Filed Pursuant to Rule 424(b)(3)
Registration Statement No. 333-258418
PROSPECTUS SUPPLEMENT NO. 1
(to prospectus dated August 24, 2021)
image_0.jpg
Wheels Up Experience Inc.
193,195,497 Shares of Class A Common Stock
4,529,950 Warrants to Purchase Class A Common Stock
12,521,494 Shares of Class A Common Stock Underlying Warrants
This Prospectus Supplement No. 1 supplements the prospectus dated August 24, 2021 (the “Prospectus”) of Wheels Up Experience Inc., a Delaware corporation (“we” or the “Company”), that forms a part of the Registration Statement on Form S-1 (File No. 333-258418).
This Prospectus Supplement No. 1 (this “Prospectus Supplement”) is being filed to update and supplement information contained in the Prospectus with the information contained in our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2021, filed with the Securities and Exchange Commission on November 10, 2021 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this Prospectus Supplement.
This Prospectus Supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This Prospectus Supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this Prospectus Supplement, you should rely on the information in this Prospectus Supplement.
Our Class A common stock, par value $0.0001 per share (“Class A common stock”) is traded on the New York Stock Exchange (the “NYSE”) under the symbol “UP”, and our warrants are listed on the NYSE under the symbol “UP WS”. On November 9, 2021, the last reported sale price of our Class A common stock was $7.31 per share and the last reported sale price of our warrants was $1.60 per warrant.
Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 27 of the Prospectus and in Item 1A of our Quarterly Report for the quarterly period ended September 30, 2021.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus Supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this Prospectus Supplement is November 10, 2021.


 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
________________
[Mark One]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
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: 001-04321
WHEELS UP EXPERIENCE INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
98-1557048
(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 shareUPNew York Stock Exchange
Redeemable warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50UP WSNew 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     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      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 filerAccelerated filer
Non-accelerated FilerSmaller 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  
As of November 8, 2021, 245,740,164 shares of Class A common stock, $0.0001 par value per share, were issued and outstanding.



WHEELS UP EXPERIENCE INC.
FORM 10-Q

TABLE OF CONTENTS
Page
Item 3.
Item 4.
PART II.
Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.



PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WHEELS UP EXPERIENCE INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share data)
September 30, 2021December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents$535,253 $312,799 
Accounts receivable, net69,044 50,397 
Other receivables10,112 8,205 
Parts and supplies inventories, net8,742 5,320 
Prepaid expenses and other 34,106 18,801 
Total current assets 657,257 395,522 
Property and equipment, net 313,986 323,090 
Operating lease right-of-use assets112,372 64,479 
Goodwill437,181 400,160 
Intangible assets, net152,416 163,710 
Restricted cash2,177 12,077 
Employee loans receivable, net— 102 
Other non-current assets 1,104 849 
Total assets $1,676,493 $1,359,989 
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt$131 $62,678 
Accounts payable 42,363 20,920 
Accrued expenses 83,231 71,381 
Deferred revenue, current585,319 651,096 
Operating lease liabilities, current32,315 15,858 
Intangible liabilities, current2,000 2,000 
Other current liabilities14,942 15,980 
Total current liabilities 760,301 839,913 
Long-term debt 22 148,411 
Deferred revenue, non-current1,948 1,982 
Operating lease liabilities, non-current87,087 56,358 
Warrant liability15,948 — 
Intangible liabilities, non-current14,583 16,083 
Other non-current liabilities3,548 3,415 
Total liabilities 883,437 1,066,162 
Commitments and contingencies (Note 11)
Equity:
Class A common stock, $0.0001 par value; 2,500,000,000 authorized; 245,583,108 and 169,717,416 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
25 17 
Additional paid-in capital 1,460,053 831,226 
Accumulated deficit (677,491)(563,441)
Total Wheels Up Experience Inc. stockholders’ equity782,587 267,802 
Non-controlling interests10,469 26,025 
Total equity793,056 293,827 
Total liabilities and equity $1,676,493 $1,359,989 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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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,
2021202020212020
Revenue$301,978 $194,781 $849,215 $485,208 
Costs and expenses:
Cost of revenue283,495 171,338 773,191 446,632 
Technology and development 8,769 6,044 23,818 15,345 
Sales and marketing 22,157 13,655 55,846 38,893 
General and administrative 42,490 14,542 76,444 38,740 
Depreciation and amortization13,639 14,722 40,952 44,189 
CARES Act grant— (51,646)— (64,923)
Total costs and expenses370,550 168,655 970,251 518,876 
Income (loss) from operations(68,572)26,126 (121,036)(33,668)
Other income (expense):
Change in fair value of warrant liability12,271 — 12,271 — 
Loss on extinguishment of debt(2,379)— (2,379)— 
Interest income36 25 503 
Interest expense(782)(5,614)(9,503)(18,127)
Total other income (expense)9,117 (5,578)414 (17,624)
Income (loss) before income taxes(59,455)20,548 (120,622)(51,292)
Income tax expense— — — — 
Net income (loss) (59,455)20,548 (120,622)(51,292)
Less: net income (loss) attributable to non-controlling interests(970)1,639 (6,572)(3,944)
Net income (loss) attributable to Wheels Up Experience Inc.$(58,485)$18,909 $(114,050)$(47,348)
Net income (loss) per share of Class A common stock:
Basic$(0.25)$0.11 $(0.60)$(0.29)
Diluted$(0.25)$0.11 $(0.60)$(0.29)
Weighted-average shares of Class A common stock outstanding:
Basic235,341,054 165,055,043 191,057,091 161,649,090 
Diluted235,341,054 165,055,043 191,057,091 161,649,090 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


WHEELS UP EXPERIENCE INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands except share data)
Class A Common Stock
SharesAmountAdditional paid-in capitalAccumulated
deficit
Non-controlling interestsTotal
Balance as of December 31, 2020169,717,146 $17 $831,226 $(563,441)$26,025 $293,827 
Consideration issued for business combination3,968,900 30,171 — — 30,172 
Equity-based compensation — — 1,160 — 254 1,414 
Change in non-controlling interests allocation— — (2,620)— 2,620 — 
Net loss— — — (29,409)(2,804)(32,213)
Balance as of March 31, 2021173,686,046 18 859,937 (592,850)26,095 293,200 
Equity-based compensation— — 1,117 — 231 1,348 
Change in non-controlling interests allocation— — (3,106)— 3,106 — 
Net loss— — — (26,156)(2,798)(28,954)
Balance as of June 30, 2021173,686,046 18 857,948 (619,006)26,634 265,594 
Exercise of stock options229,889 — 1,332 — — 1,332 
Exchange of profits interests138,629 — 1,419 — (1,419)— 
Equity-based compensation— — 19,777 — 8,129 27,906 
Issuance of common stock in connection with the Business Combination and PIPE Investment71,528,544 656,297 — — 656,304 
Transaction costs attributable to the issuance of common stock in connection with the Business Combination and PIPE Investment— — (70,406)— — (70,406)
Assumption of warrant liability— — (28,219)— — (28,219)
Change in non-controlling interests allocation— — 21,905 — (21,905)— 
Net loss— — — (58,485)(970)(59,455)
Balance as of September 30, 2021245,583,108 $25 $1,460,053 $(677,491)$10,469 $793,056 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


WHEELS UP EXPERIENCE INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited, in thousands except share data)
Class A Common Stock
SharesAmountAdditional paid-in capitalAccumulated
deficit
Non-controlling interestsTotal
Balance as of December 31, 2019116,581,683 $12 $427,579 $(478,035)$(5,810)$(56,254)
Consideration issued for business combinations52,794,775 432,139 — — 432,144 
Equity-based compensation — — 435 — 149 584 
Change in non-controlling interests allocation— — (33,600)— 33,600 — 
Net loss— — — (41,018)(3,456)(44,474)
Balance as of March 31, 2020169,376,458 17 826,553 (519,053)24,483 332,000 
Equity-based compensation— — 434 — 338 772 
Change in non-controlling interests allocation— — (1,406)— 1,406 — 
Net loss— — — (25,238)(2,127)(27,365)
Balance as of June 30, 2020169,376,458 17 825,581 (544,291)24,100 305,407 
Equity-based compensation— — 863 — 305 1,168 
Change in non-controlling interests allocation— — (89)— 89 — 
Net income— — — 18,909 1,639 20,548 
Balance as of September 30, 2020169,376,458 $17 $826,355 $(525,382)$26,133 $327,123 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


WHEELS UP EXPERIENCE INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Nine Months Ended September 30,
20212020
OPERATING ACTIVITIES:
Net loss$(120,622)$(51,292)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization 40,952 44,190 
Amortization of deferred financing costs and debt discount618 1,265 
Equity-based compensation30,668 2,524 
Change in fair value of warrant liability(12,271)— 
Provision for expected credit losses1,163 328 
Loss on extinguishment of debt2,379 — 
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable(9,074)28,196 
Other receivables(1,906)2,368 
Parts and supplies inventories(2,749)263 
Prepaid expenses and other (11,673)1,214 
Other non-current assets(256)1,019 
Operating lease liabilities, net(1,414)(297)
Accounts payable11,807 (16,786)
Accrued expenses(9,742)(9,021)
Other current liabilities(1,037)(613)
Other non-current liabilities131 2,069 
Deferred revenue(69,390)(26)
Net cash (used in) provided by operating activities(152,416)5,401 
INVESTING ACTIVITIES:
Purchases of property and equipment (6,683)(4,878)
Acquisition of businesses, net of cash acquired7,844 97,104 
Capitalized software development costs(9,589)(5,144)
Net cash (used in) provided by investing activities(8,428)87,082 
FINANCING ACTIVITIES:
Proceeds from stock option exercises1,332 — 
Proceeds from the Business Combination and PIPE Investment656,304 — 
Transaction costs in connection with the Business Combination and PIPE Investment(70,406)— 
Proceeds from long-term debt— 755 
Repayments of long-term debt(213,934)(54,772)
Repayment (issuance) of loans to employees102 (67)
Net cash provided by (used in) financing activities373,398 (54,084)
NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH212,554 38,399 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD324,876 96,440 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH END OF PERIOD$537,430 $134,839 
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Non-cash consideration issued for business acquisition of Delta Private Jets LLC— $427,007 
Non-cash consideration issued for business acquisition of Gama Aviation LLC— $32,638 
Non-cash consideration issued for business acquisition of Mountain Aviation, LLC$30,172 — 
Assumption of warrant liability in Business Combination$28,219 — 
The accompanying notes are an integral part of these condensed consolidated financial statements.

7



WHEELS UP EXPERIENCE INC.
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 (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 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 of America (“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 at December 31, 2020 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 15). 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 U.S. 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 for the year ended December 31, 2020 included in the final prospectus filed on August 25, 2021.
8



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 SARS-CoV-2 or COVID-19, 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, and the incremental borrowing rate for leases.
Warrant Liability
We determine if warrants are equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether warrants meet all of the requirements for equity classification under ASC 815, including whether warrants are indexed to our common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all of the criteria for equity classification, warrants are required to be recorded as a liability at their fair value on date of issuance and each balance sheet date thereafter. Changes in the estimated fair value of warrants are recognized as an unrealized gain or loss.
We recorded the Private Warrants and Public Warrants (each defined below and collectively the “Warrants”) assumed as part of the Business Combination (see Note 3 and Note 19) as liabilities.
Equity-Based Compensation
Restricted stock units (“RSUs”) are measured based upon the fair value of a share of Class A common stock on the date of grant. RSUs typically vest upon a service-based requirement, and we recognize compensation expense on a straight-line basis over the requisite service period.
Earnout Shares (as defined below) potentially issuable to holders of WUP profits interests and restricted interests as part of the Business Combination (see Note 3 and Note 14) are recorded as equity-based compensation. Earnout Shares contain market conditions and were valued using a Monte Carlo simulation model. Compensation expense related to an award with a market condition is recognized on an accelerated attribution basis over the requisite service period and is not reversed if the market condition is not satisfied.
Income Taxes
We account for income taxes using the asset and liability method. Deferred tax assets and liabilities reflect the expected future consequences of temporary differences between the financial reporting and tax bases of assets and liabilities as well as operating losses, capital losses, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates that are expected to be in effect when these differences are anticipated to reverse. Management makes estimates, assumptions, and judgments to determine our provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against deferred tax assets. We assess the
10


likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, we establish a valuation allowance.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Interest and penalties related to unrecognized tax benefits are recognized within income tax expense.
Net Income (Loss) per Share
Basic net income (loss) per share is computed by dividing net income (loss) attributable to Wheels Up by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share is computed based on the weighted average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period. During the periods when there is a net loss, potentially dilutive common shares are excluded from the calculation of diluted net loss per share as their effect is anti-dilutive.
Deferred Offering Costs
We capitalized certain legal, accounting and other direct third-party costs related to the Business Combination. Deferred offering costs were included as an asset on the condensed consolidated balance sheets and were deferred until the Closing Date, at which time they were deducted from additional paid-in capital of the combined business.
Reclassifications
Certain reclassifications have been made to the prior years’ condensed consolidated financial statements to conform to the current year presentation.
Adopted Accounting Pronouncements
In December 2019, the FASB issued accounting standards update (“ASU”) 2019-12, Simplifying the Accounting for Income Taxes (ASC 740). This standard simplifies the accounting for income taxes by (i) eliminating certain exceptions within ASC 740 and (ii) clarifying and amending the existing guidance to enable consistent application of ASC 740. We adopted ASU 2019-12 on January 1, 2021. This adoption did not have a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASC 848). The FASB issued a subsequent amendment to the initial guidance in January 2021 with ASU 2021-01. This standard provides temporary optional expedients and exceptions to accounting guidance on contract modifications and hedge accounting to ease financial reporting burdens as the market transitions from the London Interbank Offered Rate and other interbank offered rates to alternative reference rates. The guidance was effective upon issuance and generally can be applied through December 31, 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 represents the accounts of WUP.

11


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.
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 55,000,000 shares of common stock at a price of $10.00 per share (the “PIPE Shares”) for an aggregate purchase price of $550 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. Each Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. Each Private Warrant entitles the Sponsor to purchase one share of Class A common stock at a price of $11.50 per share.







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4.     PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
September 30,
2021
December 31, 2020
Aircraft $475,769 $473,509 
Software development costs32,129 22,414 
Leasehold improvements 11,703 9,560 
Computer equipment 2,147 1,846 
Buildings and improvements1,424 1,424 
Furniture and fixtures1,959 1,321 
Tooling 2,890 1,296 
Vehicles800 597 
528,821 511,967 
Less: Accumulated depreciation and amortization (214,835)(188,877)
Total $313,986 $323,090 
Depreciation and amortization expense of property and equipment was $8.4 million and $26.0 million for the three and nine months ended September 30, 2021, respectively, and $10.0 million and $31.0 million for the three and nine months ended September 30, 2020, respectively.
Capitalized costs related to the internal development of software was $3.9 million and $9.6 million for the three and nine months ended September 30, 2021, respectively, and $2.1 million and $5.1 million for the three and nine months ended September 30, 2020, respectively.
Amortization expense related to software development costs, included as part of depreciation and amortization expense of property and equipment, was $1.8 million and $4.8 million for the three and nine months ended September 30, 2021, respectively, and $1.2 million and $3.2 million for the three and nine months ended September 30, 2020, respectively.


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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,
2021202020212020
Services transferred at a point in time:
Flights, net of discounts and fees$218,360 $140,280 $621,494 $343,571 
Aircraft management55,388 36,107 151,405 87,737 
Other6,679 2,313 16,418 6,609 
Services transferred over time:
Memberships 17,982 13,345 49,144 39,787 
Aircraft management2,617 2,295 7,435 5,679 
Other952 441 3,319 1,825 
Total $301,978 $194,781 $849,215 $485,208 
Revenue in the condensed consolidated statements of operations is presented net of discounts and incentives of $5.0 million and $12.5 million, for the three and nine months ended September 30, 2021, respectively, and $2.8 million and $6.4 million for the three and nine months ended September 30, 2020, respectively.
Contract Balances
Receivables from member and customer contracts are included within accounts receivable, net. As of September 30, 2021 and December 31, 2020, gross receivables from members and customers were $60.5 million and $38.6 million, respectively. As of September 30, 2021 and December 31, 2020, undeposited funds were $14.0 million and $14.1 million, respectively. As of September 30, 2021 and December 31, 2020, the allowance for expected credit losses was $5.5 million and $2.3 million, respectively.
Deferred revenue consists of the following (in thousands):
 September 30, 2021December 31, 2020
Flights - Prepaid Blocks and jet cards$538,695 $609,490 
Memberships - annual dues36,771 32,016 
Memberships - initiation fees4,034 3,870 
Flights - credits6,780 7,291 
Other987 411 
Deferred revenue - total 587,267 653,078 
Less: Deferred revenue - current (585,319)(651,096)
Deferred revenue - non-current $1,948 $1,982 
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Changes in deferred revenue for the nine months ended September 30, 2021 were as follows (in thousands):
Deferred revenue - beginning balance$653,078 
Amounts deferred during the period611,985 
Revenue recognized from amounts included in the deferred revenue beginning balance(368,922)
Revenue from current period sales(308,874)
Deferred revenue - ending balance$587,267 
Revenue expected to be recognized in future periods for performance obligations that are unsatisfied, or partially unsatisfied, as of September 30, 2021 approximates $101.7 million, $393.2 million, $46.3 million and $46.0 million for 2021, 2022, 2023 and 2024, respectively.
Costs to Obtain a Contract
Capitalized costs related to sales commissions and referral fees were $3.4 million and $7.4 million for the three and nine months ended September 30, 2021, respectively, and $0.1 million and $2.2 million for the three and nine months ended September 30, 2020, respectively.
As of September 30, 2021 and December 31, 2020, capitalized sales commissions and referral fees of $6.2 million and $5.0 million, respectively, are in prepaid expenses and other current assets and $1.0 million and $0.8 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 $2.4 million and $5.9 million for the three and nine months ended September 30, 2021, respectively, and $0.2 million and $3.9 million for the three and nine months ended September 30, 2020, respectively.
6.    ACQUISITIONS
Mountain Aviation, LLC Acquisition
On January 5, 2021, we acquired all of the outstanding equity of Mountain Aviation, LLC (“Mountain Aviation”) for a total purchase price of $40.2 million, consisting of $30.2 million in WUP common interests and $10.0 million in cash. In addition, there is a potential incremental cash earn-out of up to $15.0 million based on achieving certain financial performance metrics related to certain special missions, which represents contingent consideration, and would be payable in the second quarter of 2023 to the extent achieved. The estimated fair value of the earn-out payment using a Monte Carlo simulation model as of the acquisition date was $0. As a result, we have not recorded a liability for the fair value of contingent consideration payable on the condensed consolidated balance sheet as of September 30, 2021. The valuation of the earn-out is based on significant inputs that are not observable in the market; therefore, it is a Level 3 financial instrument. Mountain Aviation adds to our Super-Midsize jet fleet and operations, provides full-service in-house maintenance capabilities, expands our presence in the Western United States and enhances our on-demand transcontinental charter flight capabilities. Acquisition-related costs for Mountain Aviation of $2.0 million were included in general and administrative expense in the condensed consolidated statements of operations for the nine months ended September 30, 2021. The acquisition of Mountain Aviation was determined to be a business combination.
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As of the date of acquisition, the total preliminary purchase price allocated to the Mountain Aviation assets acquired and liabilities assumed according to their estimated fair values were as follows (in thousands):
Current assets$32,884 
Property and equipment741 
Intangible assets5,040 
Goodwill37,021 
Other assets45,874 
Total assets acquired121,560 
Total liabilities assumed(81,388)
Net assets acquired$40,172 
Current assets of Mountain Aviation included $17.8 million of cash and $10.7 million of accounts receivable, including $1.5 million owed from Wheels Up that was eliminated in consolidation upon acquisition.
The above initial fair value estimates of the assets acquired and liabilities assumed were provisional based on the information that was available as of the acquisition date.
Goodwill represents the excess of the purchase price over the fair values of the acquired net tangible and intangible assets. The allocated value of goodwill primarily relates to anticipated synergies and economies of scale by combining the use of Mountain Aviation's aircraft, maintenance capabilities and existing business processes with our other acquisitions. The acquired goodwill is approximately 25.0% deductible for tax purposes.
The amounts allocated to acquired intangible assets and their associated weighted-average amortization periods, were determined based on the period the assets are expected to contribute directly or indirectly to our cash flows, consists of the following:
Amount
(In thousands)
Weighted-Average Amortization Period
(Years)
Customer relationships$4,600 6.0
Trade name330 1.0
Non-competition agreement110 1.0
Total acquired intangible assets$5,040 5.8
The results of Mountain Aviation were included in the condensed consolidated statement of operations from the date of acquisition. Revenue for Mountain Aviation was $87.2 million, net of intercompany eliminations, and income from operations was $11.5 million from the date of acquisition through September 30, 2021.
Unaudited Pro Forma Summary of Operations
The accompanying unaudited pro forma summary represents the consolidated results of operations as if the 2020 acquisitions of Wheels Up Private Jets LLC and Gama Aviation LLC (“Gama”) had been completed as of January 1, 2020, and the 2021 acquisition of Mountain Aviation had been completed as of January 1, 2020. The unaudited pro forma financial results for 2021 reflect the results for the three and nine months ended September 30, 2021, as well as the effects of pro forma adjustments for the transaction in 2021. The unaudited pro forma financial information includes the accounting effects of the acquisition, including adjustments to the amortization of intangible assets, and professional fees associated with the transaction. The pro forma results were based on estimates and assumptions, which we believe are reasonable. The unaudited pro forma summary does not
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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,
2021202020212020
Net revenue$301,978 $226,266 $851,330 $616,894 
Net income (loss)$(59,455)$19,081 $(121,564)$(55,652)
Net income (loss) attributable to Wheels Up Experience Inc. $(58,617)$17,560 $(115,401)$(51,372)
Net income (loss) per share$(0.25)$0.11 $(0.60)$(0.32)

7.    GOODWILL AND INTANGIBLE ASSETS
Goodwill
The change in the carrying value of goodwill for the nine months ended September 30, 2021, was as follows (in thousands):
Balance as of December 31, 2020$400,160 
Acquisition of Mountain Aviation37,021 
Balance as of September 30, 2021$437,181 
Intangible Assets
The gross carrying value, accumulated amortization and net carrying value of intangible assets consisted of the following (in thousands):
September 30, 2021
Gross Carrying
Value
Accumulated AmortizationNet Carrying
Value
Status$80,000 $13,644 $66,356 
Customer relationships74,600 12,478 62,122 
Non-competition agreement210 181 29 
Trade name14,230 4,739 9,491 
Developed technology19,545 5,675 13,870 
Leasehold interest - favorable 600 52 548 
Total $189,185 $36,769 $152,416 
December 31, 2020
Gross Carrying
Value
Accumulated AmortizationNet Carrying
Value
Status$80,000 $7,645 $72,355 
Customer relationships70,000 6,609 63,391 
Non-competition agreement100 100 — 
Trade name13,900 2,487 11,413 
Developed technology19,545 3,559 15,986 
Leasehold interest - favorable 600 35 565 
Total $184,145 $20,435 $163,710 
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Amortization expense of intangible assets was $5.4 million and $16.0 million for the three and nine months ended September 30, 2021, respectively, and $5.2 million and $14.4 million for the three and nine months ended September 30, 2020, respectively.
Intangible Liabilities
The gross carrying value, accumulated amortization and net carrying value of intangible liabilities consisted of the following (in thousands):
September 30, 2021
Gross Carrying
Value
Accumulated AmortizationNet Carrying
Value
Intangible liabilities$20,000 $3,417 $16,583 
December 31, 2020
Gross Carrying
Value
Accumulated AmortizationNet Carrying
Value
Intangible liabilities$20,000 $1,917 $18,083 
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, 2021, respectively, and $0.5 million and $1.4 million for the three and nine months ended September 30, 2020, respectively.
Future amortization expense of intangible assets and intangible liabilities held as of September 30, 2021 are as follows (in thousands):
Year ending December 31, Intangible AssetsIntangible Liabilities
2021$5,450 $500 
202220,124 2,000 
202319,864 2,000 
202419,701 2,000 
202519,288 2,000 
Thereafter67,989 8,083 
Total$152,416 $16,583 

8.    CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Cash Equivalents
As of September 30, 2021 and December 31, 2020, investments in money market funds recorded as cash equivalents on the condensed consolidated balance sheets were $408.1 million and $103.5 million, respectively.
Interest income from cash equivalents of $7 thousand and $25 thousand were recorded in interest income in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively, and $36 thousand and $0.5 million for the three and nine months ended September 30, 2020, respectively.
Restricted Cash
As of September 30, 2021 restricted cash on the condensed consolidated balance sheet represents amounts held by financial institutions to establish a standby letter of credit required by the lessor of certain corporate office space. As of December 31, 2020, restricted cash also included $10.0 million related to amounts held by third-party lenders
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to collateralize our November 2013 secured credit facility (the “1st Facility”), as amended in August 2014 to increase the availability under the 1st Facility to a total of $175.4 million (collectively, the “Amended 1st Credit Facility”).
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 shown below (in thousands):
September 30, 2021September 30, 2020
Cash and cash equivalents$535,253 $104,355 
Restricted cash2,177 30,484 
Total$537,430 $134,839 
Air Carrier Payroll Support Program
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act provides aid in the form of loans, grants, tax credits, and other forms of government assistance. Specifically, the CARES Act provided the airline industry with up to $25.0 billion in grants with assurances the support was to be used exclusively for employee salaries, wages, and benefits.
During 2020, Wheels Up applied for government assistance under the Payroll Support Program from the U.S. Department of the Treasury (the “Treasury”) as directed by the CARES Act. We were awarded a total grant of $76.4 million to support ongoing operations through payroll funding. For the nine months ended September 30, 2020 we received grant proceeds of $74.2 million. We utilized $51.6 million and $64.9 million of the grant proceeds to offset payroll expenses incurred for the three and nine months ended September 30, 2020, respectively, and the remaining balance was included as restricted cash to offset subsequent payroll expenses incurred during 2020.
The support payments were conditioned on our agreement to refrain from conducting involuntary employee layoffs or furloughs through September 30, 2020. Other conditions include continuing essential air service as directed by the Department of Transportation (“DOT”) and certain limitations on executive compensation. Based on the amount received, we were not required to provide financial protection to the Treasury in conjunction with the payroll support obtained.

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.
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Financial instruments that are measured at fair value on a recurring basis and their corresponding placement in the fair value hierarchy consist of the following (in thousands):
September 30, 2021
Level 1Level 2Level 3Fair Value
Assets:
Money market funds$408,056 $— $— $408,056 
Liabilities:
Warrant liability - Public Warrants10,150 — — 10,150 
Warrant liability - Private Warrants— 5,798 — 5,798 
Total liabilities$10,150 $5,798 $— $15,948 
December 31, 2020
Level 1Level 2Level 3Fair Value
Assets:
Money market funds$103,472 $— $— $103,472 
The carrying amount of money market funds approximates fair value and is classified within Level 1 because we determined the fair value through quoted market prices.
The Warrants were accounted for as a liability in accordance with ASC 815-40 (see Note 19). The warrant liability was measured at fair value upon assumption and on a recurring basis, with changes in fair value presented in the condensed consolidated statements of operations.
As of the Closing Date and September 30, 2021, we valued the Warrants by applying the valuation technique of a Monte Carlo simulation model to reflect the redemption conditions. We used Level 1 inputs for the Public Warrants and Level 2 inputs for the Private Warrants. The Private Warrants are substantially similar to the Public Warrants, but not directly traded or quoted on an active market.
The following table presents the changes in the fair value of the warrant liability (in thousands):
Public WarrantsPrivate WarrantsTotal
Warrant Liability
Fair value as of December 31, 2020$— $— $— 
Assumption of Warrants in Business Combination17,981 10,238 28,219 
Change in fair value of warrant liability(7,831)(4,440)(12,271)
Fair value as of September 30, 2021$10,150 $5,798 $15,948 
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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 $175.5 million.
The principal balances of all outstanding debt, unamortized debt discounts, and unamortized deferred financing costs are as follows (in thousands):
 September 30, 2021December 31, 2020
Amended 1st Credit Facility:
A-1$— $11,811 
A-2— 7,874 
A-3— 28,104 
B— 8,119 
2nd Credit Facility:
A— 55,450 
B— 24,510 
3rd Credit Facility:
A— 53,334 
Promissory Notes153 24,879 
CARES Act Paycheck Protection Program Loan— — 
153 214,081 
Less: Unamortized debt discount— (615)
Less: Unamortized deferred financing costs— (2,377)
153 211,089 
Less: Current maturities of long-term debt(131)(62,678)
Total$22 $148,411 
Amortization expense for debt discounts and deferred financing costs of $0 and $0.6 million were recorded in interest expense in the condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively, and $0.4 million and $1.3 million for the three and nine months ended September 30, 2020, respectively. As a result of the early payoff of our long-term debt, we recorded a $2.4 million loss on extinguishment of debt for the three and nine months ended September 30, 2021, related to the write off of unamortized debt discounts and deferred financing costs.
CARES Act Paycheck Protection Program Loan
Mountain Aviation applied for a loan (the “PPP Loan”), which was approved and received prior to our acquisition of the company (see Note 6). Mountain Aviation received the PPP Loan on April 14, 2020 from Zions Bancorporation N.A. dba Vectra Bank (“Vectra”) under the U.S. Small Business Administration's (“SBA’s”) Paycheck Protection Program (“PPP”) enacted as part of the CARES Act in the principal amount of $3.2 million. In connection with the acquisition, a portion of the purchase price was placed in an escrow account at Vectra, to be paid to Vectra if and to the extent the PPP Loan were not to be forgiven by the SBA under the PPP. The seller of Mountain Aviation agreed to pay any amounts owed under the PPP Loan in excess of the amount in escrow and
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agreed to indemnify us for any obligations we incurred under the PPP Loan to the extent not satisfied from the escrow account. The PPP loan was forgiven by the SBA on June 9, 2021 and the amount of sales proceeds held in escrow were released to the seller.
Debt Covenants
Our credit facilities contained certain restrictive covenants. For all periods presented, we have satisfied these covenants.
Fair Value of Debt
The carrying amount of our debt approximated fair value based on the interest rates currently available for debt with similar terms and remaining maturities. We utilized Level 2 inputs to determine the fair value.

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 condensed 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 currently believe to be immaterial, does not become material in the future.
Agreements with Operators
We lease certain of our owned and leased aircraft to Gama, a Federal Aviation Administration licensed and DOT registered air carrier, to operate our aircraft. Gama was a third-party independent operator through March 2, 2020, which is the date we executed a purchase agreement to acquire the business. The total amount of fees, net of lease payments from Gama, was $25.7 million from January 1, 2020 through the acquisition date and are included in cost of revenue in the condensed consolidated statements of operations for the nine months ended September 30, 2020.
Brand Ambassador Program
From time to time, we enter into various barter arrangements with third-parties in which there is an agreement to provide a specified amount of flight time, valued in either hours or dollars, in exchange for media advertising, marketing credits or other activities that promote brand awareness. Revenue recognized as a result of nonmonetary transactions was $1.5 million and $2.8 million for the three and nine months ended September 30, 2021, respectively, and $0.6 million and $1.8 million for the three and nine months ended September 30, 2020, respectively, while expenses included in sales and marketing in the condensed consolidated statement of operations as a result of the same barter arrangements were $1.2 million and $2.3 million, for the three and nine months ended September 30, 2021, respectively, and $0.5 million and $2.0 million for the three and nine months ended September 30, 2020, respectively. The balances for flight revenue and advertising or other marketing credits that have yet to be consumed are included in accrued expenses and prepaid expenses and other current assets on the condensed consolidated balance sheets. As of September 30, 2021 and December 31, 2020, the accrued expenses associated with these barter transactions was $2.9 million and $3.5 million, respectively, and the prepaid expenses and other current assets was $0.
Sales and Use Tax Liability
We regularly provide services to members in various states within the continental United States, 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, 2021 and December 31, 2020, respectively, we estimate the potential exposure to such tax liability to be $7.9 million and $6.6 million, the expense for which is included in
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accrued expenses on the condensed consolidated balance sheets and cost of revenue in the condensed consolidated statements of operations.

12.    LEASES
Leases primarily pertain to certain controlled aircraft, corporate headquarters, and operational facilities, including aircraft hangars, which are all accounted for as operating leases.
Our leases do not contain residual value guarantees, covenants, or other associated restrictions. 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 $3.2 million and $12.1 million for the three and nine months ended September 30, 2021, respectively, and $2.7 million and $7.9 million for the three and nine months ended September 30, 2020, respectively.
The components of net lease cost are as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Operating lease costs$12,643 $6,043 $29,900 $15,435 
Short-term lease costs3,331 3,907 16,139 12,085 
Total lease costs$15,974 $9,950 $46,039 $27,520 
Costs related to leased aircraft and operational facilities were $14.4 million and $41.1 million for the three and nine months ended September 30, 2021, respectively, and $8.1 million and $22.4 million for the three and nine months ended September 30, 2020, 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 $1.6 million and $4.7 million for the three and nine months ended September 30, 2021, respectively, and $1.8 million and $5.0 million for the three and nine months ended September 30, 2020, respectively, and are included in general and administrative expense in the condensed consolidated statements of operations.
Supplemental cash flow information related to leases are as follows (in thousands):
Nine Months Ended September 30,
20212020
Cash paid for amounts included in the measurement of operating lease liabilities:
Operating cash flows paid for operating leases$27,773 $20,072 
Right-of-use assets obtained in exchange for operating lease obligations$62,856 $51,519 
Supplemental balance sheet information related to leases are as follows:
September 30, 2021December 31, 2020
Weighted-average remaining lease term (in years):
Operating leases6.57.5
Weighted-average discount rate:
Operating leases9.5 %9.5 %
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Maturities of lease liabilities, as of September 30, 2021, are as follows (in thousands):
Year ending December 31,Operating Leases
2021$9,991 
202236,555 
202330,948 
202419,356 
202514,695 
Thereafter51,498 
Total lease payments 163,043 
Less: Imputed interest(43,641)
Total lease obligations$119,402 
13.    EQUITY
Pursuant to the Wheels Up Experience Inc. certificate of incorporation, which was filed on June 23, 2021, we are authorized to issue 2,500,000,000 shares of Class A common stock, with a 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 each share.
In January 2021, WUP issued common interests that, following conversion in the Business Combination, represented 3,968,900 common shares issued at $7.60 per share as part of the acquisition of Mountain Aviation (see Note 6).

14.    EQUITY-BASED COMPENSATION
Currently, 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”); and 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. As of September 30, 2021, no 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”) of Wheels Up adopted the Wheels Up Experience Inc. 2021 Long-Term Incentive Plan (the “2021 LTIP Plan”), for employees, consultants and other qualified persons. The 2021 LTIP Plan provides for the grant of incentive options, nonstatutory options, restricted stock, RSUs, rights, dividend equivalents, other stock-based awards, performance awards, cash awards or any combination of the foregoing.
As of the Closing Date, the Board granted accelerated vesting of 18 months on all outstanding equity-based compensation awards in connection with the Business Combination. This modification to our awards resulted in the acceleration of all remaining compensation cost due to a shorter requisite service period as compared to the original award. There was no change to the fair value or incremental compensation cost incurred.
Management Incentive Plan
As of September 30, 2021, the Board had authorized and issued an aggregate of 31.3 million profits interests under the WUP management incentive plan.
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The following table summarizes the profits interests activity under the WUP management incentive plan as of September 30, 2021:
 Number of
Profits Interests
Weighted-Average Grant
Date Fair Value
 (in thousands)
Outstanding profits interests as of January 1, 202129,111 $0.42 
Granted — — 
Exercised(206)0.74 
Expired/forfeited — — 
Outstanding profits interests as of September 30, 202128,905 $0.42 
The weighted-average remaining contractual term as of September 30, 2021 for profits interests outstanding was approximately 9.8 years.
The following table summarizes the status of non-vested profits interests as of September 30, 2021:
 Number of
Profits Interests
Weighted-Average Grant
Date Fair Value
 (in thousands)
Non-vested profits interests as of January 1, 202112,619 $0.29 
Granted— 
Vested (7,886)0.25 
Forfeited— — 
Non-vested profits interests as of September 30, 20214,733 $0.35 
The total unrecognized compensation cost related to non-vested profits interests was $1.7 million as of September 30, 2021 and is expected to be recognized over a weighted-average period of 1.4 years. The total fair value of vested profits interests amounted to $2.0 million for the nine months ended September 30, 2021.
As of September 30, 2021, under MIP Plan VII, the Board authorized and issued to certain Wheels Up employees an aggregate of 4.7 million restricted interests under the WUP management incentive plan.
The following table summarizes the restricted interests activity under the WUP management incentive plan as of September 30, 2021:
Number of
Restricted Interests
Weighted-Average Grant
Date Fair Value
(in thousands)
Non-vested and outstanding restricted interests as of January 1, 20214,662 $3.98 
Granted— — 
Vested— — 
Expired/forfeited— — 
Non-vested and outstanding restricted interests as of September 30, 20214,662 $3.98 
The weighted-average remaining contractual term as of September 30, 2021 for restricted interests outstanding was approximately 8.3 years.
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The total unrecognized compensation cost related to non-vested restricted interests was $5.9 million as of September 30, 2021. 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 restricted interests on the Closing Date.
The 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.
Stock Option Plan
As of September 30, 2021, the number of stock options authorized and issued in aggregate under the stock option plan was 17.5 million.
The following table summarizes the activity under the stock option plan as of September 30, 2021:
Number of
Stock Options
Weighted-
Average Exercise
Price
Weighted-Average Grant
Date Fair Value
(in thousands)
Outstanding stock options as of January 1, 202116,284 $7.51 $1.17 
Granted921 10.00 3.54 
Exercised(230)7.19 0.78 
Expired/forfeited(49)7.19 0.67 
Outstanding stock options as of September 30, 202116,926 $7.65 $1.31 
Exercisable stock options as of September 30, 202111,747 $7.39 $1.03 
The aggregate intrinsic value as of September 30, 2021 for stock options that were outstanding and exercisable was $0.1 million.
The weighted-average remaining contractual term as of September 30, 2021 for stock options that were outstanding and exercisable was approximately 8.0 years and 7.7 years, respectively.
The following table summarizes the status of non-vested stock options as of September 30, 2021:
 Number of Stock
Options
Weighted-Average Grant
Date Fair Value
 (in thousands)
Non-vested stock options as of January 1, 202110,987 $1.41 
Granted 921 3.54 
Vested (6,681)1.29 
Forfeited(48)0.67 
Non-vested stock options as of September 30, 20215,179 $1.94 
The total unrecognized compensation cost related to non-vested stock options was $9.6 million as of September 30, 2021 and is expected to be recognized over a weighted-average period of 2.0 years. The total fair value of stock options vested approximated $8.6 million for the nine months ended September 30, 2021.
LTIP Plan
As of September 30, 2021, the Board authorized an aggregate of 27.3 million shares for issuance under the 2021 LTIP Plan and 5.9 million RSUs were outstanding.
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The following table summarizes the activity under the 2021 LTIP Plan related to RSUs as of September 30, 2021:
Number of RSUsWeighted-Average Grant
Date Fair Value
(in thousands)
Non-vested and outstanding RSUs as of January 1, 2021— $— 
Granted5,856 7.48 
Vested— — 
Forfeited— — 
Non-vested and outstanding RSUs as of September 30, 20215,856 $7.48 
The total unrecognized compensation cost related to non-vested RSUs was $43.2 million as of September 30, 2021 and is expected to be recognized over a weighted-average period of 2.9 years.
Equity-Based Compensation Expense
Compensation expense for profits interests recognized in the condensed consolidated statements of operations was $1.0 million and $1.5 million for the three and nine months ended September 30, 2021, respectively, and $0.3 million and $0.8 million for the three and nine months ended September 30, 2020, respectively.
Compensation expense for restricted interests recognized in the condensed consolidated statements of operations was $12.6 million for the three and nine months ended September 30, 2021 and $0 for the three and nine months ended September 30, 2020.
Compensation expense for stock options recognized in the condensed consolidated statements of operations was $5.4 million and $7.7 million for the three and nine months ended September 30, 2021, respectively, and $0.9 million and $1.7 million for the three and nine months ended September 30, 2020, respectively.
Compensation expense for RSUs recognized in the condensed consolidated statements of operations was $0.6 million for 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,
2021202020212020
Cost of revenue$679 $109 $779 $226 
Technology and development619 129 806 342 
Sales and marketing2,449 261 2,901 814 
General and administrative24,159 669 26,182 1,142 
Total equity-based compensation expense$27,906 $1,168 $30,668 $2,524 
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
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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. In the event such Earnout Shares are forfeited, the number of shares that could be issued will be redistributed on a pro-rata basis to all other Earnout Share holders. Upon redistribution to any holder of WUP profits interests or restricted interests, such awards will be recorded as new awards. There have been no forfeitures of Earnout Shares as of September 30, 2021.
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 and will be recognized as compensation expense on a graded vesting basis over the derived service period or shorter if the Earnout Shares vest. 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, 2021. Compensation expense for Earnout Shares recognized in the condensed consolidated statements of operations was $8.3 million for the three and nine months ended September 30, 2021. The total unrecognized compensation cost related to Earnout Shares was $49.6 million as of September 30, 2021 and is expected to be recognized over 1.5 years.

15.    NON-CONTROLLING INTERESTS
MIP LLC is a single purpose entity formed for the purpose of administering and effectuating the award of 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 was adopted, allowing members of MIP LLC, subject to certain restrictions, to exchange their vested 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 profits interests relative to their applicable participation threshold.
The decision of whether to exchange profits interests for cash or Class A common stock is made solely at the discretion of Wheels Up. Accordingly, the 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 profits interests 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 is as follows:
September 30, 2021December 31, 2020
Number of LLC common units held by Wheels Up(1)
245,583,108 98.7 %169,717,146 91.1 %
Number of vested profits interests attributable to non-controlling interests(2)
3,285,315 1.3 %16,492,865 8.9 %
Total LLC common units and vested profits interests outstanding248,868,423 100.0 %186,210,011 100.0 %
(1) LLC 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, there would be 24,173,465 LLC common units issuable upon conversion of vested and unvested profits interests outstanding as of September 30, 2021.
Weighted average ownership percentages are used to allocate net income (loss) to Wheels Up and the non-controlling interest holders. The non-controlling interests weighted average ownership percentage was 1.4% and 5.1% for the three and nine months ended September 30, 2021, respectively, and 8.0% and 7.7% for the three and nine months ended September 30, 2020, respectively.
    
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16.    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.
As of December 31, 2020, a stockholder held a portion of the debt outstanding under our credit facilities.
We incurred expenses of $1.4 million and $3.2 million for the three and nine months ended September 30, 2021, respectively, and $0.6 million and $2.8 million for the three and nine months ended September 30, 2020, respectively, from transactions related to a commercial cooperation agreement with our stockholder Delta Air Lines, Inc. (“Delta”), of which $4.3 million and $3.0 million are included in accrued expenses on the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020, respectively. In addition, we provided $0.4 million and $1.6 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, 2021, respectively, and $0.5 million and $1.4 million for the three and nine months ended September 30, 2020, respectively. Delta provided Wheels Up pilots airfare for business travel at no cost during the periods presented. We incurred expenses of $0.2 million and $0.3 million for the three and nine months ended September 30, 2021, respectively, for an aircraft leased from the company of a stockholder.
We incurred expenses of $23 thousand and $69 thousand for the three and nine months ended September 30, 2021, respectively, and $23 thousand for the three and nine months ended September 30, 2020, respectively, with the company of a stockholder for consultation services on employee benefits. We incurred expenses of $0 for the three and nine months ended September 30, 2021 and $8 thousand and $29 thousand for the three and nine months ended September 30, 2020, respectively, with a company in which a Wheels Up executive and a member of the Board holds an ownership interest. We incurred expenses of $0.1 million for the three and nine months ended September 30, 2021, respectively, and $0.1 million for the three and nine months ended September 30, 2020, respectively, for an immediate family member of a Wheels Up executive and a member of the Board who was a full-time employee.
Employee Loans Receivable
In January 2016, a senior executive of Wheels Up borrowed $5.0 million from Wheels Up. The borrower executed an interest bearing secured promissory note with a maturity date of January 17, 2025. The interest rate on the loan is 1.8% per annum, which is payable upon the maturity date. Based on our anticipation that the Board was ultimately going to decide to forgive the senior executive loan, a full reserve was previously recorded on the amount outstanding. Prior to the effectiveness of the registration statement on Form S-4 filed by Aspirational, which the SEC declared effective on June 23, 2021, the Board forgave the senior executive loan. As of December 31, 2020, a Gama senior executive had borrowed $0.1 million that was fully repaid in January 2021.

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17.    NET INCOME (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except share data):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Numerator:
Net income (loss) attributable to Wheels Up Experience Inc. - basic and diluted$(58,485)$18,909 $(114,050)$(47,348)
Denominator:
Weighted-average shares of Class A common stock outstanding - basic and diluted235,341 165,055 191,057 161,649 
Basic and diluted net income (loss) per share of Class A common stock $(0.25)$0.11 $(0.60)$(0.29)
There were no dividends declared or paid for the three and nine months ended September 30, 2021 or 2020.
Basic and diluted net income (loss) per share were computed using the two-class method. The two-class method is an allocation formula that determines earnings or loss per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings or losses. 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. WUP restricted interests were converted into shares of restricted stock as of the Closing Date (see Note 3). All issued and outstanding shares of restricted stock, whether vested or unvested, are included in the weighted-average shares of Class A common stock outstanding beginning on the Closing Date.
Profits interests held by other members of MIP LLC, which comprise the non-controlling interests (see Note 15), are not subject to the net income (loss) per share calculation until such time the vested 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, or 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,
2021202020212020
Warrants10,870,308 — 3,623,436 — 
Earnout Shares7,813,187 — 2,604,396 — 
RSUs836,499 — 279,858 — 
Stock options16,879,379 11,153,335 16,463,474 10,494,947 
Total anti-dilutive securities36,399,373 11,153,335 22,971,164 10,494,947 

18.    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 of Wheels Up Partners Holdings LLC, as well as any standalone income or loss Wheels Up generates. Wheels Up Partners Holdings LLC 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
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income or loss generated by Wheels Up Partners Holdings LLC is passed through to and included in the taxable income or loss of its members, including Wheels Up.
We recorded income tax expense of $0 for the three and nine months ended September 30, 2021 and September 30, 2020. The effective tax rate was 0.0% for the three and nine months ended September 30, 2021 and September 30, 2020. Our effective tax rate for the three months and nine months ended September 30, 2021 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against 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 as Wheels Up Partners Holdings LLC, as a partnership, 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 its 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, 2021, we concluded, based on the weight of all available positive and negative evidence, that it is more likely than not that the deferred assets will not be realized. Accordingly, a full valuation allowance has been established.

19.    WARRANTS
Prior to the Business Combination, Aspirational issued 7,991,544 Public Warrants and 4,529,950 Private Warrants. Upon 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 Warrants become exercisable on the later of (a) 30 days after the completion of the Business Combination and (b) 12 months from the closing of the Aspirational initial public offering on September 25, 2020, and expire five years from the completion of the Business Combination or earlier upon redemption or liquidation.
Redemption of Warrants when the price of Class A common stock equals or exceeds $18.00:
Once the Warrants become exercisable, Wheels Up may redeem the outstanding Warrants (except as described below with respect to the Private Warrants):
in whole and not in part;
at a price of $0.01 per Warrant;
upon a minimum of 30 days’ prior written notice of redemption to each Warrant holder; and
if, and only if, the last reported Class A common stock sales price for any 20 trading days within a 30 trading day period ending on the third trading day prior to the date on which Wheels Up sends the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
Redemption of warrants when the price of Class A common stock equals or exceeds $10.00:
Once the Warrants become exercisable, Wheels Up may redeem the outstanding Warrants:
in whole and not in part;
at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the fair market value of Class A common stock;
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted); and
if the Reference Value is less than $18.00 per share (as adjusted), the Private Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants.
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The exercise price and number of shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of shares at a price below its exercise price. Additionally, in no event will Wheels Up be required to net cash settle the Public Warrants.
The Private Warrants are identical to the Public Warrants underlying the units sold in the Aspirational Initial Public Offering, except that the Private Warrants and the Class A common stock issuable upon the exercise of the Private Warrants were not transferable, assignable or salable until 30 days after the completion of the Business Combination, subject to certain limited exceptions. Additionally, the Private Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the Private Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Warrants will be redeemable by Wheels Up and exercisable by such holders on the same basis as the Public Warrants.
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. This Registration Statement relates to the issuance of an aggregate of 12,521,494 shares of Class A common stock underlying the Warrants. As of September 30, 2021, there have not been any Warrants exercised and 12,521,494 remain outstanding.
The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the Warrants. In addition, the warrant agreement includes a provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of ordinary shares, all holders of the Warrants would be entitled to receive cash for their Warrants (the “Tender Offer Provision”).
We evaluated the Warrants under ASC 815-40-15, which addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. We determined that the Private Warrants are not indexed to Class A common stock in the manner contemplated by ASC 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, we concluded the Tender Offer Provision included in the warrant agreement fails the classified as equity criteria as contemplated by ASC 815-40-25. As a result of the above, the Warrants are classified as derivative liabilities.

20.    SUBSEQUENT EVENTS
We evaluated events occurring subsequent to September 30, 2021, through November 10, 2021, the date on which the condensed consolidated financial statements were issued, for potential recognition and disclosure in the condensed consolidated financial statements. The following summarizes the subsequent events that require disclosure:
In October 2021, Wheels Up began entering into long-term contracts with certain third-party aircraft operators for access to a minimum number of aircraft and hours per month from these operators for a period in excess of a year. Deposits have been paid to these operators totaling $33.5 million as of the date hereof.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and our audited consolidated financial statements. This discussion contains forward-looking statements which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons including the risks faced by us described in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Unless the context otherwise requires, references in this“Management’s Discussion and Analysis of Financial Condition and Results of Operations” section to “we,” “us,”“our,” and “the Company” are intended to mean the business and operations of Wheels Up and its consolidated subsidiaries.
Overview of Our Business
Our mission is to disrupt private aviation by delivering innovative, accessible, travel through cutting edge and simple-to-use proprietary technology and mobile applications. We have become a recognized market leader and are redefining private flying by leveraging our unique technology-enabled marketplace platform. We connect flyers to private aircraft, and to one another, creating memorable lifestyle experiences.
We have a diversified and evolving business model generating revenue through flights, membership fees, management of aircraft, and other services. We operate under one reportable segment, which is private aviation services.
Flight revenue includes both retail and wholesale charter. Wheels Up has one of the largest and most diverse mix of available aircraft in the industry. We have over 180 aircraft in our owned and leased fleet that includes Turboprops, Light, Midsize, Super-Midsize and Large-Cabin jets, more than half of which are Wheels Up branded aircraft. As of September 30, 2021, we also have a managed fleet across all cabin classes of approximately 160 aircraft and an extensive network of third-party operators available in our program fleet from whom we can access over 1,200 additional safety vetted and verified partner aircraft.
Members pay a fixed quoted amount for flights plus certain incidental or additional costs, if applicable. The quoted amount can be based on a contractual capped hourly rate or dynamically priced based on a number of variables at time of booking. Wholesale customers, such as charter flight brokers and third-party operators, primarily pay a fixed rate for flights. Members are also able to purchase Prepaid Blocks, which are dollar-denominated credits that can be applied to future costs incurred by members, including annual dues, flight services, and other incidental costs such as catering and ground transportation. Prepaid Block sales allow us to have a certain amount of revenue visibility into future flight and travel demand. Members who elect not to purchase a Prepaid Block “pay as they fly” by paying for their flights at the time of booking or after their flights.
Membership revenue is generated from initiation and annual renewal fees across three different annual subscription tiers — Connect, Core and Business — each of which is designed to provide the varying services required across a range of existing and potential private flyers. Core membership is ideal for the more frequent individual private flyer who wants guaranteed availability and pricing, high-touch account management, capped rates and values ultimate convenience and flexibility. The Business membership is best suited for companies of any size that want a broader group of individuals in their organization to be able to book and fly, while also requiring maximum flexibility to meet their business needs. Our Business customers include companies that fully-outsource their private travel solution to Wheels Up, including but not necessarily managing their privately- owned aircraft, and those that use Wheels Up to serve or supplement their in-house flight desks. We have offered Core and Business memberships with guaranteed aircraft availability and fixed rate pricing since our inception. During 2019, we launched Connect, our introductory membership tier. The Connect membership offers variable rate pricing on a per trip basis and is designed for the consumer with less frequent flight needs or who has more flexibility in their schedule or does not seek capped rate pricing. All membership options provide access through the Wheels Up App to on-demand charter flights, dynamic pricing, a variety of Shared Flights, empty-leg Hot Flights, Shuttles, and The Community, an online platform of members-only forums to facilitate flight sharing, enabling members to reduce their cost of flying private.
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We have recently added a non-membership offering to tap into a larger addressable market and expand flyer participation in our marketplace. Non-member customers now have access to a full-scale marketplace of private aircraft through the Wheels Up mobile app, available on iOS and Android (the “Wheels Up App”) where they can view the real-time dynamic pricing for available aircraft classes, making it possible to instantaneously search, book and fly. These flyers are not required to purchase a membership but may pay additional transaction fees not applicable to members and do not receive membership benefits. In addition, non-member flyers do not have aircraft availability guarantees as members do and flights are priced dynamically at rates that are not capped.
In our aircraft management business, we manage aircraft for owners in exchange for a recurring contractual fee. Under the terms of many of our management agreements, in addition to owners utilizing their own aircraft, the managed aircraft may be used by us to fulfill member and non-member flights on a revenue sharing arrangement with the owner. Revenue associated with the management of aircraft also includes the recovery of owner incurred expenses as well as recharging of certain incurred aircraft operating costs.
In addition, we earn other revenue from fixed-base operator (“FBO”) and maintenance, repair and overhaul (“MRO”) ground services, flight management software subscriptions, sponsorship and partnership fees, and aircraft sales.
Recent Developments
Completion of the Business Combination
On July 13, 2021, we completed the Business Combination. We received approximately $656.3 million in gross proceeds in connection with the transaction.
Payoff of Credit Facilities and Promissory Notes
Shortly following the Closing Date, we repaid substantially all of the outstanding principal of the credit facilities and promissory notes, together with all accrued and unpaid interest in the amount of approximately $175.5 million.
Acquisitions
Mountain Aviation, LLC
On January 5, 2021, we acquired all the outstanding equity of Mountain Aviation. Mountain Aviation adds to our Super-Midsize jet fleet and operations, provides full-service in-house maintenance capabilities, expands our presence in the Western U.S. and enhances our on-demand transcontinental charter flight capabilities.
Business Impact of COVID-19
On March 11, 2020, the World Health Organization officially declared COVID-19 a pandemic. The unprecedented and rapid spread of COVID-19 led to economic and business uncertainties resulting from governmental restrictions on air travel, cancellation of large public events, businesses suspending in-person meetings and the closure of popular tourist destinations. The future effects of COVID-19 on our business, financial condition and results of operations are still uncertain and will depend on a number of factors outside of our control.
For the foreseeable future, we plan to continue the Wheels Up Safe Passage™ program introduced in response to the outbreak of COVID-19. During the year ended December 31, 2020, we incurred $1.2 million of costs for COVID-19 health and safety response initiatives and have forecasted a similar level of expense on a go-forward basis. We have not had and do not expect any material COVID-19 related contingencies, impairments, concessions, credit losses or other expenses in future periods.
Moving forward, we believe the COVID-19 global pandemic has led to a shift in consumer prioritization of wellness and safety, with private aviation viewed increasingly by those in the addressable market as a health-conscious decision rather than a discretionary luxury. We believe this will translate into an increase in flight demand over time.
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Non-GAAP Financial Measures
In addition to our results of operations below, we report certain key financial measures that are not required by, or presented in accordance with, GAAP.
These non-GAAP financial measures are an addition, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP and should not be considered as an alternative to any performance measures derived in accordance with GAAP. We believe that these non-GAAP financial measures of financial results provide useful supplemental information to investors, about Wheels Up. However, there are a number of limitations related to the use of these non-GAAP financial measures and their nearest GAAP equivalents, including that they exclude significant expenses that are required by GAAP to be recorded in Wheels Up’s financial measures. In addition, other companies may calculate non-GAAP financial measures differently or may use other measures to calculate their financial performance, and therefore, our non-GAAP financial measures may not be directly comparable to similarly titled measures of other companies.
Adjusted EBITDA
We calculate Adjusted EBITDA as net income (loss) adjusted for (i) interest income (expense), (ii) income tax expense, (iii) depreciation and amortization, (iv) equity-based compensation expense, (v) acquisition and integration related expenses, (vi) public company readiness related expenses, (vii) change in fair value of warrant liability, (viii) losses on the extinguishment of debt and (ix) other items not indicative of our ongoing operating performance, including the CARES Act grant and COVID-19 response initiatives for 2020. We include Adjusted EBITDA as a supplemental measure for assessing operating performance and for the following:
Used in conjunction with bonus program target achievement determinations, strategic internal planning, annual budgeting, allocating resources and making operating decisions; and,
Provides useful information for historical period-to-period comparisons of our business, as it removes the effect of certain non-cash expenses and variable amounts.
The following table reconciles Adjusted EBITDA to net income (loss), which is the most directly comparable GAAP measure (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Net income (loss)
$(59,455)$20,548 $(120,622)$(51,292)
Add back (deduct)
Interest expense
782 5,614 9,503 18,127 
Interest income
(7)(36)(25)(503)
Depreciation and amortization
13,639 14,722 40,952 44,189 
Equity-based compensation expense
27,906 1,168 30,668 2,524 
Public company readiness expense(1)
2,455 40 3,298 242 
Acquisition and integration expense(2)
644 376 5,017 7,694 
CARES Act grant recognition— (51,646)— (64,923)
COVID-19 response initiatives(3)
— 323 — 773 
Corporate headquarters relocation expense(4)
— 866 31 2,058 
Change in fair value of warrant liability(12,271)— (12,271)— 
Loss on extinguishment of debt2,379 — 2,379 — 
Adjusted EBITDA
$(23,928)$(8,025)$(41,070)$(41,111)
__________________
(1)Includes costs primarily associated with compliance, updated systems and consulting in advance of transitioning to a public company.
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(2)Consists mainly of system conversions, merging of operating certificates, re-branding costs and fees paid to external advisors in connection with strategic transactions.
(3)Includes expenses for the development of enhanced cleaning and operation protocols for our Safe Passage™ program due to COVID-19.
(4)Represents expenditures related to the build out and move to our new corporate headquarters in New York.
Adjusted Contribution and Adjusted Contribution Margin
We calculate Adjusted Contribution as gross profit (loss) excluding depreciation and amortization, and adjusted further for (i) equity-based compensation included in cost of revenue, (ii) acquisition and integration expense included in cost of revenue and (iii) other items included in cost of revenue that are not indicative of our ongoing operating performance, including COVID-19 response initiatives for 2020. Adjusted Contribution Margin is calculated by dividing Adjusted Contribution by total revenue. We include Adjusted Contribution and Adjusted Contribution Margin as supplemental measures for assessing operating performance and for the following:
Used to understand our ability to achieve profitability over time through scale and leveraging costs; and,
Provides useful information for historical period-to-period comparisons of our business and to identify trends.
The following table reconciles Adjusted Contribution to gross profit (loss), which is the most directly comparable GAAP measure (in thousands, except percentages):
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
Revenue$301,978 $194,781 $849,215 $485,208 
Less: Cost of revenue(283,495)(171,338)(773,191)(446,632)
Less: Depreciation and amortization(13,639)(14,722)(40,952)(44,189)
Gross profit (loss)
4,844 8,721 35,072 (5,613)
Gross margin
1.6 %4.5 %4.1%(1.2)%
Add back:
Depreciation and amortization13,639 14,722 40,952 44,189 
Equity-based compensation expense in cost of revenue679 109 779 226 
Acquisition and integration expense in cost of revenue— — 1,011 — 
COVID-19 response initiatives in cost of revenue— 117 — 395 
Adjusted Contribution
$19,162 $23,669 $77,814 $39,197
Adjusted Contribution Margin
6.3 %12.2 %9.2%8.1%

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Key Operating Metrics
In addition to financial measures, we regularly review certain key operating metrics to evaluate our business, determine the allocation of resources and make decisions regarding business strategies. We believe that these metrics can be useful for understanding the underlying trends in our business.
The following table summarizes our key operating metrics:
As of September 30,
20212020% Change
Active Members
11,375 7,864 45 %
Three Months Ended September 30,
20212020% Change
Active Users
12,011 9,280 29 %
Live Flight Legs
19,714 12,951 52 %
Active Members
We define Active Members as the number of Connect, Core and Business membership accounts that generated membership revenue in a given period and are active as of the end of the reporting period. We use Active Members to assess the adoption of our premium offerings which is a key factor in our penetration of the market in which we operate and a key driver of membership and flight revenue.
Active Users
We define Active Users as Active Members and legacy Wheels Up Private Jets LLC (“WUPJ”) jet card holders as of the reporting date plus unique non-member consumers who completed a revenue generating flight at least once in a given period and excluding wholesale flight activity. While a unique consumer can complete multiple revenue generating flights on our platform in a given period, that unique user is counted as only one Active User. We use Active Users to assess the adoption of our platform and frequency of transactions, which are key factors in our penetration of the market in which we operate and our growth in revenue.
Live Flight Legs
We define Live Flight Legs as the number of completed one-way revenue generating flight legs in a given period. The metric excludes empty repositioning legs and owner legs related to aircraft under management. We believe Live Flight Legs are a useful metric to measure the scale and usage of our platform, and our growth in flight revenue.
Component of Results of Our Operations
The key components of our results of operations include:
Revenue
Revenue is derived from flight, membership, aircraft management, and other services.
Flight revenue consists of retail, wholesale and special mission flights. Members can either pay as they fly or prepay for flights when they purchase a Prepaid Block.
Membership revenue is comprised of a one-time initiation fee paid at the commencement of a membership and recurring annual dues. In the first year of membership, a portion of the initiation fee is applied to annual dues. The remainder of the initiation fee, less any flight credits, is deferred and recognized on a straight-line basis over the estimated duration of the customer relationship period, which is currently estimated to be three years. Members are
37


charged recurring annual dues to maintain their membership. Revenue related to the annual dues are deferred and recognized on a straight-line basis over the related contractual period. If a member qualifies to earn Delta miles in the Delta SkyMiles Program as part of their membership, then a portion of the membership fee is allocated at contract inception.
Aircraft management revenue consists of contractual monthly management fees charged to aircraft owners, recovery of owner incurred expenses including maintenance coordination, cabin crew and pilots, and recharging of certain incurred aircraft operating costs such as maintenance, fuel, landing fees and parking. We pass recovery and recharge amounts back to owners at either cost or at a predetermined margin.
Other revenue primarily consists of (i) ground services derived from aircraft customers that use our FBO and MRO facilities, and (ii) flight-related services. In addition, other revenue includes subscription fees from third-party operators for access to our Avianis flight software, fees we may receive from third-party sponsorships and partnerships, and whole aircraft sales.
Costs and Expenses
Costs and expenses consist of the following components:
Cost of Revenue
Cost of revenue primarily consists of direct expenses incurred to provide flight services and facilitate operations, including aircraft lease costs, fuel, crew travel, maintenance and third-party flight costs. Cost of revenue also consists of compensation expenses, including equity-based compensation and related benefits for employees that directly facilitate flight operations. In addition, cost of revenue includes aircraft owner expenses incurred such as maintenance coordination, cabin crew and pilots, and certain aircraft operating costs such as maintenance, fuel, landing fees and parking.
Other Operating Expenses
Technology and Development
Technology and development expense primarily consists of compensation expenses for engineering, product development and design employees, including equity-based compensation, expenses associated with ongoing improvements to, and maintenance of, our platform offerings and other technology. Technology and development expense also includes software expenses and technology consulting fees.
Sales and Marketing
Sales and marketing expense primarily consists of compensation expenses in support of sales and marketing such as commissions, salaries, equity-based compensation and related benefits. Sales and marketing expense also includes expenses associated with advertising, promotions of our services, member experience, account management and brand-building.
General and Administrative
General and administrative expense primarily consists of compensation expenses, including equity-based compensation and related benefits for our executive, finance, human resources, legal and other personnel performing administrative functions. General and administrative expense also includes corporate office rent expense, third-party professional fees, acquisition and integration related expenses, public company readiness expenses and any other cost or expense incurred not deemed to be related to cost of revenue, sales and marketing expense or technology and development expense.
Depreciation and Amortization
Depreciation and amortization expense primarily consists of depreciation of capitalized aircraft. Depreciation and amortization expense also includes amortization of capitalized software development costs and acquired finite-
38


lived intangible assets. We allocate overhead such as facility costs and telecommunications charges, based on department headcount, as we believe this to be the most accurate measure. As a result, a portion of general overhead expenses are reflected in each operating expense category.
CARES Act Grant
Consists of government assistance received from the Treasury under the Payroll Support Program as directed by the CARES Act.
Change in Fair Value of Warrant Liability
Change in fair value of warrant liability consists of unrealized gain (loss) on Warrants assumed as part of the Business Combination, including Private Warrants and Public Warrants.
Loss on Extinguishment of Debt
Loss on extinguishment of debt consists of the write off of unamortized debt discounts and deferred financing costs associated with the early repayment of our outstanding credit facilities and promissory notes.
Interest Income
Interest income primarily consists of interest earned on cash equivalents from deposits in money market funds and investments in commercial paper.
Interest Expense
Interest expense primarily consists of the interest paid or payable and the amortization of debt discounts and deferred financing costs on our credit facilities and promissory notes.
Income Tax Expense
Income taxes are recorded using the asset and liability method. Under this method, deferred tax assets and liabilities are recorded based on the estimated future tax effects of differences between the financial reporting and tax bases of existing assets and liabilities. These differences are measured using the enacted tax rates that are expected to be in effect when these differences are anticipated to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management believes it is not more likely than not to be realized.
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Results of Our Operations for the Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020
The following table sets forth our results of operations for the three months ended September 30, 2021 and 2020 (in thousands, except percentages):
Three Months Ended September 30,Change in
20212020
$
%
Revenue
$301,978 $194,781 $107,197 55 %
Costs and expenses:
Cost of revenue
283,495 171,338 112,157 65 %
Technology and development
8,769 6,044 2,725 45 %
Sales and marketing
22,157 13,655 8,502 62 %
General and administrative
42,490 14,542 27,948 192 %
Depreciation and amortization
13,639 14,722 (1,083)(7)%
CARES Act grant— (51,646)51,646 100 %
Total cost and expenses
370,550 168,655 201,895 120 %
Income (loss) from operations
(68,572)26,126 (94,698)(362)%
Other income (expense):
Change in fair value of warrant liability12,271 — 12,271 100 %
Loss on extinguishment of debt(2,379)— (2,379)100 %
Interest income
36 (29)(81)%
Interest expense
(782)(5,614)4,832 (86)%
Total other income (expense)9,117 (5,578)14,695 263 %
Income (loss) before income taxes(59,455)20,548 (80,003)(389)%
Income tax expense— — — 100 %
Net income (loss) (59,455)20,548 (80,003)(389)%
Less: net income (loss) attributable to non-controlling interests(970)1,639 (2,609)(159)%
Net income (loss) attributable to Wheels Up Experience Inc.
$(58,485)$18,909 $(77,394)(409)%
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Revenue
Revenue increased by $107.2 million, or 55%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in revenue was primarily attributable to the following changes in flight revenue, membership revenue, aircraft management revenue and other revenue (in thousands, except percentages):
Three Months Ended September 30,Change in
20212020
$
%
Flight$218,360 $140,280 $78,080 56 %
Membership
17,982 13,345 4,637 35 %
Aircraft management
58,005 38,402 19,603 51 %
Other
7,631 2,754 4,877 177 %
Total
$301,978 $194,781 $107,197 55 %
Flight revenue growth was primarily driven by a 52% increase in Live Flight Legs, which resulted in $73.3 million of growth, and a 2% increase in revenue per Live Flight Leg, which drove $4.8 million of year over year improvement. The increase in Live Flight Legs was primarily attributable to an increase in the number of Active Members, as well as an increase in flying by Active Members, the impact of COVID-19 on 2020 results and the acquisition of Mountain Aviation.
Growth in membership revenue was driven entirely by a 45% increase in Active Members but was impacted by an increased mix of members at promotional rates.
The increase in aircraft management revenue was primarily attributable to an increase in our recovery of owner and rechargeable costs related to operating aircraft under management, both of which stem from increased flight activity.
The increase in other revenue was primarily attributable to an increase in whole aircraft sales where we acted as the broker, as well as ground and catering services, both of which increased due to an increase in Live Flight Legs.
Cost of Revenue
Cost of revenue increased by $112.2 million, or 65%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in cost of revenue is primarily attributable to an increase in Live Flight Legs and the increase in aircraft management revenue.
Adjusted Contribution Margin decreased 590 basis points for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, which was primarily attributable to cost pressures and supply constraints impacting the industry. Additionally, pilot availability and maintenance challenges also contributed to the decline in Adjusted Contribution Margin. See “Non-GAAP Financial Measures” above for a definition of Adjusted Contribution Margin, information regarding our use of Adjusted Contribution Margin and a reconciliation of gross margin to Adjusted Contribution Margin.
Other Operating Expenses
Technology and Development
Technology and development expenses increased by $2.7 million, or 45%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in technology and development expenses was primarily attributable to an increase of $2.0 million in employee compensation costs, which was partially offset by an increase in capitalized costs related to the development of internal use software of $0.4 million. Third-party consultant fees also increased $1.5 million, which was offset by a $1.4 million increase in capitalized costs related to internal use software. Additionally, equipment and enterprise software expense increased by $0.6 million and $0.4 million, respectively.
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Sales and Marketing
Sales and marketing expenses increased by $8.5 million, or 62%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in sales and marketing was primarily attributable to increases in headcount and related compensation and allocable costs of $4.0 million. In addition, sales commissions increased $1.3 million from growth in memberships and flight revenue. For the three months ended September 30, 2020, we took certain cost saving measures to reduce headcount and related compensation costs, consistent with applicable CARES Act limitations, which returned to normal levels for the three months ended September 30, 2021. Additionally, expenses related to in-person Wheels Down events and member benefits increased $0.8 million as we resumed holding events for our members after COVID-19 restrictions were lifted. Lastly, advertising expense increased $2.4 million as we had reduced advertising spending during the three months ended September 30, 2020 as part of cost cutting measures to offset the impact of COVID-19.
General and Administrative
General and administrative expenses increased by $27.9 million, or 192%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase in general and administrative expenses was primarily attributable to a $23.5 million increase in equity-based compensation due to accelerated vesting of all awards and restricted stock that vested in connection with the Business Combination. For the three months ended September 30, 2020, we took certain cost saving measures to reduce headcount and related compensation costs, consistent with applicable CARES Act limitations, which returned to normal levels for the three months ended September 30, 2021. In addition, for the three months ended September 30, 2021, public company readiness related costs increased $2.5 million, and we incurred $0.3 million of public company related costs. Professional service related fees, travel and entertainment expenses, office expenses and other costs increased by approximately $1.6 million.
Depreciation and Amortization
Depreciation and amortization expenses decreased by $1.1 million, or 7%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The decrease in depreciation and amortization expense was primarily attributable to a $2.2 million decrease in depreciation expense for our owned aircraft. The decrease was partially offset by increases in amortization of software development costs and intangible assets of $0.6 million and $0.5 million, respectively.
CARES Act Grant
During the three months ended September 30, 2020, as a result of the negative impact of COVID-19, we utilized grant proceeds from the Treasury of $51.6 million to offset payroll expenses.
Interest Expense
Interest expense decreased by $4.8 million, or 86%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The decrease in interest expense was primarily attributable to our repayment of substantially all of the outstanding principal of our long-term debt on July 21, 2021.

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Results of Our Operations for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020
The following table sets forth our results of operations for the nine months ended September 30, 2021 and 2020 (in thousands, except percentages):
Nine Months Ended September 30,Change in
20212020$%
Revenue
$849,215 $485,208 $364,007 75 %
Costs and expenses:
Cost of revenue
773,191 446,632 326,559 73 %
Technology and development
23,818 15,345 8,473 55 %
Sales and marketing
55,846 38,893 16,953 44 %
General and administrative
76,444 38,740 37,704 97 %
Depreciation and amortization
40,952 44,189 (3,237)(7)%
CARES Act grant— (64,923)64,923 100 %
Total cost and expenses
970,251 518,876 451,375 87 %
Loss from operations
(121,036)(33,668)(87,368)(259)%
Other income (expense):
Change in fair value of warrant liability12,271 — 12,271 100 %
Loss on extinguishment of debt(2,379)— (2,379)100 %
Interest income
25 503 (478)(95)%
Interest expense
(9,503)(18,127)8,624 (48)%
Total other income (expense)414 (17,624)18,038 102 %
Loss before income taxes(120,622)(51,292)(69,330)(135)%
Income tax expense— — — 100 %
Net loss(120,622)(51,292)(69,330)(135)%
Less: net loss attributable to non-controlling interests(6,572)(3,944)(2,628)(67)%
Net loss attributable to Wheels Up Experience Inc.
$(114,050)$(47,348)$(66,702)(141)%
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Revenue
Revenue increased by $364.0 million, or 75%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in revenue was primarily attributable to the following changes in flight revenue, membership revenue, aircraft management revenue and other revenue (in thousands, except percentages):
Nine Months Ended September 30,Change in
20212020$%
Flight$621,494 $343,571 $277,923 81%
Membership
49,144 39,787 9,357 24%
Aircraft management
158,840 93,416 65,424 70%
Other
19,737 8,434 11,303 134%
Total
$849,215 $485,208 $364,007 75%
Flight revenue growth was primarily driven by a 66% increase in Live Flight Legs, which resulted in $225.7 million of growth, and a 9% increase in revenue per Live Flight Leg, which drove $52.2 million of year over year improvement. The increase in Live Flight Legs was primarily attributable to an increase in flying by Active Members, the impact of COVID-19 on 2020 results and the acquisition of Mountain Aviation.
Growth in membership revenue was driven entirely by a 45% increase in Active Members but was impacted by an increased mix of members at promotional rates.
The increase in aircraft management revenue was primarily attributable to our acquisitions of WUPJ on January 17, 2020 and Gama on March 2, 2020. As such, the results of WUPJ and Gama were only included for a portion of the nine months ended September 30, 2020.
The increase in other revenue was primarily attributable to an increase in whole aircraft sales where we acted as the broker, as well as ground and catering services, both of which increased due to an increase in Live Flight Legs.
Cost of Revenue
Cost of revenue increased by $326.6 million, or 73%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in cost of revenue is primarily attributable to an increase in Live Flight Legs and the increase in aircraft management revenue.
Adjusted Contribution Margin increased 110 basis points for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, largely due to improvement in first party, controlled fleet fulfillment. The increase in Adjusted Contribution margin was partially offset by the integration of the Travel Management Company, LLC and WUPJ operating certificates, which resulted in a $3.0 million reduction in Contribution due to lower aircraft availability. Additionally, cost pressures and supply constraints, along with pilot availability and maintenance challenges, negatively impacted Adjusted Contribution Margin. See “Non-GAAP Financial Measures” above for a definition of Adjusted Contribution Margin, information regarding our use of Contribution Margin and a reconciliation of gross margin to Contribution Margin.
Other Operating Expenses
Technology and Development
Technology and development expenses increased by $8.5 million, or 55%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in technology and development expenses was primarily attributable to an increase of $6.1 million in employee compensation costs, which was partially offset by an increase in capitalized costs related to the development of internal use software of $0.9 million. Third-party consultant fees also increased $3.7 million, which was offset by a $3.5 million increase in
44


capitalized costs related to internal use software. Additionally, equipment and enterprise software expense increased by $1.6 million and $1.5 million, respectively, related to an increase in headcount stemming from our acquisitions.
Sales and Marketing
Sales and marketing expenses increased by $17.0 million, or 44%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in sales and marketing was primarily attributable to increases in headcount and related compensation and allocable costs of $9.8 million as a result of our acquisition of Mountain Aviation on January 5, 2021, as well as WUPJ and Gama that were included in our consolidated results for the full nine months ended September 30, 2021 as opposed to only a portion of the nine months ended September 30, 2020. In addition, sales commissions increased $4.1 million from growth in memberships and flight revenue. Additionally, advertising expense increased $4.1 million. These costs were partially offset by a $1.0 million decrease in Wheels Down event spending due to COVID-19 restrictions.
General and Administrative
General and administrative expenses increased by $37.7 million, or 97%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The increase in general and administrative expenses was primarily attributable to a $25.0 million increase in equity-based compensation due to accelerated vesting of all awards and restricted stock that vested in connection with the Business Combination. Personnel expenses and allocable costs increased by $7.6 million due to headcount growth as a result of our acquisitions. In addition, for the nine months ended September 30, 2021 public company readiness related costs increased $3.1 million, and we incurred $0.3 million of public company related costs. Additionally, travel and entertainment expenses, office expenses and other costs increased by $0.7 million. Settlements of various legal actions approximated $1.0 million.
Depreciation and Amortization
Depreciation and amortization expenses decreased by $3.2 million, or 7%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. This decrease in depreciation and amortization expenses was primarily attributable to a $6.5 million decrease in depreciation expense for our owned aircraft as certain aircraft became fully depreciable subsequent to September 30, 2020. Additionally, depreciation expense related to leasehold improvements decreased $0.6 million. The decrease was partially offset by increases in amortization of software development costs and intangible assets of $1.6 million and $2.0 million, respectively, as well as an increase in depreciation related to furniture and fixtures of $0.3 million.
CARES Act Grant
During the nine months ended September 30, 2020, as a result of the negative impact of COVID-19, we utilized grant proceeds from the Treasury of $64.9 million to offset payroll expenses.
Interest Expense
Interest expense decreased by $8.6 million, or 48%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. The decrease in interest expense was primarily attributable to our repayment of substantially all of the outstanding principal of our long-term debt on July 21, 2021.


45


Liquidity and Capital Resources
Overview
Our principal sources of liquidity have historically consisted of financing activities, including proceeds from the Business Combination, and operating activities, primarily from the increase in deferred revenue associated with the sale of Prepaid Blocks. As of September 30, 2021, we had $535.3 million of cash and cash equivalents, which were primarily invested in money market funds and $2.2 million of restricted cash. We believe our cash and cash equivalents on hand, will be sufficient to meet our projected working capital and capital expenditure requirements for at least the next 12 months.
Cash Flows
The following table summarizes our cash flows for the nine months ended September 30, 2021, and 2020 (in thousands):
Nine Months Ended September 30,
20212020
Net cash (used in) provided by operating activities
$(152,416)$5,401 
Net cash (used in) provided by investing activities
$(8,428)$87,082 
Net cash provided by (used in) financing activities
$373,398 $(54,084)
Net increase in cash, cash equivalents and restricted cash
$212,554 $38,399 
Cash Flow from Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2021 was $152.4 million. In 2021, the cash outflow from operating activities consisted of our net loss, net of non-cash items of $63.5 million and a decrease in net operating assets and liabilities, primarily as a result of a $69.4 million decrease in deferred revenue attributable to a significant increase in Live Flight Legs. In addition, during the nine months ended September 30, 2021, we sold $356.9 million of Prepaid Blocks compared to $323.3 million for the nine months ended September 30, 2020. The increase in Prepaid Block purchases was primarily attributable to the growth of Active Members.
Net cash provided by operating activities for the nine months ended September 30, 2020 was $5.4 million. In 2020, the cash inflow from operating activities consisted of our net loss, net of non-cash items of $48.3 million and an increase in net operating assets and liabilities, primarily as a result of a $28.2 million decrease in accounts receivable. The increase in net operating assets and liabilities was partially offset by a $16.8 million decrease in accounts payable and a $9.0 million decrease in accrued expenses.
Cash Flow from Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2021 was $8.4 million. In 2021, the cash outflow from investing activities was primarily attributable to $16.3 million for capital expenditures, including $9.6 million of software development costs. The cash outflow was partially offset by $7.8 million from the acquisition of Mountain Aviation, including cash acquired.
Net cash provided by investing activities for the nine months ended September 30, 2020 was $87.1 million. In 2020, the cash inflow from investing activities was primarily attributable to $97.1 million from the acquisitions of WUPJ and Gama, including cash acquired. In addition, we used $10.0 million for capital expenditures, including $5.1 million of software development costs.
Cash Flow from Financing Activities
Net cash provided by financing activities for the nine months ended September 30, 2021 was $373.4 million. In 2021, the cash inflow from financing activities was primarily attributable to gross proceeds of $656.3 million
46


received in the Business Combination, net of $70.4 million of transaction related costs. The cash inflow was partially offset by $213.9 million in repayments of our credit facilities and promissory notes.
Net cash used in financing activities for the nine months ended September 30, 2020 was $54.1 million. In 2020, the cash outflow from financing activities was primarily attributable to $54.8 million for repayments of our credit facilities offset by proceeds of $0.8 million.
Contractual Obligations and Commitments
Our principal commitments consist of contractual cash obligations under our operating leases for certain controlled aircraft, corporate headquarters, and operational facilities, including aircraft hangars. For further information on our leases see Note 12 “Leases” of the accompanying condensed consolidated financial statements.
Critical Accounting Policies and Estimates
For further information on our critical accounting policies and estimates, see “Management’s Discussion and Analysis of Financial Conditions and Results of Operations - Critical Accounting Policies and Estimates” included in the Prospectus and Note 2 to the audited consolidated financial statements for the year ended December 31, 2020 included in the Prospectus.
Recent Accounting Pronouncements
For further information on recent accounting pronouncements, see Note 2 “Summary of Significant Accounting Policies” of the accompanying condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the ordinary course of operating our business, we are exposed to market risks. Market risk represents the risk of loss that may impact our financial position or results of operations due to adverse changes in financial market prices and rates. Our principal market risks have related to interest rates and aircraft fuel.
Interest Rates
On July 21, 2021, we repaid substantially all of the outstanding principal of our long-term debt, together with all accrued and unpaid interest, in connection with proceeds received from the Business Combination.
Aircraft Fuel
We are subject to market risk associated with changes in the price and availability of aircraft fuel. Aircraft fuel expense for the three and nine months ended September 30, 2021 represented 16% and 16%, respectively, of our total cost of revenue and includes the recharge of fuel costs to our aircraft management customers. Based on our 2021 fuel consumption, a hypothetical 10.0% increase in the average price per gallon of aircraft fuel would have increased fuel expense by approximately $4.6 million and $12.1 million for the three and nine months ended September 30, 2021, respectively. We do not purchase or hold any derivative instruments to protect against the effects of changes in fuel but due to our dynamic pricing we do have the ability to raise our prices on those flights priced that way. In addition, our agreements allow us to potentially bill members a fuel price surcharge.





47



ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our Securities Exchange Act of 1934, as amended (the “Exchange Act”) reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures are effective at a reasonable assurance level.
Changes in Internal Control over Financial Reporting
Prior to completion of the Business Combination, Aspirational management continued remediation steps to address the material weakness in Aspirational’s internal control over financial reporting that was previously reported in Aspirational’s Amendment No. 1 on Form 10-K/A to its Annual Report on Form 10-K, as filed with the SEC on May 6, 2021, and to improve Aspirational’s internal control over financial reporting. Specifically, Aspirational expanded and improved its review process for complex securities and related accounting standards.
Post completion of the Business Combination, we are continuously engaged in the enhancement of our processes and internal controls over financial reporting.
Except as described above, there were no changes in our internal control over financial reporting during the quarter ended September 30, 2021, which were identified in connection with management’s evaluation required by paragraph (d) of Rule 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these matters cannot be predicted with certainty, we do not believe that the outcome of any of these matters, individually or in the aggregate, will have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

Item 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.
Summary of the Material Risks Associated with Our Business
Our business is subject to numerous risks and uncertainties that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business. The occurrence of one or more of the events or circumstances described in this section alone or in combination with other events or circumstances, may adversely affect our business, financial condition, results of operations, and prospects. Such risks include, but are not limited to:
We may not be able to successfully implement our growth strategies.
We have a limited operating history and history of net losses, and we anticipate that we will experience net losses for the foreseeable future.
Our operating results are expected to be difficult to predict based on a number of factors that also will affect our long-term performance.
We may not be able to grow our complementary products and service offerings through opportunistic acquisitions or otherwise as part of our growth strategy. Any failure to adequately integrate past and future acquisitions into our business could have a material adverse effect on us.
We are exposed to the risk of a decrease in demand for private aviation services.
The outbreak and global spread of COVID-19 has adversely impacted certain aspects of our business. The duration and severity of the COVID-19 pandemic, and similar public health threats that we may face in the future, could result in additional adverse effects on our business, operating results, financial condition and liquidity.
We are subject to certain restrictions on our business as a result of our participation in governmental programs under the CARES Act.
Delta Air Lines may have the right to terminate its commercial agreements with us.
The supply of pilots to the airline industry is limited and may negatively affect our operations and financial condition. Increases in our labor costs, which constitute a substantial portion of our total operating costs, may adversely affect our business, results of operations and financial condition.
We may be subject to unionization, work stoppages, slowdowns or increased labor costs and the unionization of our pilots and inflight crewmembers could result in increased labor costs.
Significant increases in fuel costs could have a material adverse effect on our business, financial condition and results of operations.
Some of our business is dependent on our third-party operators to provide flights for our customers. If such third-party operators do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition and results of operations could be adversely affected.
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If our efforts to continue to build our strong brand identity and improve member satisfaction and loyalty are not successful, we may not be able to attract or retain members, and our operating results may be adversely affected.
Any failure to offer high-quality customer support may harm our relationships with our customers and could adversely affect our reputation, brand, business, financial condition and results of operations.
If we are unable to adequately protect our intellectual property interests or are found to be infringing on intellectual property interests of others, we may incur significant expense and our business may be adversely affected.
A delay or failure to identify and devise, invest in and implement certain important technology, business, and other initiatives could have a material impact on our business, financial condition and results of operations.
A failure in our technology or breaches of the security of our information technology infrastructure may adversely affect our business and financial condition and disrupt our customers’, suppliers’, third-party vendors and aircraft providers businesses.
Our obligations in connection with our contractual obligations could impair our liquidity and thereby harm our business, results of operations and financial condition.
Our ability to obtain financing or access capital markets may be limited.
We could suffer losses and adverse publicity stemming from any accident involving aircraft models operated by us or third parties.
Terrorist activities or warnings have dramatically impacted the aviation industry and will likely continue to do so.
We are subject to significant governmental regulation.
We are subject to various environmental and noise laws and regulations, which could have a material adverse effect on our business, results of operations and financial condition.