Wheels Up Experience Inc. [UP] Filings

10-Q 1 up-20230930.htm 10-Q up-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

FORM 10-Q

________________

[Mark One]


þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-39541

WHEELS UP EXPERIENCE INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware (State or Other Jurisdiction of Incorporation or Organization)						98-1617611 (I.R.S. Employer Identification No.)

601 West 26th Street, Suite 900, New York, New York (Address of Principal Executive Offices)						10001 (Zip Code)

Registrant’s Telephone Number, Including Area Code: (212) 257-5252

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

New York Stock Exchange

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated Filer

☐

Smaller reporting company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

As of November 6, 2023, 166,812,505 shares of Class A common stock, $0.0001 par value per share, were outstanding.

TABLE OF CONTENTS


		Page
PART I.	Financial Information
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023 and 2022	3
	Condensed Consolidated Statements of Comprehensive Los s for the three and nine months ended September 30, 2023 and 2022	4
	Condensed Consolidated Statements of Equity for the three and nine months ended S eptember 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	7
	Notes to the Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	56

PART II.	Other Information
Item 1.	Legal Proceedings	58
Item 1A.	Risk Factors	58
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3.	Defaults Upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	64
	Signatures	67

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside of the control of Wheels Up Experience Inc. (“Wheels Up”, or “we”, “us”, or “our”), that could cause actual results to differ materially from the results discussed in the forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding: (i) the impact of Wheels Up’s cost reduction efforts and measures intended to increase Wheels Up’s operational efficiency on its business and results of operations, including the timing and magnitude of such expected actions and any associated expenses in relation to liquidity levels and working capital needs; (ii) Wheels Up’s liquidity, future cash flows and certain restrictions related to its debt obligations; (iii) the size, demands, competition in and growth potential of the markets for Wheels Up’s products and services and Wheels Up’s ability to serve and compete in those markets; (iv) the degree of market acceptance and adoption of Wheels Up’s products and services, including member program changes implemented in June 2023 and the new corporate member program introduced in November 2023; (v) Wheels Up’s ability to perform under its contractual obligations and maintain or establish relationships with third-party vendors and suppliers; (vi) the expected impact of any potential strategic actions involving Wheels Up or its subsidiaries or affiliates, including realizing any anticipated benefits relating to any such transactions or asset sales, and any potential impacts on the trading market and prices for the Company’s Class A common stock, $0.0001 par value per share (“Common Stock”), including due to future dilutive Common Stock issuances; (vii) the impact of the goodwill impairment charges recognized for the three and nine months ended September 30, 2023 or future impairment losses, which may adversely impact the perception of Wheels Up held by stockholders, investors, members and customers or the Company's business and results of operations or the market price of Common Stock; and (viii) general economic and geopolitical conditions, including due to fluctuations in interest rates, inflation, foreign currencies, consumer and business spending decisions, and general levels of economic activity. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “strive,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that statement is not forward-looking. We have identified certain known material risk factors applicable to Wheels Up in our Annual Report on Form 10-K for the year ended December 31, 2022 under Part I, Item 1A — “Risk Factors,” in this Quarterly Report under Part I, Item 2 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and Part II, Item 1A — “Risk Factors,” and elsewhere in this Quarterly Report. Moreover, it is not always possible for us to predict how new risks and uncertainties that arise from time to time may affect us. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Except as required by law, we do not intend to update any of these forward-looking statements after the date of this Quarterly Report.

EXPLANATORY NOTE REGARDING REVERSE STOCK SPLIT

Following approval by the Company’s stockholders at the Company’s 2023 Annual Meeting of Stockholders held on May 31, 2023 (the “Annual Meeting”), the Board of Directors of the Company (the “Board”) approved a reverse stock split of Wheels Up’s outstanding shares of Common Stock, at a reverse stock split ratio of 1-for-10 (the “Reverse Stock Split”) and contemporaneously with the Reverse Stock Split, a proportionate reduction in the number of authorized shares of Common Stock from 2.5 billion shares of Common Stock to 250 million shares (the “Authorized Share Reduction”), each of which became effective immediately after the close of trading on The New York Stock Exchange (the “NYSE”) on June 7, 2023. The Company’s total stockholders’ equity, in the aggregate, and the par value for the Company’s Common Stock, did not change, in each case as a result of the Reverse Stock Split and Authorized Share Reduction. The Company has adjusted the presentation of all periods covered by the condensed consolidated financial statements contained herein to give retroactive effect to the Reverse Stock Split, including adjustments to per share net loss and other per share of Common Stock amounts.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except share data)


	September 30, 2023		December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	244,847	$	585,881
Accounts receivable, net	46,773		112,383
Other receivables	7,452		5,524
Parts and supplies inventories, net	23,979		29,000
Aircraft inventory	2,073		24,826
Aircraft held for sale	26,855		8,952
Prepaid expenses	46,506		39,715
Other current assets	11,283		13,338
Total current assets	409,768		819,619
Property and equipment, net	362,053		394,559
Operating lease right-of-use assets	73,788		106,735
Goodwill	214,808		348,118
Intangible assets, net	122,783		141,765

Other non-current assets	144,494		112,429
Total assets	$	1,327,694	$	1,923,225

LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt	$	25,227	$	27,006
Accounts payable	25,568		43,166
Accrued expenses	100,814		148,947
Deferred revenue, current	691,214		1,075,133


Other current liabilities	26,197		49,968
Total current liabilities	869,020		1,344,220
Long-term debt, net	235,429		226,234
Deferred revenue, non-current	1,155		1,742
Operating lease liabilities, non-current	58,912		82,755
Warrant liability	66		751

Other non-current liabilities	17,873		15,603
Total liabilities	1,182,455		1,671,305

Commitments and contingencies (Note 13)

Equity:


Common Stock, $0.0001 par value; 250,000,000 authorized; 167,080,450 and 25,198,298 shares issued and 166,804,743 and 24,933,857 shares outstanding as of September 30, 2023 and December 31, 2022, respectively	17		3
Additional paid-in capital	1,849,093		1,545,530
Accumulated deficit	(1,682,145)		(1,275,873)
Accumulated other comprehensive loss	(14,007)		(10,053)
Treasury stock, at cost, 275,707 and 264,441 shares, respectively	(7,718)		(7,687)
Total Wheels Up Experience Inc. stockholders’ equity	145,239		251,920
Non-controlling interests	—		—
Total equity	145,239		251,920
Total liabilities and equity	$	1,327,694	$	1,923,225

The accompanying notes are an integral part of these condensed consolidated financial statements.

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenue	$	320,063	$	420,356	$	1,006,937	$	1,171,503

Costs and expenses:
Cost of revenue	299,887		403,042		981,581		1,144,698
Technology and development	19,962		16,639		50,265		42,436
Sales and marketing	22,548		30,830		71,500		87,761
General and administrative	42,853		44,323		122,334		130,200
Depreciation and amortization	15,459		16,500		45,027		46,862
Gain on sale of aircraft held for sale	(7,841)		(1,316)		(11,328)		(3,950)
Impairment of goodwill	56,200		62,000		126,200		62,000
Total costs and expenses	449,068		572,018		1,385,579		1,510,007

Loss from operations	(129,005)		(151,662)		(378,642)		(338,504)

Other income (expense):
Loss on divestiture	(2,991)		—		(2,991)		—
Loss on extinguishment of debt	(1,936)		—		(2,806)		—
Change in fair value of warrant liability	(61)		2,504		685		8,265
Interest income	404		1,130		6,090		1,612
Interest expense	(11,258)		—		(27,035)		—
Other income (expense), net	613		(625)		(822)		(1,505)
Total other income (expense)	(15,229)		3,009		(26,879)		8,372

Loss before income taxes	(144,234)		(148,653)		(405,521)		(330,132)

Income tax benefit (expense)	(579)		(185)		(751)		(505)

Net loss	(144,813)		(148,838)		(406,272)		(330,637)
Less: Net loss attributable to non-controlling interests	—		—		—		(387)
Net loss attributable to Wheels Up Experience Inc.	$	(144,813)	$	(148,838)	$	(406,272)	$	(330,250)

Net loss per share of Common Stock (Note 18)
Basic and diluted	$	(3.51)	$	(6.09)	$	(13.22)	$	(13.52)


Weighted-average shares of Common Stock outstanding:
Basic and diluted	41,261,003		24,435,096		30,737,324		24,434,787

The accompanying notes are an integral part of these condensed consolidated financial statements

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited, in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net loss	$	(144,813)	$	(148,838)	$	(406,272)	$	(330,637)
Other comprehensive income (loss):
Foreign currency translation adjustments	(8,173)		(8,329)		(3,954)		(16,647)
Comprehensive loss	(152,986)		(157,167)		(410,226)		(347,284)
Less: Comprehensive loss attributable to non-controlling interests	—		—		—		(387)
Comprehensive loss attributable to Wheels Up Experience Inc.	$	(152,986)	$	(157,167)	$	(410,226)	$	(346,897)

The accompanying notes are an integral part of these condensed consolidated financial statements

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands, except share data)


	Common Stock									Treasury stock
	Shares	Amount		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Shares	Amount		Non-controlling interests		Total
Balance as of December 31, 2022	25,198,298	$	3	$	1,545,530	$	(1,275,873)	$	(10,053)	264.441	$	(7,687)	$	—	$	251,920
Equity-based compensation	—	—		9,951		—		—		—	—		1,259		11,210
Change in non-controlling interests allocation	—	—		1,259		—		—		—	—		(1,259)		—

Issuance of Common Stock upon settlement of restricted stock units	227,513	—		—		—		—		—	—		—		—
Net loss	—	—		—		(100,866)		—		—	—		—		(100,866)
Other comprehensive income (loss)	—	—		—		—		923		—	—				923
Balance as of March 31, 2023	25,425,811	$	3	$	1,556,740	$	(1,376,739)	$	(9,130)	264,441	$	(7,687)	$	—	$	163,187
Equity-based compensation	—	—		6,592		—		—		—	—		12		6,604
Change in non-controlling interests allocation	—	—		12		—		—		—	—		(12)		—

Reclassification of equity awards	—	—		328		—		—		—	—		—		328
Issuance of Common Stock upon settlement of restricted stock units	196,685	—		—		—		—		—	—		—		—
Reverse stock split fractional shares	—	—		—		—		—		859	(3)		—		(3)
Net loss	—	—		—		(160,593)		—		—	—		—		(160,593)
Other comprehensive income (loss)	—	—		—		—		3,296		—	—		—		3,296
Balance as of June 30, 2023	25,622,496	$	3	$	1,563,672	$	(1,537,332)	$	(5,834)	265,300	$	(7,690)	$	—	$	12,819
Equity-based compensation	—	—		3,503		—		—		—	—		6		3,509
Change in non-controlling interests allocation	—	—		6		—		—		—	—		(6)		—
Issuance of Common Stock and Deferred Shares in connection with debt issuance	141,313,671	14		281,912		—		—		—	—		—		281,926
Shares withheld for employee taxes on vested equity awards	—	—		—		—		—		10,407	(28)		—		(28)
Issuance of Common Stock upon settlement of restricted stock units	144,283	—		—		—		—		—	—		—		—
Net loss	—	—		—		(144,813)		—		—	—		—		(144,813)
Other comprehensive loss	—	—		—		—		(8,173)		—	—		—		(8,173)
Balance as of September 30, 2023	167,080,450	$	17	$	1,849,093	$	(1,682,145)	$	(14,007)	275,707	$	(7,718)	$	—	$	145,239

The accompanying notes are an integral part of these condensed consolidated financial statements.

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited, in thousands, except share data)


	Common Stock									Treasury stock
	Shares	Amount		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive loss		Shares	Amount		Non-controlling interests		Total
Balance as of December 31, 2021	24,583,457	$	2	$	1,450,862	$	(720,713)	$	—	—	$	—	$	6,077	$	736,228
Equity-based compensation	—	—		13,659		—		—		—	—		8,895		22,554
Change in non-controlling interests allocation	—	—		11,743		—		—		—	—		(11,743)		—
Shares withheld for employee taxes on vested equity awards	—	—		—		—		—		168,238	(6,107)		—		(6,107)
Issuance of Common Stock upon settlement of restricted stock units	7,673	—		—		—		—		—	—		—		—
Net loss	—	—		—		(88,653)		—		—	—		(387)		(89,040)
Balance as of March 31, 2022	24,591,130	$	2	$	1,476,264	$	(809,366)	$	—	168,238	$	(6,107)	$	2,842	$	663,635
Equity-based compensation	—	—		12,328		—		—		—	—		8,453		20,781
Change in non-controlling interests allocation	—	—		11,295		—		—		—	—		(11,295)		—
Shares withheld for employee taxes on vested equity awards	—	—		—		—		—		23.086	(582)		—		(582)
Issuance of Common Stock upon settlement of restricted stock units	27,625	—		—		—		—		—	—		—		—
Net loss	—	—		—		(92,760)		—		—	—		—		(92,760)
Other comprehensive loss	—	—		—		—		(8,318)		—	—		—		(8,318)
Balance as of June 30, 2022	24,618,755	$	2	$	1,499,887	$	(902,126)	$	(8,318)	191,324	$	(6,689)	$	—	$	582,756
Equity-based compensation	—	—		13,961		—		—		—	—		8,543		22,504
Change in non-controlling interests allocation	—	—		8,543		—		—		—	—		(8,543)		—
Shares withheld for employee taxes on vested equity awards	—	—		—		—		—		47.334	(658)		—		(658)
Issuance of Common Stock upon settlement of restricted stock units	194,400	—		—		—		—		—	—		—		—
Net loss	—	—		—		(148,838)		—		—	—		—		(148,838)
Other comprehensive loss	—	—		—		—		(8,329)		—	—		—		(8,329)
Balance as of September 30, 2022	24,813,155	$	2	$	1,522,391	$	(1,050,964)	$	(16,647)	238,658	$	(7,347)	$	—	$	447,435

The accompanying notes are an integral part of these condensed consolidated financial statements.

WHEELS UP EXPERIENCE INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities
Net loss	$	(406,272)	$	(330,637)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	45,027		46,862
Equity-based compensation	21,650		65,839
Payment in kind interest	972		—
Amortization of deferred financing costs and debt discount	2,390		—
Change in fair value of warrant liability	(685)		(8,265)



Gain on sale of aircraft held for sale	(11,328)		(3,950)
Loss on divestiture	2,991		—
Loss on extinguishment of debt	2,806		—
Impairment of goodwill	126,200		62,000
Other	(2,099)		(489)
Changes in assets and liabilities:
Accounts receivable	22,513		(31,474)

Parts and supplies inventories	5,074		(8,544)
Aircraft inventory	386		(33,231)
Prepaid expenses	(8,589)		(8,065)

Other non-current assets	(36,988)		(27,534)

Accounts payable	(15,177)		(2,885)
Accrued expenses	(36,293)		(1,131)

Deferred revenue	(378,949)		(2,653)
Other assets and liabilities	4,877		(4,184)
Net cash used in operating activities	(661,494)		(288,341)

Cash flows from investing activities
Purchases of property and equipment	(12,312)		(80,039)
Purchases of aircraft held for sale	(2,311)		(39,894)
Proceeds from sale of aircraft held for sale, net	53,911		41,833
Proceeds from sale of divested business, net	13,200		—
Acquisitions of businesses, net of cash acquired	—		(75,093)
Capitalized software development costs	(16,041)		(18,532)
Other	172		—
Net cash (used in) provided by investing activities	36,619		(171,725)

Cash flows from financing activities


Purchase shares for treasury	—		(7,347)
Purchase of fractional shares	(3)		—

Proceeds from notes payable	70,000		—
Repayment of notes payable	(70,000)		—
Proceeds from long-term debt, net	343,000		—
Payment of debt issuance costs in connection with debt	(19,630)		—
Repayments of long-term debt	(40,196)		—

Net cash (used in) provided by financing activities	283,171		(7,347)

Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4,287)		(7,395)

Net decrease in cash, cash equivalents and restricted cash	(345,991)		(474,808)
Cash, cash equivalents and restricted cash, beginning of period	620,153		786,722
Cash, cash equivalents and restricted cash, end of period	$	274,162	$	311,914

Supplemental disclosure of cash flow information:
Cash paid for interest	$	23,919	$	—

The accompanying notes are an integral part of these condensed consolidated financial statement

WHEELS UP EXPERIENCE INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.SUMMARY OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Wheels Up Experience Inc. (together with its consolidated subsidiaries, “Wheels Up”, the “Company”, “we”, “us”, or “our”) is a leading provider of on-demand private aviation in the United States (“U.S.”) and one of the largest private aviation companies in the world. Wheels Up offers a complete global aviation solution with a large, modern and diverse fleet, backed by an uncompromising commitment to safety and service. Customers can access membership programs, charter, aircraft management services and whole aircraft sales, as well as unique commercial travel benefits through a strategic partnership with Delta Air Lines, Inc. (“Delta”). Wheels Up also offers freight, safety and security solutions and managed services to individuals, industry, government and civil organizations.

Wheels Up is guided by the mission to connect private flyers to aircraft, and one another, through an open platform that seamlessly enables life’s most important experiences. Powered by a global private aviation marketplace connecting its base of approximately 11,000 members and customers to a network of approximately 1,500 safety-vetted and verified private aircraft, Wheels Up is widening the aperture of private travel for millions of consumers globally. With the Wheels Up mobile app and website, members and customers have the digital convenience to search, book and fly.

Basis of Presentation

The 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, they do not include all of the financial information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of the Company’s management, the condensed consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s balance sheet as of September 30, 2023, its results of operations, including its comprehensive loss and stockholders' equity for the three months ended September 30, 2023 and 2022, and its results of operations, including its comprehensive loss and stockholders' equity and its cash flows for the nine months ended September 30, 2023 and 2022. All adjustments are of a normal recurring nature. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending December 31, 2023.

Immediately after the close of business on the New York Stock Exchange (the “ NYSE”) on June 7, 2023, the reverse stock split of Wheels Up’s outstanding shares of Common Stock, at a reverse stock split ratio of 1-for-10 (the “Reverse Stock Split”) and contemporaneously with the Reverse Stock Split, a proportionate reduction in the number of authorized shares of Common Stock from 2.5 billion shares of Common Stock to 250 million shares (the “Authorized Share Reduction”). Accordingly, the presentation of all periods covered by the condensed consolidated financial statements contained herein have been adjusted to give retroactive effect to the Reverse Stock Split, including adjustments to per share net loss and other per share of Common Stock amounts.

These condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Consistent with these requirements, this Form 10-Q does not include all the information required by GAAP for complete financial statements. As a result, this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2023.

Liquidity

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business.

As disclosed on August 14, 2023, in the notes to the condensed consolidated financial statements for the interim period ended June 30, 2023, the Company demonstrated various adverse conditions that raised substantial doubt about the Company’s ability to continue as a going concern. These adverse conditions included insufficient liquidity, a working capital deficit, net operating cash outflows, recurring losses from operations, and the applicability of certain liquidity covenants in connection with the Equipment Notes (as defined in Note 7).

Subsequent to August 14, 2023, we obtained funding as discussed in Note 7, Long-Term Debt, amended the Equipment Notes to reduce liquidity covenant requirements and divested the aircraft management business as discussed in Note 4, Acquisitions and Divestitures. During the third quarter of 2023, we also began to realize the impacts of our spend reduction efforts, as a result of the restructuring and operational changes implemented throughout 2023. We have concluded that these events and circumstances, and continued execution of our previously implemented plans, as outlined above, have mitigated the conditions that previously raised substantial doubt about our ability to continue as a going concern.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. We consolidate Wheels Up 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 12). All intercompany transactions and balances have been eliminated in consolidation.

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. 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 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.

Impairment

During the second quarter of 2023, we determined that, because of continued negative cash flows and changes in our management and business strategy, there was an indication that the carrying value of the long-lived assets associated with the WUP Legacy reporting unit may not be recoverable. As a result, we performed an undiscounted cash flow analysis of our long-lived assets for potential impairment as of June 1, 2023. Based on the analysis, it was determined that there was no impairment to our long-lived assets.

As a result of the aforementioned factors, we determined that there was an indication that it was more likely than not that the fair value of our WUP Legacy reporting unit was less than its carrying amount. We performed an interim quantitative impairment assessment of goodwill as of June 1, 2023. Using a discounted cash flow approach, we calculated the fair value of WUP Legacy based on the present value of estimated future cash flows. The significant underlying 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, we recognized a goodwill impairment charge of $70.0 million relating to the WUP Legacy

reporting unit during the three months ended June 30, 2023. The decline in the fair value of the reporting unit was primarily due to a more material reduction in working capital than expected during the three months ended June 30, 2023, as well as an increase in the discount rate.

To facilitate reconciliation of the fair value of our reporting units to our market capitalization as of June 1, 2023, we elected to perform a quantitative impairment assessment of the Air Partner reporting unit as of June 1, 2023, using a combination of the discounted cash flow and guideline public company methods, which did not result in impairment to goodwill. Based on the valuation, the fair value of the Air Partner reporting unit exceeded its carrying value by more than 10%.

During the third quarter of 2023, we determined that upon entering into the Term Loan and Revolving Credit Facility (as each is defined below) on September 20, 2023 (see Note 7), and due to associated changes to our ownership and governance structure on that same date (see Note 10), there was an indication that the fair value of the WUP Legacy reporting unit was less than its carrying amount. We performed an interim quantitative impairment assessment of goodwill as of September 20, 2023. Using a discounted cash flow approach, we calculated the fair value of WUP Legacy, based on the present value of estimated future cash flows. The significant underlying 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, we recognized a goodwill impairment charge of $56.2 million relating to the WUP Legacy reporting unit during the three months ended September 30, 2023. The impairment charge represents the amount by which the carrying value of the reporting unit as of the assessment date exceeded the estimated fair value of the reporting unit as of the assessment date. Since the previous analysis on June 1, 2023, the fair value of the reporting unit increased as a result of the run-off of unprofitable periods in our estimated future cash flows; however, the carrying value of the reporting unit increased in a substantially equivalent amount due to the issuance of the Term Loan (see Note 7) and Initial Shares (as defined in Note 10).

To facilitate reconciliation of the fair value of our reporting units to our market capitalization as of September 20, 2023, we elected to perform a quantitative impairment assessment of the Air Partner reporting unit as of September 20, 2023, using a combination of the discounted cash flow and guideline public company methods, which did not result in impairment to goodwill. Based on the valuation, the fair value of the Air Partner reporting unit exceeded its carrying value by more than 20%.

Adopted Accounting Pronouncements and Accounting Pronouncements Not Yet Effective

There have been no recent accounting pronouncements, changes in accounting pronouncements or recently adopted accounting guidance during the three months ended September 30, 2023 that are of significance or potential significance to us.

2.REVENUE RECOGNITION

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,
	2023		2022		2023		2022
Services transferred at a point in time:
Flights, net of discounts and incentives	$	214,645	$	278,917	$	681,691	$	799,351
Aircraft management	51,081		56,558		158,396		172,914
Other	29,720		58,728		89,665		121,695

Services transferred over time:
Memberships	20,622		22,409		63,780		67,076
Aircraft management	2,154		2,404		7,035		7,272
Other	1,841		1,340		6,370		3,195
Total	$	320,063	$	420,356	$	1,006,937	$	1,171,503

Revenue in the condensed consolidated statements of operations is presented net of discounts and incentives of $2.7 million and $6.7 million for the three and nine months ended September 30, 2023, respectively, and $2.7 million and $9.4 million for the three and nine months ended September 30, 2022, respectively.

Other revenue included within services transferred at a point in time is primarily related to revenue for group charter of $9.8 million, safety and security of $5.9 million, one-time software license revenue of $5.9 million and whole aircraft sales of $2.8 million for the three months ended September 30, 2023, and whole aircraft sales of $35.9 million, group charter of $8.7 million, and safety and security of $5.9 million for the three months ended September 30, 2022. Other revenue included within services transferred at a point in time is primarily related to revenue for group charter of $25.7 million, whole aircraft sales of $18.2 million, safety and security of $17.5 million and software license revenue of $7.0 million for the nine months ended September 30, 2023, and whole aircraft sales of $63.9 million, group charter of $19.8 million, and safety and security of $12.6 million for the nine months ended September 30, 2022.

Contract Balances

Accounts receivable, net consists of the following (in thousands):


	September 30, 2023		December 31, 2022
Gross receivables from members and customers	$	49,705	$	112,243
Undeposited funds	5,304		10,122
Less: Allowance for credit losses	(8,236)		(9,982)
Accounts receivable, net	$	46,773	$	112,383

Deferred revenue consists of the following (in thousands):


	September 30, 2023		December 31, 2022
Flights - Prepaid Blocks	$	651,458	$	1,023,985
Memberships - annual dues	35,935		43,970
Memberships - initiation fees	2,804		3,899
Flights - credits	1,773		4,246
Other	399		775
Deferred revenue - total	692,369		1,076,875

Less: Deferred revenue - current	(691,214)		(1,075,133)
Deferred revenue - non-current	$	1,155	$	1,742

Changes in deferred revenue for the nine months ended September 30, 2023 were as follows (in thousands):


Deferred revenue as of December 31, 2022	$	1,076,875
Amounts deferred during the period	342,923
Revenue recognized from amounts included in the deferred revenue beginning balance	(571,211)
Revenue from current period sales	(156,218)
Deferred revenue as of September 30, 2023	$	692,369

Revenue expected to be recognized in future periods for performance obligations that are unsatisfied, or partially unsatisfied, as of September 30, 2023 were as follows (in thousands):


Remainder of 2023	$	113,830
2024	292,149
2025	143,268
2026	143,122
Total	$	692,369

Costs to Obtain a Contract

Capitalized costs related to sales commissions and referral fees were $1.9 million and $6.0 million for the three and nine months ended September 30, 2023, respectively, and $3.3 million and $12.6 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023 and December 31, 2022, capitalized sales commissions and referral fees of $4.8 million and $8.7 million, respectively, were included in Other current assets, and $0.6 million and $1.3 million, respectively, were included 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 $2.6 million and $9.4 million for the three and nine months ended September 30, 2023, respectively, and $4.4 million and $12.1 million for the three and nine months ended September 30, 2022, respectively.

3.PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):


	September 30, 2023		December 31, 2022
Aircraft	$	509,984	$	566,338
Software development costs	80,582		65,303
Leasehold improvements	22,274		11,930
Computer equipment	3,447		3,014
Buildings and improvements	1,424		1,424
Furniture and fixtures	4,311		3,208
Tooling	4,180		3,835
Vehicles	2,351		1,538
	628,553		656,590

Less: Accumulated depreciation and amortization	(266,500)		(262,031)
Total	$	362,053	$	394,559

Depreciation and amortization expense, excluding amortization expense related to software development costs, was $10.0 million and $28.8 million for the three and nine months ended September 30, 2023, respectively, and $10.6 million and $30.3 million for the three and nine months ended September 30, 2022, respectively.

Amortization expense related to software development costs, included as part of depreciation and amortization expense of property and equipment, was $4.4 million and $11.2 million for the three and nine months ended September 30, 2023, and $3.6 million and $9.0 million for the three and nine months ended September 30, 2022.

4.ACQUISITIONS AND DIVESTITURES

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 expanded 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 three 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. As of the date of acquisition, the total 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.

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 included in General and administrative expense in the condensed consolidated statements of operations for the three months ended September 30, 2022 were immaterial. The acquisition of Air Partner was determined to be a business combination.

As of the date of acquisition, the total 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	$	49,617
Property and equipment, net	2,012
Operating lease right-of-use assets	2,780
Goodwill	83,910
Intangible assets	20,921
Restricted cash	27,507
Other assets	1,686
Total assets acquired	188,433
Total liabilities assumed	(80,239)
Net assets acquired	$	108,194

Current assets of Air Partner included $18.0 million of cash and $16.6 million of accounts receivable.

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, consisted of the following:


	Amount (In thousands)		Weighted-Average Amortization Period (Years)
Customer relationships	$	16,521	5.7
Backlog	1,458		1.5
Trade name	1,931		1.9
Developed technology	1,011		5.8
Total acquired intangible assets	$	20,921	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 8). The valuation method used for the Air Partner intangible assets was the income approach.

Unaudited Pro Forma Summary of Operations

The accompanying unaudited pro forma summary represents the consolidated results of operations as if the 2022 acquisitions of Alante Air and Air Partner had been completed as of January 1, 2022. 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).


	Nine Months Ended September 30,
		2022
Net revenue		$	1,209,321
Net loss		$	(266,628)
Net loss attributable to Wheels Up Experience Inc.		$	(266,628)
Net loss per share(1)		$	(10.98)

(1) Adjusted for the impact of the Reverse Stock Split

Divestiture of Aircraft Management Business

On September 30, 2023, (the “Closing Date”), Wheels Up Partners Holdings LLC, our direct subsidiary (“WUP”), pursuant to an equity purchase agreement (the “Purchase Agreement”) with Executive AirShare LLC, completed the sale of 100% of the issued and outstanding equity interests of Circadian Aviation LLC, our indirect subsidiary (“Circadian”). The Closing Date fair value of the aggregate consideration transferred was $19.1 million and the Company recognized a loss on the sale of $3.0 million. The $19.1 million was comprised of $13.2 million of cash received on the Closing Date, contingent consideration with a fair value of $4.8 million, an escrow receivable of $0.6 million and a non-contingent consideration receivable of $0.5 million. The fair value of the contingent consideration was deemed to be the approximate contract value as of the Closing Date.

Circadian was released from all guarantor obligations with respect to the Equipment Notes (as defined below) on the Closing Date pursuant to certain debt release letters entered into concurrently with the Purchase Agreement.

Concurrently with entering into the Purchase Agreement: (i) WUP entered into a transition services agreement with Circadian, pursuant to which WUP will provide Circadian certain specified services on a temporary basis; (ii) Wheels Up Partners LLC, our indirect subsidiary (“WUP LLC”), entered into a master operating agreement with Circadian, pursuant to which Circadian will conduct certain on-demand charter operations for certain of WUP LLC’s owned aircraft after the Closing Date while such aircraft are transitioned from a FAA operating certificate held by Circadian to the Company’s subsidiaries, and WUP LLC will provide certain maintenance, pilots services, management and other related services for WUP LLC’s owned aircraft during the transition period; and (iii) certain of the Company’s subsidiaries entered into fleet management agreements with Circadian, pursuant to which Circadian will provide certain maintenance, pilots services, management and other related services for managed aircraft after the Closing Date while they are transitioned from a FAA operating certificate held by the applicable Company subsidiary to Circadian.

5.GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table presents goodwill carrying values and the change in balance, by reporting unit, during the nine months ended September 30, 2023 (in thousands):


	WUP Legacy		Air Partner		Total
Balance as of December 31, 2022(1)	$	270,467	$	77,651	$	348,118
Acquisitions(2)	—		350		350
Impairment(3)	(126,200)		—		(126,200)
Divestitures(4)	(8,169)		—		(8,169)
Foreign currency translation adjustment	—		708		708
Balance as of September 30, 2023	$	136,098	$	78,710	$	214,808

(1) Net of accumulated impairment losses of $180 million, all of which was recognized on the goodwill attributable to the WUP Legacy reporting unit during the year ended December 31, 2022.

(2) Reflects the current period impact of measurement period adjustments (See Note 4)

(3) Impairment charge recognized during the second and third quarters of 2023 as a result of an interim quantitative assessments of goodwill as of June 1, 2023 and September 20, 2023, respectively (See Note 1)

(4) Reflects the amount of goodwill allocated to the divestiture of the aircraft management business (See Note 4).

Intangible Assets

The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):


	September 30, 2023
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Status	$	80,000	$	29,644	$	50,356
Customer relationships	89,121		32,226		56,895

Trade name	13,161		6,321		6,840
Developed technology	20,556		11,580		8,976
Leasehold interest - favorable	600		96		504
Backlog	1,458		1,313		145
Foreign currency translation adjustment	(1,480)		(547)		(933)
Total	$	203,626	$	80,843	$	122,783


	December 31, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Status	$	80,000	$	23,644	$	56,356
Customer relationships	91,121		24,613		66,508
Non-competition agreement	210		210		—
Trade name	16,161		8,294		7,867
Developed technology	20,556		9,332		11,224
Leasehold interest - favorable	600		80		520
Backlog	1,458		880		578
Foreign currency translation adjustment	(1,662)		(374)		(1,288)
Total	$	208,444	$	66,679	$	141,765

Amortization expense of intangible assets was $6.0 million and $17.8 million for the three and nine months ended September 30, 2023, respectively, and $6.4 million and $18.1 million for the three and nine months ended September 30, 2022, respectively.

Intangible Liabilities

Associated with our acquisition of Delta Private Jets on January 17, 2020, we recognized intangible liabilities for the fair value of complimentary Connect Memberships provided to existing Delta SkyMiles 360 customers as of the acquisition date, as required under the Commercial Cooperation Agreement (as amended, the “CCA”) with Delta. The gross carrying value, accumulated amortization and net carrying value of intangible liabilities consisted of the following (in thousands):


	September 30, 2023
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible liabilities	$	20,000	$	7,417	$	12,583


	December 31, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value
Intangible liabilities	$	20,000	$	5,917	$	14,083

Amortization of intangible liabilities, which reduces amortization expense, was $0.5 million for each of the three months ended September 30, 2023, and 2022, and $1.5 million for each of the nine months ended September 30, 2023, and 2022.

Future amortization expense of intangible assets and intangible liabilities held as of September 30, 2023, were as follows (in thousands):


	Intangible Assets		Intangible Liabilities
Remainder of 2023	$	5,865	$	500
2024	22,759		2,000
2025	22,345		2,000
2026	21,486		2,000
2027	17,018		2,000
2028 and Thereafter	33,310		4,083
Total	$	122,783	$	12,583

6.CASH EQUIVALENTS AND RESTRICTED CASH

Cash Equivalents

As of September 30, 2023 and December 31, 2022, cash equivalents on the condensed consolidated balance sheets were $0.1 million and $430.3 million, respectively, and generally consisted of investments in money market funds, savings and time deposits.

Restricted Cash

As of September 30, 2023 and December 31, 2022, restricted cash, which is presented within Other non-current assets on the condensed consolidated balance sheets, included $6.2 million held by financial institutions to establish standby letters of credit required by the lessors of certain corporate office space that we leased as of such dates and $3.4 million held by financial institutions to collateralize against our credit card programs. The standby letters of credit expire on December 31, 2033 and June 30, 2034. The balances as of September 30, 2023 and December 31, 2022 also included $19.7 million and $26.3 million, respectively, related to funds held but unavailable for immediate use due to contractual restrictions.

A reconciliation of cash and cash equivalents and restricted cash from the condensed consolidated balance sheets to the condensed consolidated statements of cash flows is as follows (in thousands):


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	244,847	$	585,881
Restricted cash	29,315		34,272
Total	$	274,162	$	620,153

7.LONG-TERM DEBT

The following table presents the components of long-term debt on our condensed consolidated balance sheets (in thousands):


	Weighted Average Interest Rate		September 30, 2023		December 31, 2022
Equipment Notes	12.0	%	$	232,610	$	270,000
Term Loan	10.0	%	350,972		—
Total debt			583,582		270,000
Less: Total unamortized deferred financing costs and debt discount			322,926		16,760
Less: Current maturities of long-term debt			25,227		27,006
Long-term debt			$	235,429	$	226,234

Maturities of our principal debt payments for the next five years are as follows (in thousands):


	Maturities
Remainder of 2023	$	6,307
2024	25,227
2025	43,916
2026	38,907
2027	33,258
2028 and Thereafter	435,967
Total	$	583,582

2022-1 Equipment Notes

On October 14, 2022, WUP LLC issued $270.0 million aggregate principal amount of 12% fixed rate equipment notes (collectively, the “Equipment Notes”) using an EETC (enhanced equipment trust certificate) loan structure. The Equipment Notes were issued for net proceeds (before transaction-related expense) of $259.2 million. The final expected distribution date of the Equipment Notes varies from July 15, 2025 to October 15, 2029, unless redeemed earlier by WUP LLC. The Equipment Notes bear interest at the rate of 12% per annum with annual amortization of the principal amount equal to 10% per annum and balloon payments due at each maturity date. As of September 30, 2023, the Equipment Notes were secured by first-priority liens on 127 of the Company’s owned aircraft fleet and by liens on certain intellectual property assets of the Company and certain of its subsidiaries (collectively, the “Equipment Note Collateral”).

The Equipment Notes were sold pursuant to a Note Purchase Agreement, dated as of October 14, 2022 (the “Note Purchase Agreement”), and issued under separate Trust Indentures and Mortgages, dated as of October 14, 2022 (each, an “Indenture” and collectively, the “Indentures”). On September 20, 2023, the Company, WUP LLC, certain other subsidiaries of the Company that guaranteed and/or granted collateral to secure WUP LLC’s obligations under the Equipment Notes, Wilmington Trust National Association (“WTNA”), and the Lenders (as defined below) entered into the Omnibus Amendment No. 1 (the “Omnibus Amendment”). The Omnibus Amendment provides for, among other things, (i) reducing the minimum liquidity covenant under the guarantee agreement related to the Equipment Notes (the “Guarantee”) with respect to the Company and its subsidiaries from $125.0 million as of the end of each fiscal quarter to $75.0 million on any date, (ii) permitting the execution of the

Credit Agreement (as defined below) and (iii) reflecting the consent of the Equipment Note lenders that will allow the Company to effect a sale of certain guarantors under the Guarantee.

The Note Purchase Agreement, the Indentures and the Guarantee, as each was amended by the Omnibus Amendment, contain certain covenants, including a liquidity covenant that requires the Company to maintain minimum aggregate available cash and Cash Equivalents (as defined in the Note Purchase Agreement), including certain amounts held in deposit for the benefit of the lenders, of $75.0 million on any date, a covenant that limits the maximum loan to appraised value ratio of all aircraft financed, subject to certain cure rights of the Company, and restrictive covenants that provide limitations under certain circumstances on, among other things: (i) making certain acquisitions, mergers or disposals of its assets; (ii) making certain investments or entering into certain transactions with affiliates; (iii) prepaying, redeeming or repurchasing the Equipment Notes, subject to certain exceptions; and (iv) paying dividends and making certain other specified restricted payments. Each Indenture contains customary events of default for Equipment Notes of this type, including cross-default provisions among the Equipment Notes and the Term Loan and Revolving Credit Facility (as each term is defined below). WUP LLC’s obligations under the Equipment Notes are guaranteed by the Company and certain of its subsidiaries. WUP LLC is also obligated to cause additional subsidiaries and affiliates of WUP LLC to become guarantors under certain circumstances. The Equipment Notes issued with respect to each aircraft are cross-collateralized by the other aircraft for which Equipment Notes were issued under the Indentures. The maturity of the Equipment Notes may be accelerated upon the occurrence of certain events of default under the Note Purchase Agreement and each Indenture and the related guarantees. As of September 30, 2023, we were in compliance with the covenants under the Note Purchase Agreement, each Indenture and the related guarantees. We recognized $4.9 million in General and administrative expense in the condensed consolidated statement of operations associated with executing the Omnibus Amendment.

Interest and principal payments on the Equipment Notes are payable quarterly on each January 15, April 15, July 15 and October 15, which began on January 15, 2023. During the nine months ended September 30, 2023, the Company redeemed in-full the Equipment Notes for seven aircraft, which reduced the aggregate principal amount outstanding under the Equipment Notes by $17.4 million. As of September 30, 2023, the carrying value of the 127 aircraft that are subject to first-priority liens under the Equipment Notes was $300.2 million.

Amortization expense for debt discounts and deferred financing costs of $0.3 million and $2.7 million was recorded in interest expense in the condensed consolidated statement of operations for the three and nine months ended September 30, 2023, respectively.

Delta Promissory Note

On August 8, 2023, the Company entered into a Secured Promissory Note (the “Note”) with Delta, as payee, which was subsequently amended pursuant to the First Amendment thereto, dated August 15, 2023, the Second Amendment thereto, dated August 21, 2023, the Third Amendment thereto, dated September 6, 2023, and the Fourth Amendment thereto, dated September 14, 2023 (collectively, the “Amendments” and, collectively with the Note, the “Amended Note”), pursuant to which Delta provided $70.0 million aggregate principal amount of short-term funding to the Company at an interest rate of 10% per annum, which was payable in kind and capitalized to the outstanding principal amount of the Amended Note on a quarterly basis and a maturity date of February 4, 2024. The Amended Note was secured by a first-priority lien on unencumbered assets of the Company and its direct and indirect wholly-owned U.S. subsidiaries, including unencumbered aircraft of WUP LLC. The Amended Note was guaranteed by the Company’s wholly-owned U.S. subsidiaries. On September 20, 2023, the Company repaid all amounts due and owed under the Amended Note using a portion of the proceeds from the Term Loan (as defined below) and entered into a Letter Agreement, dated as of September 20, 2023 with Delta, which terminated the Amended Note and released all liens and guarantees thereunder in connection with such repayment. The repayment of all amounts due and owed under the Amended Note was accounted for as a debt extinguishment, and no gain or loss was recognized.

Term Loan and Revolving Credit Facility

On September 20, 2023 (the “Credit Agreement Closing Date”), the Company entered into a Credit Agreement (the “Credit Agreement”), by and among the Company, as borrower, certain subsidiaries of the Company as

guarantors (collectively with the Company, the “Loan Parties”), Delta, CK Wheels LLC (“CK Wheels”), and Cox Investment Holdings, Inc. (“CIH” and collectively with Delta and CK Wheels, the “Lenders”), and U.S. Bank Trust Company, N.A., as administrative agent for the Lenders and as collateral agent for the secured parties, pursuant to which (i) the Lenders provided a term loan facility (the “Term Loan”) in the aggregate original principal amount of $350.0 million and (ii) Delta provided commitments for a revolving loan facility (the “Revolving Credit Facility”) in the aggregate original principal amount of $100.0 million. On September 20, 2023, the Company issued the Term Loan of $350.0 million to the Lenders for net proceeds (before transaction-related expense) of $343.0 million. Pursuant to the Credit Agreement, the Company, with the consent of Delta and CK Wheels, may request the establishment of new term loan commitments (each, an “Incremental Term Loan”) after the Credit Agreement Closing Date in an aggregate principal amount up to $50.0 million, subject to certain limitations and requirements. Any additional lender providing an Incremental Term Loan after the Credit Agreement Closing Date in accordance with the Credit Agreement will join the Credit Agreement.

The scheduled maturity date for the Term Loan is September 20, 2028, and the scheduled maturity date for the Revolving Credit Facility is the earlier of September 20, 2028 and the first date after September 20, 2025 on which all amounts owed with respect to borrowings under the Revolving Credit Facility have been repaid (in each case, as applicable, the “Maturity Date”), subject in each case to earlier termination upon acceleration or termination of any obligations upon the occurrence and continuation of an event of default. Interest on the Term Loan and any borrowings under the Revolving Credit Facility (each, a “Loan” and collectively, the “Loans”) accrues at a rate of 10% per annum on the unpaid principal balance of the Loans then outstanding. Accrued interest on each Loan is payable in kind as compounded interest and capitalized to the principal amount of the applicable Loan on the last day of each of March, June, September and December, and the Maturity Date. If in the future the Company or its subsidiaries either redeem in full the outstanding Equipment Notes or commence payoff at maturity thereof, the Company may elect to make interest payments (or some portion thereof) on any Loans then outstanding in cash.

If the Company does not consummate the Deferred Issuance (as defined in Note 10 below) by January 18, 2024, the interest rate on the Term Loan will be increased to 20% per annum until such time that such Deferred Issuance is consummated. Also, upon the occurrence and during the continuance of an event of default under the Credit Agreement, (y) interest will accrue on the unpaid principal balance of the Loans at the rate then applicable to such Loans plus 2% and (z) interest will accrue on all other outstanding liabilities, interest, expenses, fees and other sums under the Credit Agreement, at a rate equal to the Alternate Base Rate (as defined in the Credit Agreement) plus 2% per annum.

The Credit Agreement also contains certain covenants and events of default, in each case customary for transactions of this type. The obligations under the Credit Agreement are secured by a first-priority lien on unencumbered assets of the Loan Parties (excluding certain accounts, including any segregated account exclusively holding customer deposits, and other assets specified in the Credit Agreement), as well as a junior lien on the Equipment Note Collateral. The Credit Agreement is initially guaranteed by all U.S. and certain non-U.S. direct and indirect subsidiaries of the Company. In the future, the Company may be required to add any new or after-acquired subsidiaries of the Company that meet certain criteria as guarantors.

In connection with the transactions contemplated by the Credit Agreement, the Company entered into an Investment and Investor Rights Agreement on September 20, 2023 (the “Investor Rights Agreement”), by and among the Company and the Lenders. Pursuant to the Investor Rights Agreement, the Company issued the Lenders 141,313,671 shares in the aggregate (the “Initial Shares”) of Common Stock in a private placement that closed after the end of the trading day on September 20, 2023, which represented approximately 80% of the Company’s issued and outstanding shares of Common Stock on a fully diluted basis as of September 15, 2023 (the “Initial Issuance”). The Initial Shares were issued such that each Lender received a pro rata portion of the Initial Shares equal to the proportion of its participation in the Term Loan as of the Credit Agreement Closing Date.

Additionally, the Company agreed to issue an additional 529,926,270 shares in the aggregate (the “Deferred Shares” and, together with the Initial Shares, the “Investor Shares”) of Common Stock, which together with the Initial Shares will represent approximately 95% of the Company’s issued and outstanding shares of Common Stock on a fully diluted basis as of September 15, 2023 (the “Deferred Issuance”). The Deferred Issuance is contingent upon, and the Deferred Shares are expected to be issued to the Lenders (and any additional lender permitted

pursuant to the Credit Agreement) after, the receipt of stockholder approval of an amendment to the Company’s Certificate of Incorporation to increase the number of shares of Common Stock authorized for issuance thereunder (the “Authorized Shares Amendment”) at a special meeting of the Company’s stockholders expected to be held on November 9, 2023 (the “Special Meeting”). The Investor Shares will be issued in a private placement such that upon completion of the Deferred Issuance, if at all, each Lender (or any additional lender permitted pursuant to the Credit Agreement) will have been issued a pro rata portion of the Investor Shares equal to the proportion of its participation in the Term Loan, together with any additional term loan issued prior to or concurrently with the Deferred Issuance. The Investor Rights Agreement also contains certain other terms and conditions related to the Lenders’ ownership of Common Stock, including, among other things, that the Lenders have the right to designate certain members of the Board depending on the level of Common Stock ownership and certain transfer restrictions and liquidity rights.

In accordance with ASC 470, Debt, the value of the Term Loan, Initial Issuance, and Deferred Issuance was allocated using a relative fair value allocation. We evaluated features of the three instruments in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. The Company determined that the Term Loan, Initial Issuance and Deferred Issuance did not contain any features that would qualify as a derivative or embedded derivative and require bifurcation. In addition, the Company determined the Initial Issuance and Deferred Issuance should be classified as equity. The allocation on a relative fair value basis resulted in gross amounts recorded of $44.9 million for the Term Loan, $64.2 million for the Initial Issuance and $240.9 million for the Deferred Issuance. The fair value of debt was principally based on inputs such as estimated credit risk, recently completed market transactions and estimates based on interest rates, maturities, credit risk and underlying collateral. These inputs are primarily classified as Level 3 within the ASC 820 fair value hierarchy. The fair value of the Initial Issuance and Deferred Issuance were based on the quoted market prices of Common Stock, which represent Level 1 within the ASC 820 fair value hierarchy given these issuances were announced and known by the public.

Issuance costs of $26.6 million were incurred in connection with the Credit Agreement and Investor Rights Agreement. The deferred issuance costs were allocated on a relative fair value basis, resulting in an allocation of $

Wheels Up Experience Inc. [UP] Filings
Wheels Up Experience Inc. [WSUPW] Filings
10-Q	[2023-11-09]
10-Q	[2023-08-14]
10-Q	[2023-05-09]
10-K	[2023-03-31]
10-Q	[2022-11-09]
10-Q	[2022-08-11]
10-Q	[2022-05-13]
10-K	[2022-03-10]
10-Q	[2021-11-10]
10-Q	[2021-08-19]
S-1	[2021-08-03]
10-Q	[2021-05-24]
10-K	[2021-03-15]
10-Q	[2020-11-16]
S-1	[2020-09-04]

Wheels Up Experience Inc. [UP] Filings

Wheels Up Experience Inc. [WSUPW] Filings