Business context and reporting period
Aspirational Consumer Lifestyle Corp. filed this unaudited Form 10-Q for the quarter ended March 31, 2021. It was a blank-check company seeking a business combination, not an operating company; it had not commenced operations or generated operating revenue. The filing describes a proposed combination with Wheels Up Partners Holdings LLC. Dollar amounts below are U.S. dollars.
Financial results and liquidity
| Metric | Q1 2021 / March 31, 2021 |
|---|---|
| Operating revenue | None |
| Operating and formation costs | $3.7 million |
| Net loss | $8.2 million, including a $4.5 million noncash loss from the increase in warrant liabilities; trust-account interest income was $45,303 |
| Operating cash flow | $(757,533) |
| Cash outside trust | $62,393, down from $719,926 at December 31, 2020 |
| Trust-account investments | $239.8 million, primarily U.S. Treasury securities |
| Total liabilities | $30.5 million, including $17.8 million of warrant liabilities and $8.4 million of deferred underwriting fees |
| Working capital | Deficit of $3.9 million |
| Debt | $100,000 related-party promissory note outstanding; 2.75% interest, due at the earlier of a business combination or September 25, 2022 |
Changes versus prior comparable period
The filing presents Q1 2021 results but no Q1 2020 comparison. From December 31, 2020 to March 31, 2021, cash outside the trust fell by $657,533; warrant liabilities rose by $4.5 million; accrued expenses increased by $2.8 million; and the carrying value of redeemable Class A shares increased to $239.8 million from $213.0 million. Shareholders’ deficit was $30.0 million at quarter-end, versus equity of $5.0 million at year-end, largely reflecting the redemption-value adjustment and the quarter’s net loss.
Transaction, outlook and risks
- The February 1, 2021 merger agreement proposed a $1.885 billion aggregate equity consideration for Wheels Up holders, plus up to 9 million earnout shares tied to share-price thresholds of $12.50, $15.00 and $17.50. The transaction remained subject to customary conditions, including shareholder and Wheels Up equityholder approval.
- Concurrent PIPE subscription agreements covered 55 million shares for $550 million, to be funded substantially concurrently with closing. The filing also discloses a $10 million advisory fee payable upon successful completion of the Wheels Up combination.
- The company had until September 25, 2022, subject to permitted extensions, to complete a business combination. If unsuccessful, it would generally redeem public shares from the trust; warrants could expire worthless.
- Management said additional funding might be needed for working capital and transaction costs. The low outside cash balance and working-capital deficit raised substantial doubt about the company’s ability to continue as a going concern for one year from issuance. Sponsor and affiliate loans were possible but not assured. A further $150,000 sponsor note was issued on April 30, 2021.
- Management noted that COVID-19 could adversely affect the company’s position or target search, but the effect was not readily determinable. The filing reports no off-balance-sheet arrangements, no legal proceedings, and no material change to previously disclosed risk factors.
- Disclosure controls were deemed ineffective. Management identified material weaknesses involving expense accrual controls and accounting for IPO warrants, and described remediation efforts without assurance of success.
Most important facts to verify
- Whether the Wheels Up transaction closed, and whether all closing conditions and shareholder approvals were satisfied.
- Whether the $550 million PIPE funding was completed and the final cash proceeds available after redemptions, fees and transaction costs.
- The company’s post-combination capitalization, including dilution from warrants, converted founder shares, awards and earnout shares.
- How the company addressed its going-concern uncertainty, working-capital needs and related-party financing.
- Whether material weaknesses were remediated and whether subsequent filings report effective disclosure controls.