NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.ORGANIZATION AND OPERATIONS
Wheels Up Experience Inc. (together with its consolidated subsidiaries, “Wheels Up”, the “Company”, “our”, “we”, and “us”) is a leading brand in private aviation that strives to deliver a total private aviation solution.
On July 13, 2021 (the “Closing Date”), we consummated the transactions contemplated by the Agreement and Plan of Merger (as amended, the “Merger Agreement”), dated as of February 1, 2021, as amended on May 6, 2021, by and among Aspirational Consumer Lifestyle Corp., a blank check company originally incorporated as a Cayman Islands exempted company (“Aspirational”), Wheels Up Partners Holdings LLC, a Delaware limited liability company (“WUP”), Kittyhawk Merger Sub LLC., a Delaware limited liability company and a direct wholly owned subsidiary of Aspirational (“Merger Sub”), Wheels Up Blocker Sub LLC, a Delaware limited liability company and a direct wholly owned subsidiary of Aspirational (“Blocker Sub”), the Blocker Merger Subs (as defined in the Merger Agreement) and the Blockers (as defined in the Merger Agreement). In connection with the closing of the Merger Agreement, 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”).
On the Closing 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 Wheels 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 Wheels 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).
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The unaudited interim condensed consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the condensed consolidated balance sheet as of December 31, 2021, has been derived from the audited consolidated financial statements at that date, but certain notes or other information that are normally required by U.S. GAAP have been omitted if they substantially duplicate the disclosures contained in our annual audited consolidated financial statements. The condensed consolidated financial statements include the accounts of Wheels Up Experience Inc. and its wholly-owned subsidiaries. We consolidate Wheels Up Partners MIP LLC (“MIP LLC”) and record the profits interests held in MIP LLC that Wheels Up does not own as non-controlling interests (see Note 14). All intercompany transactions and balances have been eliminated in consolidation.
Certain information and footnote disclosure normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the United States Securities and Exchange Commission (“SEC”). In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are normal and recurring, necessary for a fair presentation of the consolidated statement of operations, financial position, and cash flows. Interim results should not be regarded as indicative of results that may be expected for any other period or the entire year. The unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended December 31, 2021.
Use of Estimates
Preparing the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates due to risks and uncertainties, including uncertainty in the current economic environment due to the coronavirus pandemic, and any evolutions thereof (“COVID-19”). The most significant estimates include, but are not limited to, the useful lives and residual values of purchased aircraft, the fair value of financial assets and liabilities, acquired intangible assets, goodwill, contingent consideration, and other 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 and the incremental borrowing rate for leases.
Foreign Currency Translation Adjustments
Assets and liabilities of foreign subsidiaries, where the functional currency is not the United States (“U.S.”) dollar, have been translated at period-end exchange rates and profit and loss accounts have been translated using weighted-average exchange rates. Adjustments resulting from currency translation have been recorded in the equity section of the condensed consolidated balance sheets and the condensed consolidated statements of other comprehensive loss as a cumulative translation adjustment.
Interim Impairment Test (As Restated)
During the second quarter of 2022, we determined that because of a sustained decrease in the quoted market price of our Class A common stock, par value $0.0001 per share (“Class A common stock”), from the Closing Date, combined with a further decline in our operating margins, there was an indication that a triggering event occurred and the carrying value of our long-lived assets and goodwill may not be recoverable associated with the legacy Wheels Up reporting unit (“WUP Legacy”). As a result, we performed an undiscounted cash flow analysis of our long-lived assets for potential impairment as of June 1, 2022, and 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.
During the third quarter of 2022, we determined that because of continued deterioration in our stock price, resulting in a market capitalization that was below the carrying value of our equity, there was an indication that a triggering event occurred and the carrying value of WUP Legacy may not be recoverable. As a result, we performed a quantitative impairment test using the income approach. The fair value using the income approach was based on the present value of estimated future cash flows. The significant underlying unobservable inputs used to measure the fair value included forecasted revenue growth rates and margins, weighted average cost of capital, normalized working capital level and projected long-term growth rates. As a result of this assessment, a goodwill impairment charge of $62.0 million was recorded to WUP Legacy as of September 30, 2022. The decline in the fair value of the reporting unit, as compared to the quantitative analysis performed as of June 1, 2022, was primarily due to an increase in the discount rate.
Correction of an Immaterial Error
During the fourth quarter of 2021, we identified an immaterial error related to the accounting for equity as part of the reverse recapitalization (see Note 3) that resulted in an understatement of our accumulated deficit and an overstatement of additional paid-in capital by $32.7 million as of December 31, 2020. The error had no impact on our total equity or our financial position, results of operations or cash flows.
We assessed the materiality of the error on our consolidated financial statements for prior periods and concluded that they were not material. We have corrected the error by adjusting the prior period consolidated financial statements.
Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-08, Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (ASC 805). This standard simplifies the measurement and recognition of contract assets and contract liabilities from contracts with customers acquired in a business combination. This guidance will generally result in the recognition of contract assets and contract liabilities consistent with those reported by the acquiree immediately before the acquisition date. We adopted ASU 2021-08 on January 1, 2022. This adoption did not have a material impact on our consolidated financial statements.
3.BUSINESS COMBINATION
The Business Combination was accounted for as a reverse recapitalization, where Aspirational was treated as the acquired company for financial reporting purposes. This accounting treatment is the equivalent of Wheels Up issuing stock for the net assets of Aspirational, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Accordingly, WUP is deemed the accounting predecessor of the combined business, and Wheels Up, as the parent company of the combined business, is the successor SEC registrant, meaning that all historical financial information presented in the condensed consolidated financial statements prior to the closing of the Business Combination represents the accounts of WUP.
Upon closing of the Business Combination, all outstanding WUP common interests and WUP preferred interests (including WUP restricted interests), as well as shares underlying WUP options, were converted into 190.0 million shares of Class A common stock and rolled over into the combined business. In addition, there were 29.0 million outstanding WUP profits interests recapitalized in connection with the Business Combination that can be exchanged on a value-for-value basis for Class A common stock subject to vesting.
Upon closing of the Business Combination, Aspirational and Aspirational’s public shareholders held 6.0 million and 10.6 million shares, respectively, of Class A common stock.
All references to numbers of common shares and per common share data prior to the Business Combination in these condensed consolidated financial statements and related notes have been retroactively adjusted to account for the effect of the reverse recapitalization. The reported share and per share amounts, have been converted by applying the exchange ratio established in the Merger Agreement of 0.4604, which was based on the Wheels Up implied price per share prior to the Business Combination (the “Exchange Ratio”). On the Closing Date, we received approximately $656.3 million in gross proceeds. In connection with the Business Combination, we incurred $70.4 million of transaction costs, consisting of advisory, legal, share registration and other professional fees, which are recorded within additional paid-in capital as a reduction of proceeds.
PIPE Investment
In connection with the Business Combination, Aspirational entered into subscription agreements with certain investors (the “PIPE Investors”), whereby Aspirational issued 55.0 million shares of common stock at a price of $10.00 per share (the “PIPE Shares”) for an aggregate purchase price of $550.0 million (the “PIPE Investment”), which closed simultaneously with the consummation of the Business Combination. On the Closing Date, the PIPE Shares were automatically converted into shares of Class A common stock on a one-for-one basis.
Earnout Shares
Further, as part of the Business Combination, existing holders of WUP equity, including holders of profits interests and restricted interests, but excluding holders of stock options, have the right to receive up to an aggregate of 9,000,000 additional shares of Class A common stock in three equal tranches, which are issuable upon the achievement of Class A common stock share price thresholds of $12.50, $15.00, and $17.50 for any 20 trading days within a period of 30 consecutive trading days within five years of the Closing Date, respectively (the “Earnout Shares”).
Public Warrants and Private Warrants
The warrants assumed in the Business Combination include (i) 7,991,544 redeemable warrants sold by Aspirational as part of its initial public offering (the “Public Warrants”) of 23,974,362 units, consisting of one share of Class A common stock and one-third of one warrant exercisable for Class A common stock and (ii) 4,529,950 warrants privately sold by Aspirational at a price of $1.50 per warrant (the “Private Warrants”) to Aspirational Consumer Lifestyle Sponsor LLC (the “Sponsor”) simultaneously with the closing of the Aspirational initial public offering exercisable for Class A common stock.
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| Aircraft | $ | 559,505 | | | $ | 482,848 | |
| Software development costs | 55,269 | | | 35,818 | |
| Leasehold improvements | 10,012 | | | 12,584 | |
| Computer equipment | 2,476 | | | 2,147 | |
| Buildings and improvements | 1,424 | | | 1,424 | |
| Furniture and fixtures | 3,039 | | | 1,960 | |
| Tooling | 3,613 | | | 3,129 | |
| Vehicles | 1,461 | | | 1,142 | |
| 636,799 | | | 541,052 | |
| | | |
| Less: Accumulated depreciation and amortization | (248,997) | | | (223,216) | |
| Total | $ | 387,802 | | | $ | 317,836 | |
Depreciation and amortization expense of property and equipment was $10.6 million and $30.3 million for the three and nine months ended September 30, 2022, respectively, and $8.4 million and $26.0 million for the three and nine months ended September 30, 2021, respectively.
Capitalized costs related to the internal development of software was $5.6 million and $18.5 million for the three and nine months ended September 30, 2022, respectively, and $3.9 million and $9.6 million for the three and nine months ended September 30, 2021, respectively.
Amortization expense related to software development costs, included as part of depreciation and amortization expense of property and equipment, was $3.6 million and $9.0 million for the three and nine months ended September 30, 2022, respectively, and $1.8 million and $4.8 million for the three and nine months ended September 30, 2021, respectively.
5. REVENUE
Disaggregation of Revenue
The following table disaggregates revenue by service type and the timing of when these services are provided to the member or customer (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Services transferred at a point in time: | | | | | | | |
| Flights, net of discounts and incentives | $ | 278,917 | | | $ | 218,360 | | | $ | 799,351 | | | $ | 621,494 | |
| Aircraft management | 56,558 | | | 55,388 | | | 172,914 | | | 151,405 | |
| Other | 58,728 | | | 6,679 | | | 121,695 | | | 16,418 | |
| | | | | | | |
| Services transferred over time: | | | | | | | |
| Memberships | 22,409 | | | 17,982 | | | 67,076 | | | 49,144 | |
| Aircraft management | 2,404 | | | 2,617 | | | 7,272 | | | 7,435 | |
| Other | 1,340 | | | 952 | | | 3,195 | | | 3,319 | |
| Total | $ | 420,356 | | | $ | 301,978 | | | $ | 1,171,503 | | | $ | 849,215 | |
Revenue in the condensed consolidated statements of operations is presented net of discounts and incentives of $2.7 million and $9.4 million for the three and nine months ended September 30, 2022, respectively, and $5.0 million and $12.5 million, respectively, for the three and nine months ended September 30, 2021.
Included in services transferred at a point in time, Other, is revenue related to whole aircraft sales of $35.9 million and $63.9 million for the three and nine months ended September 30, 2022, respectively.
Contract Balances
Receivables from member and customer contracts are included within accounts receivable, net on the condensed consolidated balance sheets. As of September 30, 2022 and December 31, 2021, gross receivables from members and customers were $118.1 million and $71.8 million, respectively. As of September 30, 2022 and December 31, 2021, undeposited funds, included within accounts receivable, net, were $13.6 million and $13.5 million, respectively. As of September 30, 2022 and December 31, 2021, the allowance for expected credit losses was $4.3 million and $5.9 million, respectively.
Deferred revenue consists of the following (in thousands):
| | | | | | | | | | | |
| | September 30, 2022 | | December 31, 2021 |
| Flights - Prepaid Blocks and jet cards | $ | 916,372 | | | $ | 876,750 | |
| Memberships - annual dues | 42,688 | | | 47,069 | |
| Memberships - initiation fees | 4,119 | | | 4,072 | |
| Flights - credits | 4,438 | | | 6,633 | |
| Other | 635 | | | 960 | |
| Deferred revenue - total | 968,252 | | | 935,484 | |
| | | |
| Less: Deferred revenue - current | (966,367) | | | (933,527) | |
| Deferred revenue - non-current | $ | 1,885 | | | $ | 1,957 | |
Changes in deferred revenue for the nine months ended September 30, 2022 were as follows (in thousands):
| | | | | |
| Deferred revenue - beginning balance | $ | 935,484 | |
| Amounts deferred during the period | 954,042 | |
| Revenue recognized from amounts included in the deferred revenue beginning balance | (509,962) | |
| Revenue from current period sales | (411,312) | |
| Deferred revenue - ending balance | $ | 968,252 | |
Revenue expected to be recognized in future periods for performance obligations that are unsatisfied, or partially unsatisfied, as of September 30, 2022 approximates $170.6 million for the remaining quarter of 2022 and $511.4 million, $143.3 million and $143.0 million for 2023, 2024 and 2025, respectively.
Costs to Obtain a Contract
Capitalized costs related to sales commissions and referral fees were $3.3 million and $12.6 million for the three and nine months ended September 30, 2022, respectively, and $3.4 million and $7.4 million for the three and nine months ended September 30, 2021, respectively.
As of September 30, 2022 and December 31, 2021, capitalized sales commissions and referral fees of $9.2 million and $8.6 million, respectively, are in other current assets and $1.5 million and $1.4 million, respectively, are in other non-current assets on the condensed consolidated balance sheets. Amortization expense related to capitalized sales commissions and referral fees included in sales and marketing expense in the condensed consolidated statements of operations was $4.4 million and $12.1 million for the three and nine months ended September 30, 2022, respectively, and $2.4 million and $5.9 million for the three and nine months ended September 30, 2021, respectively.
6. ACQUISITIONS
Alante Air Charter, LLC Acquisition
On February 3, 2022, we acquired all of the outstanding equity of Alante Air Charter, LLC (“Alante Air”) for a total purchase price of $15.5 million in cash. Alante Air added 12 Light jets to our controlled fleet and expands our presence in the Western U.S. Acquisition-related costs for Alante Air of $0.5 million were included in general and administrative expense in the condensed consolidated statements of operations for the nine months ended September 30, 2022. The acquisition of Alante Air was determined to be a business combination.
We have allocated the purchase price for Alante Air to its individual assets and liabilities assumed. While the purchase price allocation is substantially complete, it is still preliminary and subject to change. As of the date of acquisition, the total preliminary purchase price allocated to the Alante Air assets acquired and liabilities assumed according to their estimated fair values were as follows (in thousands):
| | | | | |
| 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 of Alante Air included $3.0 million of cash and $1.4 million of accounts receivable, including $15 thousand owed from Wheels Up that was eliminated in consolidation upon acquisition.
Goodwill represents the excess of the purchase price over the fair values of the acquired net tangible assets. The allocated value of goodwill primarily relates to anticipated synergies and economies of scale by combining the use of Alante Air’s aircraft and existing business processes with our other acquisitions. The acquired goodwill is deductible for tax purposes.
The results of Alante Air were included in the condensed consolidated statement of operations from the date of acquisition. Revenue for Alante Air was $2.9 million, net of intercompany eliminations, and loss from operations was $24.2 million from the date of acquisition through September 30, 2022.
Air Partner plc Acquisition
On April 1, 2022, we acquired all of the outstanding equity of Air Partner plc (“Air Partner”) for a total purchase price of $108.2 million in cash. Air Partner is a United Kingdom-based international aviation services group that provides us with operations in 18 locations across four continents. Acquisition-related costs for Air Partner of $2.9 million were included in general and administrative expense in the condensed consolidated statements of operations for the nine months ended September 30, 2022. The acquisition of Air Partner was determined to be a business combination.
As of the date of acquisition, the total preliminary purchase price allocated to the Air Partner assets acquired and liabilities assumed according to their estimated fair values were as follows (in thousands):
| | | | | |
| 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 | |
Current assets of Air Partner included $18.0 million of cash and $17.4 million of accounts receivable.
The above initial fair value estimates of the assets acquired and liabilities assumed are provisional. We are still evaluating the fair value of intangible assets, and income taxes, in addition to ensuring all other assets, liabilities and contingencies have been identified and recorded. We have estimated the preliminary fair value of assets acquired and liabilities assumed based on information currently available and will continue to adjust those estimates as additional information pertaining to events or circumstances present at the acquisition date becomes available during the measurement period.
The allocated value of goodwill primarily relates to anticipated synergies and economies of scale by combining the use of Air Partner’s existing business processes with our platform to expand on an international basis. The acquired goodwill is not deductible for tax purposes.
The amounts allocated to acquired intangible assets and their associated weighted-average amortization periods, which were determined based on the period the assets are expected to contribute directly or indirectly to our cash flows, consist of the following:
| | | | | | | | | | | |
| 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 |
The intangible asset fair value measurements are primarily based on significant inputs that are not observable in the market which represent a Level 3 measurement (see Note 9). The valuation method used for the Air Partner intangible assets was the income approach.
The results of Air Partner were included in the condensed consolidated statement of operations from the date of acquisition. Revenue for Air Partner was $65.0 million, net of intercompany eliminations, and income from operations was $6.6 million from the date of acquisition through September 30, 2022.
Unaudited Pro Forma Summary of Operations
The accompanying unaudited pro forma summary represents the consolidated results of operations as if the 2021 acquisition of Mountain Aviation, LLC had been completed as of January 1, 2021 and the 2022 acquisitions of Alante Air and Air Partner had been completed as of January 1, 2021. The unaudited pro forma financial results for 2022 reflect the results for the three and nine months ended September 30, 2022, as well as the effects of pro forma adjustments for the transactions in 2022. The unaudited pro forma financial information includes the accounting effects of the acquisitions, including adjustments to the amortization of intangible assets and professional fees associated with the transactions. The pro forma results were based on estimates and assumptions, which we believe are reasonable but remain subject to adjustment. The unaudited pro forma summary does not necessarily reflect the actual results that would have been achieved had the companies been combined during the periods presented, nor is it necessarily indicative of future consolidated results (in thousands, except per share data).
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Net revenue | $ | 420,356 | | | $ | 344,291 | | | $ | 1,209,321 | | | $ | 949,405 | |
| Net loss | $ | (87,507) | | | $ | (54,046) | | | $ | (266,628) | | | $ | (115,279) | |
| Net loss attributable to Wheels Up Experience Inc. | $ | (87,507) | | | $ | (53,289) | | | $ | (266,628) | | | $ | (109,400) | |
| Net loss per share | $ | (0.61) | | | $ | (0.25) | | | $ | (1.35) | | | $ | (0.60) | |
7. GOODWILL AND INTANGIBLE ASSETS (AS RESTATED)
Goodwill
The change in the carrying value of goodwill for the nine months ended September 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 | |
Impairment of goodwill(1) | (62,000) | |
| Foreign currency translation adjustments | (12,019) | |
| Balance as of September 30, 2022 | $ | 459,847 | |
__________________1) Represents a non-cash impairment charge related to goodwill realized in the third quarter of 2022. See Note 2, Summary of Significant Accounting Policies in the of the Notes to Condensed Consolidated Financial Statements included herein.
Intangible Assets
The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Status | $ | 80,000 | | | $ | 21,644 | | | $ | 58,356 | |
| Customer relationships | 88,608 | | | 21,640 | | | 66,968 | |
| Non-competition agreement | 210 | | | 210 | | | — | |
| Trade name | 15,867 | | | 7,406 | | | 8,461 | |
| Developed technology | 20,402 | | | 8,570 | | | 11,832 | |
| Leasehold interest - favorable | 600 | | | 74 | | | 526 | |
| Backlog | 1,235 | | | 497 | | | 738 | |
| Total | $ | 206,922 | | | $ | 60,041 | | | $ | 146,881 | |
| | | | | | | | | | | | | | | | | |
| 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 | |
Amortization expense of intangible assets was $6.4 million and $18.1 million for the three and nine months ended September 30, 2022, respectively, and $5.4 million and $16.0 million for the three and nine months ended September 30, 2021, respectively.
Intangible Liabilities
The gross carrying value, accumulated amortization and net carrying value of intangible liabilities consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Intangible liabilities | $ | 20,000 | | | $ | 5,417 | | | $ | 14,583 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2021 |
| Gross Carrying
Value | | Accumulated Amortization | | Net Carrying
Value |
| Intangible liabilities | $ | 20,000 | | | $ | 3,917 | | | $ | 16,083 | |
Amortization of intangible liabilities, which reduces amortization expense was $0.5 million and $1.5 million for the three and nine months ended September 30, 2022, respectively, and $0.5 million and $1.5 million for the three and nine months ended September 30, 2021, respectively.
Future amortization expense of intangible assets and intangible liabilities held as of September 30, 2022, are as follows (in thousands):
| | | | | | | | | | | |
| Year ending December 31, | Intangible Assets | | Intangible Liabilities |
| 2022 (excluding the nine months ended September 30, 2022) | $ | 6,295 | | | $ | 500 | |
| 2023 | 23,296 | | | 2,000 | |
| 2024 | 22,643 | | | 2,000 | |
| 2025 | 22,230 | | | 2,000 | |
| 2026 | 21,386 | | | 2,000 | |
| Thereafter | 51,031 | | | 6,083 | |
| Total | $ | 146,881 | | | $ | 14,583 | |
8. CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash Equivalents
As of September 30, 2022 and December 31, 2021, cash equivalents on the condensed consolidated balance sheets were $162.4 million and $408.1 million, respectively, and generally consisted of investments in money market funds, U.S. treasury bills and time deposits.
Interest income from cash equivalents of $1.1 million and $1.6 million were recorded in interest income in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022, respectively, and $7 thousand and $25 thousand for the three and nine months ended September 30, 2021, respectively.
Restricted Cash
As of September 30, 2022 and December 31, 2021, restricted cash on the condensed consolidated balance sheets represents amounts held by financial institutions to establish a standby letter of credit required by the lessor of certain corporate office space. In addition, as of September 30, 2022, restricted cash also included $20.1 million related to cash received from customers for Air Partner jet cards. Air Partner jet cards do not have an expiration date
and are refundable upon demand by the customer. As such, we are contractually and legally restricted from using Air Partner jet card deposits.
A reconciliation of cash and cash equivalents and restricted cash from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows was as follows (in thousands):
| | | | | | | | | | | |
| September 30, 2022 | | September 30, 2021 |
| Cash and cash equivalents | $ | 285,498 | | | $ | 535,253 | |
| Restricted cash | 26,416 | | | 2,177 | |
| Total | $ | 311,914 | | | $ | 537,430 | |
9. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability, an exit price, in an orderly transaction between unaffiliated willing market participants on the measurement date under current market conditions. Assets and liabilities recorded at fair value are measured and classified in accordance with a three-tier fair value hierarchy based on the observability of the inputs available and activity in the markets used to measure fair value. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.
| | | | | |
| 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. |
Financial instruments that are measured at fair value on a recurring basis and their corresponding placement in the fair value hierarchy consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Level 1 | | Level 2 | | Level 3 | | Fair Value |
| Assets: | | | | | | | |
| Cash equivalents | $ | 162,392 | | | $ | — | | | $ | — | | | $ | 162,392 | |
| | | | | | | |
| Liabilities: | | | | | | | |
| Warrant liability - Public Warrants | 1,278 | | | — | | | — | | | 1,278 | |
| Warrant liability - Private Warrants | — | | | 725 | | | — | | | 725 | |
| Total liabilities | $ | 1,278 | | | $ | 725 | | | $ | — | | | $ | 2,003 | |
| | | | | | | |
| 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 | |
The carrying amount of cash equivalents approximates fair value and is classified within Level 1, because we determined the fair value through quoted market prices.
The warrants were accounted for as a liability in accordance with ASC 815-40 (see Note 18). The warrant liability was measured at fair value upon assumption and on a recurring basis, with changes in fair value presented in the condensed consolidated statements of operations.
As of September 30, 2022 and December 31, 2021, we used Level 1 inputs for the Public Warrants and Level 2 inputs for the Private Warrants. We valued the Private Warrants by applying the valuation technique of a Monte Carlo simulation model to reflect the redemption conditions. The Private Warrants are substantially similar to the Public Warrants, but not directly traded or quoted on an active trading market.
The following table presents the changes in the fair value of the warrant liability (in thousands):
| | | | | | | | | | | | | | | | | |
| 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 | (5,275) | | | (2,990) | | | (8,265) | |
| Fair value as of September 30, 2022 | $ | 1,278 | | | $ | 725 | | | $ | 2,003 | |
10. LONG-TERM DEBT
On July 21, 2021, in connection with proceeds received from the Business Combination, we repaid substantially all of the outstanding principal of our long-term debt, together with all accrued and unpaid interest in the amount of $175.5 million.
Our credit facilities contained certain restrictive covenants. We satisfied these covenants for all periods presented during which we were subject to such covenants.
Amortization expense for debt discounts and deferred financing costs was $0 for each of the three and nine months ended September 30, 2022 and $0 and $0.6 million for the three and nine months ended September 30, 2021, respectively, which was recorded in interest expense in the condensed consolidated statements of operations.
11. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are party to various legal actions arising in the normal course of business. While we do not expect that the ultimate resolution of any of these pending actions will have a material effect on our consolidated results of operations, financial position, or cash flows, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which we believe to be immaterial as of September 30, 2022, does not become material in the future.
Sales and Use Tax Liability
We regularly provide services to members in various states within the continental U.S., which may create sales and use tax nexus via temporary presence, potentially requiring the payment of these taxes. We determined that there is uncertainty as to what constitutes nexus in respective states for a state to levy taxes, fees and surcharges relating to our activity. As of September 30, 2022 and December 31, 2021, we estimate the potential exposure to such tax liability to be $9.9 million and $7.9 million, respectively, the expense for which is included in accrued expenses on the condensed consolidated balance sheets and cost of revenue in the condensed consolidated statements of operations as of and for the applicable periods presented.
12. LEASES
Leases primarily pertain to certain controlled aircraft, corporate headquarters, and operational facilities, including aircraft hangars, which are primarily accounted for as operating leases. We sublease the corporate headquarters from a third party and sublease the aircraft hangar at Cincinnati/Northern Kentucky International Airport from Delta Air Lines, Inc. (“Delta”).
We have certain variable lease agreements with aircraft owners that contain payment terms based on an hourly lease rate multiplied by the number of flight hours during a month. Variable lease payments were $3.6 million and $12.5 million for the three and nine months ended September 30, 2022, respectively, and $3.2 million and $12.1 million for the three and nine months ended September 30, 2021, respectively.
The components of net lease cost were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Operating lease costs | $ | 9,789 | | | $ | 12,643 | | | $ | 28,614 | | | $ | 29,900 | |
| Short-term lease costs | 8,086 | | | 3,331 | | | 22,600 | | | 16,139 | |
| Total lease costs | $ | 17,875 | | | $ | 15,974 | | | $ | 51,214 | | | $ | 46,039 | |
Costs related to leased aircraft and operational facilities were $15.0 million and $43.3 million for the three and nine months ended September 30, 2022, respectively, and $14.0 million and $40.7 million for the three and nine months ended September 30, 2021, respectively, and are included in cost of revenue in the condensed consolidated statements of operations. Costs related to leased corporate headquarters and other office space including expenses for non-lease components were $2.9 million and $7.9 million for the three and nine months ended September 30, 2022, respectively, and $2.0 million and $5.1 million for the three and nine months ended September 30, 2021,
respectively, and are included in general and administrative expense in the condensed consolidated statements of operations.
Supplemental cash flow information related to leases were as follows (in thousands):
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2022 | | 2021 |
| Cash paid for amounts included in the measurement of operating lease liabilities: | | | |
| Operating cash flows paid for operating leases | $ | 28,865 | | | $ | 27,773 | |
| Right-of-use assets obtained in exchange for operating lease obligations | $ | 46,916 | | | $ | 62,856 | |
Supplemental balance sheet information related to leases are as follows:
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
| Weighted-average remaining lease term (in years): | | | |
| Operating leases | 5.8 | | 6.4 |
| Weighted-average discount rate: | | | |
| Operating leases | 9.0 | % | | 9.5 | % |
Maturities of lease liabilities, as of September 30, 2022, were as follows (in thousands):
| | | | | |
| Year ending December 31, | Operating Leases |
| 2022 (excluding the nine months ended September 30, 2022) | $ | 10,074 | |
| 2023 | 38,557 | |
| 2024 | 33,090 | |
| 2025 | 19,384 | |
| 2026 | 11,230 | |
| Thereafter | 42,441 | |
| Total lease payments | 154,776 | |
| Less: Imputed interest | (37,698) | |
| Total lease obligations | $ | 117,078 | |
13. STOCKHOLDERS’ EQUITY AND EQUITY-BASED COMPENSATION
Pursuant to the Wheels Up Experience Inc. certificate of incorporation, we are authorized to issue 2,500,000,000 shares of Class A common stock, par value of $0.0001 per share, and 25,000,000 shares of preferred stock, par value $0.0001 per share. Holders of Class A common stock are entitled to one vote per share.
As of September 30, 2022, we have the following nine equity-based compensation plans that were approved by the board of directors of WUP prior to the Business Combination: Wheels Up Partners Holdings LLC Equity Incentive Plan (“MIP Plan”); Wheels Up Partners Holdings LLC Equity Incentive Plan II (“MIP Plan II”); Wheels Up Partners Holdings LLC Equity Incentive Plan III (“MIP Plan III”); Wheels Up Partners Holdings LLC Equity Incentive Plan IV (“MIP Plan IV”); Wheels Up Partners Holdings LLC Equity Incentive Plan V (“MIP Plan V”); Wheels Up Partners Holdings LLC Equity Incentive Plan VI (“MIP Plan VI”); Wheels Up Partners Holdings LLC Equity Incentive Plan VII (“MIP Plan VII”); and Wheels Up Partners Holdings LLC Equity Incentive Plan VIII (“MIP Plan VIII”); which collectively constitute the management incentive plan and the Wheels Up Partners Holdings LLC Option Plan, which is the WUP stock option plan. Following the consummation of the Business Combination, no new grants can be made under the WUP management incentive plan or the WUP stock option plan.
In connection with the Business Combination, the board of directors (the “Board”) and stockholders of Wheels Up adopted the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan (the “2021 LTIP”), for employees, consultants and other qualified persons.
On June 30, 2022, the Board adopted the Wheels Up Experience Inc. 2022 Inducement Grant Plan (the “2022 Inducement Plan”) to be used for a one-time employment inducement grant for our new Chief Financial Officer, Todd Smith, pursuant to New York Stock Exchange Rule 303A.08. The maximum number of awards that could be granted under the 2022 Inducement Plan were 2,051,282 shares of Class A common stock, which were all granted in the form of RSUs to Mr. Smith on July 1, 2022. 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.
WUP Management Incentive Plan
WUP Profits Interests
As of September 30, 2022, an aggregate of 31.3 million profits interests have been authorized and issued under the WUP management incentive plan.
The following table summarizes the profits interests activity under the WUP management incentive plan as of September 30, 2022:
| | | | | | | | | | | |
| | 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 September 30, 2022 | 28,813 | | | $ | 0.42 | |
The weighted-average remaining contractual term as of September 30, 2022, for WUP profits interests outstanding was approximately 8.8 years.
The following table summarizes the status of non-vested WUP profits interests as of September 30, 2022:
| | | | | | | | | | | |
| | 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 | (3,029) | | | 0.31 | |
| Forfeited | (6) | | | 0.24 | |
| Non-vested WUP profits interests as of September 30, 2022 | 1,698 | | | $ | 0.42 | |
The total unrecognized compensation cost related to non-vested WUP profits interests was $0.3 million as of September 30, 2022 and is expected to be recognized over a weighted-average period of 0.5 years. The total fair value for WUP profits interests that vested was approximated $1.0 million for the nine months ended September 30, 2022.
WUP Restricted Interests
As of September 30, 2022, under MIP Plan VII, 4.7 million WUP restricted interests have been authorized and issued to certain current and former Wheels Up employees.
The following table summarizes the restricted interests activity under the WUP management incentive plan as of September 30, 2022:
| | | | | | | | | | | |
| 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 | (4,662) | | | 3.98 | |
| Forfeited | — | | | — | |
| Non-vested WUP restricted interests as of September 30, 2022 | — | | | $ | — | |
The weighted-average remaining contractual term as of September 30, 2022, for WUP restricted interests outstanding was approximately 7.5 years.
The total unrecognized compensation cost related to non-vested WUP restricted interests was $0 as of September 30, 2022. WUP restricted interests are time and performance-based awards that vest with a change in control or initial public offering. As a result, we started recording compensation cost for WUP restricted interests on the Closing Date. The total fair value for WUP restricted interests that vested was approximated $18.6 million for the nine months ended September 30, 2022.
The WUP restricted interests granted vest when both of the following conditions exist: (i) ratably over a four-year service period and (ii) upon the first to occur of (A) a change of control and (B) the later to occur of (1) six months after an initial public offering and (2) 30 days after the expiration of any applicable lock-up period in connection with an initial public offering. The WUP restricted interests lock-up period expired on February 8, 2022. As of such date, the holders of WUP restricted interests met the vesting conditions for the portion of their awards that did not require further service. The remainder of such eligible vestings occurred prior to filing this Form 10-Q/A.
WUP Stock Option Plan
As of September 30, 2022, the number of WUP stock options authorized and issued in aggregate under the WUP stock option plan was 17.5 million. Each outstanding stock option is exercisable for one share of Class A common stock.
The following table summarizes the activity under the WUP stock option plan as of September 30, 2022:
| | | | | | | | | | | | | | | | | |
| 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 | (2,483) | | | 7.61 | | | 1.16 | |
| Expired | — | | | — | | | — | |
| Outstanding WUP stock options as of September 30, 2022 | 13,230 | | | $ | 7.50 | | | $ | 1.19 | |
| Exercisable WUP stock options as of September 30, 2022 | 12,139 | | | $ | 7.45 | | | $ | 1.12 | |
The aggregate intrinsic value as of September 30, 2022, for WUP stock options that were outstanding and exercisable was $0.
The weighted-average remaining contractual term as of September 30, 2022, for WUP stock options that were outstanding and exercisable was approximately 7.0 years and 6.9 years, respectively.
The following table summarizes the status of non-vested WUP stock options as of September 30, 2022:
| | | | | | | | | | | |
| | 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 | (2,632) | | | 1.48 | |
| Expired | — | | | — | |
| Forfeited | (248) | | | 1.64 | |
| Non-vested WUP stock options as of September 30, 2022 | 1,091 | | | $ | 1.98 | |
The total unrecognized compensation cost related to non-vested WUP stock options was $1.8 million as of September 30, 2022 and is expected to be recognized over a weighted-average period of 0.9 years. The total fair value for WUP stock options that vested was approximated $3.9 million for the nine months ended September 30, 2022.
2021 LTIP
As of September 30, 2022, an aggregate of 27.3 million shares were authorized for issuance under the 2021 LTIP.
Restricted Stock Units (“RSUs”)
The following table summarizes the activity under the 2021 LTIP related to RSUs as of September 30, 2022:
| | | | | | | | | | | |
| 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) | 17,880 | | | 3.01 | |
| Vested | (2,257) | | | 6.66 | |
| Forfeited | (2,627) | | | 6.13 | |
| Non-vested RSUs as of September 30, 2022 | 21,407 | | | $ | 3.96 | |
(1) Includes 1,600 RSUs granted to our Chief Executive Officer (“CEO”). See “—2022 CEO Awards” for additional details regarding this grant.
The total unrecognized compensation cost related to non-vested RSUs was $65.2 million as of September 30, 2022 and is expected to be recognized over a weighted-average period of 2.3 years. The total fair value for RSUs that vested was approximated $15.0 million for the nine months ended September 30, 2022.
Performance-Based Restricted Stock Units (“PSUs”)
Under the terms of the non-vested PSUs granted to certain employees, upon the achievement of certain pre-determined performance objectives, subject to the participant’s continued service (except as described under “—2022 CEO Awards”), each PSU may settle into shares of our Class A common stock. The PSUs will vest, if at all, upon the actual achievement of the related performance objective, subject to specified change of control exceptions.
The following table summarizes the activity under the 2021 LTIP related to PSUs as of September 30, 2022:
| | | | | | | | | | | |
| 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 September 30, 2022(2) | 1,149 | | | $ | 2.13 | |
(1) Includes 380 PSUs granted to our CEO. See “—2022 CEO Awards” for additional details regarding this grant.
(2) Approximately 769 of the PSUs reflected in this table may settle into shares of our Class A common stock equal to 80-120% of the PSUs based on the level of performance.
Equity-based compensation expense associated with PSUs is based on the fair value of our Class A common stock on the grant date, which equals the closing price of our Class A common stock on the grant date. We recognize compensation expense over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance objectives becomes probable. The total grant date fair value of unvested PSUs as of September 30, 2022 was $1.9 million. As of September 30, 2022, the achievement of the related performance objective was not probable of being achieved and, accordingly, no compensation cost for the PSUs has been recognized.
2022 CEO Awards
During the second quarter of 2022, the Board approved certain grants under the 2021 LTIP to our CEO consisting of 1,600,000 RSUs that contain a service-based vesting condition (the “CEO Service-Based RSUs”), 380,000 PSUs that contain performance-based vesting conditions (the “CEO PSUs”) and 1,615,000 RSUs that contain market-based vesting conditions (the “CEO Market-Based RSUs”, together with the CEO Service-Based RSUs and CEO PSUs, the “2022 CEO Awards”). All of the 2022 CEO Awards require continued employment through the vesting date, subject to specified change in control and service termination exceptions. The CEO Service-Based RSUs vest annually over a three-year period from the grant date. The CEO Service-Based RSUs are included in the table under “—Restricted Stock Units (“RSUs”)” above as of September 30, 2022.
The CEO PSUs will vest, if at all, with the achievement of certain separate performance conditions based on the achievement of pre-determined annual revenue and earnings before interest, taxes, depreciation and amortization thresholds. Any CEO PSUs that have not vested prior to the date the audited financial statements for the year ending December 31, 2026 are finalized will be forfeited. The CEO PSUs are included in the table under “—Performance-Based Restricted Stock Units (“PSUs”)” above as of September 30, 2022.
The CEO Market-Based RSUs will vest, if at all, with the achievement of certain separate market-based vesting conditions based on the closing Class A common stock price over any 30 consecutive trading day-period that occurs prior to December 31, 2026. The CEO Market-Based RSUs are in addition to those described in the tables above under “—Restricted Stock Units (“RSUs”)” and “—Performance-Based Restricted Stock Units (“PSUs”)”.
As of September 30, 2022, none of the CEO PSUs had vested and 133,333 CEO PSUs had a performance-based vesting condition deemed probable of being achieved. The total unrecognized compensation cost related to such CEO PSUs with a probable performance-based vesting condition was $0.3 million as of September 30, 2022 and is expected to be recognized over 0.6 years.
The grant-date fair value of the CEO Market-Based RSUs, using a Monte Carlo simulation model, was $0.3 million. The derived service period for such CEO Market-Based RSUs began on June 8, 2022 and is a weighted-average period of 3.8 years.
Based on the Class A common stock trading price, the market conditions for the CEO Market-Based RSUs were not met, and no shares vested as of September 30, 2022. The total unrecognized compensation cost related to such CEO Market-Based RSUs was $0.2 million as of September 30, 2022 and is expected to be recognized over 3.5 years.
Wheels Up Stock Options
The following table summarizes the activity under the 2021 LTIP related to Wheels Up stock options as of September 30, 2022:
| | | | | | | | | | | | | | | | | |
| 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 September 30, 2022 | 921 | | | $ | 10.00 | | | $ | 4.75 | |
| Exercisable Wheels Up stock options as of September 30, 2022 | 384 | | | $ | 10.00 | | | $ | 4.75 | |
The aggregate intrinsic value as of September 30, 2022, for Wheels Up stock options that were outstanding and exercisable was $0.
The weighted-average remaining contractual term as of September 30, 2022, for Wheels Up stock options that were outstanding and exercisable was approximately 8.8 years and 8.8 years, respectively.
The following table summarizes the status of non-vested Wheels Up stock options as of September 30, 2022:
| | | | | | | | | | | |
| | 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 | (230) | | | 4.75 | |
| Expired | — | | | — | |
| Forfeited | — | | | — | |
| Non-vested Wheels Up stock options as of September 30, 2022 | 538 | | | $ | 4.75 | |
The total unrecognized compensation cost related to non-vested Wheels Up stock options was $2.3 million as of September 30, 2022 and is expected to be recognized over a weighted-average period of 1.6 years. The total fair value of Wheels Up stock options that vested was approximated $1.1 million for the nine months ended September 30, 2022.
Equity-Based Compensation Expense
Compensation expense for WUP profits interests recognized in the condensed consolidated statements of operations was $0.2 million and $1.1 million for the three and nine months ended September 30, 2022, respectively, and $1.0 million and $1.5 million for the three and nine months ended September 30, 2021, respectively.
Compensation expense for WUP restricted interests recognized in the condensed consolidated statements of operations was $0 and $0.4 million for the three and nine months ended September 30, 2022, respectively, and $12.6 million for each of the three and nine months ended September 30, 2021.
Compensation expense for WUP stock options and Wheels Up stock options recognized in the condensed consolidated statements of operations was $1.3 million and $5.5 million for the three and nine months ended September 30, 2022, respectively, and $5.4 million and $7.7 million for the three and nine months ended September 30, 2021, respectively.
Compensation expense for RSUs recognized in the condensed consolidated statements of operations was $11.2 million and $29.9 million for the three and nine months ended September 30, 2022, respectively, and $0.6 million for each of the three and nine months ended September 30, 2021.
The following table summarizes equity-based compensation expense recognized by condensed consolidated statement of operations line item (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Cost of revenue | $ | 3,581 | | | $ | 679 | | | $ | 11,320 | | | $ | 779 | |
| Technology and development | 751 | | | 619 | | | 2,047 | | | 806 | |
| Sales and marketing | 2,756 | | | 2,449 | | | 8,314 | | | 2,901 | |
| General and administrative | 15,416 | | | 24,159 | | | 44,158 | | | 26,182 | |
| Total equity-based compensation expense | $ | 22,504 | | | $ | 27,906 | | | $ | 65,839 | | | $ | 30,668 | |
Earnout Shares
The 9,000,000 Earnout Shares vest with the achievement of separate market conditions. One-third of the Earnout Shares will meet the market condition when the closing Class A common stock price is greater than or equal to $12.50 for any 20 trading days within a period of 30 consecutive trading days within five years of the Closing Date. An additional one-third will vest when the Class A common stock is greater than or equal to $15.00 over the same measurement period. The final one-third will vest when the Class A common stock is greater than or equal to $17.50 over the same measurement period.
Earnout Shares that are attributable to WUP profits interests and restricted interests require continued employment as of the date on which each of the Earnout Share market conditions are met. As of September 30, 2022 forfeitures of Earnout Shares were not material.
The grant-date fair value of the Earnout Shares attributable to the holders of WUP profits interests and restricted interests, using a Monte Carlo simulation model, was $57.9 million. The derived service period began on the Closing Date and is a weighted-average period of 1.7 years.
Based on the Class A common stock trading price, the market conditions were not met, and no Earnout Shares vested as of September 30, 2022. Compensation expense for Earnout Shares recognized in the condensed consolidated statements of operations was $9.7 million and $28.8 million for the three and nine months ended September 30, 2022, respectively, and $8.3 million for each of the three and nine months ended September 30, 2021. The total unrecognized compensation cost related to Earnout Shares was $11.1 million as of September 30, 2022 and is expected to be recognized over 0.5 years.
Treasury Stock
During the three and nine months ended September 30, 2022, respectively, 473,339 and 2,386,585 shares, with a market value of $0.7 million and $7.3 million, respectively, or $1.39 and $3.47 per share, respectively, were withheld to settle employee taxes due upon the vesting of either restricted stock or RSUs and were added to treasury stock on our condensed consolidated balance sheets as of September 30, 2022.
14. NON-CONTROLLING INTERESTS (AS RESTATED)
MIP LLC is a single purpose entity formed for the purpose of administering and effectuating the award of WUP profits interests to employees, consultants and other qualified persons. Wheels Up is the sole managing member of MIP LLC and, as a result, consolidates the financial results of MIP LLC. We record non-controlling interests representing the ownership interest in MIP LLC held by other members of MIP LLC. In connection with the Business Combination, the Seventh Amended and Restated LLC Agreement of WUP was adopted, allowing members of MIP LLC, subject to certain restrictions, to exchange their vested WUP profits interests for cash or a corresponding number of shares of Class A common stock, at the option of Wheels Up, based on the value of such WUP profits interests relative to their applicable participation threshold.
The decision of whether to exchange WUP profits interests for cash or Class A common stock is made solely at the discretion of Wheels Up. Accordingly, the WUP profits interests held by MIP LLC are treated as permanent equity and changes in the ownership interest of MIP LLC are accounted for as equity transactions. Future exchanges of WUP profits interests, if settled in Class A common stock at the discretion of Wheels Up, will reduce the amount recorded as non-controlling interests and increase additional paid-in-capital on the condensed consolidated balance sheets.
The calculation of non-controlling interests was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022
As Restated | | December 31, 2021 |
Number of WUP common units held by Wheels Up(1) | 245,745,014 | | | 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 | 245,745,014 | | | 100.0 | % | | 247,880,564 | | | 100.0 | % |
(1) WUP common units represent an equivalent ownership of Class A common stock outstanding.
(2) Based on the closing price of Class A common stock on the last trading day of the period covered by this Form 10-Q/A, there would be 0 WUP common units issuable upon conversion of vested and unvested WUP profits interests outstanding as of September 30, 2022.
Weighted-average ownership percentages are used to allocate net loss to Wheels Up and the non-controlling interest holders. The non-controlling interests weighted-average ownership percentage was 0.0% and 0.0% for the three and nine months ended September 30, 2022, respectively, and 1.4% and 5.1% for the three and nine months ended September 30, 2021, respectively.
15. RELATED PARTIES
We engage in transactions with certain stockholders who are also members, ambassadors or customers. Such transactions primarily relate to their membership in the Wheels Up program, flights and flight-related services.
We incurred expenses of $0.1 and $1.5 million for the three and nine months ended September 30, 2022, respectively, and $1.4 million and $3.2 million for the three and nine months ended September 30, 2021, respectively, from transactions related to a commercial cooperation agreement with our stockholder Delta. We have also recorded $3.2 and $5.3 million in accrued expenses on the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively, for transactions associated with the commercial cooperation agreement. In addition, we provided $0.5 million and $1.9 million of flights to certain persons currently and previously affiliated with Delta at a discount to our retail pricing for the three and nine months ended September 30, 2022, respectively, and $0.4 million and $1.6 million for the three and nine months ended September 30, 2021, respectively. Delta provided Wheels Up Private Jets pilots airfare for business travel at no cost for all periods presented.
We incurred expenses of $0.1 million and $0.3 million for the three and nine months ended September 30, 2022, respectively, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2021, respectively, for an aircraft leased from an employee. We recognized revenue of $1.3 million and $3.9 million for
flights and other services, including aircraft management, provided to Board members for the three and nine months ended September 30, 2022, respectively, and $0 and $0.7 million for the three and nine months ended September 30, 2021, respectively. We incurred expenses of $0 for each of the three and nine months ended September 30, 2022, and $0 for each of the three and nine months ended September 30, 2021, for an immediate family member of a Wheels Up executive and a member of the Board who was a full-time employee. We incurred marketing expenses of $0 and $0.3 million for the three and nine months ended September 30, 2022, respectively, and $0 for each of the three and nine months ended September 30, 2021, with a company where a member of the Board is an executive.
16. NET LOSS PER SHARE (AS RESTATED)
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022
As Restated | | 2021 | | 2022
As Restated | | 2021 |
| Numerator: | | | | | | | |
| Net loss attributable to Wheels Up Experience Inc. - basic and diluted | $ | (148,838) | | | $ | (58,485) | | | $ | (330,250) | | | $ | (114,050) | |
| Denominator: | | | | | | | |
| Weighted-average shares of Class A common stock outstanding - basic and diluted | 244,351 | | | 235,341 | | | 244,348 | | | 191,057 | |
| Basic and diluted net loss per share of Class A common stock | $ | (0.61) | | | $ | (0.25) | | | $ | (1.35) | | | $ | (0.60) | |
There were no dividends declared or paid for each of the three and nine months ended September 30, 2022 or 2021.
Basic and diluted net loss per share were computed using the two-class method. Shares of unvested restricted stock are considered participating securities, because these awards contain a non-forfeitable right to participate equally in any dividends prior to forfeiture of the restricted stock, if any, irrespective of whether the awards ultimately vest. All issued and outstanding shares of restricted stock are included in the weighted-average shares of Class A common stock outstanding.
WUP profits interests held by other members of MIP LLC are not subject to the net loss per share calculation until such time the vested WUP profits interests are actually exchanged for shares of Class A common stock.
The following securities were not included in the computation of diluted shares outstanding, because the effect would be anti-dilutive, and issuance of such shares is contingent upon the satisfaction of certain conditions which were not satisfied by the end of the period:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| Warrants | 12,521,494 | | | 10,870,308 | | | 12,521,494 | | | 3,623,436 | |
| Earnout Shares | 9,000,000 | | | 7,813,187 | | | 9,000,000 | | | 2,604,396 | |
RSUs(1) | 24,327,885 | | | 836,499 | | | 24,327,885 | | | 279,858 | |
| Stock options | 14,150,655 | | | 16,879,379 | | | 14,150,655 | | | 16,463,474 | |
| Total anti-dilutive securities | 60,000,034 | | | 36,399,373 | | | 60,000,034 | | | 22,971,164 | |
(1) Includes RSUs, PSUs and CEO Market-Based RSUs outstanding as of September 30, 2022.
17. INCOME TAXES
We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income or loss from WUP, as well as any standalone income or loss Wheels Up generates. WUP is treated as a partnership for U.S. federal and most applicable state and local income tax purposes and generally does not pay income taxes in most jurisdictions. Instead, any taxable income or loss generated by WUP is passed through to and included in the taxable income or loss of its members, including Wheels Up.
As a result of the Air Partner acquisition, we now conduct business in various foreign jurisdictions and are subject to tax in those foreign jurisdictions. We currently expect the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, the Company has not provided for the tax effect, if any, of limited outside basis differences of its foreign subsidiaries. The determination of the future tax consequences of the remittance of these earnings is not practicable.
We recorded income tax expense of $0.2 million and $0.5 million for the three and nine months ended September 30, 2022, respectively, and $0 for each of the three and nine months ended September 30, 2021. The effective tax rate was (0.2)% and (0.2)% for the three and nine months ended September 30, 2022, respectively, and 0% for each of the three and nine months ended September 30, 2021. Our effective tax rate for each of the three and nine months ended September 30, 2022, differs from the federal statutory rate of 21% primarily due to a full valuation allowance against the majority of our net deferred tax assets where it is more likely than not that the deferred tax assets will not be realized. For the periods prior to the Business Combination, there is no income tax expense recorded because WUP is treated as a partnership for U.S. federal tax purposes and is not subject to U.S. federal and most applicable state and local income taxes.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of the deferred tax assets may not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, and tax-planning strategies. As of September 30, 2022, we concluded, based on the weight of all available positive and negative evidence, that it is more likely than not that the U.S. deferred tax assets will not be realized. Accordingly, a full valuation allowance has been established on the majority of our net deferred tax assets in the U.S.
Additionally, the Company is subject to the income tax effects associated with the Global Intangible Low-Taxed Income (“GILTI”) provisions and treats the tax effects of GILTI as a current period expense in the period incurred.
18. WARRANTS
Prior to the Business Combination, Aspirational issued 7,991,544 Public Warrants and 4,529,950 Private Warrants. On the Closing Date, Wheels Up assumed the warrants. Each whole warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. The Public Warrants and Private Warrants became exercisable on September 25, 2021, which was 12 months from the closing of the Aspirational initial public offering, and expire five years from the completion of the Business Combination or earlier upon redemption or liquidation.
In connection with the Business Combination, we filed a Registration Statement on Form S-1 that was declared effective by the SEC on August 24, 2021, as amended by Post-Effective Amendment No. 1 thereto that was declared effective by the SEC on March 21, 2022, as further amended by Post-Effective Amendment No. 2 to Form S-1 on Form S-3 filed with the SEC on July 20, 2022, and as further amended by Post-Effective Amendment No. 3 to Form S-1 on Form S-3 that was declared effective by the SEC on August 10, 2022 (collectively, the “Selling Stockholder Registration Statement”). The Selling Stockholder Registration Statement relates to the issuance of an aggregate of 12,521,494 shares of Class A common stock underlying the Public Warrants and Private Warrants. As of September 30, 2022, there have not been any warrants exercised and 12,521,494 remain outstanding.
19. SUBSEQUENT EVENTS
On October 14, 2022, Wheels Up Partners LLC (“WUP LLC”), an indirect subsidiary of the Company, entered into a Note Purchase Agreement (the “Note Purchase Agreement”), pursuant to which WUP LLC issued $270.0 million aggregate principal amount of equipment notes (collectively, the “Equipment Notes”). The Equipment Notes were issued under separate Trust Indentures and Mortgages (each, an “Indenture” and collectively, the “Indentures”) with respect to each aircraft. The Equipment Notes were issued for net proceeds (before transaction-related expenses) equal to 96% of principal amount, or $259.2 million, and bear interest at the rate of 12% per annum with annual amortization of principal amount equal to 10% per annum.
The Equipment Notes are secured by first-priority liens on 134 of the Company’s owned aircraft fleet and by liens on certain intellectual property assets of the Company and certain of its subsidiaries. WUP LLC’s obligations under the Equipment Notes are guaranteed by the Company and certain of its subsidiaries.
Interest and principal payments on the Equipment Notes are payable quarterly on each January 15, April 15, July 15 and October 15, beginning on January 15, 2023. The final expected distribution date of the Equipment Notes varies from July 15, 2025 to October 15, 2029 depending on the type of aircraft, unless redeemed earlier by the Company. The Note Purchase Agreement and each Indenture and the related guarantees contain certain operational and financial covenants, including a minimum liquidity covenant and a covenant that limits the maximum loan to value ratio of all aircraft financed, subject to certain cure rights of the Company, and other restrictive covenants that provide limitations under certain circumstances. Each Indenture contains customary events of default for transactions of this type, including cross-default provisions among the Equipment Notes. The maturity of the Equipment Notes may be accelerated upon the occurrence of certain events of default.
20. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s consolidated financial statements as of and for the year ended December 31, 2022, the Company’s management identified an error in its previously issued unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2022. The identified error related to the recognition of a goodwill impairment charge that should have been recognized during the three months ended September 30, 2022.
In connection with these errors, the Company is restating the previously issued unaudited condensed consolidated financial statements, and related notes thereto, as of and for the three and six months ended September 30, 2022, as filed in the Company’s Quarterly Report on Form 10-Q on November 9, 2022. The Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended September 30, 2022 included in this Form 10-Q/A have been restated to correct the error as presented in the following tables.
The table below sets forth the unaudited condensed consolidated balance sheet information as of September 30, 2022, including the balances as reported, adjustments and the balances as restated (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| As Reported | | Adjustments | | As Restated |
| ASSETS | | | | | |
| Current assets: | | | | | |
| Cash and cash equivalents | $ | 285,498 | | | | | $ | 285,498 | |
| Accounts receivable, net | 127,354 | | | | | 127,354 | |
| Other receivables | 8,920 | | | | | 8,920 | |
| Parts and supplies inventories, net | 18,127 | | | | | 18,127 | |
| Aircraft inventory | 33,231 | | | | | 33,231 | |
| Aircraft held for sale | 20,113 | | | | | 20,113 | |
| Prepaid expenses | 38,561 | | | | | 38,561 | |
| Other current assets | 19,790 | | | | | 19,790 | |
| Total current assets | 551,594 | | | — | | | 551,594 | |
| Property and equipment, net | 387,802 | | | | | 387,802 | |
| Operating lease right-of-use assets | 111,250 | | | | | 111,250 | |
| Goodwill | 521,847 | | | (62,000) | | | 459,847 | |
| Intangible assets, net | 146,881 | | | | | 146,881 | |
| Restricted cash | 26,416 | | | | | 26,416 | |
| Other non-current assets | 63,948 | | | | | 63,948 | |
| Total assets | $ | 1,809,738 | | | $ | (62,000) | | | $ | 1,747,738 | |
| LIABILITIES AND EQUITY | | | | | |
| Current liabilities: | | | | | |
| Accounts payable | $ | 48,962 | | | | | $ | 48,962 | |
| Accrued expenses | 128,557 | | | | | 128,557 | |
| Deferred revenue, current | 966,367 | | | | | 966,367 | |
| Operating lease liabilities, current | 30,051 | | | | | 30,051 | |
| Intangible liabilities, current | 2,000 | | | | | 2,000 | |
| Other current liabilities | 18,126 | | | | | 18,126 | |
| Total current liabilities | 1,194,063 | | | — | | | 1,194,063 | |
| Deferred revenue, non-current | 1,885 | | | | | 1,885 | |
| Operating lease liabilities, non-current | 87,027 | | | | | 87,027 | |
| Warrant liability | 2,003 | | | | | 2,003 | |
| Intangible liabilities, non-current | 12,583 | | | | | 12,583 | |
| Other non-current liabilities | 2,742 | | | | | 2,742 | |
| Total liabilities | 1,300,303 | | | — | | | 1,300,303 | |
| Equity: | | | | | |
Class A common stock, $0.0001 par value; 2,500,000,000 authorized; 248,131,546 shares issued and 245,744,961 shares outstanding as of September 30, 2022 | 25 | | | | | 25 | |
| Additional paid-in capital | 1,522,368 | | | | | 1,522,368 | |
| Accumulated deficit | (988,964) | | | (62,000) | | | (1,050,964) | |
| Accumulated other comprehensive loss | (16,647) | | | | | (16,647) | |
Treasury stock, at cost, 2,386,585 shares | (7,347) | | | | | (7,347) | |
| Total Wheels Up Experience Inc. stockholders’ equity | 509,435 | | | (62,000) | | | 447,435 | |
| Non-controlling interests | — | | | | | — | |
| Total equity | 509,435 | | | (62,000) | | | 447,435 | |
| Total liabilities and equity | $ | 1,809,738 | | | $ | (62,000) | | | $ | 1,747,738 | |
The table below sets forth the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022, including the balances as reported, adjustments and the as restated balances (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Three Months Ended | | Nine Months Ended |
| As Reported | | Adjustments | | As Restated | | As Reported | | Adjustments | | As Restated |
| Revenue | $ | 420,356 | | | | | $ | 420,356 | | | $ | 1,171,503 | | | | | $ | 1,171,503 | |
| | | | | | | | | | | |
| Costs and expenses: | | | | | | | | | | | |
| Cost of revenue | 403,042 | | | | | 403,042 | | | 1,144,698 | | | | | 1,144,698 | |
| Technology and development | 16,639 | | | | | 16,639 | | | 42,436 | | | | | 42,436 | |
| Sales and marketing | 30,830 | | | | | 30,830 | | | 87,761 | | | | | 87,761 | |
| General and administrative | 44,323 | | | | | 44,323 | | | 130,200 | | | | | 130,200 | |
| Depreciation and amortization | 16,500 | | | | | 16,500 | | | 46,862 | | | | | 46,862 | |
| Gain on sale of aircraft held for sale | (1,316) | | | | | (1,316) | | | (3,950) | | | | | (3,950) | |
| Impairment of goodwill | — | | | 62,000 | | | 62,000 | | | — | | | 62,000 | | | 62,000 | |
| Total costs and expenses | 510,018 | | | 62,000 | | | 572,018 | | | 1,448,007 | | | 62,000 | | | 1,510,007 | |
| | | | | | | | | | | |
| Loss from operations | (89,662) | | | (62,000) | | | (151,662) | | | (276,504) | | | (62,000) | | | (338,504) | |
| | | | | | | | | | | |
| Other income (expense): | | | | | | | | | | | |
| Change in fair value of warrant liability | 2,504 | | | | | 2,504 | | | 8,265 | | | | | 8,265 | |
| Loss on extinguishment of debt | — | | | | | — | | | — | | | | | — | |
| Interest income | 1,130 | | | | | 1,130 | | | 1,612 | | | | | 1,612 | |
| Interest expense | — | | | | | — | | | — | | | | | — | |
| Other expense, net | (625) | | | | | (625) | | | (1,505) | | | | | (1,505) | |
| Total other income (expense) | 3,009 | | | — | | | 3,009 | | | 8,372 | | | — | | | 8,372 | |
| | | | | | | | | | | |
| Loss before income taxes | (86,653) | | | (62,000) | | | (148,653) | | | (268,132) | | | (62,000) | | | (330,132) | |
| | | | | | | | | | | |
| Income tax expense | (185) | | | | | (185) | | | (505) | | | | | (505) | |
| | | | | | | | | | | |
| Net loss | $ | (86,838) | | | $ | (62,000) | | | $ | (148,838) | | | $ | (268,637) | | | $ | (62,000) | | | $ | (330,637) | |
| Less: Net loss attributable to non-controlling interests | — | | | | | — | | | (387) | | | | | (387) | |
| Net loss attributable to Wheels Up Experience Inc. | $ | (86,838) | | | $ | (62,000) | | | $ | (148,838) | | | $ | (268,250) | | | $ | (62,000) | | | $ | (330,250) | |
| | | | | | | | | | | |
| Net loss per share of Class A common stock - basic and diluted | $ | (0.36) | | | $ | (0.25) | | | $ | (0.61) | | | $ | (1.10) | | | $ | (0.25) | | | $ | (1.35) | |
| Weighted-average shares of Class A common stock outstanding - basic and diluted | 244,350,959 | | | | 244,350,959 | | 244,347,871 | | | | 244,347,871 |
The tables below sets forth the unaudited condensed consolidated statements of comprehensive (loss) income for the three and nine months ended September 30, 2022, including balances as reported, adjustments and balances as restated amounts (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2022 |
| Three Months Ended | | Nine Months Ended |
| As Reported | | Adjustments | | As Restated | | As Reported | | Adjustments | | As Restated |
| Net loss | $ | (86,838) | | | $ | (62,000) | | | $ | (148,838) | | | $ | (268,637) | | | $ | (62,000) | | | $ | (330,637) | |
| Other comprehensive loss: | | | | | | | | | | | |
| Foreign currency translation adjustments | (8,329) | | | | | (8,329) | | | (16,647) | | | | | (16,647) | |
| Comprehensive loss | (95,167) | | | (62,000) | | | (157,167) | | | (285,284) | | | (62,000) | | | (347,284) | |
| Less: Comprehensive loss attributable to non-controlling interests | — | | | | | — | | | (387) | | | | | (387) | |
| Comprehensive loss attributable to Wheels Up Experience Inc. | $ | (95,167) | | | $ | (62,000) | | | $ | (157,167) | | | $ | (284,897) | | | $ | (62,000) | | | $ | (346,897) | |
The table below sets forth the unaudited condensed consolidated statement of stockholders’ equity at September 30, 2022, including balances as reported, adjustments and balances as restated amounts (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Class A Common Stock | | | | | | | | Treasury Stock | | | | |
| Shares | | Amount | | Additional paid-in capital | | Accumulated
deficit | | Accumulated
other comprehensive loss | | Shares | | Amount | | Non-controlling interests | | Total |
| Balance at September 30, 2022 as reported | 248,131,546 | | | $ | 25 | | | $ | 1,522,368 | | | $ | (988,964) | | | $ | (16,647) | | | 2,386,585 | | | $ | (7,347) | | | $ | — | | | $ | 509,435 | |
| Adjustment to net loss | | | | | | | (62,000) | | | | | | | | | | | (62,000) | |
| Balance at September 30, 2022 as restated | 248,131,546 | | $ | 25 | | | $ | 1,522,368 | | | $ | (1,050,964) | | | $ | (16,647) | | | 2,386,585 | | $ | (7,347) | | | $ | — | | | $ | 447,435 | |
The table below sets forth the unaudited condensed consolidated statement of cash flows for the nine months ended September 30, 2022, including balances as reported, adjustments and balances as restated amounts (in thousands):
| | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 2022 |
| As Reported | | Adjustments | | As Restated |
| OPERATING ACTIVITIES: | | | | | |
| Net loss | $ | (268,637) | | | $ | (62,000) | | | $ | (330,637) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | |
| Depreciation and amortization | 46,862 | | | | | 46,862 | |
| Amortization of deferred financing costs and debt discount | — | | | | | — | |
| Equity-based compensation | 65,839 | | | | | 65,839 | |
| Change in fair value of warrant liability | (8,265) | | | | | (8,265) | |
| Provision for bad debt expense | — | | | | | — | |
| Provision for (recovery of) expected credit losses | (489) | | | | | (489) | |
| Gain on sale of aircraft held for sale | (3,950) | | | | | (3,950) | |
| Loss on extinguishment of debt | — | | | | | — | |
| Impairment of goodwill | — | | | 62,000 | | | 62,000 | |
| Changes in operating assets and liabilities, net of effects from acquisitions: | | | | | |
| Accounts receivable | (31,474) | | | | | (31,474) | |
| Other receivables | (859) | | | | | (859) | |
| Parts and supplies inventories | (8,544) | | | | | (8,544) | |
| Aircraft inventory | (33,231) | | | | | (33,231) | |
| Prepaid expenses | (8,065) | | | | | (8,065) | |
| Other current assets | (2,477) | | | | | (2,477) | |
| | | | | | | | | | | | | | | | | |
| Other non-current assets | (27,534) | | | | | (27,534) | |
| Operating lease liabilities, net | (624) | | | | | (624) | |
| Accounts payable | (2,885) | | | | | (2,885) | |
| Accrued expenses | (1,131) | | | | | (1,131) | |
| Other current liabilities | 812 | | | | | 812 | |
| Other non-current liabilities | (1,036) | | | | | (1,036) | |
| Deferred revenue | (2,653) | | | | | (2,653) | |
| Net cash (used in) provided by operating activities | (288,341) | | | — | | | (288,341) | |
| | | | | |
| INVESTING ACTIVITIES: | | | | | |
| Purchases of property and equipment | (80,039) | | | | | (80,039) | |
| Purchase of aircraft held for sale | (39,894) | | | | | (39,894) | |
| Proceeds from sale of aircraft held for sale, net | 41,833 | | | | | 41,833 | |
| Acquisition of businesses, net of cash acquired | (75,093) | | | | | (75,093) | |
| Capitalized software development costs | (18,532) | | | | | (18,532) | |
| Net cash (used in) provided by investing activities | (171,725) | | | — | | | (171,725) | |
| | | | | |
| FINANCING ACTIVITIES: | | | | | |
| Proceeds from stock option exercises | — | | | | | — | |
| Purchase of Shares for Treasury | (7,347) | | | | | (7,347) | |
| Proceeds from Business Combination and PIPE Investment | — | | | | | — | |
| Transaction costs in connection with the Business Combination and PIPE Investment | — | | | | | — | |
| Proceeds from long-term debt | — | | | | | — | |
| Repayments of long-term debt | — | | | | | — | |
| Repayment of loans to employees | — | | | | | — | |
| Net cash used in financing activities | (7,347) | | | — | | | (7,347) | |
| | | | | |
| Effect of exchange rate changes on cash | (7,395) | | | | | (7,395) | |
| | | | | |
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (474,808) | | | | | (474,808) | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD | 786,722 | | | | | 786,722 | |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH END OF PERIOD | $ | 311,914 | | | $ | — | | | $ | 311,914 | |
