Wheels Up Experience Inc., and completed its merger with WUP. The filing states that the post-closing company received $656.1 million in PIPE proceeds and cash remaining in trust, net of redemptions and expenses. Management said it had sufficient funds to operate for 12 months following the financial-statement date; this is a post-quarter-end statement, not operating guidance.
No operating outlook or revenue forecast is provided. Before closing, management expected to incur costs pursuing the combination. The filing discusses potential dilution from share issuance and risks associated with debt, but reports no off-balance-sheet arrangements and no legal proceedings. The company reported no material market or interest-rate risk from its short-term U.S. Treasury and money-market holdings.
Controls, contingencies and other notable items
- Disclosure controls and procedures were determined to be ineffective. Management identified material weaknesses in expense-accrual controls and in accounting for warrants, the latter associated with a prior financial-statement restatement. Remediation plans were described, with no assurance they would be effective.
- Deferred underwriting fees of $8.39 million and a $10 million advisory transaction fee were contingent on completion of a business combination. The merger subsequently closed.
- The filing reports that there were no material changes to previously disclosed risk factors. The unaudited interim results are not necessarily indicative of future results.
Investor verification priorities
- Review post-combination filings for actual Wheels Up revenue, profitability, cash flows, and the use of the reported $656.1 million in proceeds.
- Verify redemption levels, transaction expenses, and the resulting share count and dilution, including potential earnout shares and warrants.
- Track remediation of the material weaknesses and assess whether subsequent filings report improved controls.
- Confirm how the warrant liability and related fair-value changes are treated in post-merger financial statements.
- Review the terms and settlement of transaction-related fees and related-party obligations.