SEC Filing | Inspirato Inc.

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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 June 30, 2023

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

For the transition period from to

Commission File Number: 001-39791

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	ISPO	The Nasdaq Global Market
Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 per share	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 August 3, 2023, the registrant had 68,141,929 shares of Class A Common Stock, 58,483,781 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 (Deficit)	6
	Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

PART II.	OTHER INFORMATION	34
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	37
SIGNATURES		39

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), 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 Form 10-Q may include, for example, statements about:

●

Our anticipated partnership with Capital One;

●

Our ability to consummate the convertible note financing and satisfy applicable closing conditions, including the entry into a commercial agreement with Capital One on acceptable terms and the receipt of necessary shareholder approval;

●

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 or other product 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 natural disasters, acts of war, terrorism, widespread global pandemics or illness, including the COVID-19 pandemic, on our business and the actions we may take in response thereto;

●

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 our reduction in workforce on our expenses;

●

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 Risk Factors in Part II, Item 1A of this Form 10-Q and in Part I, Item 1A of our most recent Annual Report on Form 10-K (“Form 10-K”) filed with the Securities and Exchange Commission (“SEC”), those discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I, Item 2 of this Form 10-Q and in Part II, Item 7 of our Form 10-K and those discussed in other documents we file with the SEC.

Investors should consider the risks and uncertainties described herein and should not place undue reliance on any forward-looking statements. We do not undertake, and specifically disclaim, any obligation to publicly release the results of any revisions that may be made to any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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Although we believe that the expectations reflected in any forward-looking statements are reasonable, we cannot guarantee future results, events, levels of activity, performance or achievements. We do not assume responsibility for the accuracy and completeness of any forward-looking statements. We assume no responsibility for updating forward-looking information contained or incorporated by reference herein or in any documents we file with the SEC, except as required by law.

Should one or more of the risks or uncertainties described herein or in any documents we file with the SEC occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

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 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

(in thousands, except par value)


	December 31,		June 30,
	2022		2023
			(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	80,278	$	44,383
Restricted cash		1,661		1,662
Accounts receivable, net		3,140		3,453
Accounts receivable, net – related parties		663		275
Prepaid member travel		19,915		22,185
Prepaid expenses		10,922		12,053
Other current assets		302		1,037
Total current assets		116,881		85,048
Property & equipment, net		18,298		18,711
Goodwill		21,233		21,233
Right-of-use assets		271,702		234,676
Other noncurrent assets		2,253		5,756
Total assets	$	430,367	$	365,424
Liabilities
Current liabilities
Accounts payable	$	30,611	$	31,257
Accrued liabilities		5,475		1,668
Deferred revenue, current		167,733		160,016
Lease liabilities, current		74,299		65,913
Total current liabilities		278,118		258,854
Deferred revenue, noncurrent		18,321		19,084
Lease liabilities, noncurrent		208,159		209,914
Warrants		759		483
Total liabilities		505,357		488,335

Commitments and contingencies (Note 12)

Equity (Deficit)
Class A common stock, par value $0.0001 per share, 1,000,000 shares authorized, 62,716 and 67,887 shares issued and outstanding as of December 31, 2022, and June 30, 2023, respectively		6		7
Class V common stock, $0.0001 par value, 500,000 shares authorized, 61,360 and 58,555 shares issued and outstanding as of December 31, 2022, and June 30, 2023, respectively		6		6
Additional paid-in capital		245,652		248,346
Accumulated deficit		(233,931)		(260,343)
Total equity (deficit) excluding noncontrolling interest		11,733		(11,984)
Noncontrolling interests (Note 16)		(86,723)		(110,927)
Total deficit		(74,990)		(122,911)
Total liabilities and deficit	$	430,367	$	365,424

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INSPIRATO INCORPORATED

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited)

(in thousands, except per share amounts)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2023		2022		2023
Revenue	$	83,698	$	84,092	$	165,771	$	175,792
Cost of revenue (including depreciation of $495 and $870 in 2022, and $804 and $1,731 in 2023, respectively)		57,402		64,686		104,711		124,738
Asset impairment		—		30,054		—		30,054
Gross margin		26,296		(10,648)		61,060		21,000
General and administrative (including equity-based compensation of $2,431 and $2,833 in 2022, and $3,731 and $4,388 in 2023, respectively)		16,250		17,885		33,944		35,995
Sales and marketing		11,061		7,954		21,203		14,601
Operations		11,179		6,419		20,853		14,624
Technology and development		2,876		3,007		5,684		6,369
Depreciation and amortization		694		1,015		1,353		1,994
Interest, net		192		(414)		331		(527)
Warrant fair value (gains) losses		(11,126)		(380)		6,544		(276)
Other expense, net		—		321		—		378
Loss and comprehensive loss before income taxes		(4,830)		(46,455)		(28,852)		(52,158)
Income tax expense		206		217		387		417
Net loss and comprehensive loss		(5,036)		(46,672)		(29,239)		(52,575)
Net loss and comprehensive loss attributable to noncontrolling interests (Note 16)		2,969		23,252		14,870		26,259
Net loss and comprehensive loss attributable to Inspirato Incorporated	$	(2,067)	$	(23,420)	$	(14,369)	$	(26,316)

Basic and diluted weighted average Class A shares outstanding		52,400		67,341		47,384		65,975
Basic and diluted net loss attributable to Inspirato Incorporated per Class A share	$	(0.04)	$	(0.35)	$	(0.30)	$	(0.40)

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INSPIRATO INCORPORATED

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT) (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, 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)
Net loss and comprehensive 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)
Net loss and comprehensive 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)

Balance at January 1, 2023	—	$	—	—	$	—	62,716	$	6	61,360	$	6	$	245,652	$	(233,931)	$	(86,723)	$	(74,990)
Cumulative effect of change in accounting principle	—		—	—		—	—		—	—		—		—		(96)		(108)		(204)
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(2,896)		(3,007)		(5,903)
Equity-based compensation	—		—	—		—	—		—	—		—		657		—		—		657
Issuance of common stock upon exercise of stock option awards, net of shares withheld for income taxes	—		—	—		—	1,827		—	—		—		438		—		—		438
Issuance of Class A shares upon conversion of Class V shares	—		—	—		—	2,157		1	(2,157)		—		(1,481)		—		1,480		—
Balance at March 31, 2023	—	$	—	—	$	—	66,700	$	7	59,203	$	6	$	245,266	$	(236,923)	$	(88,358)	$	(80,002)
Net loss and comprehensive loss	—		—	—		—	—		—	—		—		—		(23,420)		(23,252)		(46,672)
Equity-based compensation	—		—	—		—	—		—	—		—		3,731		—		—		3,731
Issuance of common stock upon exercise of stock option awards, net of shares withheld for income taxes	—		—	—		—	539		—	—		—		32		—		—		32
Issuance of Class A shares upon conversion of Class V shares	—		—	—		—	648		—	(648)		—		(683)		—		683		—
Balance at June 30, 2023	—	$	—	—	$	—	67,887	$	7	58,555	$	6	$	248,346	$	(260,343)	$	(110,927)	$	(122,911)

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INSPIRATO INCORPORATED

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)


	Six months ended June 30,
	2022		2023
Cash flows from operating activities:
Net loss and comprehensive loss	$	(29,239)	$	(52,575)
Adjustments to reconcile net loss and comprehensive loss to net cash provided by (used in) operating activities:
Depreciation and amortization		2,223		3,725
Loss on disposal of fixed assets		—		588
Warrant fair value losses (gains)		6,544		(276)
Asset impairment		—		30,054
Equity‑based compensation		2,833		4,388
Amortization of right-of-use assets		45,841		42,362
Changes in operating assets and liabilities:
Accounts receivable, net		613		(517)
Accounts receivable, net – related parties		(322)		388
Prepaid member travel		(3,675)		(2,270)
Prepaid expenses		(3,625)		(1,131)
Lease liability		(46,155)		(41,699)
Other assets		126		(1,192)
Accounts payable		(697)		(392)
Accrued liabilities		(1,237)		(3,807)
Deferred revenue		359		(6,954)
Net cash used in operating activities		(26,411)		(29,308)

Cash flows from investing activities:
Development of internal-use software		(489)		(4,556)
Purchase of property and equipment		(4,619)		(2,500)
Net cash used in investing activities		(5,108)		(7,056)

Cash flows from financing activities:
Repayments of debt		(13,267)		—
Proceeds from debt		14,000		—
Proceeds from reverse recapitalization		90,070		—
Payments of reverse recapitalization costs		(23,899)		—
Proceeds from issuance of Class A common stock		5,000		—
Payments of employee taxes for stock-based award exercises and vestings		(117)		(837)
Proceeds from option exercises		23		1,307
Distributions		(183)		—
Net cash provided by financing activities		71,627		470

Net increase (decrease) in cash, cash equivalents, and restricted cash		40,108		(35,894)
Cash, cash equivalents, and restricted cash – beginning of period		82,953		81,939
Cash, cash equivalents, and restricted cash – end of period	$	123,061	$	46,045
Supplemental cash flow information
Cash paid for interest	$	285	$	—
Cash paid for income taxes		—		59
Significant noncash transactions:
Accounting principle adoption		—		204
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		324		1,038
Operating lease right-of-use assets exchanged for lease obligations		306,912		35,068
Conversion of deferred rent and prepaid rent to right-of-use assets		6,831		—

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INSPIRATO INCORPORATED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) Nature of Business

Inspirato Incorporated and its subsidiaries (the “Company”, also referred to as “Inspirato”, “we”, “us”, and “our”) is a subscription-based luxury travel company that provides exclusive access to a managed and controlled portfolio of curated vacation options, delivered through an innovative model designed to ensure the service, certainty, and value that discerning customers demand. The Inspirato portfolio includes branded luxury vacation homes, accommodations at five-star hotel and resort partners, and custom travel experiences.

The Company was initially incorporated in Delaware on July 31, 2020 as Thayer Ventures Acquisition Corporation (“Thayer”), a special purpose acquisition company. On February 11, 2022 (the “Closing Date”), the Company 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 a subsidiary of the Company merged with and into Inspirato LLC (the “Business Combination”), resulting in Inspirato LLC becoming a subsidiary of the Company. The Company 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 consolidated financial statements presented herein represent the operating results of Inspirato LLC before and after the Business Combination.

(2) Significant Accounting Policies

(a) Basis of Presentation

These unaudited consolidated financial statements are 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 consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company’s 2022 Form 10-K.

These unaudited consolidated financial statements and the accompanying notes (collectively, the “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, 2023 and the results of operations for the three and six months ended June 30, 2022 and 2023. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any other future interim or annual period.

The historical equity of Inspirato LLC was previously 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 unit 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 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.

All amounts presented in these Consolidated Financial Statements are expressed in thousands of U.S. dollars, except share and per share amounts and unless otherwise noted.

Refer to Note 2, Significant Accounting Policies to the consolidated financial statements in the Company’s Form 10-K for a summary and discussion of the Company’s significant accounting policies, except as updated below.

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(b) Principles of Consolidation

For the periods after February 11, 2022, the Consolidated Financial Statements comprise the accounts of the Company, 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 and as such, Inspirato LLC was evaluated under the voting interest model. As Inspirato Incorporated has the right to appoint a majority of the 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 the 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 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 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, incremental borrowing rates as they relate to leases, contingencies, allowance accounts, lease revenue forecasts as it relates to impairment, and fair value measurements related to stock-based compensation.

(d) Goodwill

The Company performs its annual impairment review of goodwill at December 1 and when a triggering event occurs between annual impairment tests. At June 30, 2023, management determined that a triggering event occurred in relation to the impairment of asset groups related to the Company’s operating leases. The Company performed a qualitative assessment and determined based on that assessment that it is not more likely than not that the fair value of the Company’s reporting unit is less than its carrying value. As such, no goodwill impairment was identified as a result of this interim test and a quantitative impairment test is not required.

(e) Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. An adjustment has been made to the Consolidated Statements of Cash Flows for the six months ended June 30, 2022, to separately identify amortization of Right of Use Assets and change in Lease Liability. This change in classification does not affect previously reported cash flows from operating activities in the Consolidated Statements of Cash Flows.

(f) Recently Adopted Accounting Pronouncements

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including accounts receivable.

The Company adopted Accounting Standards Codification (“ASC”) 326 using the modified retrospective method for all financial assets measured at amortized cost. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $0.2 million as of January 1, 2023 for the cumulative effect of adopting ASC 326.

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(3) Reverse Recapitalization

On February 11, 2022, Inspirato LLC and Thayer consummated the Business Combination, resulting in Inspirato LLC becoming a subsidiary of the Company. The resulting Company organizational structure is commonly referred to as an umbrella partnership corporation (or “UP-C”) structure. This organizational structure allows certain Continuing Inspirato Members (as defined below), to retain their equity ownership directly in Inspirato LLC.

The Business Combination was accounted for as a reverse recapitalization in accordance with GAAP; management determined Inspirato LLC was not a variable interest entity (see Note 2), and as result, identified Inspirato LLC as the accounting acquirer of the Business Combination. The Company was treated as the “acquired” company for accounting purposes. This determination is primarily based on the fact that subsequent to the Business Combination, the Continuing Inspirato Members have a majority of the voting power of the Company, and Inspirato LLC’s operations comprise all of the ongoing operations of the Company. Following the Business Combination, Inspirato LLC is managed by a board of managers designated by Inspirato Incorporated and the holders of the noncontrolling interests in Inspirato LLC, who also hold noneconomic voting interests in Inspirato Incorporated through their ownership of Class V Common Stock of Inspirato Incorporated (“Continuing Inspirato Members”).

In connection with the Business Combination, among other things, (i) the Company changed its name to “Inspirato Incorporated”, (ii) each of the then issued and outstanding Class A and Class B common stock of Thayer, converted automatically, on a one-for-one basis, into a share of Class A Common Stock of Inspirato Incorporated, (iii) each of the then issued and outstanding warrants of Thayer converted automatically into a redeemable warrant to purchase one share of Class A Common Stock, and (iv) each of the then issued and outstanding units of Thayer that had not been previously separated into the underlying Thayer Class A Common Stock and Thayer public warrant upon the request of the holder thereof, were cancelled and entitled the holder thereof to one share of Inspirato Class A Common Stock and one-half of one Inspirato warrant to purchase Class A Common Stock issued in connection with the IPO of Thayer (the “Public Warrants”).

As a result of the Business Combination, each outstanding unit of Inspirato LLC was cancelled and each unitholder received either (i) a number of shares of Class A Common Stock equal to 37.2275 (the “Exchange Ratio”) for each unit of Inspirato LLC owned and certain rights under a tax receivable agreement (the “Tax Receivable Agreement”) or (ii) a number of new common units of Inspirato LLC (“New Common Units”) equal to the Exchange Ratio, an equal number of shares of Class V Common Stock, which have no economic value, but entitles the holder thereof to one vote per share, and certain rights under the Tax Receivable Agreement. This exchange resulted in Inspirato Incorporated owning 41.2% of the issued and outstanding units of Inspirato LLC at the Closing and the Continuing Inspirato Members owning a noncontrolling interest of Inspirato LLC. In addition, options to purchase Inspirato LLC units were converted into options to purchase shares of Class A Common Stock at the Exchange Ratio.

Accordingly, the Consolidated Financial Statements reflect the continuation of the financial statements of Inspirato LLC with the Business Combination being treated as the equivalent of Inspirato LLC issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company were recognized as of the Business Combination at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination are presented as those of Inspirato LLC and the accumulated deficit of Inspirato LLC has been carried forward after the Closing.

All periods prior to the Business Combination have been retrospectively adjusted using the Exchange Ratio for the equivalent number of shares outstanding immediately after the Business Combination to give effect to the reverse recapitalization.

In connection with the Closing, the Company raised $90 million of gross proceeds including $88 million from the issuance of 8.8 million shares of Class A Common Stock to a number of accredited investors pursuant to a separate subscription agreement entered into on June 30, 2021, as amended. The Company incurred $25 million in transaction costs during the six months ended June 30. 2022, consisting of banking, legal and other professional fees, of which $24 million was recorded as a reduction to additional paid-in capital and the remaining $1.1 million was expensed in the consolidated statement of operations and comprehensive loss. The total net cash proceeds to the Company as a result of the Business Combination was $66 million.

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(4) Revenue

Revenues are as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2023		2022		2023
Travel	$	48,136	$	48,031	$	97,909	$	103,159
Subscription		35,562		36,038		67,728		72,549
Other		—		23		134		84
Total	$	83,698	$	84,092	$	165,771	$	175,792

As of December 31, 2022, deferred revenue was $186 million. Significant movements in deferred revenue during the six months ended June 30, 2023 consisted of increases due to payments received prior to travel by members and prepaid subscriptions, offset by decreases due to revenue recognized upon completion of trips and the passage of time for subscriptions. During the six months ended June 30, 2023, approximately $103 million of revenue recognized was included in the balance of deferred revenue as of December 31, 2022.

The Company recognizes assets and liabilities related to contracts with its customers. Assets include commissions paid to the Company’s sales staff for contracts with initial terms greater than one year; these costs are capitalized and amortized over the life of the contract and are included within other current assets and other noncurrent assets on the consolidated balance sheet. Liabilities included deferred revenue as discussed above. Assets and liabilities related to contracts with customers are as follows:


	December 31,		June 30,
	2022		2023
Assets:
Accounts receivable, net	$	3,140	$	3,453
Other current assets		—		623
Other noncurrent assets		—		688

Liabilities:
Deferred revenue, current	$	167,733	$	160,016
Deferred revenue, noncurrent		18,321		19,084

(5)

Prepaid Expenses and Prepaid Member Travel

Prepaid expenses

Prepaid expenses are as follows:


	December 31,		June 30,
	2022		2023
Property operations	$	4,299	$	4,386
Software		3,601		2,807
Operating supplies		1,441		1,356
Insurance		1,581		3,504
Total	$	10,922	$	12,053

Prepaid Member Travel

Prepaid member travel of $20 million and $22 million at December 31, 2022 and June 30, 2023, respectively, includes deposits for future member travel.

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(6) Property and Equipment

Property and equipment are as follows:


	Useful life	December 31,		June 30,
	(years)	2022		2023
Residence leasehold improvements	3	$	15,302	$	17,012
Internal-use software	3		13,559		15,262
Corporate office leasehold improvements	3		5,156		5,156
Computer equipment	3		1,436		1,100
Furniture, fixtures, and equipment	5		1,208		1,214
Residence vehicles	5		806		620