Wheels Up Experience Inc. (then Aspirational Consumer Lifestyle Corp.) — Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The registrant was a newly formed SPAC, not the Wheels Up operating business; its financial statements cover July 7, 2020 (inception) through December 31, 2020. The filing was signed March 15, 2021.
Business context and proposed transaction
Aspirational was formed to acquire a business, with an intended focus on premium consumer brands and aspirational lifestyle businesses. On February 1, 2021, after year-end, it announced a proposed business combination with Wheels Up Partners Holdings LLC. The proposed transaction contemplated $1.885 billion of equity consideration, up to 9 million additional earnout shares tied to share-price targets, and a $550 million PIPE investment. Completion remained subject to conditions, including shareholder and Wheels Up equityholder approvals. The 2020 financial statements do not reflect the proposed combination.
Financial results, liquidity and capital
- Revenue and operations: No operating revenues or operating activity through year-end. The company reported no revenue; operating expenses primarily reflected formation, public-company and transaction-search costs.
- Loss: Net loss was $1.554 million for the inception-to-year-end period, comprising $1.603 million of formation and operating costs, $49,590 of Trust Account interest income and a $785 unrealized investment loss. Operating margins are not meaningful for this pre-operating SPAC.
- Cash flow: Net cash used in operating activities was $1.085 million. Investing activities used $239.746 million, principally for the Trust Account; financing activities provided $241.551 million. Cash outside the Trust Account was $719,926 at year-end.
- Assets and liquidity: Total assets were $241.124 million, including $239.795 million of cash and marketable securities in the Trust Account and $1.329 million of current assets. The Trust Account was principally invested in U.S. Treasury securities and was designated for a business combination or shareholder redemptions—not ordinary operating expenses.
- Liabilities and equity: Total liabilities were $9.876 million, including $8.391 million of deferred underwriting fees payable only if a business combination is completed. Shareholders’ equity was $5.000 million; working capital deficit was $155,767. The filing reported no long-term debt at December 31.
- Subsequent borrowing: On March 8, 2021, the company issued a $100,000 Sponsor promissory note bearing 2.75% annual interest. It was payable at the earlier of September 25, 2022 or completion of a business combination.
Changes versus comparable periods
No prior-year comparable operating period is presented: the company was incorporated in July 2020 and had no operations or revenue. Accordingly, year-over-year growth, margin trends and operating comparisons are not available.
Outlook, risks and unusual items
- Going concern: The auditor’s report included an explanatory paragraph expressing substantial doubt about the company’s ability to continue as a going concern. Management said cash outside the Trust Account and working capital were insufficient for planned activities and that additional financing might be needed; Sponsor and affiliate loans were not assured. The financial statements contain no adjustments for a possible failure to continue as a going concern.
- Internal controls: Management concluded disclosure controls were ineffective at December 31, 2020 and identified a material weakness in controls for identifying and accruing expenses, potentially leaving liabilities incomplete or inaccurate. Management planned additional communication and documentation procedures, but remediation was not assured; it stated it did not believe the weakness caused a financial-statement misstatement.
- Transaction and dilution risks: The Wheels Up transaction was not complete. Redemptions could reduce cash available at closing, and the proposed merger, PIPE, earnout and equity awards could affect ownership and dilution. The filing describes no assurance that the transaction or financing would close.
- Fees and related parties: The company had monthly charges of $10,000 for office/administrative services and $10,000 for support services, involving Sponsor/CEO-affiliated entities. A separate advisory agreement provided for a $10 million transaction fee upon a successful Wheels Up combination. Deferred underwriting fees of $8.391 million would also be payable upon a completed business combination.
- Other risks: The company cited COVID-19-related market and transaction uncertainty, third-party claims that could reduce Trust Account proceeds, potential conflicts of interest among management and Sponsor affiliates, and the possibility that public shareholders could receive less than $10 per share upon liquidation. Warrants would expire worthless if no business combination were completed by the deadline.
Investor facts to verify
- Whether the Wheels Up combination and $550 million PIPE closed, and the final cash proceeds after redemptions, fees and other adjustments.
- Available unrestricted cash and financing needs, given the going-concern warning and limited year-end cash outside the Trust Account.
- Remediation of the expense-accrual material weakness and subsequent effectiveness of disclosure and financial-reporting controls.
- Final ownership dilution from the merger consideration, PIPE, earnout shares, equity awards and warrants.
- Actual transaction, advisory, underwriting and related-party service fees paid or payable at closing.