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ASPIRATIONAL CONSUMER LIFESTYLE CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-K)

03/15/2021 | 03:55pm EDT

Unless the context otherwise requires, all references in this section to the "Company," "our," "us," "we," or "Aspirational" refer to Aspirational Consumer Lifestyle Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the audited financial statements and the notes related thereto which are included in "Item 8. Financial Statements and Supplementary Data" of this Annual Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those that will be set forth in our preliminary prospectus/proxy statement to be included in a Registration Statement on Form S-4 that we will file with the SEC relating to our proposed business combination with Wheels Up Partners Holdings LLC (the "Wheels Up Business Combination"), and those set forth under "Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary," "Item 1A. Risk Factors" and elsewhere in this Annual Report.




Overview



We are a blank check company incorporated in the Cayman Islands on July 7, 2020 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.

The issuance of additional shares in a business combination:

· may significantly dilute the equity interest of investors, which dilution would

increase if the anti-dilution provisions in the Aspirational Class B ordinary

shares resulted in the issuance of Aspirational Class A ordinary shares on a

greater than one-to-one basis upon conversion of the Aspirational Class B

   ordinary shares;



· may subordinate the rights of holders of ordinary shares if preferred shares

are issued with rights senior to those afforded our ordinary shares;

· could cause a change of control if a substantial number of our ordinary shares

    is issued, which may affect, among other things, our ability to use our net
    operating loss carry forwards, if any, and could result in the resignation or
    removal of our present directors and officers;


· may have the effect of delaying or preventing a change of control of us by

    diluting the share ownership or voting rights of a person seeking to obtain
    control of us;


· may adversely affect prevailing market prices for our units, ordinary shares

and/or warrants; and

· may not result in adjustment to the exercise price of our warrants.

Similarly, if we issue debt securities or otherwise incur significant indebtedness, it could result in:

· default and foreclosure on our assets if our operating revenues after an

initial business combination are insufficient to repay our debt obligations;

· acceleration of our obligations to repay the indebtedness even if we make all

    principal and interest payments when due if we breach certain covenants that
    require the maintenance of certain financial ratios or reserves without a
    waiver or renegotiation of that covenant;


· our immediate payment of all principal and accrued interest, if any, if the

debt is payable on demand;

· our inability to obtain necessary additional financing if the debt contains

    covenants restricting our ability to obtain such financing while the debt is
    outstanding;


· our inability to pay dividends on our ordinary shares;

· using a substantial portion of our cash flow to pay principal and interest on

    our debt, which will reduce the funds available for dividends on our ordinary
    shares if declared, expenses, capital expenditures, acquisitions and other
    general corporate purposes;


· limitations on our flexibility in planning for and reacting to changes in our

business and in the industry in which we operate;

· increased vulnerability to adverse changes in general economic, industry and

competitive conditions and adverse changes in government regulation;

· limitations on our ability to borrow additional amounts for expenses, capital

expenditures, acquisitions, debt service requirements, execution of our

strategy and other purposes; and

· other disadvantages compared to our competitors who have less debt.




Recent Developments


On February 1, 2021, we announced that we entered into an Agreement and Plan of Merger (the "Merger Agreement"), with Wheels Up Partners Holdings LLC, a Delaware limited liability company ("Wheels Up"), KittyHawk Merger Sub LLC, a Delaware limited liability corporation and our direct wholly owned subsidiary ("Merger Sub"), Wheels Up Blocker Sub LLC, a Delaware limited liability company and our direct wholly owned subsidiary ("Blocker Sub"), the Blocker Merger Subs (as defined in the Merger Agreement) and the Blockers (as defined in the Merger Agreement).



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The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following transactions will occur (together with the other agreements and transactions contemplated by the Merger Agreement, the "Wheels Up Business Combination"): The Merger Agreement provides that, among other things and upon the terms and subject to the conditions thereof, the following transactions will occur (together with the other agreements and transactions contemplated by the Merger Agreement, the "Business Combination"): (i) at the closing of the transactions contemplated by the Merger Agreement (the "Closing"), upon the terms and subject to the conditions of the Merger Agreement and in accordance with the General Corporation Law of the State of Delaware, as amended ("DGCL"), and the Limited Liability Company Act of the State of Delaware, as amended, as applicable, (x) each of the Blocker Merger Subs will simultaneously merge with and into the respective Blockers, the separate corporate existence of each Blocker Merger Sub will cease and each Blocker will survive as our wholly owned subsidiary (the "First Step Blocker Mergers"), (y) the surviving Blocker entities will thereafter simultaneously merge with and into Blocker Sub, the separate corporate existence of each Blocker will cease and Blocker Sub will be the surviving entity (the "Second Step Blocker Mergers," and together with the First Step Blocker Mergers, the "Blocker Mergers") and (z) Merger Sub will thereafter merge with and into Wheels Up (the "Company Merger"), the separate corporate existence of Merger Sub will cease and Wheels Up will be the surviving entity (the "Surviving Company"), with us as its managing member (together with the Blocker Mergers, the "Mergers"); (ii) as a result of the Mergers, among other things, (x) the Blocker Equity Interests (as defined in the Merger Agreement) of each Blocker that are issued and outstanding immediately prior to the effective time of the First Step Blocker Mergers (the "First Step Blocker Effective Time") (other than any Cancelled Blocker Interests (as defined in the Merger Agreement)) will be cancelled and converted into the right to receive in the aggregate (A) a number of shares of our Class A common stock (after our Domestication (as defined below)), par value $0.0001 per share (the "ASPL Class A Common Stock"), that is equal to the Exchange Ratio (as defined in the Merger Agreement) multiplied by the aggregate number of Wheels Up preferred interests held by such Blocker as of immediately prior to the First Step Blocker Effective Time and (B) any Earnout Shares (as defined below) that may be due and issuable pursuant to the Merger Agreement, and (y) each outstanding Wheels Up common interest and preferred interest (other than any Wheels Up common interests subject to the Wheels Up awards discussed below and the Wheels Up preferred interests held by Blocker Sub) immediately prior to the effective time of the Company Merger (the "Effective Time") will be cancelled in exchange for the right to receive (A) a number of shares of ASPL Class A Common Stock that is equal to the Exchange Ratio and (B) any Earnout Shares that may be due and issuable pursuant to the Merger Agreement, which will, in the case of all shares described in clauses (x) and (y), together with the shares of ASPL Class A Common Stock reserved in respect of the awards described immediately below, in the aggregate equal an aggregate merger consideration of $1,885,000,000, in addition to a number of shares of ASPL Class A Common Stock that may be issued post-Closing if any Wheels Up Options (as defined below) were to be cash exercised and due to the conversion of any Wheels Up Profits Interests (as defined below) for shares of ASPL Class A Common Stock at a level above the intrinsic value of such profits interests immediately after Closing, plus any Earnout Shares; (iii) as a result of the Mergers, among other things, (x) each option to purchase Wheels Up common interests (the "Wheels Up Options") that is outstanding immediately prior to the Effective Time will be converted into the right to receive (as adjusted, including with respect to the applicable exercise price, based on the Exchange Ratio) an option related to the shares of ASPL Class A Common Stock, (y) each award of Wheels Up profits interests (the "Wheels Up Profit Interests"), including those granted under any Wheels Up incentive plan in Wheels Up that is outstanding immediately prior to the Effective Time, will be converted into the right to receive (as adjusted based on the Exchange Ratio and to maintain the intrinsic value of such award) an award of profits interests of the Surviving Company with substantially the same terms and conditions as were applicable to such award as of immediately prior to the Effective Time, which, upon vesting and subject to the expiration of the Lock-Up Period (as defined below), if applicable to the particular holder thereof, will be exchangeable for shares of ASPL Class A Common Stock, and (z) each award of Wheels Up restricted interests (the "Wheels Up Restricted Interests") granted under any Wheels Up incentive plan will be converted into the right to receive (as adjusted based on the Exchange Ratio) an award of restricted interests of the Surviving Company with substantially the same terms and conditions as were applicable to such award as of immediately prior to the Effective Time, which, upon vesting and subject to the expiration of the Lock-Up Period, will be exchangeable for shares of ASPL Class A Common Stock; (iv) as a result of the Mergers, existing Wheels Up equityholders will have the right to receive, including profits interests holders and restricted interest holders through the issuance of Wheels Up EO Units (as defined in the Merger Agreement) that upon vesting may become exchangeable for, up to an aggregate of 9,000,000 additional shares of ASPL Class A Common Stock in three equal tranches which are issuable upon the achievement of share price thresholds for ASPL Class A Common Stock of $12.50, $15.00 and $17.50, respectively (such shares, the "Earnout Shares"); and (v) upon the effective time of the Domestication, we will immediately be renamed "Wheels Up Experience Inc."



                                       43




Prior to the Closing, subject to the approval of our shareholders, and in accordance with the DGCL, Cayman Islands Companies Act (2021 Revision) (the "CICA") and our Amended and Restated Memorandum and Articles of Association (as may be amended from time to time, the "Cayman Constitutional Documents"), ASPL will effect a deregistration under the CICA and a domestication under Section 388 of the DGCL (by means of filing a certificate of domestication with the Secretary of State of Delaware), pursuant to which our jurisdiction of incorporation will be changed from the Cayman Islands to the State of Delaware (the "Domestication").

In connection with the Domestication, (i) each of our then issued and outstanding Class A ordinary shares will convert automatically, on a one-for-one basis, into a share of ASPL Class A Common Stock, which are entitled to one vote per share, (ii) each of our then issued and outstanding Class B ordinary shares will convert automatically, on a one-for-one basis, into a share of ASPL Class A Common Stock, (iii) each of our then issued and outstanding warrants will convert automatically into a warrant to acquire one share of ASPL Class A Common Stock ("Domesticated ASPL Warrant") and (iv) each of our then issued and outstanding unit will convert automatically into a share of ASPL Class A Common Stock, on a one-for-one basis, and one-third of one Domesticated ASPL Warrant.

In addition, on February 1, 2021, we announced that, concurrently with the execution of the Merger Agreement, we entered into subscription agreements (the "Subscription Agreements") with certain investors (collectively, the "PIPE Investors") pursuant to which, on the terms and subject to the conditions therein, the PIPE Investors have collectively subscribed for 55,000,000 shares of our Class A Common Stock for an aggregate purchase price equal to $550,000,000 (the "PIPE Investment"). The PIPE Investment will be consummated substantially concurrently with the Closing, subject to the terms and conditions contemplated by the Subscription Agreements.

On February 1, 2021, we also entered into a Sponsor Support Agreement (the "Sponsor Support Agreement"), by and among us, our Sponsor, Wheels Up and the other parties thereto, pursuant to which our Sponsor and each of our directors agreed to, among other things, vote in favor of the Merger Agreement and the transactions contemplated thereby and not to redeem their shares in us in connection therewith, in each case, subject to the terms and conditions contemplated by the Sponsor Support Agreement. In addition, we have entered into a Equityholder Support Agreement (the "Equityholder Support Agreement") by and among us, Wheels Up and certain equityholders of Wheels Up (the "Key Company Equityholders"), pursuant to which the Key Company Equityholders have agreed to, among other things, vote in favor of the Merger Agreement and the transactions contemplated thereby, in each case, subject to the terms and conditions contemplated by the Equityholder Support Agreement.

The consummation of the proposed Wheels Up Business Combination is subject to certain conditions as further described in the Merger Agreement.

For more information about the Merger Agreement and the proposed Wheels Up Business Combination, see our Current Report on Form 8-K filed with the SEC on February 1, 2021, and the Wheels Up Disclosure Statement that we will file with the SEC. Unless specifically stated, this Annual Report does not give effect to the proposed Wheels Up Business Combination and does not contain the risks associated with the proposed Wheels Up Business Combination. Such risks and effects relating to the proposed Wheels Business Combination will be included in the Wheels Up Disclosure Statement.

On March 8, 2021, we issued a promissory note (the "Promissory Note') to the Sponsor, pursuant to which we borrowed an aggregate principal amount of $100,000.




Results of Operations



We have neither engaged in any operations nor generated any operating revenues to date. Our only activities from July 7, 2020 (inception) through December 31, 2020 were organizational activities, those necessary to prepare for our Initial Public Offering, as described below, and the search for a target company for a Business Combination, including the proposed Wheels Up Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We have generated and except to generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We have incurred and expect to incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.

For the period from July 7, 2020 (inception) through December 31, 2020, we had a net loss of $1,554,342, which consisted of formation and operating costs of $1,603,147 and an unrealized loss on marketable securities held in our Trust Account of $785, offset by interest income on marketable securities held in the Trust Account of $49,590.



                                       44




Liquidity and Capital Resources

Until the consummation of the Initial Public Offering, our only source of liquidity was an initial purchase of ordinary shares by the Sponsor and loans from our Sponsor.

On September 25, 2020, we consummated the Initial Public Offering of 22,500,000 Units at a price of $10.00 per Unit, generating gross proceeds of $225,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 4,333,333 Private Placement Warrants to the Sponsor at a price of $1.50 per Private Placement Warrant generating gross proceeds of $6,500,000.

On October 2, 2020, in connection with the underwriter's election to partially exercise of its over-allotment option, we consummated the sale of an additional 1,474,632 Units and the sale of an additional 196,617 Private Placement Warrants, generating total gross proceeds of $15,041,246.

Following the Initial Public Offering, the partial exercise of the over-allotment option by the underwriter and the sale of the Private Placement Warrants, a total of $239.7 million was placed in the Trust Account, and we had $1,861,552 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, available for working capital purposes. We incurred $12,952,619 in transaction costs, including $4.5 million of underwriting fees, paid to Credit Suisse (of which 10% was reimbursed to cover the financial advisory fee paid to Connaught), $8.391 million of deferred underwriting fees payable to Credit Suisse (of which 10% will be reimbursed to cover the deferred financial advisory fee payable to Connaught) and $577,619 of other costs. Credit Suisse, Connaught and their respective affiliates have engaged in, or may in the future engage in, as applicable, investment banking and other commercial dealings in the ordinary course of business with us, our affiliates or Wheels Up. They have received, or may in the future receive, as applicable, customary fees and commissions for these transactions.

For the period from July 7, 2020 (inception) through December 31, 2020, net cash used in operating activities was $1,084,845. Net loss of $1,554,342 was impacted by interest earned on marketable securities of $49,590, unrealized loss on marketable securities held in our Trust Account of $785 and formation costs paid by Sponsor in exchange for issuance of Class B Aspirational ordinary shares of $15,092. Changes in operating assets and liabilities provided $503,210 of cash from operating activities.

At December 31, 2020, we had marketable securities held in the Trust Account of $239,795,125. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, to complete the Business Combination, including to pay deferred underwriting commission. We may withdraw interest from the Trust Account to pay our taxes, if any. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

At December 31, 2020, we had cash of $719,926 held outside of the Trust Account. The primary uses of the funds held outside the Trust Account were to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of our officers and directors may, but are not obligated to (other than pursuant to the Promissory Note), loan us additional funds as may be required. If we complete a Business Combination, we may repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from the Trust Account would be used for such repayment.

On March 8, 2021, Aspirational issued the Promissory Note to the Sponsor, pursuant to which Aspirational borrowed an aggregate principal amount of $100,000. We may need to raise additional capital through loans or additional investments from the Sponsor, shareholders, officers, directors, or third parties. Our officers, directors and the Sponsor may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable to meet our working capital needs. Accordingly, we may not be able to obtain additional financing. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. We cannot provide any assurance that new financing will be available to us on commercially acceptable terms, if at all. These conditions raise substantial doubt about our ability to continue as a going concern for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. The financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern.



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Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of December 31, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.



Contractual Obligations


We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor a monthly fee of $10,000 for office space, administrative and support services, provided to Aspirational. Such agreement was assigned from the Sponsor to Turmeric Capital Singapore Pte Ltd ("Turmeric Capital"), an affiliate of our Chief Executive Officer, on December 31, 2020. We began incurring these fees on September 23, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

We have agreed, commencing on September 23, 2020, to pay Turmeric Capital$10,000 per month for support services, including accounting, book and record keeping and cash management services. Upon completion of the Business Combination or our liquidation, we will cease paying these monthly fees.

The underwriter is entitled to a deferred fee of $0.35 per Unit, or $8,391,121 in the aggregate. The deferred fee will become payable to the underwriter from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:

Class A Ordinary Shares Subject to Possible Redemption

We account for our Class A ordinary shares subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480, Distinguishing Liabilities from Equity. Class A ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders' equity. The Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders' equity section of the balance sheet.

Net Loss per Ordinary Share

Net income (loss) per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period. We have not considered the effect of the public warrants and the Private Placement Warrants to purchase an aggregate of 12,521,494 shares in the calculation of diluted loss per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

Our statement of operations includes a presentation of income (loss) per share for our redeemable Class A ordinary shares in a manner similar to the two-class method of income (loss) per share. Net income per common share, basic and diluted, for our redeemable Class A ordinary shares is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of ordinary shares subject to possible redemption outstanding since original issuance.

Net loss per share, basic and diluted, for our non-redeemable Class A and Class B ordinary shares is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to our redeemable Class A prdinary shares, by the weighted average number of non-redeemable ordinary shares outstanding for the period.

Our non-redeemable Class A and Class B ordinary shares include our Founder Shares and non-redeemable ordinary shares as these shares do not have any redemption features. Our non-redeemable Class A and Class B ordinary shares participate in the income or loss on marketable securities based on such non-redeemable ordinary shares' proportionate interest.



                                       46





Recent Accounting Standards


Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

© Edgar Online, source Glimpses

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