Filed Pursuant to Rule 424(b)(3)

Registration No. 333-262472

 

PROSPECTUS SUPPLEMENT NO. 11

(To the Prospectus dated March 10, 2022)

 

Primary Offering of

15,800,000 Shares of Class A Common Stock Issuable Upon Exercise of Warrants

 

Secondary Offering of

16,025,284 Shares of Class A Common Stock

7,175,000 Warrants to Purchase Shares of Class A Common Stock

 

 

 

This prospectus supplement supplements the prospectus, dated March 10, 2022 (as amended, the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-262472). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our Amended Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on December 15, 2022 (the “Amended Quarterly Report”). Accordingly, we have attached the Amended Quarterly Report to this prospectus supplement.

 

The Prospectus and this prospectus supplement relate to the resale by the selling securityholders named in the Prospectus (or their permitted transferees) (the “Selling Securityholders”) of (i) up to 16,025,284 shares of our Class A common stock, par value $0.0001 per share (”Class A Common Stock”), (including (a) 7,175,000 shares that may be issued upon the exercise of the Private Warrants (as defined below) and (b) 8,850,384 PIPE Shares (as defined in the Prospectus) and (ii) up to 7,175,000 warrants to purchase shares of Class A Common Stock (the “Private Warrants”) originally issued in a private placement that closed concurrently with the initial public offering of Thayer Ventures Acquisition Corporation, our legal predecessor and a special purpose acquisition company (“Thayer”). In addition, the Prospectus and this prospectus supplement relate to the issuance by us of up to (i) 7,175,000 shares of Class A Common Stock that are issuable upon the exercise of the Private Warrants and (ii) 8,625,000 shares of Class A Common Stock that are issuable upon the exercise warrants to purchase shares of Class A Common Stock sold as part of Thayer’s initial public offering (the “Public Warrants” and together with the Private Warrants, the “Warrants”).

 

Our Class A Common Stock is currently listed on The Nasdaq Global Market (“Nasdaq”) under the symbol “ISPO” and the Warrants are listed on Nasdaq under the symbol “ISPOW.” On December 16, 2022, the last reported sales price of our Class A Common stock was $1.41 per share and the last reported sales price of our Warrants was $0.10.

 

This prospectus supplement should be read in conjunction with the Prospectus and is not complete without, and may not be delivered or utilized except in connection with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement is qualified by reference to the Prospectus, including any amendments or supplements thereto, except to the extent that the information in this prospectus supplement updates and supersedes the information contained therein. 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.

 

Investing in our securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing in our securities in “Risk Factors” beginning on page 12 of the Prospectus.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

Prospectus Supplement dated December 19, 2022.

 

 

 

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q/A

Amendment No. 1


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

For the quarterly period ended June 30, 2022

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: 001-39791


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

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 August 4, 2022, the registrant had 52,450,471 shares of Class A Common Stock, 69,780,665 shares of Class V Common Stock, and 8,624,792 Warrants outstanding.


EXPLANATORY NOTE

Inspirato Incorporated (the “Company”) is filing this Amendment No. 1 on Form 10-Q/A (the “Amended Report”) to amend its Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, that was originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on August 10, 2022 (the “Original Report”), to restate certain items presented in the Original Report (the “Restatement”). This Amended Report includes a restatement of the Company's unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2022 and amends certain other information in the Original Report as further described below.

Background

As disclosed in the Company’s Current Report on Form 8-K, filed with the SEC on November 14, 2022, the Restatement is to correct errors that resulted from (i) the incorrect application of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (“ASC 842”) with respect to the assessment of right-of-use assets and lease liabilities and (ii) the over accrual of liabilities and property-related and other expenses as of June 30, 2022. The incorrect application of ASC 842 led to an understatement of $23 million of the right-of-use assets and total lease liabilities as of June 30, 2022. Separately, property-related and other expenses were overstated by $2.1 million and $1.8 million during the three-month and six-months ended June 30, 2022, respectively.

Refer to “Note 2 – Significant Accounting Policies and Restatement of Previously Issued Financial Statements (As Restated)” (“Note 2”) to our unaudited condensed consolidated financial statements included in this Amended Report for more information regarding the impact of correcting these errors on the Company’s unaudited condensed consolidated financial statements.

In connection with the Restatement, the Company’s management concluded that as of June 30, 2022, its disclosure controls and procedures remained ineffective at a reasonable assurance level due to the unremediated material weaknesses in its internal control over financial reporting previously disclosed in Part I, Item 4. “Controls and Procedures” of the Original Report. For discussion of management’s consideration of the Company’s disclosure controls and procedures, internal controls over financial reporting, and material weaknesses identified, refer to “Part I, Item 4. Controls and Procedures,” included in this Amended Report.

Items Amended in this Amended Report

The following sections in the Original Report are revised in this Amended Report, solely as a result of, and to reflect, the Restatement:

● Part I – Item 1. Financial Information

● Part I – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

● Part I – Item 4. Controls and Procedures

● Part II – Item 1A. Risk Factors

● Part II – Item 6. Exhibits and Signatures

In addition, in accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended, Part II, Item 6 of the Original Report has been amended to include the currently-dated certifications from the Company’s principal executive officer and principal financial officer as Exhibits 31.1, 31.2, 32.1 and 32.2.

For the convenience of the reader, this Amended Report sets forth the information in the Original Report in its entirety, as such information is modified and superseded only where described above. This Amended Report does not amend, update or change any other items or disclosures in the Original Report and does not purport to reflect any information or events subsequent to the filing thereof other than those disclosed in Note 2. Among other things, forward-looking statements made in the Original Report have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the Original Report, and such forward-looking statements should be read in their historical context. Accordingly, this Amended Report should be read in conjunction with the Company’s filings made with the SEC subsequent to the filing of the Original Report, including any amendment to those filings. This Amended Report reflects an updated Exhibit 101 (Interactive Data Files), which is filed herewith, as applicable.

i


Table of Contents

Table of Contents

    

    

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

4

Consolidated Balance Sheets (As Restated)

4

Consolidated Statements of Operations and Comprehensive Loss (As Restated)

5

Consolidated Statements of Equity (As Restated)

6

Consolidated Statements of Cash Flows (As Restated)

7

Notes to Unaudited Consolidated Financial Statements (As Restated)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (As Restated)

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

42

Item 4.

Controls and Procedures

42

PART II.

OTHER INFORMATION

44

Item 1.

Legal Proceedings

44

Item 1A.

Risk Factors

44

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

82

Item 3.

Defaults Upon Senior Securities

83

Item 4.

Mine Safety Disclosures

83

Item 5.

Other Information

83

Item 6.

Exhibits

83

SIGNATURES

85


Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Amended Quarterly Report on Form 10-Q/A 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 Amended Quarterly Report on Form 10-Q/A 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 its 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”);
The ability to maintain the listing of our Class A Common Stock (as defined below) and Warrants (as defined below) on the Nasdaq Stock Market LLC (“Nasdaq”);
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;
The Restatement and the impact of such Restatement on our future financial statements and other financial measures;
The material weaknesses we identified in our internal controls over financial reporting and our efforts and timing related to such remediation; 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 Amended Quarterly Report on Form 10-Q/A.

2


Table of Contents

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Amended Quarterly Report on Form 10-Q/A 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 Amended Quarterly Report on Form 10-Q/A. 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 Amended Quarterly Report on Form 10-Q/A. 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 Amended Quarterly Report on Form 10-Q/A 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 Amended Quarterly Report on Form 10-Q/A to reflect events or circumstances after the date of this Amended Quarterly Report on Form 10-Q/A 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 Amended Quarterly Report on Form 10-Q/A 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.

3


Table of Contents

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements.

INSPIRATO INCORPORATED

CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except par value)

December 31, 

June 30, 

   

2021

   

2022

(As Restated)

Assets

  

 

  

Current assets

  

 

  

Cash and cash equivalents

$

80,233

$

121,321

Restricted cash

 

2,720

 

1,740

Accounts receivable, net

 

2,389

 

1,776

Accounts receivable, net – related parties

 

386

 

708

Prepaid subscriber travel

 

17,183

 

24,520

Prepaid expenses

 

11,101

 

9,970

Other current assets

 

762

 

574

Total current assets

 

114,774

 

160,609

Property & equipment, net

 

8,695

 

11,904

Goodwill

 

21,233

 

21,233

Right of use assets

259,714

Other long term assets

 

1,068

 

1,130

Total assets

$

145,770

$

454,590

Liabilities

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

33,140

$

32,443

Accrued liabilities

 

6,035

 

5,122

Deferred revenue

 

176,813

 

175,841

Deferred rent

 

457

 

Debt

 

13,267

 

14,000

Lease liability

 

 

74,245

Total current liabilities

 

229,712

 

301,651

Deferred revenue

 

14,450

 

15,781

Deferred rent

 

7,468

 

Lease liability

 

 

191,986

Warrants

 

547

 

5,607

Total liabilities

252,177

515,025

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 June 30, 2022

 

12,809

 

Series A-2; 130 authorized, issued, and outstanding at December 31, 2021; none at June 30, 2022

 

5,489

 

Series B; 193 authorized, issued, and outstanding at December 31, 2021; none at June 30, 2022

 

19,860

 

Series B-1; 128 authorized and 124 issued and outstanding at December 31, 2021; none at June 30, 2022

 

15,282

 

Series D; 158 authorized, issued, and outstanding at December 31, 2021; none at June 30, 2022

 

20,125

 

Series E; 132 authorized and 96 issued and outstanding at December 31, 2021; none at June 30, 2022

 

9,719

 

Total temporary equity

 

83,284

 

Equity

Series C; 491 authorized, issued, and outstanding at December 31, 2021; none at June 30, 2022 (Note 3)

21,477

Common units 4,470 authorized; 1,149 issued and outstanding at December 31, 2021; none at June 30, 2022 (Note 3)

Class A common stock, par value $0.0001 per share, 1,000,000 shares authorized, 52,448 shares issued and outstanding as of June 30, 2022

5

Class V common stock, $0.0001 par value, 500,000 shares authorized, 69,781 shares issued and outstanding as of June 30, 2022

7

Additional paid-in capital

244,799

Accumulated deficit

 

(211,168)

(225,720)

Total equity excluding noncontrolling interest

(189,691)

19,091

Noncontrolling interests (Note 16)

 

(79,526)

Total equity

(189,691)

(60,435)

Total liabilities, temporary equity, and equity

$

145,770

$

454,590

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Table of Contents

INSPIRATO INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(in thousands, except per share amounts)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2022

    

2021

    

2022

(As Restated)

(As Restated)

Revenue

$

52,286

$

83,698

$

101,566

$

165,771

Cost of revenue (including depreciation of $408 and $880 in 2021, and $495 and $870 in 2022, respectively)

 

35,623

 

57,402

 

67,712

 

104,711

Gross margin

 

16,663

 

26,296

 

33,854

 

61,060

General and administrative (including equity-based compensation of $466 and $975 in 2021, and $2,431 and $2,833 in 2022, respectively)

 

13,024

 

16,250

 

21,658

 

33,944

Sales and marketing

 

6,000

 

11,061

 

11,249

 

21,203

Operations

5,850

11,179

10,879

20,853

Technology and development

897

2,876

1,780

5,684

Depreciation and amortization

600

694

1,283

1,353

Interest, net

378

192

547

331

Warrant fair value (gains) losses

(11,126)

456

6,544

Gain on forgiveness of debt

(9,518)

(9,518)

Loss and comprehensive loss before income taxes

(568)

(4,830)

(4,480)

(28,852)

Income tax expense

206

387

Net loss and comprehensive loss

(568)

(5,036)

(4,480)

(29,239)

Net loss and comprehensive loss attributable to noncontrolling interests (Note 16)

 

 

2,969

 

 

14,870

Net loss and comprehensive loss attributable to Inspirato Incorporated

$

(568)

$

(2,067)

$

(4,480)

$

(14,369)

 

Basic and diluted weighted average common units and Class A shares outstanding

105,503

52,400

105,503

47,384

Basic and diluted net loss attributable to Inspirato Incorporated per common unit and Class A share, respectively

$

(0.01)

$

(0.04)

$

(0.04)

$

(0.30)

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Table of Contents

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

(As Restated)

(As Restated)

(As Restated)

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)

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)

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INSPIRATO INCORPORATED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

    

Six Months Ended June 30, 

    

  

2021

  

2022

  

(As Restated)

Cash flows from operating activities:

 

  

 

  

 

Consolidated net loss

$

(4,480)

$

(29,239)

Adjustments to reconcile consolidated net loss to net cash provided by (used in) operating activities

 

  

 

Depreciation and amortization

 

2,164

 

2,223

Warrant fair value losses

 

456

 

6,544

Equity‑based compensation

 

975

 

2,833

Gain on forgiveness of debt

(9,518)

Non-cash lease expense

 

515

 

179

Changes in operating assets and liabilities, net of reverse recapitalization:

 

Accounts receivable, net

 

183

 

613

Accounts receivable, net – related parties

 

(388)

 

(322)

Prepaid member travel

 

(3,538)

 

(3,675)

Prepaid expenses

 

(101)

 

(3,625)

Right of use asset

 

 

(493)

Other assets

 

280

 

126

Accounts payable

 

10,566

 

(697)

Accrued liabilities

 

2,212

 

(1,237)

Deferred revenue

 

20,299

 

359

Net cash provided by (used in) operating activities

 

19,625

 

(26,411)

 

  

 

Cash flows from investing activities:

 

Development of internal-use software

 

(263)

 

(489)

Purchase of property and equipment

 

(1,061)

 

(4,619)

Net cash used in investing activities

 

(1,324)

 

(5,108)

 

 

Cash flows from financing activities:

 

 

Repayments of debt

 

(476)

 

(13,267)

Proceeds from debt

 

 

14,000

Proceeds from reverse recapitalization

 

 

90,070

Payments of reverse recapitalization costs

 

 

(23,899)

Proceeds from issuance of common stock

5,000

Payments of employee taxes for unit option exercises

(117)

Proceeds from unit option exercises

23

Distributions

(81)

(183)

Net cash (used in) provided by financing activities

(557)

71,627

Net increase in cash, cash equivalents, and restricted cash

17,744

40,108

Cash, cash equivalents, and restricted cash – beginning of period

67,001

82,953

Cash, cash equivalents, and restricted cash – end of period

$

84,745

$

123,061

Supplemental cash flow information – cash paid for interest

$

290

$

285

Significant noncash transactions:

 

 

Conversion of preferred stock in connection with reverse recapitalization

$

$

104,761

Warrants acquired at fair value

8,390

Warrants exercised

9,874

Fixed assets purchased but unpaid, included in accounts payable

324

Operating lease right-of-use assets exchanged for lease obligations

306,912

Conversion of deferred rent and prepaid rent to right of use asset

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 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 June 30, 2022, the Company had 43 subsidiaries and one branch, of which 34 are wholly owned domestic limited liability companies. The remaining 9 and the branch, which are owned through direct domestic subsidiaries, are as follows: (i) a wholly owned Mexican S.R.L; (ii) a wholly owned Turks and Caicos limited company; (iii) a wholly owned Cayman 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; and (x) a wholly owned Grenadian limited liability company. 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 a materially adverse impact on the Company’s results of operations and financial condition, particularly in 2020. 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 June 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.

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(2) Significant Accounting Policies and Restatement of Previously Issued Financial Statements (As Restated)

(a) Restatement

The Company has restated its unaudited condensed consolidated financial statements as of and for the three and six months ended June 30, 2022 due to the incorrect application of ASC 842 with respect to the assessment of right-of-use assets and lease liabilities. The incorrect application of ASC 842 led to an understatement of $23 million of the right-of-use assets and total lease liabilities, respectively, an overaccrual of $0.6 million of accounts payable, and and ommission of a non-cash disclosure of operating lease right-of-use assets exchanged for lease obligations of $307 million in the unaudited condensed consolidated financial statements included in the Original Report; the Company also over accrued property-related and other expenses of $2.3 million as of June 30, 2022 and overstated cost of revenue by $2.1 million and $1.8 million for the three and six months ended June 30, 2022, respectively. The Restatement also impacted the Company’s basic and diluted net loss per common share calculations. The following tables present the Restatement on all affected line items of our previously issued Consolidated Balance Sheet as of June 30, 2022, the Condensed Consolidated Statements of Operations and Comprehensive Loss and the Condensed Consolidated Statement of Equity for the three and six months ended June 30, 2022, and the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2022. The Restatement had no effect on total net cash flows from operating, investing or financing activities in the Condensed Consolidated Statement of Cash Flows. The Restatement also impacted Note 2 Section (e). Leases, Note 4. Revenue, Note 7. Income Taxes, Note 10. Loss per Share, and Note 11. Leases, which were restated in these consolidated financial statements.

Consolidated Balance Sheet:

    

June 30, 2022

As

ASC 842

Property-related

Previously

Lease

and Other Expense

As

Reported

Adjustments

Adjustments

Restated

(in thousands)

Accounts receivable, net

$

2,725

$

$

(949)

$

1,776

Total current assets

161,558

(949)

160,609

Right of use assets

236,393

23,321

259,714

Total assets

432,218

23,321

(949)

454,590

Accounts payable

35,319

(596)

(2,280)

32,443

Lease liability - current

65,210

9,035

74,245

Total current liabilities

295,492

8,439

(2,280)

301,651

Lease liability - noncurrent

177,597

14,389

191,986

Total liabilities

494,477

22,828

(2,280)

515,025

Accumulated deficit

(226,361)

198

443

(225,720)

Total equity excluding noncontrolling interest

18,450

198

443

19,091

Noncontrolling interests

(80,709)

295

888

(79,526)

Total equity

(62,259)

493

1,331

(60,435)

Total liabilities, temporary equity, and equity

$

432,218

$

23,321

$

(949)

$

454,590

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Condensed Consolidated Statement of Operations and Comprehensive Loss:

Three Months Ended June 30, 2022

As

ASC 842

Property-related

Previously

Lease

and Other Expense

As

Reported

Adjustments

Adjustments

Restated

(in thousands)

Cost of revenue

$

60,081

$

(538)

$

(2,141)

$

57,402

Gross margin

23,617

538

2,141

26,296

General and administrative

15,782

468

16,250

Loss and comprehensive loss before income taxes

(7,042)

539

1,673

(4,830)

Net loss and comprehensive loss

(7,248)

539

1,673

(5,036)

Net loss and comprehensive loss attributable to noncontrolling interests

4,274

(320)

(985)

2,969

Net loss and comprehensive loss attributable to Inspirato Incorporated

(2,974)

219

688

(2,067)

Basic and diluted net loss attributable to Inspirato Incorporated per common unit and class A share

$

(0.06)

$

$

0.02

$

(0.04)

Condensed Consolidated Statement of Operations and Comprehensive Loss:

Six Months Ended June 30, 2022

As

ASC 842

Property-related

Previously

Lease

and Other Expense

As

Reported

Adjustments

Adjustments

Restated

(in thousands)

Cost of revenue

$

107,002

$

(493)

$

(1,798)

$

104,711

Gross margin

58,769

493

1,798

61,060

General and administrative

33,476

468

33,944

Loss and comprehensive loss before income taxes

(30,676)

493

1,331

(28,852)

Net loss and comprehensive loss

(31,063)

493

1,331

(29,239)

Net loss and comprehensive loss attributable to noncontrolling interests

16,053

(295)

(888)

14,870

Net loss and comprehensive loss attributable to Inspirato Incorporated

(15,010)

198

443

(14,369)

Basic and diluted net loss attributable to Inspirato Incorporated per common unit and class A share

$

(0.32)

$

$

0.02

$

(0.30)

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Condensed Consolidated Statement of Cash Flows

Six Months Ended June 30, 2022

As

ASC 842

Property-related

Previously

Lease

and Other Expense

As

Reported

Adjustments

Adjustments

Restated

(in thousands)

Consolidated net loss

$

(31,063)

$

493

$

1,331

$

(29,239)

Non-cash lease expense

76

103

179

Accounts receivable, net

(336)

949

613

Accounts payable

2,179

(596)

(2,280)

(697)

Operating lease right-of-use assets exchanged for lease obligations

$

$

306,912

$

$

306,912

Condensed Consolidated Statement of Equity

Six Months Ended June 30, 2022

As

ASC 842

Property-related

Previously

Lease

and Other Expense

As

Reported

Adjustments

Adjustments

Restated

(in thousands)

Accumulated deficit

Consolidated net loss

$

(12,036)

$

(31)

$

(235)

$

(12,302)

Balance at March 31, 2022

(223,387)

(31)

(235)

(223,653)

Consolidated net loss

(2,974)

219

688

(2,067)

Balance at June 30, 2022

(226,361)

198

443

(225,720)

Noncontrolling interest

Consolidated net loss

(11,779)

(14)

(108)

(11,901)

Balance at March 31, 2022

(76,435)

(14)

(108)

(76,557)

Consolidated net loss

(4,274)

320

985

(2,969)

Balance at June 30, 2022

(80,709)

295

888

(79,526)

Total equity

Consolidated net loss

(23,815)

(45)

(343)

(24,203)

Balance at March 31, 2022

(62,377)

(45)

(343)

(62,765)

Consolidated net loss

(7,248)

539

1,673

(5,036)

Balance at June 30, 2022

$

(62,259)

$

493

$

1,331

$

(60,435)

(b) 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 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 July 31, 2020 (inception) through December 31, 2020 and Inspirato LLC’s audited consolidated financial statements and accompanying notes for the years ended

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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 June 30, 2022 and the results of operations for the three and six months ended June 30, 2022. The results of operations for the three and six months ended June 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 six months ended June 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 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 consolidated financial statements and related notes thereto give effect to the conversion for all periods presented. The consolidated financial statements do not necessarily represent the capital structure of Inspirato Incorporated had the Business Combination occurred in prior periods.

(c) Principles of Consolidation

For the period of February 11, 2022 through June 30, 2022, the 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.

(d) Use of Estimates

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.

(e) Leases

The Company is party to operating lease agreements for its vacation homes, hotels and corporate offices. In February 2016, the FASB issued 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 long-term liabilities on the Company’s condensed consolidated balance sheet as of June 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 lease 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 $193 million, and (ii) recording lease liabilities of $200 million, as of January 1, 2022 on the consolidated balance sheets. The Company also reclassified prepaid expenses of $1.1 million and deferred rent balances (including tenant improvement allowances and other liability balances) of $7.9 million relating to the Company’s existing lease arrangements as of December 31, 2021, into the ROU asset balance as of January 1, 2022. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The adoption of the new lease standard did not materially impact the Company’s consolidated statement of operations and consolidated statement of cash flows and has had no impact on our debt covenants.

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The cumulative effect of the changes made to the Company’s consolidated balance sheet as of January 1, 2022 for the adoption of the new lease standard was as follows:

    

Balances at December 31, 

Adjustments from Adoption of New Lease

Balances at January 1,

2021

   

Standard

   

2022

(in thousands)

Assets

    

(As Restated)

Prepaid expenses

$

11,101

$

(1,094)

$

10,007

Operating lease ROU assets

201,728

201,728

Liabilities

Current lease liabilities

$

$

63,415

$

63,415

Other current liabilities

457

(457)

Long-term lease liabilities

145,144

145,144

Other long-term liabilities

7,468

(7,468)

(f) Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is computed by dividing net earnings or loss attributable to Inspirato Incorporated Class A common stock (“Class A Common Stock”), as applicable, by the weighted average number of shares of Class A Common Stock outstanding during the period. Diluted EPS is computed after adjusting the basic EPS computation for the effect of potentially dilutive securities outstanding during the period. The effect of non-vested equity based compensation awards, if dilutive, is computed using the treasury stock method.

(g) Noncontrolling Interests

Noncontrolling interests represent the economic interest of Inspirato LLC not owned by Inspirato Incorporated. These noncontrolling interests arose from the Business Combination. Noncontrolling interests were initially recorded as the relative proportion of the net assets of Inspirato LLC at the time of the Business Combination. This amount is subsequently adjusted for the proportionate share of earnings or losses attributable to the noncontrolling interests and any dividends or distributions paid to the noncontrolling interests.

As of June 30, 2022, Inspirato Incorporated directly owned 41.0% of the interest in Inspirato LLC and the noncontrolling interest was 59.0%. The noncontrolling interest relates to the economic interests in Inspirato LLC held directly by owners of our Inspirato Incorporated Class V common stock (“Class V Common Stock”) in the form of New Common Units (as defined below) as a result of Business Combination. See Note 3 - Reverse Recapitalization.

(h) Income Taxes

For periods prior to the Business Combination, Inspirato LLC was treated as a partnership for U.S. federal income tax purposes. As a partnership, Inspirato LLC is itself generally not subject to U.S. federal income tax under current U.S. tax laws, and any taxable income or loss is passed through and included in the taxable income or loss of its members, including Inspirato Incorporated. Inspirato Incorporated is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its distributive share of the items of the net taxable income or loss and any related tax credits of Inspirato LLC.

Subsequent to the Business Combination, Inspirato Incorporated holds an interest in Inspirato LLC, which continues to be treated as a partnership for U.S. federal income tax purposes. Inspirato LLC is also subject to taxes in foreign jurisdictions in which it operates.

Inspirato Incorporated is subject to income taxes predominately in the U.S. The Company provides for income taxes and the related accounts under the asset and liability method. Income tax expense, deferred tax assets and liabilities and reserves for unrecognized tax benefits reflect management’s best assessment of estimated current and future taxes to be paid. The relevant tax laws are often complex and may be subject to different interpretations.

Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities and are measured using the enacted tax rates expected to be in effect during the year in which the basis difference reverses. In evaluating the ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company

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considers all available positive and negative evidence. If based upon all available positive and negative evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is established. The valuation allowance may be reversed in a subsequent reporting period if the Company determines that it is more likely than not that all or part of the deferred tax asset will become realizable.

The Company’s interpretations of tax laws are subject to review and examination by various taxing authorities and jurisdictions where the Company operates, and disputes may occur regarding its view on a tax position. These disputes over interpretations with the various tax authorities may be settled by audit, administrative appeals or adjudication in the court systems of the tax jurisdictions in which the Company operates. The Company regularly reviews whether it may be assessed additional income taxes as a result of the resolution of these matters, and the Company records additional reserves as appropriate. In addition, the Company may revise its estimate of income taxes due to changes in income tax laws, legal interpretations and business strategies. The Company recognizes the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The Company records interest and penalties related to uncertain income tax positions in income tax expense. For additional information regarding income taxes, see Note 7.

(i) Warrant Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instru