SEC Filing | Inspirato Inc.

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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, 2022

☐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: 001-39791

INSPIRATO INCORPORATED

(Exact Name of Registrant as Specified in its Charter)


Delaware	85-2426959
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
1544 Wazee Street Denver, CO	80202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (303) 586-7771

Not applicable

(Former name, former address, and former fiscal year, if changed since last report)

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

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

Warrants, each whole warrant exercisable for one share of Class

A Common Stock at an exercise price of $11.50 per share

ISPO

ISPOW

The Nasdaq Global Market

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 Regulation 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☒

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

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

As of December 12, 2022, the registrant had 58,873,840 shares of Class A Common Stock, 65,196,419 shares of Class V Common Stock, and 8,624,792 Warrants outstanding.

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		Page

PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations and Comprehensive Loss	5
	Consolidated Statements of Equity	6
	Consolidated Statements of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	38
PART II.	OTHER INFORMATION	40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	77
Item 3.	Defaults Upon Senior Securities	78
Item 4.	Mine Safety Disclosures	78
Item 5.	Other Information	78
Item 6.	Exhibits	78
SIGNATURES		80

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risks and uncertainties. Our forward-looking statements include, but are not limited to, statements regarding our and our management team’s hopes, beliefs, intentions or strategies regarding the future or our future events or our future financial or operating performance. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this Quarterly Report on Form 10-Q may include, for example, statements about:

●

Changes in our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects and plans;

●

The implementation, market acceptance and success of our business model and growth strategy;

●

Our expectations and forecasts with respect to the size and growth of the travel and hospitality industry;

●

The ability of our services to meet customers’ needs;

●

Our ability to compete with others in the luxury travel and hospitality industry;

●

Our ability to attract and retain qualified employees and management;

●

Our ability to adapt to changes in consumer preferences, perception and spending habits and develop and expand our destination offerings and gain market acceptance of our services, including in new geographies;

●

Our ability to develop and maintain our brand and reputation;

●

Developments and projections relating to our competitors and industry;

●

The impact of health epidemics, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;

●

The impact of the COVID-19 pandemic on customer demands for travel and hospitality services;

●

Expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”);

●

Our future capital requirements and sources and uses of cash;

●

The impact of market conditions on our financial condition and operations, including fluctuations in interest rates and inflation;

●

Our ability to obtain funding for our operations and future growth;

●

Our business, expansion plans and opportunities; and

●

Other factors detailed under the section entitled “Risk Factors.”

We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

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You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. You should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

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Part I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INSPIRATO INCORPORATED

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except par value)


	December 31,		September 30,
	2021		2022
Assets
Current assets
Cash and cash equivalents	$	80,233	$	82,081
Restricted cash		2,720		1,661
Accounts receivable, net		2,389		2,460
Accounts receivable, net – related parties		386		226
Prepaid subscriber travel		17,183		18,905
Prepaid expenses		11,101		9,248
Other current assets		762		502
Total current assets		114,774		115,083
Property & equipment, net		8,695		15,001
Goodwill		21,233		21,233
Right-of-use assets		—		255,166
Other noncurrent assets		1,068		1,199
Total assets	$	145,770	$	407,682
Liabilities
Current liabilities
Accounts payable	$	33,140	$	31,011
Accrued liabilities		6,035		5,408
Deferred revenue		176,813		159,146
Deferred rent, current		457		—
Debt		13,267		—
Lease liabilities, current		—		70,566
Total current liabilities		229,712		266,131
Deferred revenue		14,450		12,582
Deferred rent, noncurrent		7,468		—
Lease liabilities, noncurrent		—		190,665
Warrants		547		2,088
Total liabilities		252,177		471,466

Commitments and contingencies (Note 12)

Temporary equity (Note 3)

Series A-1; 222 authorized and 217 issued and outstanding at December 31, 2021; none at September 30, 2022		12,809		—
Series A-2; 130 authorized, issued, and outstanding at December 31, 2021; none at September 30, 2022		5,489		—
Series B; 193 authorized, issued, and outstanding at December 31, 2021; none at September 30, 2022		19,860		—
Series B-1; 128 authorized and 124 issued and outstanding at December 31, 2021; none at September 30, 2022		15,282		—
Series D; 158 authorized, issued, and outstanding at December 31, 2021; none at September 30, 2022		20,125		—
Series E; 132 authorized and 96 issued and outstanding at December 31, 2021; none at September 30, 2022		9,719		—
Total temporary equity		83,284		—

Equity
Series C; 491 authorized, issued, and outstanding at December 31, 2021; none at September 30, 2022 (Note 3)		21,477		—
Common units 4,470 authorized; 1,149 issued and outstanding at December 31, 2021; none at September 30, 2022 (Note 3)		—		—
Class A common stock, par value $0.0001 per share, 1,000,000 shares authorized, 58,741 shares issued and outstanding as of September 30, 2022		—		6
Class V common stock, $0.0001 par value, 500,000 shares authorized, 65,267 shares issued and outstanding as of September 30, 2022		—		7
Additional paid-in capital		—		248,701
Accumulated deficit		(211,168)		(231,294)
Total equity excluding noncontrolling interest		(189,691)		17,420
Noncontrolling interests (Note 16)		—		(81,204)
Total equity		(189,691)		(63,784)
Total liabilities, temporary equity, and equity	$	145,770	$	407,682

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INSPIRATO INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(in thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2022		2021		2022
Revenue	$	64,824	$	93,132	$	166,390	$	258,903
Cost of revenue (including depreciation of $402 and $1,283 in 2021, and $520 and $1,390 in 2022, respectively)		42,394		62,959		110,106		167,669
Gross margin		22,430		30,173		56,284		91,234
General and administrative (including equity-based compensation of $1,872 and $2,847 in 2021, and $2,596 and $5,429 in 2022, respectively)		15,530		16,934		37,188		50,878
Sales and marketing		7,856		9,438		19,105		30,641
Operations		6,457		10,351		17,336		31,204
Technology and development		1,177		3,778		2,957		9,462
Depreciation and amortization		593		812		1,876		2,165
Interest, net		(64)		(125)		483		207
Warrant fair value (gains) losses		—		(3,518)		456		3,026
Gain on forgiveness of debt		—		—		(9,518)		—
Other income, net		—		(447)		—		(447)
Loss and comprehensive loss before income taxes		(9,119)		(7,050)		(13,599)		(35,902)
Income tax expense		—		202		—		589
Net loss and comprehensive loss		(9,119)		(7,252)		(13,599)		(36,491)
Net loss and comprehensive loss attributable to noncontrolling interests (Note 16)		—		4,147		—		19,017
Net loss and comprehensive loss attributable to Inspirato Incorporated	$	(9,119)	$	(3,105)	$	(13,599)	$	(17,474)

Basic and diluted weighted average common units and Class A shares outstanding		105,503		55,192		105,503		50,015
Basic and diluted net loss attributable to Inspirato Incorporated per common unit and Class A share, respectively	$	(0.09)	$	(0.06)	$	(0.13)	$	(0.35)

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INSPIRATO INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Unaudited)

(in thousands)


													Additional
	Common Units			Series C			Class A Common Stock			Class V Common Stock			Paid-in		Accumulated		Noncontrolling
	Units	Value		Units	Value		Shares	Value		Shares	Value		Capital		Deficit		Interests		Total
Balance at January 1, 2021 (as previously reported)	1,166	$	—	491	$	21,477	—	$	—	—	$	—	$	—	$	(184,682)	$	—	$	(163,205)
Reverse recapitalization, net (Note 3)	104,377		—	(491)		(21,477)	—		—	—		—		21,477		—		—		—
Balance at January 1, 2021, after effect of reverse recapitalization	105,543		—	—		—	—		—	—		—		21,477		(184,682)		—		(163,205)
Consolidated net loss	—		—	—		—	—		—	—		—		—		(3,910)		—		(3,910)
Equity-based compensation	—		—	—		—	—		—	—		—		509		—		—		509
Distributions	—		—	—		—	—		—	—		—		—		(81)		—		(81)
Balance at March 31, 2021	105,543	$	—	—	$	—	—	$	—	—	$	—	$	21,986	$	(188,673)	$	—	$	(166,687)
Consolidated net loss	—		—	—		—	—		—	—		—		—		(568)		—		(568)
Equity-based compensation	—		—	—		—	—		—	—		—		466		—		—		466
Balance at June 30, 2021	105,543		—	—		—	—		—	—		—		22,452		(189,241)		—		(166,789)
Consolidated net loss	—		—	—		—	—		—	—		—		—		(9,119)		—		(9,119)
Equity-based compensation	—		—	—		—	—		—	—		—		1,872		—		—		1,872
Balance at September 30, 2021	105,543	$	—	—	$	—	—	$	—	—	$	—	$	24,324	$	(198,360)	$	—	$	(174,036)
																				—
Balance at January 1, 2022 (as previously reported)	1,149	$	—	491	$	21,477	—	$	—	—	$	—	$	—	$	(211,168)	$	—	$	(189,691)
Reverse recapitalization, net (Note 3)	103,709		—	(491)		(21,477)	—		—	—		—		21,477		—		—		—
Balance at January 1, 2022, after effect of reverse recapitalization	104,858		—	—		—	—		—	—		—		21,477		(211,168)		—		(189,691)
Consolidated net loss	—		—	—		—	—		—	—		—		—		(12,302)		(11,901)		(24,203)
Equity-based compensation	—		—	—		—	—		—	—		—		402		—		—		402
Issuance of common stock and common stock warrants upon the reverse recapitalization, net of issuance costs	(104,858)		—	—		—	46,832		4	69,781		7		206,253		—		(64,656)		141,608
Issuance of common stock upon exercise of warrants	—		—	—		—	5,079		1	—		—		9,330		—		—		9,331
Issuance of common stock upon exercise of stock option awards, net of shares withheld for income taxes	—		—	—		—	25		—	—		—		(29)		—		—		(29)
Distributions	—		—	—		—	—		—	—		—		—		(183)		—		(183)
Balance at March 31, 2022	—	$	—	—	$	—	51,936	$	5	69,781	$	7	$	237,433	$	(223,653)	$	(76,557)	$	(62,765)
Consolidated net loss	—		—	—		—	—		—	—		—		—		(2,067)		(2,969)		(5,036)
Equity-based compensation	—		—	—		—	—		—	—		—		2,431		—		—		2,431
Issuance of common stock	—		—	—		—	490		—	—		—		5,000		—		—		5,000
Issuance of common stock upon exercise of stock option awards, net of shares withheld for income taxes	—		—	—		—	22		—	—		—		(65)		—		—		(65)
Balance at June 30, 2022	—		—	—		—	52,448		5	69,781		7		244,799		(225,720)		(79,526)		(60,435)
Consolidated net loss	—		—	—		—	—		—	—		—		—		(3,105)		(4,147)		(7,252)
Equity-based compensation	—		—	—		—	—		—	—		—		2,596		—		—		2,596
Issuance of common stock upon exercise of stock option awards, net of shares withheld for income taxes	—		—	—		—	1,779		—	—		—		1,306		—		—		1,306
Issuance of Class A shares upon conversion of Class V shares	—		—	—		—	4,514		1	(4,514)		—		—		(2,469)		2,469		1
Balance at September 30, 2022	—	$	—	—	$	—	58,741	$	6	65,267	$	7	$	248,701	$	(231,294)	$	(81,204)	$	(63,784)

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INSPIRATO INCORPORATED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Nine months ended September 30,
	2021		2022
Cash flows from operating activities:
Consolidated net loss	$	(13,599)	$	(36,491)
Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities
Depreciation and amortization		3,159		3,555
Loss on disposal of fixed assets		—		214
Warrant fair value losses		456		3,026
Equity‑based compensation		2,847		5,429
Gain on forgiveness of debt		(9,518)		—
Non-cash lease loss (gain)		433		(554)
Changes in operating assets and liabilities, net of reverse recapitalization:
Accounts receivable, net		(162)		(71)
Accounts receivable, net – related parties		(258)		160
Prepaid member travel		(3,856)		1,940
Prepaid expenses		(224)		(2,903)
Right-of-use assets		—		(212)
Other assets		118		129
Accounts payable		12,335		(2,339)
Accrued liabilities		2,252		(627)
Deferred revenue		24,372		(19,535)
Net cash provided by (used in) operating activities		18,355		(48,279)

Cash flows from investing activities:
Development of internal-use software		(919)		(2,747)
Purchase of property and equipment		(1,776)		(7,118)
Net cash used in investing activities		(2,695)		(9,865)

Cash flows from financing activities:
Repayments of debt		(765)		(27,267)
Proceeds from debt		—		14,000
Proceeds from reverse recapitalization (Note 3)		—		90,070
Payments of reverse recapitalization costs (Note 3)		—		(23,899)
Proceeds from issuance of Class A common stock		—		5,000
Payments of employee taxes for unit option exercises		—		(117)
Proceeds from unit option exercises		—		1,329
Distributions		(81)		(183)
Net cash (used in) provided by financing activities		(846)		58,933

Net increase in cash, cash equivalents, and restricted cash		14,814		789
Cash, cash equivalents, and restricted cash – beginning of period		67,001		82,953
Cash, cash equivalents, and restricted cash – end of period	$	81,815	$	83,742

Supplemental cash flow information – cash paid for interest	$	466	$	288
Significant noncash transactions:
Conversion of preferred stock in connection with reverse recapitalization		—		104,761
Warrants acquired at fair value		—		9,874
Warrants exercised		—		8,390
Fixed assets purchased but unpaid, included in accounts payable at period end		—		211
Operating lease right-of-use assets exchanged for lease obligations		—		324,450
Conversion of deferred rent and prepaid rent to right-of-use assets		—		6,831

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INSPIRATO INCORPORATED

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Nature of Business

Inspirato Incorporated and its subsidiaries (the “Company”) is a subscription-based luxury travel company that provides unique solutions for (i) affluent travelers seeking superior service and certainty across a wide variety of accommodations and experiences and (ii) hospitality suppliers who want to solve pain points that include monetizing excess inventory and efficiently outsourcing the hassle involved in managing rental properties.

Inspirato Incorporated was incorporated in Delaware on July 31, 2020 as Thayer Ventures Acquisition Corporation (“Thayer”); a special purpose acquisition company (“SPAC”) for the purpose of effecting a merger with one or more operating businesses. On February 11, 2022 (the “Closing Date”), Thayer and Inspirato LLC consummated the transaction contemplated in the Business Combination Agreement dated June 30, 2021 and as amended September 15, 2021 (the “Business Combination Agreement”) whereby amongst other transactions, a subsidiary of Thayer merged within and into Inspirato LLC with Inspirato LLC as the surviving company (the “Business Combination”), resulting in Inspirato LLC becoming a subsidiary of Thayer. Thayer changed its name to “Inspirato Incorporated” upon closing of the Business Combination (the “Closing”).

The Business Combination was accounted for as a reverse recapitalization whereby Inspirato LLC acquired Thayer for accounting purposes. As such, the condensed consolidated financial statements presented herein represent the operating results, assets and liabilities of Inspirato LLC before and after the Business Combination. See Note 3 – Reverse Recapitalization for more information.

As of September 30, 2022, the Company had 44 subsidiaries and one branch, of which 32 are wholly owned domestic limited liability companies. The remaining 12 and the branch, which are owned through direct domestic subsidiaries, are as follows: (i) a wholly owned Mexican company with a foreign designation equivalent to a limited liability company (S.R.L.); (ii) a wholly owned Turks and Caicos Islands limited company; (iii) a wholly owned Cayman Islands exempted company; (iv) a wholly owned Costa Rican limited liability company; (v) a wholly owned Italian S.R.L.; (vi) a wholly owned Canadian unlimited liability company; (vii) a wholly owned Dominican Republic branch of a wholly owned domestic liability company; (viii) a wholly owned U.S. Virgin Islands limited liability company; (ix) a wholly owned Puerto Rican limited liability company; (x) a wholly owned Grenadian limited liability company; (xi) a wholly owned British Virgin Islands designated company; (xii) a wholly owned Anguillan non-public company; and (xiii) a second wholly owned Mexican company with a foreign designation equivalent to a limited liability company (S.R.L). These entities typically lease local properties.

Since early 2020, the COVID-19 pandemic has severely restricted the level of economic activity around the world and is continuing to have an unprecedented effect on the global hospitality and travel industries. The global spread of COVID-19 has been and continues to be a complex and evolving situation. The COVID-19 pandemic had and continues to have a materially adverse impact on the Company’s results of operations and financial condition. Revenues declined as a result of reduced travel and management undertook cost reduction methods in response. No impairments were recorded during the periods presented. Through September 30, 2022 as restrictions were lifted across travel destinations, revenues began to recover to pre-pandemic levels. However, due to the significant uncertainty surrounding the pandemic, including the potential adverse impact of the spread of COVID-19 variants, management’s judgment regarding this could change in the future. Management cannot estimate the length or impacts of the COVID-19 outbreak on the Company’s future operations, financial position and cash flows, particularly if there are significant impacts that continue in the future.

(2) Significant Accounting Policies

(a) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the years ended December 31, 2021 and for the period from

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July 31, 2020 (inception) through December 31, 2020 and Inspirato LLC’s audited consolidated financial statements and accompanying notes for the years ended December 31, 2020 and 2021 included in the final prospectus statement dated March 10, 2022 filed with the SEC pursuant to Rule 424(b)(3) under the Securities Act.

In management’s opinion, these unaudited condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and reflect all adjustments, which include normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2022 and the results of operations for the three and nine months ended September 30, 2022. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or any other future interim or annual period.

For the three and nine months ended September 30, 2021, these unaudited condensed consolidated financial statements present the consolidated results of operations, comprehensive income (loss), cash flows and changes in equity of Inspirato LLC. The condensed consolidated balance sheet as of December 31, 2021 presents the financial condition of Inspirato LLC and its wholly owned subsidiaries. All intercompany balances and transactions of Inspirato LLC have been eliminated.

The Business Combination was accounted for as a reverse recapitalization and the condensed consolidated financial statements presented herein are for Inspirato Incorporated and its subsidiaries, including Inspirato LLC. Inspirato LLC was the accounting acquirer of Thayer and the financial statements for all periods prior to February 11, 2022 are those of Inspirato LLC. See Note 3 – Reverse Recapitalization for more information.

In accordance with Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations” the historical equity of Inspirato LLC has been recast in all periods up to the Closing Date, to reflect the number of shares of Inspirato Incorporated’s Class A Common Stock (as defined below) and Class V Common Stock (as defined below) issued to Inspirato LLC Holders in connection with the Business Combination. The Company recast the units outstanding related to the historical Inspirato LLC preferred units and common units (the “Historical Inspirato LLC Equity”) prior to the Business Combination, reflecting the exchange ratio of 1-for-37.2275, pursuant to the Business Combination Agreement. The condensed consolidated financial statements and related notes thereto give effect to the conversion for all periods presented. The condensed consolidated financial statements do not necessarily represent the capital structure of Inspirato Incorporated had the Business Combination occurred in prior periods.

(b) Principles of Consolidation

For the period of February 11, 2022 through September 30, 2022, the condensed consolidated financial statements comprise the accounts of the Company and its consolidated subsidiaries, including Inspirato LLC. In determining the accounting of Inspirato Incorporated’s interest in Inspirato LLC after the Business Combination, management concluded Inspirato LLC was not a variable interest entity as defined by ASC Topic 810, “Consolidation,” and as such, Inspirato LLC was evaluated under the voting interest model. As Inspirato Incorporated has the right to appoint a majority (four of the seven) managers of Inspirato LLC, Inspirato Incorporated controls Inspirato LLC, and therefore, the financial results of Inspirato LLC and its subsidiaries, after the Closing on February 11, 2022, are consolidated with and into Inspirato Incorporated’s financial statements. All intercompany accounts and transactions among the Company and its consolidated subsidiaries have been eliminated.

For the days and periods prior to Business Combination, the consolidated financial statements of the Company comprise the accounts of Inspirato LLC and its wholly owned subsidiaries. All intercompany accounts and transactions among Inspirato LLC and its consolidated subsidiaries were eliminated.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the 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 revenue and expenses during the reporting period. Changes in facts and circumstances or discovery of new information may result in revised estimates, and actual results could differ from those estimates.

The condensed consolidated financial statements include amounts that are based on management’s best estimates and judgments. The most significant estimates relate to valuation and estimated economic lives of capitalized software and long-lived assets,

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contingencies, allowance accounts, expected length of certain subscription types, and fair value measurements related to stock-based compensation.

(d) Leases

The Company is party to operating lease agreements for its vacation homes, hotels and corporate offices. In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02 (“ASC 842”), Leases, to require lessees to recognize all leases, with certain exceptions, on the balance sheet, while recognition on the statement of operations remains similar to legacy lease accounting. Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvements for Lessors, and ASU 2019-01, Codification Improvements, to clarify and amend the guidance in ASU No. 2016-02. ASC 842 eliminates real estate-specific provisions and modifies certain aspects of lessor accounting.

The Company adopted ASC 842 as of January 1, 2022 using the modified retrospective approach (“adoption of the new lease standard”). This approach allows entities to either apply the new lease standard to the beginning of the earliest period presented or only to the consolidated financial statements in the period of adoption without restating prior periods. The Company has elected to apply the new guidance at the date of adoption without restating prior periods. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward the historical determination of contracts as leases and lease classification and not reassess initial direct costs for historical lease arrangements. The Company also elected the practical expedient to not separate lease and non-lease components for all of our current classes of leases.

Operating lease assets are included within right-of-use (“ROU”) assets and the corresponding operating lease liabilities are included within current liabilities and other noncurrent liabilities on the Company’s condensed consolidated balance sheet as of September 30, 2022.

The Company has elected not to present short-term leases on the consolidated balance sheet as these leases have a lease term of 12 months or less at lease inception and do not contain purchase options or renewal terms that the Company is reasonably certain to exercise. All other right-of-use assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the later of ASC 842 adoption date or lease commencement date. Because most of the Company’s leases do not provide an implicit rate of return, the Company used the Company’s incremental borrowing rate based on the information available at adoption date or lease commencement date in determining the present value of lease payments.

Adoption of the new lease standard on January 1, 2022 had a material impact on the Company’s interim condensed consolidated financial statements. The most significant impacts related to the (i) recording ROU assets of $