424B3 1 d205623d424b3.htm 424B3 424B3
Prospectus Supplement No. 1    Filed Pursuant to Rule 424(b)(3)
(to prospectus dated September 20, 2021)    Registration No. 333-256133

WeWork Inc.

646,133,747 Shares of Class A Common Stock

 

 

This prospectus supplement is being filed to update and supplement the information contained in the prospectus dated September 20, 2021 (the “Prospectus”), related to the issuance by us of up to 646,133,747 shares of our Class A common stock, par value $0.0001 per share (“Class A common stock”), with the information contained in our (i) Quarterly Report on Form 10-Q, filed with the Securities and Exchange Commission (“SEC”) on November 15, 2021 (the “Quarterly Report”), and (ii) Amendment No. 2 to Current Report on Form 8-K, filed with the SEC on November 15, 2021 (the “Current Report”). Accordingly, we have attached the Quarterly Report and the Current Report to this prospectus supplement and the Quarterly Report and the Current Report are incorporated by reference into this prospectus supplement.

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

Our Class A common stock and warrants are traded on the New York Stock Exchange under the symbols “WE” and “WE WS,” respectively. On November 12, 2021, the closing price of our Class A common stock was $9.18 per share and the closing price of our warrants was $2.52 per share.

 

 

Investing in our securities involves risks. See “Risk Factors” beginning on page 31 of the Prospectus and in any applicable prospectus supplement.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

 

 

The date of this prospectus supplement is November 15, 2021.


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

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

For the quarterly period ended September 30, 2021

OR

 

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

For the transition period from                      to                     

001-39419

(Commission File Number)

 

 

WeWork Inc.

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   85-1144904

(State or Other Jurisdiction of

Incorporation)

 

(IRS Employer

Identification No.)

575 Lexington Avenue

New York, NY 10022

(Address of Principal Executive Offices) (Zip Code)

(646) 389-3922

(Registrant’s Telephone Number, Including Area Code)

BowX Acquisition Corp.

2400 Sand Hill Rd., Suite 200

Menlo Park, CA 94025

(Former Name or Former Address, 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, par value $0.0001 per share   WE   The New York Stock Exchange
Warrants, each whole warrant exercisable for one share of Class A common stock   WE WS   The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of 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 November 15, 2021, 696,492,801 shares of Class A common stock, par value $0.0001 per share, and 19,938,089 shares of Class C common stock, par value $0.0001 per share, were issued and outstanding, respectively.

 

 

 


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

Quarterly Report on Form 10-Q

 

         Page  

PART I. FINANCIAL INFORMATION

 

Item 1.

  Condensed Consolidated Financial Statements      1  
  Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020      1  
  Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2021 and for the Three Months Ended September 30, 2020 and the Period from May  19, 2020 (Inception) through September 30, 2020      2  
  Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2021, and for the Three Months Ended September  30, 2020 and the Period from May 19, 2020 (Inception) through September 30, 2020      3  
  Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and for the Period from May 19, 2020 (Inception) through September 30, 2020      4  
  Notes to Unaudited Condensed Consolidated Financial Statements      5  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      18  

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      22  

Item 4.

  Controls and Procedures      23  

PART II. OTHER INFORMATION

 

Item 1.

  Legal Proceedings      23  

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities      23  

Item 6.

  Exhibits      24  

 

 

1


PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     September 30,
2021
    December 31,
2020
 
              
     (Unaudited)        

Assets:

    

Current assets:

    

Cash

   $ 242,155     $ 921,049  

Prepaid expenses

     240,705       372,412  
  

 

 

   

 

 

 

Total current assets

     482,860       1,293,461  

Investments held in Trust Account

     483,078,641       483,227,051  
  

 

 

   

 

 

 

Total assets

   $ 483,561,501     $ 484,520,512  
  

 

 

   

 

 

 

Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit:

    

Current liabilities:

    

Accounts payable

   $ 376,731     $ 315  

Accrued expenses

     5,791,175       76,695  

Accrued income tax

     —         12,010  

Franchise tax payable

     73,311       122,242  
  

 

 

   

 

 

 

Total current liabilities

     6,241,217       211,262  

Deferred underwriting commissions in connection with the initial public offering

     16,905,000       16,905,000  

Warrant liabilities

     16,168,533       13,292,400  
  

 

 

   

 

 

 

Total liabilities

     39,314,750       30,408,662  
    

Commitments and Contingencies (Note 5)

    
    

Class A common stock subject to possible redemption, $0.0001 par value; 48,300,000 shares at $10.00 per share as of September 30, 2021 and December 31, 2020

     483,000,000       483,000,000  
    

Stockholders’ Deficit:

    

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding as of September 30, 2021 and December 31, 2020

     —         —    

Class A common stock, $0.0001 par value; 87,500,000 shares authorized as of September 30, 2021 and December 31, 2020

     —         —    

Class B common stock, $0.0001 par value; 12,500,000 shares authorized; 12,075,000 shares issued and outstanding as of September 30, 2021 and December 31, 2020

     1,208       1,208  

Accumulated deficit

     (38,754,457     (28,889,358
  

 

 

   

 

 

 

Total stockholders’ deficit

     (38,753,249     (28,888,150
  

 

 

   

 

 

 

Total Liabilities, Class A Common Stock Subject to Possible Redemption and Stockholders’ Deficit

   $ 483,561,501     $ 484,520,512  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     For the Three Months Ended     For the Nine Months Ended    

For the Period from
May 19, 2020 (Inception)

 
     September 30, 2021     September 30, 2020     September 30, 2021     through September 30, 2020  

Operating expenses

        

General and administrative expenses

   $ 2,815,163     $ 92,911     $ 6,905,678     $ 93,312  

Franchise tax expense

     50,411       49,315       149,589       72,379  
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (2,865,574     (142,226     (7,055,267     (165,691

Change in fair value of warrant liabilities

     9,794,399       (1,243,733     (2,876,133     (1,243,733

Offering costs associated with private placement warrants

     —         (9,344     —         (9,344

Net gain from investments held in Trust Account

     6,937       83,554       66,301       83,554  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense

     6,935,762       (1,311,749     (9,865,099     (1,335,214

Income tax expense

     —         2,347       —         2,347  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 6,935,762     $ (1,314,096   $ (9,865,099   $ (1,337,561
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of Class A common stock, basic and diluted

     48,300,000       28,464,130       48,300,000       20,458,594  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net income (loss) per share, Class A common stock

   $ 0.11     $ (0.03   $ (0.16   $ (0.04
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding of Class B common stock, basic and diluted

  

 

12,075,000

 

    11,338,859       12,075,000       11,102,930  
  

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted net income (loss) per share, Class B common stock

   $ 0.11     $ (0.03   $ (0.16   $ (0.04
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of this unaudited condensed consolidated financial statements.

 

2


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three and Nine Months Ended September 30, 2021

 

     Class B Common Stock      Additional Paid-In      Accumulated     Total
Stockholders’
 
     Shares      Amount      Capital      Deficit     Deficit  
                                   

Balance - December 31, 2020

     12,075,000      $ 1,208      $ —        $  (28,889,358   $  (28,888,150

Net loss

     —          —          —          (5,617,146     (5,617,146
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance - March 31, 2021 (Unaudited)

     12,075,000        1,208        —          (34,506,504     (34,505,296

Net loss

     —          —          —          (11,183,715     (11,183,715
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance - June 30, 2021 (Unaudited)

     12,075,000        1,208        —          (45,690,219     (45,689,011

Net income

     —          —          —          6,935,762       6,935,762  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Balance - September 30, 2021 (Unaudited)

     12,075,000      $ 1,208      $ —        $  (38,754,457   $  (38,753,249
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

For the Three Months Ended September 30, 2020, and the Period from May 19, 2020 (Inception) through September 30, 2020

 

                               Total  
     Class B Common Stock      Additional Paid-In     Accumulated     Stockholders’  
     Shares      Amount      Capital     Deficit     Equity (Deficit)  
                                  

Balance - May 19, 2020 (inception)

     —        $ —        $ —       $ —       $ —    

Issuance of Class B common stock to initial stockholders

     12,075,000        1,208        23,792       —         25,000  

Net loss

     —          —          —         (23,465     (23,465
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance - June 30, 2020 (Unaudited)

     12,075,000      $ 1,208      $ 23,792     $ (23,465   $ 1,535  

Excess cash received over the fair value of the private warrants

     —          —          3,031,600       —         3,031,600  

Offering costs associated with public warrants

           (964,454     —         (964,454

Accretion on Class A common stock subject to possible redemption amount

     —          —          (2,090,938     (24,079,042     (26,169,980

Net loss

     —          —          —         (1,314,096     (1,314,096
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance - September 30, 2020 (Unaudited)

     12,075,000      $ 1,208      $ —       $ (25,416,603   $ (25,415,395
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of this unaudited condensed consolidated financial statements.

 

3


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     For the Nine Months Ended
September 30, 2021
    For the Period from
May 19, 2020 (Inception)
through September 30, 2020
 
              

Cash Flows from Operating Activities:

    

Net loss

   $ (9,865,099   $ (1,337,561

Adjustments to reconcile net loss to net cash used in operating activities:

    

General and administrative expenses paid by related party

     —         381  

Change in fair value of warrant liabilities

     2,876,133       1,243,733  

Offering costs associated with private placement warrants

     —         9,344  

Net gain from investments held in Trust Account

     (66,301     (83,554

Changes in operating assets and liabilities:

    

Prepaid expenses

     131,707       (456,593

Accounts payable

     376,416       6,115  

Accrued expenses

     5,714,480       (5,000

Accrued income tax

     (12,010     2,347  

Franchise tax payable

     (48,931     72,379  
  

 

 

   

 

 

 

Net cash used in operating activities

     (893,605     (548,409
  

 

 

   

 

 

 

Cash Flows from Investing Activities

    

Interest released from Trust Account

     214,711       —    

Cash deposited in Trust Account

     —         (483,000,000
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     214,711       (483,000,000
  

 

 

   

 

 

 

Cash Flows from Financing Activities:

    

Repayment of note payable to related party

     —         (195,475

Proceeds received from initial public offering, gross

     —         483,000,000  

Proceeds received from private placement

     —         11,660,000  

Offering costs paid

     —         (9,943,684
  

 

 

   

 

 

 

Net cash provided by financing activities

     —         484,520,841  
  

 

 

   

 

 

 

Net (decrease) increase in cash

     (678,894     972,432  

Cash - beginning of the period

     921,049       —    
  

 

 

   

 

 

 

Cash - end of the period

   $ 242,155     $ 972,432  
  

 

 

   

 

 

 

Supplemental Cash Flow Information

    

Cash paid for income taxes

   $ 34,957     $ —    
  

 

 

   

 

 

 

Supplemental disclosure of noncash activities:

    

Offering costs paid by related party in exchange for issuance of Class B common stock

   $ —       $ 25,000  
  

 

 

   

 

 

 

Offering costs included in accrued expenses

   $ —       $ 75,000  
  

 

 

   

 

 

 

Offering costs included in note payable

   $ —       $ 195,094  
  

 

 

   

 

 

 

Deferred underwriting commissions in connection with the initial public offering

   $ —       $ 16,905,000  
  

 

 

   

 

 

 

The accompanying notes are an integral part of this unaudited condensed consolidated financial statements.

 

4


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of Organization and Business Operations

Organization and General

BowX Acquisition Corp. (the “Company”, or BowX), predecessor to WeWork Inc. was incorporated as a Delaware corporation on May 19, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination (“Business Combination”) with one or more operating businesses or entities that it has not yet selected. The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company has neither engaged in any operations nor generated revenue to date. As of September 30, 2021, the Company was an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012 (the “JOBS Act”).

As of September 30, 2021, the Company had not commenced any operations. All activity for the period from May 19, 2020 (inception) through September 30, 2021, had been related to the Company’s formation and the initial public offering (“Initial Public Offering”) described below, and since the offering, the search for a prospective Business Combination. The Company will not generate any operating revenue until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income on investments held in the Trust Account (as defined below).

Sponsor and Financing

The Company’s sponsor is BowX Sponsor, LLC, a Delaware limited liability company of which Vivek Ranadivé, the Company’s Chairman of the Board and Co-Chief Executive Officer, and Murray Rode, the Company’s Co-Chief Executive Officer and Chief Financial Officer, are the managing members (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on August 4, 2020. On August 7, 2020, the Company consummated its Initial Public Offering of 42,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $420.0 million, and incurring offering costs of approximately $23.6 million, inclusive of $14.7 million in deferred underwriting commissions (Note 5). On August 10, 2020, the underwriter exercised the over-allotment option to purchase an additional of 6,300,000 Units at the Initial Public Offering price at $10.00 per Unit and the Company consummated the sale of such Units on August 13, 2020, generating additional gross proceeds of $63.0 million, and incurring additional offering costs of approximately $3.5 million, inclusive of approximately $2.2 million in deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 6,933,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to certain of the Company’s initial stockholders and certain funds and accounts managed by subsidiaries of BlackRock, Inc. (the “Private Placement Warrants Purchasers”), generating gross proceeds of $10.4 million (Note 4), and incurring offering costs of approximately $8,000. In connection with the consummation of the sale of additional Units pursuant to the underwriter’s over-allotment option on August 13, 2020, the Company sold an additional 840,000 Private Placement Warrants to the Private Placement Warrants Purchasers, generating additional gross proceeds of approximately $1.3 million.

Trust Account

Upon the closing of the Initial Public Offering and the Private Placement (including the exercise of the over-allotment option), $483.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and Private Placement Warrants in the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and held as cash or invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

 

 

5


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Initial Business Combination

The Company’s management had broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering, although substantially all of the net proceeds of the Initial Public Offering were intended to be generally applied toward completing a Business Combination. The Company’s stockholders approved the Business Combination with WeWork Inc. (“WeWork”), the leading flexible space provider. On October 19, 2021, BowX held a special meeting of its stockholders (the “Special Meeting”) in connection with the Business Combination. BowX’s stockholders voted to approve its business combination with WeWork.

The Company, after signing a definitive agreement for a Business Combination, was to either (i) seek stockholder approval of the Business Combination at a meeting called for such purpose in connection with which Public Stockholders may seek to redeem their Public shares, regardless of whether they vote for or against the Business Combination or do not vote at all, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes, or (ii) provide the Public Stockholders with the opportunity to sell their shares to the Company by means of a tender offer for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account calculated as of two business days prior to the consummation of the initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes. These Public Shares have been recorded at a redemption value and classified as temporary equity, in accordance with Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” Prior to the Special Meeting, a total of 15,006,786 shares of Class A Common Stock were presented for redemption for cash at a price of $10.00 per share in connection with the Special Meeting (the “Redemptions”).

Consummated Business Combination

On October 20, 2021, the Company, BowX Merger Subsidiary Corp. (“Merger Sub”), a newly formed wholly owned subsidiary of the Company, and WeWork Inc., a Delaware corporation, consummated the previously announced merger pursuant to that certain Agreement and Plan of Merger, dated March 25, 2021. Merger Sub merged with and into New WeWork Inc., a Delaware corporation formerly known as WeWork Inc. (“Prior WeWork”, and such merger sometimes referred to as the “First Merger”), with Prior WeWork surviving the First Merger as a wholly owned subsidiary of BowX (Prior WeWork, in its capacity as the surviving corporation of the First Merger, is sometimes referred to as the “Surviving Corporation”). Immediately following and as part of the same overall transaction as the First Merger, the Surviving Corporation merged with and into BowX Merger Subsidiary II, LLC (“Merger Sub II”), a Delaware limited liability company and a direct wholly owned subsidiary of BowX (the “Second Merger” and, together with the First Merger and with the other transactions described in the Merger Agreement, the “Business Combination”), with Merger Sub II being the surviving entity of the Second Merger. In connection with the closing of the Business Combination, BowX changed its name to WeWork Inc. See the Form 8-K, filed with the SEC on October 26, 2021, for additional information.

Note 2—Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected through December 31, 2021 or for any future periods.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10K/A filed with the SEC on May 12, 2021.

 

6


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Revision to Previously Reported Financial Statements

In preparation of the Company’s unaudited condensed consolidated financial statements as of and for quarterly period ended September 30, 2021, the Company concluded it should revise its financial statements to classify all Class A common stock subject to possible redemption in temporary equity. In accordance with the SEC and its staff’s guidance on redeemable equity instruments, ASC 480, paragraph 10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. The Company had previously classified a portion of its Class A common stock in permanent equity, or total stockholders’ equity. Although the Company did not specify a maximum redemption threshold, its charter currently provides that the Company will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001. Previously the Company did not consider redeemable stock classified as temporary equity as part of net tangible assets. Effective with these financial statements, the Company revised this interpretation to include temporary equity in net intangible assets. Accordingly, effective with this filing, the Company presents all redeemable Class A common stock as temporary equity and recognizes accretion from the initial book value to redemption value at the time of its Initial Public Offering (including exercise of the over-allotment option) and in accordance with ASC 480. The change in the carrying value of the redeemable shares of Class A common stock at the Initial Public Offering and over-allotment resulted in a decrease of approximately $5.1 million in additional paid-in capital and an increase of approximately $20.9 million to accumulated deficit, as well as a reclassification of 2,597,621 shares of Class A common stock from permanent equity to temporary equity. The Company will present this revision in a prospective manner in all future filings. Under this approach, the previously issued financial statement included as an exhibit to the Company’s Form 8-K filed with the SEC on August 13, 2020, and Form 10-Qs will not be amended, but historical amounts presented in the current and future filings will be recast to be consistent with the current presentation.

The impact of the revision to the balance sheet as of December 31, 2020, and the unaudited condensed consolidated balance sheets as of September 30, 2020, March 31, 2021, and June 30, 2021, is a reclassification of $33.9 million, $30.4 million, $39.5 million and $50.7 million, respectively, from total stockholders’ equity to Class A common stock subject to possible redemption. There is no impact to the reported amounts for total assets, total liabilities, cash flows or net income (loss). In connection with the change in presentation for the Class A common stock subject to possible redemption, the Company has revised its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares share pro rata in the income and losses of the Company.

Principles of Consolidation

The condensed consolidated financial statements of the Company include its wholly owned subsidiary in connection with the planned merger. All inter-company accounts and transactions are eliminated in consolidation.

Emerging Growth Company

As an emerging growth company as of September 30, 2021, the Company could take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an

 

7


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

emerging growth company, was able to adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of unaudited 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 unaudited condensed consolidated financial statements and the reported amounts of expenses during the reporting period. One of the more significant accounting estimates included in these financial statements are the determination of the fair value of the warrant liabilities. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents as of September 30, 2021, and December 31, 2020.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times, may exceed the Federal depository insurance coverage of $250,000, and investments held in Trust Account. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. The Company’s investments held in the Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments in a money market funds that comprise only U.S. treasury securities money market funds.

Investments Held in the Trust Account

The Company’s portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the Company’s investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the Company’s investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in net gain from investments held in Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities which qualify as financial instruments under the FASB ASC Topic 820, “Fair Value Measurements,” equal or approximate the carrying amounts represented in the condensed balance sheets.

Fair Value Measurement

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

 

8


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers consist of:

 

   

Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;

 

   

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

 

   

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

Offering Costs Associated with Initial Public Offering

Offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the Initial Public Offering that were directly related to the Initial Public Offering. Offering costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis, compared to total proceeds received. Offering costs associated with warrant liabilities were expensed as incurred, presented as non-operating expenses in the condensed statements of operations. Offering costs associated with the Class A common stock were charged against the carrying value of the Class A common stock, and offering costs associated with the public warrants were charged to stockholders’ equity upon the completion of the Initial Public Offering. The Company classifies deferred underwriting commissions as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Derivative 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 shares purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

The Company accounts for its warrants issued in connection with the Private Placement as derivative warrant liabilities in accordance with ASC 815. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed consolidated statements of operations. The fair value of warrants issued by the Company in connection with the Private Placement has been estimated by reference to the Public Warrant trading prices at each measurement date after the units split. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

 

9


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021, and December 31, 2020, 48,300,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ deficit section of the Company’s condensed consolidated balance sheets.

Effective with the closing of the Initial Public Offering (including exercise of the over-allotment option), the Company recognized the accretion from initial book value to redemption amount, which resulted in charges against additional paid-in capital (to the extent available) and accumulated deficit.

Net Income (Loss) per Share of Common Stock

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” The Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average number of common stock outstanding for the respective period.

The calculation of diluted net loss per share of common stock does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement Warrants to purchase 23,873,333 shares of Class A common stock in the calculation of diluted loss per share, because their exercise is contingent upon future events. As a result, diluted net loss per share of common stock is the same as basic net loss per share of common stock for the three and nine months ended September 30, 2021, and for the three months ended September 30, 2020 and the period from May 19, 2020 (inception) through September 30, 2020. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

The table below presents a reconciliation of the numerator and denominator used to compute basic and diluted net loss per share of common stock for each class of common stock:

 

     For the Three Months Ended      For the Nine Months Ended  
     September 30, 2021      September 30, 2021  
     Class A      Class B      Class A      Class B  
                             

Numerator:

           

Allocation of net income (loss)

   $  5,548,610      $ 1,387,152      $ (7,892,080    $ (1,973,019

Denominator:

           

Weighted average common stock outstanding, basic and diluted

     48,300,000        12,075,000        48,300,000        12,075,000  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic and diluted net per share of common stock

   $ 0.11      $ 0.11      $ (0.16    $ (0.16
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     For the Three Months Ended      For the Period from May 19, 2020 (Inception)  
     September 30, 2020      through September 30, 2020  
     Class A      Class B      Class A      Class B  
                             

Numerator:

           

Allocation of net loss

   $  (939,743    $ (374,353    $ (867,025    $ (470,536

Denominator:

           

Weighted average common stock outstanding, basic and diluted

     28,464,130        11,338,859        20,458,594        11,102,930  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic and diluted net loss per share of common stock

   $ (0.03    $ (0.03    $ (0.04    $ (0.04
  

 

 

    

 

 

    

 

 

    

 

 

 

 

10


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Income Taxes

The Company complies with the accounting and reporting requirements of Financial Accounting Standards Board Accounting Standard Codification, or FASB ASC, 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

Recent Accounting Pronouncements

The Company’s management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the accompanying unaudited condensed consolidated financial statements.

Note 3—Initial Public Offering

Public Units

In August 2020, the Company sold 48,300,000 Units, including 6,300,000 over-allotment Units at $10.00 per Unit, generating gross proceeds of $483.0 million, and incurring offering costs of approximately $27.1 million, inclusive of $16.9 million in deferred underwriting commissions. Upon the closing of the Initial Public Offering and the Private Placement Warrants in the Private Placement (including the exercise of the over-allotment option), $483.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in the Trust Account.

Each Unit consists of one of the Company’s shares of Class A common stock, $0.0001 par value, and one-third of one redeemable warrant (the “Public Warrants” and, collectively with the Private Placement Warrants, the “Warrants”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share. The exercise price and number of shares of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation.

Note 4—Related Party Transitions

Founder Shares

On May 26, 2020, the Company’s Chairman and Co-Chief Executive Officer paid for certain offering costs for an aggregate price of $25,000 in exchange for issuance of 10,062,500 shares of Class B common stock, par value $0.0001 per share (the “Founder Shares”). In July 2020, the Company’s Chairman and Co-Chief Executive Officer transferred certain Founder Shares to the Company’s directors and officers as well as to certain third parties. On August 4, 2020, the Company effected a stock dividend of 0.2 shares of Class B common stock for each share of Class B common stock outstanding, resulting in an aggregate of 12,075,000 Founder Shares outstanding. All shares and associated amounts have been retroactively restated to reflect the share dividend. Of the 12,075,000 Founder Shares, up to 1,575,000 Founder Shares are subject to forfeiture to the extent that the over-allotment option is not exercised in full by the underwriter so that the Founder Shares will represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriter fully exercised the over-allotment option on August 10, 2020, and the Company consummated the sale of such Units on August 13, 2020; thus, these 1,575,000 Founder Shares were no longer subject to forfeiture.

 

11


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Private Placement Warrants

Simultaneously with the closing of the Initial Public Offering, the Private Placement Warrants Purchasers purchased an aggregate of 6,933,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrants, generating gross proceeds of $10.4 million in the Private Placement, and incurring offering costs of approximately $8,000. In connection with the sale of Units pursuant to the over-allotment option on August 13, 2020, the Company sold an additional 840,000 Private Placement Warrants to the Private Placement Warrants Purchasers, generating additional gross proceeds of approximately $1.3 million.

Each whole Private Placement Warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the proceeds from the sale of the Private Placement Warrants was added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash (subject to certain exceptions) and exercisable on a cashless basis so long as they are held by the initial purchasers or their permitted transferees.

The Private Placement Warrants (and the Class A common stock issuable upon exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion of the initial Business Combination (subject to certain exceptions).

Related Party Loans

On May 26, 2020, the Company’s Chairman and Co-Chief Executive Officer agreed to loan the Company up to an aggregate of $150,000 pursuant to an unsecured promissory note (the “Note”) to cover expenses related to the Initial Public Offering. This loan was payable without interest upon the completion of the Initial Public Offering. The Company borrowed approximately $150,000 under the Note and received additional advances of approximately $45,000 advancement of funds from such officer, for a total outstanding loan of approximately $195,000. The Company fully repaid the Note and the advances to such officer on August 7, 2020.

Working Capital Loans

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the initial stockholders, officers and directors and their affiliates may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans to date. To date, the Company had no borrowings under the Working Capital Loans.

Note 5—Commitments and Contingencies

Registration Rights

The initial stockholders and holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement. The initial stockholders and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that the Company register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by the Company. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

 

12


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Underwriting Agreement

Pursuant to the Underwriting Agreement, as described in Note 3, $0.35 per unit, or $16.9 million in the aggregate, including the over-allotment fees, was payable to the underwriter for deferred underwriting commissions. The deferred fee was paid to the underwriter at the close of the Business Combination from the amounts held in the Trust Account in accordance with the terms of the underwriting agreement.

Contingent Fees

The Company has entered into certain consulting arrangements for due diligence, a transaction advisory agreement, and a placement agent arrangement in connection with its search for a prospective initial Business Combination. A portion of the fees in connection with the services rendered as of September 30, 2021 have been deferred and were contingent upon the closing of a Business Combination and therefore not included as liabilities on the accompanying condensed balance sheet. As of September 30, 2021, these fees were approximately $28.9 million.

Note 6—Warrants

Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available and such shares are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder (or the Company permits holders to exercise their Public Warrants on a cashless basis under certain circumstances). The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, the Company will use its reasonable best efforts to file, and within 60 business days following the initial Business Combination to have declared effective, a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Warrants and to maintain the effectiveness of such registration statement and a current prospectus relating to those shares of Class A common stock until the Warrants expire or are redeemed; provided that, if the Class A common stock is at the time of any exercise of a Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, it will not be required to file or maintain in effect a registration statement, but it will be required to use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.

The Warrants will have an exercise price of $11.50 per share, subject to adjustment, and will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

In addition, if (x) the Company issues additional shares or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share (as adjusted for stock splits, stock dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors, and in the case of any such issuance to the Company’s initial stockholders, officers, directors or their affiliates, without taking into account any Founder Shares held by them prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s shares of Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of each Warrant will be adjusted (to the nearest cent) such that the effective exercise price per full share will be equal to 115% of the higher of (i) the Market Value and (ii) the Newly Issued Price, and the $18.00 per-share redemption trigger price described below will be adjusted (to the nearest cent) to be equal to 180% of the higher of (i) the Market Value and (ii) the Newly Issued Price.

 

13


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The Private Placement Warrants are identical to the Public Warrants, except that (1) the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions, (2) the Private Placement Warrants will be non-redeemable (subject to certain exceptions) and exercisable on a cashless basis so long as they are held by the initial purchasers or their permitted transferees and (3) the initial purchasers and their permitted transferees will also have certain registration rights related to the private placement warrants (including the shares of Class A common stock issuable upon exercise of the Private Placement Warrants. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Once the Warrants become exercisable, the Company may redeem the outstanding Warrants (except for the Private Placement Warrants):

 

   

in whole and not in part;

 

   

at a price of $0.01 per Warrant;

 

   

upon a minimum of 30 days’ prior written notice of redemption; and

 

   

if, and only if, the last reported sale price of the Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the Warrants become exercisable and ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders.

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

Commencing ninety days after the Warrants become exercisable, the Company may redeem the outstanding Warrants:

 

   

in whole and not in part;

 

   

at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock to be determined by reference to an agreed table based on the redemption date and the “fair market value” of the Company’s Class A common stock;

 

   

if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) on the trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders;

 

   

if, and only if, the Private Placement Warrants are also concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above; and

 

   

if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock (or a security other than the Class A common stock into which the Class A common stock has been converted or exchanged for in the event the Company is not the surviving company in the initial Business Combination) issuable upon exercise of the Warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given.

The “fair market value” of the Class A common stock for this purpose shall mean the average last reported sale price of the Class A common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Warrants.

In no event will the Company be required to net cash settle any Warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly, the Warrants may expire worthless.

 

14


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The Public Warrants are accounted for as equity and the Private Placement warrants are accounted for as liabilities on the balance sheet.

Note 7 – Class A Common Stock Subject to Possible Redemption

The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of future events. The Company is authorized to issue 87,500,000 Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. Accordingly, as of September 30, 2021 and December 31, 2020, 48,300,000 shares of Class A common stock subject to possible redemption and presented as temporary equity, outside of the stockholders’ equity section of the accompanying condensed consolidated balance sheets.

The Class A common stock subject to possible redemption reflected on the condensed consolidated balance sheet is reconciled on the following table:

 

Gross proceeds received from Initial Public Offering and over-allotment

   $ 483,000,000  

Less:

  

Offering costs allocated to Class A common stock

     (26,169,980

Plus:

  

Accretion on Class A common stock to redemption value

     26,169,980  
  

 

 

 

Class A common stock subject to possible redemption

   $ 483,000,000  
  

 

 

 

Note 8—Stockholders’ Deficit

Preferred stock—The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of September 30, 2021, and December 31, 2020, there are no shares of preferred stock issued or outstanding.

Class A Common Stock—The Company is authorized to issue 87,500,000 shares of Class A common stock with a par value of $0.0001 per share. As of September 30, 2021, and December 31, 2020, there were 48,300,000 shares of Class A common stock issued or outstanding, and all of which were subject to possible redemption and classified as temporary equity. See Note 7.

Class B Common Stock—The Company is authorized to issue 12,500,000 shares of Class B common stock with a par value of $0.0001 per share. Holders of the Company’s Class B common stock are entitled to one vote for each share. On August 4, 2020, the Company effected a stock dividend of 0.2 shares of Class B common stock for each share of Class B common stock outstanding. All shares and associated amounts have been retroactively restated to reflect the share dividend including up to 1,575,000 which were subject to forfeiture to the Company to the extent that the underwriter’s over-allotment option was not exercised in full or in part, so that the shares of Class B common stock will represent 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. On August 10, 2020, the underwriter exercised the over-allotment option in full. Accordingly, as of September 30, 2021, and December 31, 2020, 12,075,000 shares of Class B common stock were issued and outstanding, none subject to forfeiture.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the initial Business Combination, or earlier at the option of the holder, on a one-for-one basis (subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment as described herein). In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of the initial Business Combination (including pursuant to a specified future issuance), the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the then-

 

15


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance, including pursuant to a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with our initial Business Combination (excluding any shares or equity-linked securities issued or issuable to any seller in the initial Business Combination).

Note 9—Fair Value Measurements

The following table presents information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2021, and December 31, 2020, by level within the fair value hierarchy:

 

     Fair Value Measured as of September 30, 2021  
     Level 1      Level 2      Level 3      Total  

Assets

           

Investments held in Trust Account - U.S. Treasury Securities

   $ 483,078,641      $ —        $ —        $ 483,078,641  

Liabilities:

           

Warrant liabilities

   $ —        $ 16,168,533      $ —        $ 16,168,533  

 

     Fair Value Measured as of December 31, 2020  
     Level 1      Level 2      Level 3      Total  

Assets

           

Investments held in Trust Account—U.S. Treasury Securities

   $ 483,227,051      $ —      $ —      $ 483,227,051  

Liabilities:

           

Warrant liabilities

   $    $ 13,292,400      $ —      $ 13,292,400  

Transfers to/from Levels 1, 2 and 3 are recognized at the beginning of the reporting period. There were no transfers between levels for the three and nine months ended September 30, 2021.

The Company utilizes the fair value of the Public Warrants as of December 31, 2020, and September 30, 2021 to estimate the fair value of the warrants, with changes in fair value recognized in the unaudited condensed consolidated statements of operations. For the three months ended September 30, 2021, the Company recognized a charge to the condensed statements of operations resulting from an increase in the fair value of the warrant liabilities of approximately $9.8 million, and for the nine months ended September 30, 2021, the Company recognized income resulting from a decrease in the fair value of the warrant liabilities of approximately $2.9 million, presented as change in fair value of derivative warrant liabilities. For the three months ended September 30, 2020, and for the period from May 19, 2020 (inception) through September 30, 2020, the Company recognized a charge to the statements of operations resulting from an increase in the fair value of the warrant liabilities of approximately $1.2 million presented as change in fair value of derivative warrant liabilities.

The change in the fair value of the derivative warrant liabilities for the three and nine months ended September 30, 2021, is summarized as follows:

 

Warrant liabilities at December 31, 2020

   $ 13,292,400  

Change in fair value of warrant liabilities

     3,342,533  
  

 

 

 

Warrant liabilities at March 31, 2021

     16,634,933  

Change in fair value of warrant liabilities

     9,327,999  
  

 

 

 

Warrant liabilities at June 30, 2021

     25,962,932  

Change in fair value of warrant liabilities

     (9,794,399
  

 

 

 

Warrant liabilities at September 30, 2021

   $ 16,168,533  
  

 

 

 

 

16


WEWORK INC.

(Formerly Known as BowX Acquisition Corp.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 10—Subsequent Events

On October 20, 2021, the Company, BowX Merger Subsidiary Corp., a newly formed wholly owned subsidiary of the Company, and WeWork, consummated the previously announced merger pursuant to that certain Agreement and Plan of Merger, dated March 25, 2021, as disclosed in the footnotes.

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as noted above.

 

17


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References to the “Company,” “BowX Acquisition Corp.,” “BowX,” “our,” “us” or “we” refer to BowX Acquisition Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited interim condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.

Overview

We are a blank check company incorporated as a Delaware corporation on May 19, 2020. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”). We are not limited to a particular industry or sector for purposes of consummating a Business Combination. As of September 30, 2021, we were an emerging growth company and, as such, we were subject to all of the risks associated with emerging growth companies.

Our sponsor is BowX Sponsor, LLC, a Delaware limited liability company of which Vivek Ranadivé, the Company’s Chairman and Co-Chief Executive Officer, and Murray Rode, our Co-Chief Executive Officer and Chief Financial Officer, are the managing members (the “Sponsor”). The registration statement for the initial public offering (the “Initial Public Offering”) was declared effective on August 4, 2020. On August 7, 2020, we consummated our Initial Public Offering of 42,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $420.0 million, and incurring offering costs of approximately $23.7 million, inclusive of $14.7 million in deferred underwriting commissions. On August 10, 2020, the underwriter exercised the over-allotment option to purchase an additional of 6,300,000 Units at the Initial Public Offering price at $10.00 per Unit and we consummated the sale of such Units on August 13, 2020, generating additional gross proceeds of $63.0 million, and incurring additional offering costs of approximately $3.5 million, inclusive of approximately $2.2 million in deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, we consummated the private placement (“Private Placement”) of 6,933,333 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant in a private placement to certain of the initial stockholders and certain funds and accounts managed by subsidiaries of BlackRock, Inc (the “Private Placement Warrants Purchasers”), generating gross proceeds of $10.4 million, and incurring offering costs of approximately $8,000. In connection with the consummation of the sale of additional Units pursuant to the underwriter’s over-allotment option on August 13, 2020, we sold an additional 840,000 Private Placement Warrants to the Private Placement Warrants Purchasers, generating additional gross proceeds of approximately $1.3 million.

Upon the closing of the Initial Public Offering and the Private Placement (including the exercise of the over-allotment) $483.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in the Initial Public Offering and the Private Placement were placed in a trust account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as trustee, and held as cash or invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by us, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the Trust Account as described below.

 

18


Consummated Business Combination

On October 20, 2021, we, BowX Merger Subsidiary Corp., a newly formed wholly owned subsidiary of us, and WeWork Inc., a Delaware corporation (“WeWork”), consummated the previously announced merger pursuant to that certain Agreement and Plan of Merger, dated March 25, 2021. See the Form 8-K, filed with the SEC on October 26, 2021, for additional information.

Liquidity and Capital Resources

As of September 30, 2021, we had approximately $242,000 in cash and working capital deficit of approximately $5.8 million.

Through September 30, 2021, our liquidity needs were satisfied through a payment of $25,000 from the Company’s Chairman and Co-Chief Executive Officer to cover for certain offering costs in exchange for the issuance of the Founder Shares, and the loan under the Note of approximately $150,000 to us to cover for offering costs in connection with the Initial Public Offering. Subsequent to the consummation of the Initial Public Offering on August 7, 2020, the liquidity needs have been satisfied through the net proceeds from the consummation of the Private Placement not held in the Trust Account. We fully repaid the Note on August 7, 2020.

Results of Operations

Our entire activity since inception through September 30, 2021, was in preparation for our formation, the Initial Public Offering, and, since the closing of our Initial Public Offering, a search for business combination candidates including due diligence on the WeWork transaction. We will not be generating any operating revenues until the closing and completion of our initial Business Combination.

For the three months ended September 30, 2021, we had a net income of approximately $6.9 million, which consisted of approximately $9.8 million in change in fair value of warrant liabilities and approximately $7,000 of interest income from investments held in Trust Account, partially offset by approximately $2.8 million in general and administrative expenses and approximately $50,000 in franchise tax expense.

For the nine months ended September 30, 2021, we had net loss of approximately $9.9 million, which consisted of approximately $6.9 million in general and administrative expenses, approximately $2.9 million in change in fair value of warrant liabilities and approximately $150,000 in franchise tax expense, partially offset by approximately $66,000 of interest income from investments held in Trust Account.

For the three months ended September 30, 2020, we had net loss of approximately $1.3 million, which consisted of approximately $93,000 in general and administrative expenses, approximately $1.2 million in change in fair value of warrant liabilities, approximately $49,000 in franchise tax expense and approximately $10,000 offering costs associated with private placement warrants, partially offset by approximately $84,000 of interest income from investments held in Trust Account.

For the period from May 19, 2020 (inception) through September 30, 2020, we had net loss of approximately $1.3 million, which consisted of approximately $93,000 in general and administrative expenses, approximately $1.2 million in change in fair value of warrant liabilities, approximately $72,000 in franchise tax expense, approximately $2,000 of income tax expense, and approximately $10,000 offering costs associated with private placement warrants, partially offset by approximately $84,000 of interest income from investments held in Trust Account.

 

19


Related Party Transactions

Founder Shares

On May 26, 2020, we issued 10,062,500 shares of Class B common stock to our Company’s Chairman and Co-Chief Executive Officer in exchange for a payment of $25,000 for offering costs made by our Sponsor on behalf of our company (the “Founder Shares”). In July 2020, the Chairman and Co-Chief Executive Officer transferred certain Founder Shares to our directors and officers as well as to certain third parties. On August 4, 2020, we effected a stock dividend of 0.2 shares of Class B common stock for each share of Class B common stock outstanding, resulting in an aggregate of 12,075,000 Founder Shares outstanding. All shares and associated amounts have been retroactively restated to reflect the share dividend. On August 13, 2020, the underwriters exercised their 15% over-allotment option in full; thus, the Founder Shares were no longer subject to forfeiture.

The initial stockholders have agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one year after the completion of the initial Business Combination and (B) subsequent to the initial Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, or (y) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Related Party Loans

On May 26, 2020, our Chairman and Co-Chief Executive Officer agreed to loan us up to an aggregate of $150,000 pursuant to an unsecured promissory note (the “Note”) to cover expenses related to the Initial Public Offering. This loan was payable without interest upon the completion of the Initial Public Offering. We borrowed up to the full amount of the Note and received additional advances of approximately $45,000 advancement of funds from such officer, for a total outstanding loan of approximately $195,000. We fully repaid the Note and the advances to such officer on August 7, 2020.

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the initial stockholders, officers and directors and their affiliates may, but are not obligated to, loan us funds as may be required (the “Working Capital Loans”). Up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. Except for the foregoing, the terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans to date. To date, we did not have any borrowings under the Working Capital Loans.

Contractual Obligations

Registration Rights

The initial stockholders and holders of the Private Placement Warrants are entitled to registration rights pursuant to a registration rights agreement. The initial stockholders and holders of the Private Placement Warrants will be entitled to make up to three demands, excluding short form registration demands, that we register such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights to include their securities in other registration statements filed by us. We will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

We granted the underwriter a 45-day option to purchase up to 6,300,000 additional Units to cover any over-allotments, at the Initial Public Offering price less the underwriting discounts and commissions. On August 10, 2020, the underwriter fully exercised the over-allotment option.

The underwriter was entitled to an underwriting discount of $0.20 per unit, or $8.4 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or $14.7 million in the aggregate was paid to the underwriter for deferred underwriting commissions. The deferred fee was paid to the underwriter from the amounts held in the Trust Account in accordance with the terms of the underwriting agreement.

 

20


In connection with the consummation of the sale of Units pursuant to the over-allotment option on August 13, 2020, the underwriter received an aggregate of $1.26 million in underwriting fees and additional deferred underwriting commissions of approximately $2.2 million.

Contingent Fees

We entered into certain consulting arrangements for due diligence, a transaction advisory agreement, and a placement agent arrangement in connection with our search for a prospective initial Business Combination. A portion of the fees in connection with the services rendered as of September 30, 2021 have been deferred and were contingent upon the closing of a Business Combination and therefore not included as liabilities on the accompanying condensed balance sheet. As of September 30, 2021, these fees were approximately $28.9 million.

Critical Accounting Policies

Investments Held in the Trust Account

Our portfolio of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities and generally have a readily determinable fair value, or a combination thereof. When the investments held in the Trust Account are comprised of U.S. government securities, the investments are classified as trading securities. When the investments held in the Trust Account are comprised of money market funds, the investments are recognized at fair value. Trading securities and investments in money market funds are presented on the balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities are included in net gain from investments held in Trust Account in the accompanying unaudited condensed consolidated statements of operations. The estimated fair values of investments held in the Trust Account are determined using available market information.

Class A Common Stock Subject to Possible Redemption

We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of September 30, 2021 and December 31, 2020, 48,300,000 shares of Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the accompanying condensed consolidated balance sheet.

Net Income (Loss) per Share of Common Stock

We comply with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” We have two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared pro rata between the two classes of shares. Net income (loss) per share of common stock is calculated by dividing the net income (loss) by the weighted average number of common stock outstanding for the respective period.

The calculation of diluted net income (loss) per share of common stock does not consider the effect of the warrants underlying the Units sold in the Initial Public Offering (including exercise of the over-allotment option) and the Private Placement Warrants to purchase 23,873,333 shares of Class A common stock in the calculation of diluted loss per share, because their exercise is contingent upon future events. As a result, diluted net loss per share of common stock is the same as basic net loss per share of common stock for the three and nine months ended September 30, 2021, and for the three months ended September 30, 2020 and the period from May 19, 2020 (inception) through September 30, 2020. Accretion associated with the redeemable Class A common stock is excluded from earnings per share as the redemption value approximates fair value.

 

21


Derivative Warrant Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of its financial instruments, including issued shares purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

We account for the warrants issued in connection with the Private Placement as derivative warrant liabilities in accordance with ASC 815. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the statements of operations. The fair value of warrants issued by us in connection with the Private Placement has been estimated using Public Warrant trading prices at each measurement date. The determination of the fair value of the warrant liability may be subject to change as more current information becomes available and accordingly the actual results could differ significantly. Derivative warrant liabilities are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities.

Recent Accounting Pronouncements

Our management does not believe there are any recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a material effect on our financial statements.

Off-Balance Sheet Arrangements

As of September 30, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. As of September 30, 2021, we qualified as an “emerging growth company” and under the JOBS Act were allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We elected to delay the adoption of new or revised accounting standards, and as a result, we may not have complied with new or revised accounting standards on the relevant dates on which adoption of such standards was required for non-emerging growth companies. As a result, the unaudited condensed financial statements may not be comparable to companies that complied with new or revised accounting pronouncements as of public company effective dates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

 

22


Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures

Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of September 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were effective as of September 30, 2021.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

Changes in internal control over financial reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2021, covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The material weakness discussed below was remediated during the quarter ended September 30, 2021.

Remediation of a Material Weakness in Internal Control over Financial Reporting

We recognize the importance of the control environment as it sets the overall tone for the Company and is the foundation for all other components of internal control. Consequently, we designed and implemented remediation measures to address the material weakness previously identified in the second quarter of 2021 and enhanced our internal control over financial reporting. In light of the material weakness, we enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our condensed consolidated financial statements, including providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. As a result of these enhancements, our management concluded that the material weakness was remediated as of September 30, 2021.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company is involved in legal matters arising in the ordinary course of business. While management believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in litigation, will not have a material adverse effect on its business, financial condition or results of operations.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On August 7, 2020, we consummated the Initial Public Offering of 42,000,000 Units. The Units sold in the Initial Public Offering were sold at an offering price of $10.00 per unit, generating total gross proceeds of $420 million. UBS Securities LLC acted as sole book-running manager. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (Nos. 333-239941 and 333-240430). The SEC declared the registration statements effective on August 4, 2020.

Simultaneous with the consummation of the Initial Public Offering, the Company consummated the private placement of an aggregate of 6,933,333 Private Placement Warrants at a price of $1.50 per Private Placement Warrant, generating total proceed of $10.4 million. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

 

23


On August 10, 2020, the underwriters exercised the over-allotment option to purchase an additional of 6,300,000 Units at the Initial Public Offering price at $10.00 per Unit and we consummated the sale of such Units on August 13, 2020, generating additional gross proceeds of $63.0 million, and incurring additional offering costs of approximately $3.5 million, inclusive of an additional of approximately $2.2 million in deferred underwriting commissions.

In connection with the consummation of the sale of additional Units pursuant to the underwriter’s over-allotment option on August 13, 2020, we sold an additional 840,000 Private Placement Warrants to the Private Placement Warrants Purchasers, generating additional gross proceeds of approximately $1.3 million.

Of the gross proceeds received from the Initial Public Offering and sale of the Private Placement Warrants, including the over-allotment exercise, $483,000,000 was placed in the Trust Account.

For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.

As of September 30, 2021, after giving effect to our Initial Public Offering and our operations subsequent thereto, approximately $483.1 million was held in the Trust Account, and we had approximately $242,000 of unrestricted cash available to us for our activities in connection with identifying and conducting due diligence of a suitable Business Combination, and for general corporate matters.

Item 6. Exhibits.

 

Exhibit
Number
  

Description

  2.1    Agreement and Plan of Merger, dated as of March  25, 2021, by and among BowX Acquisition Corp., BowX Merger Subsidiary Corp., and WeWork, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K/A filed with the SEC on March 30, 2021).
31.1*    Certification of Chairman and Co-Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*    Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32*    Certification of Chairman and Co-Chief Executive Officer (Principal Executive Officer) and Co-Chief Executive Officer and Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS    XBRL Instance Document
101.SCH    XBRL Taxonomy Extension Schema Document
101.CAL    XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF    XBRL Taxonomy Extension Definition Linkbase Document
101.LAB    XBRL Taxonomy Extension Label Linkbase Document
101.PRE    XBRL Taxonomy Extension Presentation Linkbase Document
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*

These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

 

24


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Dated: November 15, 2021     WEWORK INC.
    By:  

/s/ Benjamin Dunham

    Name:   Benjamin Dunham
    Title:   Chief Financial Officer (Principal Financial Officer)

 

 

25


Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Sandeep Mathrani, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of WeWork Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 15, 2021      

/s/ Sandeep Mathrani

     

Sandeep Mathrani

Chief Executive Officer (Principal Executive Officer)


Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Benjamin Dunham, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of WeWork Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have:

 

  a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

 

  b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

 

  c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

  d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

  b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 15, 2021      

/s/ Benjamin Dunham

      Benjamin Dunham
      Chief Financial Officer (Principal Financial Officer)


Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of WeWork Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2021 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

 

Date: November 15, 2021      

/s/ Sandeep Mathrani

      Sandeep Mathrani
      Chief Executive Officer (Principal Executive Officer)
     

/s/ Benjamin Dunham

      Benjamin Dunham
      Chief Financial Officer (Principal Financial Officer)


 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

(Amendment No. 2)

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 15, 2021 (October 20, 2021)

 

 

WEWORK INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-39419   85-1144904
(State or other jurisdiction   (Commission   (I.R.S. Employer
of incorporation)   File Number)   Identification No.)

 

575 Lexington Avenue,  
New York, NY   10022
(Address of principal executive offices)   (Zip Code)

(646) 389-3922

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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, par value $0.0001 per share   WE   The New York Stock Exchange
Warrants, each whole warrant exercisable for one share of Class A common stock   WE WS   The New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  ☐

 

 

 


Explanatory Note

This Amendment No. 2 on Form 8-K/A (“Amendment No. 2”) amends the Current Report on Form 8-K of WeWork Inc. (the “Company”), filed on October 26, 2021 (as amended by Amendment No. 1 on Form 8-K/A, the “Original Report”), in which the Company reported, among other events, the completion of the Business Combination (as defined in the Original Report).

This Amendment No. 2 is being filed in order to include the Report of New WeWork Inc., formerly known as WeWork Inc. (“Legacy WeWork”), dated November 15, 2021, which includes (a) the unaudited condensed consolidated financial statements of Legacy WeWork as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 and (b) Management’s Discussion and Analysis of Financial Condition and Results of Operations of Legacy WeWork for the three and nine months ended September 30, 2021 and 2020 (the “Q3 MD&A”).

Accordingly, the Original Report is hereby amended solely to (i) update the Item 2.01 information to reflect the Q3 MD&A and the Quantitative and Qualitative Disclosures about Market Risk and (ii) amend and restate Item 9.01. Except as set forth herein, this Amendment No. 2 does not amend any other item of the Original Report or purport to provide an update or a discussion of any developments at the Company or its subsidiaries, including Legacy WeWork, subsequent to the filing date of the Original Report. Except as amended by this Amendment No. 2, the information previously reported in or filed with the Original Report is hereby incorporated by reference into this Form 8-K/A.

 

Item 2.01

Completion of Acquisition or Disposition of Assets.

Management’s Disclosure and Analysis of Financial Condition and Results of Operations

The Form 10 information in Item 2.01 of the Original Report is hereby amended and supplemented by adding the following paragraph at the end of the sub-heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Reference is made to the disclosure contained in the section titled “WeWork’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 90 of Exhibit 99.3 of this Current Report on Form 8-K, which is incorporated herein by reference.

Quantitative and Qualitative Disclosures about Market Risk

The Form 10 information in Item 2.01 of the Original Report is hereby amended and supplemented by adding the following paragraph at the end of the sub-heading “Quantitative and Qualitative Disclosures about Market Risk.”

Reference is made to the disclosure contained in the section titled “Quantitative and Qualitative Disclosures about Market Risk” beginning on page 142 of Exhibit 99.3 of this Current Report on Form 8-K, which is incorporated herein by reference.

 

Item 9.01

Financial Statements and Exhibits.

 

(a)

Financial statements of businesses acquired

Information responsive to Item 9.01(a) of Form 8-K is set forth in the financial statements included in the Proxy Statement/Prospectus on pages F-3 through F-222, which are incorporated herein by reference.

Additionally, the unaudited condensed consolidated financial statements of Legacy WeWork as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, and the related notes thereto, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations of Legacy WeWork for the three and nine months ended September 30, 2021 and 2020, are included in Exhibit 99.3 attached hereto and are incorporated herein by reference.

 

(b)

Pro forma financial information.

Certain pro forma financial information of the Company is attached as Exhibit 99.2 to the Original Report and is incorporated herein by reference.


(c)

Exhibits.

 

Exhibit
Number

  

Description

2.1*    Agreement and Plan of Merger, dated as of February  23, 2021, by and among BowX Acquisition Corporation, BowX Merger Subsidiary Corp. and New WeWork Inc. (formerly known as WeWork Inc.), (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K/A filed on March 30, 2020).
3.1    Second Amended and Restated Certificate of Incorporation of WeWork Inc., dated October  20, 2021 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
3.2    Amended and Restated Bylaws of WeWork Inc., dated as of October  20, 2021 (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
4.1    Specimen Common Stock Certificate of WeWork Inc. (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on October 26, 2021)
4.2    Warrant Agreement, dated August 4, 2020, between BowX Acquisition Corp. and Continental Stock Transfer  & Trust Company, as warrant agent (incorporated by reference to Exhibit 4.1 to BowX’s Current Report on Form 8-K filed with the SEC on August 10, 2020).
4.3    WeWork Inc. Warrant to Purchase Common Stock, dated as of October  20, 2021, by and between WeWork Inc. and SB WW Holdings (Cayman) Limited (incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
4.4    WeWork Inc. Warrant to Purchase Common Stock, dated as of October  20, 2021, by and between WeWork Inc. and SVF Endurance (Cayman) Limited (incorporated by reference to Exhibit 4.4 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
4.5    Indenture, dated as of April  30, 2018, relating to WeWork Companies Inc.’s 7.875% Senior Notes due 2025, by and among WeWork Companies Inc., the guarantors party thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.6    Fifth Supplemental Indenture, dated as of July  15, 2019, by and among WeWork Companies LLC, as successor to WeWork Companies Inc., The WeWork CO Inc., as co-obligor, The We Company, each of the guarantors listed on the signature pages thereto and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.6 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.7    Tenth Supplemental Indenture, dated as of October  20, 2021, by and between WW Holdco LLC, as successor to Old WeWork, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.7 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.8    Indenture, dated as of July 10, 2020, relating to WeWork Companies LLC’s 5.00  % Senior Notes due 2025, by and among WeWork Companies LLC, WeWork CO Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.8 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.9    Supplemental Indenture No. 1, dated as of August  14, 2020, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.9 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).


Exhibit
Number

  

Description

4.10    Supplemental Indenture No. 2, dated as of September 15, 2020, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.10 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.11    Supplemental Indenture No. 3, dated as of October  19, 2020, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.11 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.12    Supplemental Indenture No. 4, dated as of November 17, 2020, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.12 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.13    Supplemental Indenture No. 5, dated as of December 17, 2020, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.13 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.14    Supplemental Indenture No. 6, dated as of January  20, 2021, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.14 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.15    Supplemental Indenture No. 7, dated as of February 22, 2021, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.15 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.16    Supplemental Indenture No. 8, dated as of March  22, 2021, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.16 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.17    Supplemental Indenture No. 9, dated as of April  22, 2021, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.17 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.18    Supplemental Indenture No. 10, dated as of June  1, 2021, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor, the guarantors party thereto and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.18 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
4.19    Supplemental Indenture No. 11, dated as of October  20, 2021, by and between WW Holdco LLC, as successor to Old WeWork, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.19 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).


Exhibit
Number

  

Description

10.1    Amended and Restated Registration Rights Agreement dated as of October  20, 2021, by and among WeWork Inc., BowX Sponsor, LLC and certain stockholders of WeWork Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on October  26, 2021).
10.2    Stockholders Agreement, dated as of October  20, 2021, by and among WeWork Inc., BowX Sponsor, LLC, SB WW Holdings (Cayman) Limited, SVF Endurance (Cayman) Limited and Benchmark Capital Partners VII (AIV), L.P. (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
10.3^    Third Amended and Restated Agreement of Exempted Limited Partnership of The We Company Management Holdings L.P., dated as of October  20, 2021 (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
10.4+    WeWork Inc. 2021 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
10.5+    WeWork Inc. 2021 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
10.6    Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
10.7    Amended and Restated Master Senior Secured Notes Note Purchase Agreement, dated as of October  20, 2021, by and among WeWork Companies LLC, WW Co-Obligor Inc., as co-obligor and StarBright WW LP, as purchaser (incorporated by reference to Exhibit 10.15 of the Company’s Registration Statement on Form S-1 (File No. 333-260976) filed on November 10, 2021).
16.1    Letter from WithumSmith+Brown, PC to the Securities and Exchange Commission, dated as of October  26, 2021 (incorporated by reference to Exhibit 16.1 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
21.1    List of Subsidiaries (incorporated by reference to Exhibit 21.1 of the Company’s Current Report on Form 8-K filed on October 26, 2021)
99.1    Press Release, dated October 20, 2021 (incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
99.2    Unaudited Pro Forma Condensed Combined Financial Information (incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on October 26, 2021).
99.3    Report of Legacy WeWork, dated November 15, 2021, which contains the unaudited condensed consolidated financial statements of Legacy WeWork as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, and Management’s Discussion and Analysis of Financial Condition and Results of Operations of Legacy WeWork for the three and nine months ended September 30, 2021 and 2020.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

*

Certain schedules to this Exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K of the Exchange Act. The Company hereby agrees to hereby furnish supplementally a copy of all omitted schedules to the SEC upon request.

+

Indicates a management or compensatory plan.

^

Certain portions of this Exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company hereby agrees to furnish supplementally an unredacted copy of the exhibit to the SEC upon its request.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

 

    WEWORK INC.
    By:  

/s/ Jared DeMatteis

Date: November 15, 2021       Name: Jared DeMatteis
      Title: Chief Legal Officer


Exhibit 99.3

Legacy WeWork

Quarterly Report including Condensed Consolidated Financial Statements as of September 30, 2021 and December 31, 2020 and for the three and nine months ended September 30, 2021 and 2020


Legacy WeWork

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

         Page No.  

Part I - Financial Information

  

Cautionary Note Regarding Forward-Looking Statements

  

Item 1.

  Financial Statements and Supplementary Data   
 

Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020 (Unaudited)

     2  
 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

     4  
 

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

     5  
 

Condensed Consolidated Statements of Changes in Convertible Preferred Stock, Noncontrolling Interests and Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

     6  
 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)

     10  
 

Notes to Condensed Consolidated Financial Statements (Unaudited)

     12  
  Supplementary Information      79  
 

Condensed Consolidating Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020

     80  
 

Condensed Consolidating Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited)

     82  
 

Condensed Consolidating Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (Unaudited)

     86  

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations      90  

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk      142  

Part II - Other Information

 

Item 1.

  Legal Proceedings      143  

Item 1A.

  Risk Factors      144  


Part I. Financial Information

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report (this “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current views with respect to, among other things, the impact of the coronavirus pandemic, including current and newly appearing strains (collectively “COVID-19”) and our response to it, future events and our future business plans, operational and financial metrics (including profitability, liquidity and cash flow), financial condition, results of operations and prospects.

These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or phrases or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry as well as certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. These forward-looking statements are subject to a number of known and unknown risks, uncertainties and assumptions, including those described in “Risk Factors,” and other cautionary statements included in our Annual Report for the year ended December 31, 2020 and in our Registration Statement on Form S-1 filed with the Securities and Exchange Commission on November 10, 2021, in this Quarterly Report and in our other filings with the Securities and Exchange Commission, which you should consider and read carefully.

We operate in a very competitive and rapidly changing environment and have recently undergone significant changes at the executive and board levels and changes in our planned growth trajectory. New risks emerge from time to time. It is not possible for us to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report, and our expected future levels of activity and performance, may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. As a result, you should not regard any of these forward-looking statements as a representation or warranty by us or any other person or place undue reliance on any such forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from our expectations. All of our forward-looking statements are qualified by the cautionary statements contained in this section and elsewhere in this Quarterly Report. 

The Company is also supplementing and updating certain risk factors previously disclosed in Part I Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in our Registration Statement on Form S-1, filed with the Securities and Exchange Commission on November 10, 2021. These supplements and updates are included in Part II Item 1A of this Quarterly Report.


Item 1. Financial Statements and Supplementary Data

 

1


LEGACY WEWORK

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

      September 30,      December 31,  

(Amounts in thousands, except share and per share amounts)

   2021      2020  
               

Assets

     

Current assets:

     

Cash and cash equivalents (1)

   $ 477,244    $ 800,535

Accounts receivable and accrued revenue, net of allowance of $77,468 and $107,806 as of September 30, 2021 and December 31, 2020, respectively

     133,695      176,521

Other current assets (including related party amounts of $0 and $780 as of September 30, 2021 and December 31, 2020, respectively)

     402,150      352,172
  

 

 

    

 

 

 

Total current assets

     1,013,089      1,329,228

Property and equipment, net

     5,707,310      6,859,163

Lease right-of-use assets, net

     13,412,306      15,107,880

Restricted cash (1)

     11,275      53,618

Equity method and other investments

     197,942      214,940

Goodwill

     676,932      679,351

Intangible assets, net

     58,257      49,896

Other assets (including related party amounts of $545,180 and $699,478 as of September 30, 2021 and December 31, 2020, respectively)

     878,766      1,062,258
  

 

 

    

 

 

 

Total assets (1)

   $ 21,955,877    $ 25,356,334
  

 

 

    

 

 

 

Liabilities

     

Current liabilities:

     

Accounts payable and accrued expenses (including amounts due to related parties of $76,739 and $14,497 as of September 30, 2021 and December 31, 2020, respectively)

   $ 602,777    $ 723,411

Members’ service retainers

     385,946      358,566

Deferred revenue (including amounts from related parties of $5,771 and $9,717 as of September 30, 2021 and December 31, 2020, respectively)

     134,691      176,004

Current lease obligations (including amounts due to related parties of $22,295 and $10,148 as of September 30, 2021 and December 31, 2020, respectively)

     853,011      847,531

Other current liabilities (including amounts due to related parties of $0 and $900 as of September 30, 2021 and December 31, 2020, respectively)

     437,046      83,755
  

 

 

    

 

 

 

Total current liabilities

     2,413,471      2,189,267

Long-term lease obligations (including amounts due to related parties of $506,746 and $436,074 as of September 30, 2021 and December 31, 2020, respectively)

     18,401,347      20,263,606

Unsecured related party debt

     2,200,000      1,200,000

Convertible related party liabilities, net

     50,482      418,908

Long-term debt, net

     659,379      688,356

Other liabilities

     246,278      221,780
  

 

 

    

 

 

 

Total liabilities (1)

     23,970,957      24,981,917

Commitments and contingencies (Note 16)

     

Convertible preferred stock; 959,370,218 shares authorized as of September 30, 2021, and 499,018,795 and 368,912,507 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

     8,379,182      7,666,098

Redeemable noncontrolling interests

     276,162      380,242
                   

 

2


LEGACY WEWORK

CONDENSED CONSOLIDATED BALANCE SHEETS – (CONTINUED)

(UNAUDITED)

 

      September 30,     December 31,  

(Amounts in thousands, except share and per share amounts)

   2021     2020  
              

Equity

    

Legacy WeWork shareholders’ equity (deficit):

    

Common stock Class A; par value $0.001; 941,647,617 shares authorized as of September 30, 2021, and 176,731,955 and 41,512,605 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

     177     42

Common stock Class B; par value $0.001; 234,910,597 shares authorized as of September 30, 2021 and zero and 129,382,459 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

     —         129

Common stock Class C; par value $0.001; 50,967,800 shares authorized as of September 30, 2021, and 24,132,575 and 25,168,938 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

     24     25

Common stock Class D; par value $0.001; 234,910,597 shares authorized as of September 30, 2021, and zero shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

     —         —    

Additional paid-in capital

     2,776,772     2,188,319

Accumulated other comprehensive income (loss)

     (26,573     (158,810

Accumulated deficit

     (13,427,090     (9,703,490
  

 

 

   

 

 

 

Total Legacy WeWork shareholders’ deficit

     (10,676,690     (7,673,785

Noncontrolling interests

     6,266     1,862
  

 

 

   

 

 

 

Total equity

     (10,670,424     (7,671,923
  

 

 

   

 

 

 

Total liabilities and equity

   $ 21,955,877   $ 25,356,334
  

 

 

   

 

 

 
                  

 

(1)

The Company’s condensed consolidated balance sheets include assets and liabilities of consolidated variable interest entities (“VIEs”). As of September 30, 2021 and December 31, 2020, total assets of consolidated VIEs, after intercompany eliminations, were $2.9 billion and $2.1 billion, respectively, including $100.7 million and $166.6 million of cash and cash equivalents, respectively, and $10.1 million and $10.0 million of restricted cash, respectively. Total liabilities of consolidated VIEs, after intercompany eliminations, were $2.5 billion and $1.7 billion as of September 30, 2021 and December 31, 2020, respectively. Creditors of VIEs do not have recourse against the general credit of the Company, except relating to certain lease guarantees totaling $13.5 million and $14.6 billion as of September 30, 2021 and December 31, 2020, respectively, provided by Legacy WeWork to certain landlords of the VIEs. See Note 5 for additional details.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

                                  
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
              

(Amounts in thousands, except share and per share data)

   2021     2020     2021     2020  
                          

Revenue (including related party revenue of $28,496 and $44,906 for the three months and $116,190 and $129,383 for the nine months ended September 30, 2021 and 2020, respectively. See Note 17)

   $ 661,031   $ 810,752   $ 1,852,362   $ 2,749,369
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Location operating expenses—cost of revenue (exclusive of depreciation and amortization of $162,418 and $182,967 for the three months and $508,044 and $534,585 for the nine months ended September 30, 2021 and 2020, respectively, shown separately below)

     752,493     924,363     2,351,305     2,729,165

Pre-opening location expenses

     40,367     60,741     117,206     226,660

Selling, general and administrative expenses(1)

     233,928     387,248     733,430     1,312,349

Restructuring and other related costs

     15,934     18,964     481,979     155,180

Impairment/(gain on sale) of goodwill, intangibles and other assets

     87,541     253,625     629,126     809,584

Depreciation and amortization

     170,816     197,964     535,157     588,120
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses (including related party expenses of $21,209 and $19,772 for the three months and $59,462 and $65,296 for the nine months ended September 30, 2021 and 2020, respectively. See Note 17)

     1,301,079     1,842,905     4,848,203     5,821,058
  

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

     (640,048     (1,032,153     (2,995,841     (3,071,689

Interest and other income (expense), net:

        

Income (loss) from equity method and other investments

     5,096     2,526     (19,414     (44,585

Interest expense (including related party expenses of $(103,713) and $(76,498) for the three months and $(288,455) and $(171,530) for the nine months ended September 30, 2021 and 2020, respectively. See Note 9 and Note 17)

     (121,306     (92,956     (339,134     (231,046

Interest income

     5,142     4,151     14,597     12,893

Foreign currency gain (loss)

     (102,859     112,049     (140,784     (37,936

Gain (loss) from change in fair value of related party financial instruments (See Note 9)

     7,462     13,550     (343,360     805,863

Loss on extinguishment of debt

     —         (1,041     —         (77,336
  

 

 

   

 

 

   

 

 

   

 

 

 

Total interest and other income (expense), net

     (206,465     38,279     (828,095     427,853
  

 

 

   

 

 

   

 

 

   

 

 

 

Pre-tax loss

     (846,513     (993,874     (3,823,936     (2,643,836

Income tax benefit (provision)

     2,251     (5,586     (5,031     (21,701
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

     (844,262     (999,460     (3,828,967     (2,665,537

Net loss attributable to noncontrolling interests:

        

Redeemable noncontrolling interests — mezzanine

     42,130     39,461     106,250     643,224

Noncontrolling interest — equity

     (268     18,736     (883     33,352
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss attributable to Legacy WeWork

   $ (802,400   $ (941,263   $ (3,723,600   $ (1,988,961
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to Class A and Class B common stockholders (see Note 15):

        

Basic

   $ (4.54   $ (5.51   $ (21.31   $ (11.65
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ (4.54   $ (5.51   $ (21.31   $ (11.65
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares used to compute net loss per share attributable to Class A and Class B common stockholders, basic and diluted

     176,708,911     170,715,288     174,750,082     170,699,512
                                  

 

(1)

Includes cost of revenue in the amount of $28.7 million and $67.1 million for the three months and $61.4 million and $209.6 million for the nine months ended September 30, 2021 and 2020, respectively. Excludes depreciation and amortization of none and none for the three months and none and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively, shown separately below.

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(UNAUDITED)

 

                                  
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
              

(Amounts in thousands)

   2021     2020     2021     2020  
                          

Net loss

   $ (844,262   $ (999,460   $ (3,828,967   $ (2,665,537

Other comprehensive income (loss), net of tax:

        

Foreign currency translation adjustments, net of tax of $0 for the three and nine months ended September 30, 2021 and 2020, respectively

     86,424     (75,280     107,007     (8,374

Unrealized (loss) gain on available-for-sale securities, net of tax of $84 and $167 for the three months and $28 and $(829) for the nine months ended September 30, 2021 and 2020, respectively

     (337     (603     (2,600     2,992
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss), net of tax

     86,087     (75,883     104,407     (5,382
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss

     (758,175     (1,075,343     (3,724,560     (2,670,919

Net (income) loss attributable to noncontrolling interests

     41,862     58,197     105,367     676,576

Other comprehensive (income) loss attributable to noncontrolling interests

     3,609     (1,809     27,830     (14,113
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive loss attributable to Legacy WeWork

   $ (712,704   $ (1,018,955   $ (3,591,363   $ (2,008,456
  

 

 

   

 

 

   

 

 

   

 

 

 
                                  

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK, NONCONTROLLING INTERESTS AND EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021

(UNAUDITED)

 

      Convertible      Redeemable  
     Preferred Stock      Noncontrolling  

(Amounts in thousands, except share amounts)

   Shares      Amount      Interests  

Balance—June 30, 2021

     499,018,795    $ 8,379,182    $ 291,901

Issuance of noncontrolling interests

     —          —          30,000

Net income (loss)

     —          —          (42,130

Other comprehensive income (loss), net of tax

     —          —          (3,609
  

 

 

    

 

 

    

 

 

 

Balance—September 30, 2021

     499,018,795    $ 8,379,182    $ 276,162
  

 

 

    

 

 

    

 

 

 
                            

 

      Legacy WeWork Shareholders’ Equity (Deficit)                 

(Amounts in thousands, except
share amounts)

                                     Accumulated                     
   Common Stock      Common Stock      Common Stock      Additional     Other                     
   Class A      Class B      Class C      Paid-In     Comprehensive     Accumulated     Noncontrolling         
   Shares      Amount      Shares      Amount      Shares      Amount      Capital     Income (Loss)     Deficit     Interests      Total  

Balance—June 30, 2021

     176,628,752    $ 177      —        $ —          24,132,575    $ 24    $ 2,775,762   $ (116,269   $ (12,624,690   $ 5,998    $ (9,958,998

Forfeiture of noncontrolling WeWork Partnerships Profits Interest Units in the WeWork Partnership and Common Stock Class C

     —          —          —          —          —          —          —         —         —         —          —    

Issuance of stock for services rendered, net of forfeitures

     —          —          —          —          —          —          1     —         —         —          1

Stock-based compensation

     —          —          —          —          —          —          4,036     —         —         —          4,036

Exercise of stock options

     103,203      —          —          —          —          —          (3,027     —         —         —          (3,027

Cancellation of shares

     —          —          —          —          —          —          —         —         —         —          —    

Exercise of warrants

     —          —          —          —          —          —          —         —         —         —          —    

Net income (loss)

     —          —          —          —          —          —          —         —         (802,400     268      (802,132

Other comprehensive income (loss), net of tax

     —          —          —          —          —          —          —         89,696     —         —          89,696
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance—September 30, 2021

     176,731,955    $ 177      —        $ —        24,132,575    $ 24    $ 2,776,772   $ (26,573   $ (13,427,090   $ 6,266    $ (10,670,424
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
                                                                                                 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK, NONCONTROLLING INTERESTS AND EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(UNAUDITED)

 

      Convertible      Redeemable  
     Preferred Stock      Noncontrolling  

(Amounts in thousands, except share amounts)

   Shares      Amount      Interests  

Balance—December 31, 2020

     368,912,507    $ 7,666,098    $ 380,242

Issuance of shares in connection with convertible note conversion

     218,369      —          —    

Issuance of noncontrolling interests

     —          —          30,000

Exercise of warrants, net

     129,887,919      713,084      —    

Net income (loss)

     —          —          (106,250

Other comprehensive income (loss), net of tax

     —          —          (27,830
  

 

 

    

 

 

    

 

 

 

Balance—September 30, 2021

     499,018,795    $ 8,379,182    $ 276,162
  

 

 

    

 

 

    

 

 

 

 

      Legacy WeWork Shareholders’ Equity (Deficit)                 

(Amounts in thousands, except
share amounts)

               Accumulated                     
   Common Stock     Common Stock     Common Stock     Additional     Other                     
   Class A     Class B     Class C     Paid-In     Comprehensive     Accumulated     Noncontrolling         
   Shares     Amount     Shares     Amount     Shares     Amount     Capital     Income (Loss)     Deficit     Interests      Total  

Balance—December 31, 2020

     41,512,605   $ 42     129,382,459   $ 129     25,168,938   $ 25   $ 2,188,319   $ (158,810   $ (9,703,490   $ 1,862    $ (7,671,923

Forfeiture of noncontrolling WeWork Partnerships Profits Interest Units in the WeWork Partnership and Common Stock Class C

     —         —         —         —         (1,036,363     (1     1     —         —         —          —    

Issuance of stock for services rendered, net of forfeitures

     —         —         —         —         —         —         (2,142     —         —         —          (2,142

Transfer from Class B to Class A

     129,382,459     129     (129,382,459     (129     —         —         —         —         —         —          —    

Stock-based compensation

     873,142     1     —         —         —         —         163,821     —         —         —          163,822

Exercise of stock options

     5,499,435     5     —         —         —         —         8,683     —         —         —          8,688

Cancellation of shares

     (536,180     (1     —         —         —         —         (10,198     —         —         —          (10,199

Exercise of warrants

     494     1     —         —         —         —         (1     —         —         —          —    

Transaction with principal shareholder

     —         —         —         —         —         —         428,289     —         —         —          428,289

Net income (loss)

     —         —         —         —         —         —         —         —         (3,723,600     883      (3,722,717

Other comprehensive income (loss), net of tax

     —         —         —         —         —         —         —         132,237     —         —          132,237

Other

     —         —         —         —         —         —         —         —         —         3,521      3,521
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 

Balance—September 30, 2021

     176,731,955   $ 177     —       $  —         24,132,575   $ 24   $ 2,776,772   $ (26,573   $ (13,427,090   $ 6,266    $ (10,670,424
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

    

 

 

 
                                                                                           

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK, NONCONTROLLING INTERESTS AND EQUITY

FOR THREE MONTHS ENDED SEPTEMBER 30, 2020

(UNAUDITED)

 

      Convertible      Redeemable  
     Preferred Stock      Noncontrolling  

(Amounts in thousands, except share amounts)

   Shares      Amount      Interests  

Balance—June 30, 2020

     368,881,372    $ 7,665,327    $ 347,900

Issuance of noncontrolling interests

     —          —          99,999

Stock-based compensation

     13,742      771      —    

Acquisition of Noncontrolling interest

     —          —          —    

Exercise of warrants, net

     —          —          —    

Distribution to noncontrolling interests

     —          —          (6,646

Net income (loss)

     —          —          (39,461

Other comprehensive income (loss), net of tax

     —          —          1,809
  

 

 

    

 

 

    

 

 

 

Balance—September 30, 2020

     368,895,114    $ 7,666,098    $ 403,601
  

 

 

    

 

 

    

 

 

 
                            

 

      Legacy WeWork Shareholders’ Equity (Deficit)                

(Amounts in thousands, except
share amounts)

                                                    Accumulated                    
   Common Stock      Common Stock      Common Stock      Additional      Other                    
   Class A      Class B      Class C      Paid-In      Comprehensive     Accumulated     Noncontrolling        
   Shares      Amount      Shares      Amount      Shares      Amount      Capital      Income (Loss)     Deficit     Interests     Total  

Balance—June 30, 2020

     41,365,892    $ 41      129,341,872    $ 129      25,229,393    $ 25    $ 1,825,411    $ 66,012   $ (7,621,830   $ 37,760   $ (5,692,452

Issuance of stock for services rendered, net of forfeitures

     —          —          —          —          —          —          4,126      —         —         991     5,117

Stock-based compensation

     —          —          9,216      —          —          —          8,231      —         —         28     8,259

Exercise of stock options

     5,949      —          6,860      —          —          —          31      —         —         —         31

Settlement of stockholder notes receivable

        —          —          —          —          —          5,527      —         —         —         5,527

Issuance of stock in connection with acquisitions

     129,239      —          —          —          —          —          —          —         —         —         —    

Issuance of noncontrolling interests

     —          —          —          —          —          —          —          —         —         16     16

Deconsolidation of consolidated subsidiaries

     —          —          —          —          —          —          —          —         —         (35,501     (35,501

Transactions with principal shareholder

     —          —          —          —          —          —          21,640      —         —         —         21,640

Net income (loss)

     —          —          —          —          —          —          —          —         (941,263     (18,736     (959,999

Other comprehensive income (loss), net of tax

     —          —          —          —          —          —          —          (77,692     —         —         (77,692
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance—September 30, 2020

     41,501,080    $ 41      129,357,948    $ 129      25,229,393    $ 25    $ 1,864,966    $ (11,680   $ (8,563,093   $ (15,442   $ (6,725,054
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 
                                                                                                 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

8


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK, NONCONTROLLING INTERESTS AND EQUITY

FOR NINE MONTHS ENDED SEPTEMBER 30, 2020

(UNAUDITED)

 

      Convertible      Redeemable  
     Preferred Stock      Noncontrolling  

(Amounts in thousands, except share amounts)

   Shares      Amount      Interests  

Balance—December 31, 2019

     222,329,647    $ 6,473,604    $ 1,032,080

Issuance of noncontrolling interests

     —          —          100,100

Stock-based compensation

     13,742      1,028      —    

Acquisition of Noncontrolling interest

     34,482,759      280,345      (92,822

Exercise of warrants, net

     112,068,966      911,121      —    

Distribution to noncontrolling interests

     —          —          (6,646

Net income (loss)

     —          —          (643,224

Other comprehensive income (loss), net of tax

     —          —          14,113
  

 

 

    

 

 

    

 

 

 

Balance—September 30, 2020

     368,895,114    $ 7,666,098    $ 403,601
  

 

 

    

 

 

    

 

 

 
                            

 

      Legacy WeWork Shareholders’ Equity (Deficit)                

(Amounts in thousands, except
share amounts)

                                                Accumulated                    
   Common Stock      Common Stock      Common Stock     Additional     Other                    
   Class A      Class B      Class C     Paid-In     Comprehensive     Accumulated     Noncontrolling        
   Shares     Amount      Shares      Amount      Shares     Amount     Capital     Income (Loss)     Deficit     Interests     Total  

Balance—December 31, 2019

     41,304,381   $ 41      129,220,654    $ 129      27,752,323   $ 28   $ 1,879,838   $ (2,611   $ (6,574,322   $ 322,185   $ (4,374,712

Adoption of ASC 326 (Note 2)

     —         —          —          —          —         —         —         —         190     —         190

Forfeiture of noncontrolling WeWork Partnerships Profits Interest Units in the WeWork Partnership and Common Stock Class C

     —         —          —          —          (2,522,930     (3     3     —         —         —         —    

Issuance of stock for services rendered, net of forfeitures

     —         —          —          —          —         —         12,330     —         —         2,858     15,188

Stock-based compensation

     251,324     —          62,048      —          —         —         175,082     —         —         38     175,120

Exercise of stock options

     22,283     —          75,246      —          —         —         156     —         —         —         156

Settlement of stockholder notes receivable (see Note 14)

     (206,147     —          —          —          —         —         16,667     —         —         —         16,667

Issuance of stock in connection with acquisitions

     129,239     —          —          —          —         —         —         —         —         —         —    

Issuance of noncontrolling interests

     —         —          —          —          —         —         —         —         —         544     544

Distributions to noncontrolling interests

     —         —          —          —          —         —         (42,801     —         —         (272,214     (315,015

Deconsolidation of consolidated subsidiaries

     —         —          —          —          —         —         —         —         —         (35,501     (35,501

Acquisition of noncontrolling interest

     —         —          —          —          —         —         (197,949     10,426     —         —         (187,523

Transactions with principal shareholder

     —         —          —          —          —         —         21,640     —         —         —         21,640

Net income (loss)

     —         —          —          —          —         —         —         —         (1,988,961     (33,352     (2,022,313

Other comprehensive income (loss), net of tax

     —         —          —          —          —         —         —         (19,495     —         —         (19,495
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance—September 30, 2020

     41,501,080   $ 41      129,357,948    $ 129      25,229,393   $ 25   $ 1,864,966   $ (11,680   $ (8,563,093   $ (15,442   $ (6,725,054
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
                                                                                             

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

9


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

      Nine Months Ended
September 30,
 

(Amounts in thousands)

   2021     2020  

Cash Flows from Operating Activities:

    

Net loss

   $ (3,828,967   $ (2,665,537

Adjustments to reconcile net loss to net cash from operating activities:

    

Depreciation and amortization

     535,157     588,120

Impairment of property and equipment

     —         3,541

Impairment/(gain on sale) of goodwill, intangibles and other assets

     629,126     809,584

Non-cash transaction with principal shareholder

     428,289     —    

Loss on extinguishment of debt

     —         77,336

Stock-based compensation expense

     164,023     55,865

Cash paid to settle employee stock awards

     —         (3,141

Issuance of stock for services rendered, net of forfeitures

     (2,272     14,995

Non-cash interest expense

     157,787     119,603

Provision for allowance for doubtful accounts

     20,033     53,549

(Income) loss from equity method and other investments

     19,414     44,585

Distribution of income from equity method and other investments

     3,210     —    

Foreign currency (gain) loss

     140,784     37,936

Change in fair value of financial instruments

     343,360     (805,863

Contingent consideration fair market value adjustment

     —         (122

Changes in operating assets and liabilities:

    

Operating lease right-of-use assets

     1,161,406     646,995

Current and long-term lease obligations

     (1,252,360     724,205

Accounts receivable and accrued revenue

     (10,624     (46,425

Other assets

     (37,506     (48,651

Accounts payable and accrued expenses

     32,961     (92,228

Deferred revenue

     (38,279     61,489

Other liabilities

     (6,377     6,349

Deferred income taxes

     1,720     119
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (1,539,115     (417,696

Cash Flows from Investing Activities:

    

Purchases of property and equipment

     (202,589     (1,252,833

Capitalized software

     (29,433     (18,538

Change in security deposits with landlords

     3,778     (3,094

Proceeds from asset divestitures and sale of investments, net of cash divested

     10,832     1,170,766

Contributions to investments

     (26,704     (93,357
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (244,116     (197,056
                  

 

10


LEGACY WEWORK

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (CONTINUED)

(UNAUDITED)

 

      Nine Months Ended
September 30,
 

(Amounts in thousands)

   2021     2020  

Cash Flows from Financing Activities:

    

Principal payments for property and equipment acquired under finance leases

     (3,397     (2,959

Proceeds from issuance of debt

     —         34,309

Proceeds from unsecured related party debt

     1,000,000     600,000

Proceeds from LC Debt Facility

     698,705     —    

Repayments of debt

     (349,011     (813,140

Repayment of security deposit loan

     (7,942     —    

Debt and equity issuance costs

     —         (11,578

Proceeds from exercise of stock options and warrants

     2,417     149

Proceeds from issuance of noncontrolling interests

     30,000     100,628

Distributions to noncontrolling interests

     —         (317,611

Payments for contingent consideration and holdback of acquisition proceeds

     (2,523     (35,706

Proceeds relating to contingent consideration and holdbacks of disposition proceeds

     12,177     —    

Additions to members’ service retainers

     330,358     305,432

Refunds of members’ service retainers

     (291,828     (455,530
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,418,956     (596,006

Effects of exchange rate changes on cash, cash equivalents and restricted cash

     (1,359     (4,301
  

 

 

   

 

 

 

Net increase (decrease) in cash, cash equivalents and restricted cash

     (365,634     (1,215,059

Cash, cash equivalents and restricted cash—Beginning of period

     854,153     2,200,688
  

 

 

   

 

 

 

Cash, cash equivalents and restricted cash—End of period

   $ 488,519   $ 985,629
  

 

 

   

 

 

 
                  

 

      September 30,  

(Amounts in thousands)

   2021        2020  

Cash and cash equivalents

   $ 477,244        $ 876,323  

Restricted cash

     11,275        109,306
  

 

 

      

 

 

 

Cash, cash equivalents and restricted cash

   $    488,519      $    985,629
  

 

 

      

 

 

 
                     

 

      Nine Months Ended
September 30,
 

(Amounts in thousands)

   2021        2020  

Supplemental Cash Flow Disclosures:

       

Cash paid during the period for interest (net of capitalized interest of $0 and $2,981 during 2021 and 2020, respectively)

   $    138,029        $ 70,430  

Cash received for operating lease incentives — tenant improvement allowances

     306,413          1,062,704

Cash received for operating lease incentives — broker commissions

     670        15,830
Supplemental Disclosure of Non-cash Investing & Financing Activities:        

Property and equipment included in accounts payable and accrued expenses

     78,795        279,485

Conversion of related party liabilities to into Preferred Stock

     711,786        —    

Creator Awards production services reimbursement obligation payable to SoftBank reclassified to additional paid-in capital

     —            21,641

Distribution of investment to noncontrolling interest holder

     —            6,646
                     

Additional ASC 842 Supplemental Disclosures

 

      Nine Months Ended
September 30,
 

(Amounts in thousands)

   2021      2020  

Cash paid for fixed operating lease costs included in the measurement of lease obligations in operating activities

   $ 1,720,517    $ 1,560,186  

Cash paid for interest relating to finance leases in operating activities

     3,225      3,533

Cash paid for principal relating to finance leases in financing activities

     3,398      2,959

Right-of-use assets obtained in exchange for finance lease obligations

     866      920

Right-of-use assets obtained in exchange for operating lease obligations, net of modifications and terminations

     (1,279,474      177,409
                   

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

11


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

Note 1. Organization and Business

WeWork Companies Inc. was founded in 2010. The We Company was incorporated under the laws of the state of Delaware in April 2019 as a direct wholly-owned subsidiary of WeWork Companies Inc. As a result of various legal entity reorganization transactions undertaken in July 2019, The We Company became the holding company of our business, and the then-stockholders of WeWork Companies Inc. became the stockholders of The We Company. WeWork Companies Inc. is the predecessor of the Company for financial reporting purposes. Effective October 14, 2020, The We Company changed its legal name to WeWork Inc.

Effective October 20, 2021, in connection with the BowX Merger Agreement and Business Combination as defined and discussed below, (i) WeWork Inc. changed its legal name to New WeWork Inc.; (ii) New WeWork Inc. merged with and into BowX Merger Subsidiary Corp., a Delaware corporation and a direct wholly owned subsidiary of BowX Acquisition Corp., with New WeWork Inc. surviving the merger; (iii) New WeWork Inc. then merged with and into BowX Merger Subsidiary II, LLC, a Delaware limited liability company and wholly owned subsidiary of BowX Acquisition Corp., with BowX Merger Subsidiary II, LLC surviving the second merger; and (iv) BowX Merger Subsidiary II, LLC changed its legal name to WW Holdco LLC (“Legacy WeWork” or the “Company”). In connection with the Business Combination, BowX Acquisition Corp. changed its name to WeWork Inc. (“PubCo”).

The Company holds an indirect general partner interest and indirect limited partner interests in The We Company Management Holdings L.P. (the “WeWork Partnership”). The WeWork Partnership owns 100% of the equity in WeWork Companies LLC. The Company, through the WeWork Partnership and WeWork Companies LLC, holds all the assets held by WeWork Companies Inc. prior to the legal entity reorganization and is subject to all the liabilities to which WeWork Companies Inc. was subject prior to the legal entity reorganization.

Our core global business offering integrates space, community, services and technology in 764 locations, including 631 Consolidated Locations, around the world as of September 1, 2021. Our membership offerings are designed to accommodate our members’ distinct space needs. We provide our members the optionality to choose from a dedicated desk, a private office or a fully customized floor with the flexibility to choose the type of membership that works for them on a monthly subscription basis, through a multi-year membership agreement or on a pay-as-you-go basis.

The Company’s operations are headquartered in New York.

All references to “we”, “us”, “our”, “WeWork”, “Legacy WeWork” and the “Company” are references to (A) prior to the closing of the Business Combination on October 20, 2021, WeWork Inc. and its subsidiaries on a consolidated basis and (B) after the closing of the Business Combination on October 20, 2021, WeWork Holdco LLC and its subsidiaries on a consolidated basis. All references to “PubCo” are references to (A) prior to the closing of the Business Combination on October 20, 2021, BowX Acquisition Corp. and (B) after the closing of the Business Combination on October 20, 2021, WeWork Inc. (formerly known as BowX Acquisition Corp.). All references to “SBG” are references to SoftBank Group Corp. or a controlled affiliate or subsidiary thereof, but, unless the context otherwise requires, does not include SVF Endurance (Cayman) Limited (“SVFE”) or the SoftBank Vision Fund (AIV M1) L.P. (“SoftBank Vision Fund”).

In October 2019, the Company entered into an agreement with SBG and SoftBank Vision Fund for additional equity and debt financing, as well as a number of changes to the Company’s corporate governance, including changes to the voting rights associated with certain series of the Company’s capital stock (as subsequently amended, the “Master Transaction Agreement”). The changes associated with this October 2019 agreement, and related agreements and amendments entered into subsequent to October 2019, as described throughout these financial statement notes, are collectively referred to as the “SoftBank Transactions.” SBG is a principal stockholder with representation on the Company’s Board of Directors.

 

12


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

BowX Merger Agreement

On March 25, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, PubCo, and BowX Merger Subsidiary Corp., a Delaware corporation and a direct wholly owned subsidiary of PubCo (“Merger Sub”).

As previously disclosed, on October 20, 2021, the transactions contemplated by the Merger Agreement closed and, among other things and upon the terms and subject to the conditions of the Merger Agreement, the following occurred (together with the other agreements and transactions contemplated by the Merger Agreement, the “Business Combination”):

 

   

at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), upon the terms and subject to the conditions of the Merger Agreement and in accordance with the Delaware General Corporation Law, as amended (the “DGCL”), Merger Sub merged with and into the Company, the separate corporate existence of Merger Sub ceased and the Company was the surviving corporation and became a wholly owned subsidiary of PubCo (the “Merger”);

 

   

immediately following the Merger and as part of the same overall transaction as the Merger, the Company merged with and into BowX Merger Subsidiary II, LLC, a Delaware limited liability company and a direct wholly owned subsidiary of PubCo (Merger Sub II and such transaction, the “Second Merger”), with Merger Sub II being the surviving entity of the Second Merger;

 

   

as a result of the Merger, among other things, all outstanding shares of capital stock of the Company (other than shares of Class C common stock of the Company, treasury shares, shares held by stockholders who have perfected and not withdrawn a demand for appraisal rights pursuant to the DGCL and shares of Company stock subject to options, warrants and restricted stock units (“RSUs”)) were cancelled in exchange for the right to receive a number of newly issued shares of Class A common stock, par value $0.0001 per share, of PubCo (“Class A Common Stock”) determined using an exchange ratio (the “Exchange Ratio”) which was determined based on a pre-money enterprise valuation of the Company of approximately $9.0 billion, a $10.00 price per share of Class A Common Stock and the fully diluted equity capitalization of the Company immediately prior to the Closing (which was equal to 0.82619);

 

   

shares of Class C common stock of the Company were cancelled in exchange for the right to receive a number of newly issued shares of Class C common stock, par value $0.0001 per share, of PubCo (“Class C Common Stock”) determined using the Exchange Ratio;

 

   

outstanding options and warrants to purchase Company stock and RSUs were converted into the right to receive options or warrants to purchase shares of Class A Common Stock or restricted stock units representing the right to receive shares of Class A Common Stock, as applicable, on the same terms and conditions that are in effect with respect to such options, warrants or RSUs on the day of Closing, subject to adjustments using the Exchange Ratio, as described below;

 

   

BowX Acquisition Corp. was renamed “WeWork Inc.”; and

 

   

Upon Closing, PubCo received approximately $1.3 billion in gross cash proceeds consisting of approximately $333.0 million from the PubCo trust account, $150.0 million from the previously announced backstop investment by DTZ Worldwide Limited, a parent company to Cushman & Wakefield U.S., Inc. (the “Backstop Investor”), and $800.0 million from the PIPE Investment (as defined below).

Immediately after giving effect to the Business Combination, there were 696,492,801 issued and outstanding shares of Class A Common Stock and 19,938,089 issued and outstanding shares of Class C Common Stock. PubCo’s public units separated into their component securities upon consummation of the Business Combination and, as a result, no longer trade as a separate security and were delisted from the Nasdaq Stock Market LLC (“Nasdaq”). As of the date of the Closing, PubCo’s post-Closing directors

 

13


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

and executive officers and their respective affiliated entities beneficially owned approximately 4.1% of the outstanding shares of Class A Common Stock, which represents approximately 4.0% of the total voting power of our outstanding shares, and no outstanding shares of Class C Common Stock, and the securityholders of PubCo immediately prior to the Closing (which includes Vivek Ranadivé, who is one of PubCo’s post-Closing directors) beneficially owned post-Closing approximately 6.1% of the outstanding shares of Class A Common Stock, which represents approximately 5.9% of the total voting power of our outstanding shares, and no outstanding shares of Class C Common Stock. On October 21, 2021, the shares of Class A Common Stock and the public warrants of PubCo began trading on the New York Stock Exchange.

Certain Related Agreements

Subscription Agreements

On March 25, 2021, concurrently with the execution of the Merger Agreement, PubCo entered into subscription agreements (the “Subscription Agreements”) with certain investors (collectively, the “PIPE Investors”), pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors collectively subscribed for 80,000,000 shares of Class A Common Stock for $10.00 per share, for an aggregate subscription price equal to $800.0 million, (the “PIPE Investment”). The PIPE Investment was consummated substantially concurrently with the Closing.

Backstop Investment

On October 13, 2021, PubCo entered into a backstop subscription agreement (the “Backstop Subscription Agreement”) with DTZ Worldwide (the “Backstop Investor”), pursuant to which, and on the terms and subject to the conditions of which, the Backstop Investor committed to subscribe for the number of shares of Class A Common Stock validly redeemed by the public stockholders of PubCo in connection with the Merger, subject to a cap of 15,000,000 shares of Class A Common Stock (the “Cap”). The purchase price for such shares of Class A Common Stock is equal to $10.00 per share multiplied by the number of shares of Class A Common Stock validly redeemed by the public stockholders of PubCo in connection with the Business Combination subject to the Cap, for an aggregate purchase price of up to $150.0 million (the “Backstop Investment”). The terms of the Backstop Investment substantially conform to the terms of the Subscription Agreements with the PIPE Investors. Substantially concurrently with the Closing, the Backstop Investor subscribed for 15,000,000 shares of Class A Common Stock for $150.0 million. So long as the Backstop Investor continues to hold a specified amount of shares of Class A Common Stock, then the Backstop Investor has the right to designate a board observer to the board of directors of PubCo (the “Board”).

Credit Support Letter (LC)

On March 25, 2021, WeWork Companies LLC, SBG and PubCo entered into a letter agreement (the “Credit Support Letter”) pursuant to which SBG has committed to consent to an extension of the termination date of the Credit Agreement from February 10, 2023 to no later than February 10, 2024 (the “LC Facility Termination Extension”), subject to the terms and conditions set forth therein. Any LC Facility Termination Extension will require the requisite consent of the lenders thereunder.

Credit Support Letter (SSN)

On March 25, 2021, the Company and an affiliate of SBG entered into a letter agreement pursuant to which the Company and an affiliate of SBG have agreed to amend and restate the terms of the Master Senior Secured Notes Note Purchase Agreement that governs the SoftBank Senior Secured Notes (as amended and restated, the “A&R Senior Secured Note Purchase Agreement”) on the earlier of (i) the Closing and (ii) August 12, 2021. The A&R Senior Secured Note Purchase Agreement allows the Company to borrow up to an aggregate principal amount of $550.0 million of senior secured debt in the form of new 7.5% senior secured notes (the “A&R Senior Secured Notes”). It was a condition to the execution of the A&R Senior Secured Note Purchase Agreement that any outstanding SoftBank Senior

 

14


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

Secured Notes be redeemed, repurchased or otherwise repaid and canceled at a price of 101% of the principal amount thereof plus accrued and unpaid interest. The A&R Senior Secured Note Purchase Agreement allows the Company to borrow once every 30 days with minimum draws of $50.0 million. The A&R Senior Secured Notes will mature no later than February 12, 2023 or, if earlier, 18 months from the Closing. In August 2021, the Company and SBG agreed to amend and restate the terms of the Master Senior Secured Notes Note Purchase Agreement that governs the SoftBank Senior Secured Notes to extend the draw period from August 12, 2021 to September 30, 2021. In September 2021, the Company and SBG agreed to amend and restate the terms to extend the draw period from September 30, 2021 to October 31, 2021. On October 20, 2021, the Company and SBG entered into the A&R Senior Secured Note Purchase Agreement.

Warrants

On October 20, 2021, PubCo issued to (i) SB WW Holdings (Cayman) Limited (“SBWW”) a warrant (the “SBWW Warrant”) to purchase a number of shares of Class A Common Stock (rounded to the nearest whole share) equal to 35,038,960 multiplied by the Exchange Ratio (which product is equal to 28,948,838 shares of Class A Common Stock), subject to the terms set forth therein, at a price per share equal to $0.01 divided by the Exchange Ratio (rounded to the nearest full cent) (which quotient is equal to a price per share equal to $0.01) and (ii) SVFE a warrant (the “SVFE Warrant” and, together with the SBWW Warrant, the “First Warrants”) to purchase a number of shares of Class A Common Stock (rounded to the nearest whole share) equal to 12,327,444 multiplied by the Exchange Ratio (which product is equal to 10,184,811 shares of Class A Common Stock), subject to the terms set forth therein, at a price per share equal to $0.01 divided by the Exchange Ratio (rounded to the nearest full cent) (which quotient is equal to a price per share equal to $0.01). The First Warrants will expire on the tenth anniversary of the Closing. Although the First Warrants were issued by PubCo, solely for purposes of calculating the Exchange Ratio used in the Business Combination, the First Warrants are treated in the same manner as a hypothetical outstanding warrant to purchase 47,366,404 shares of Company Class A common stock at an exercise price of $0.01 per share.

The First Warrants issued to SBWW and SVFE were an inducement to obtain SBWW’s and SVFE’s, and their respective affiliates’, support in effectuating the automatic conversion of Company preferred stock on a one-to-one basis to Company common stock.

At the Exchange Ratio, the SBWW Warrant enables SBWW to purchase 28,948,838 shares of Class A Common Stock. Assuming a price of $10 per share, the SBWW Warrant has an estimated fair value of approximately $289.5 million. At the Exchange Ratio, the SVFE Warrant enables SVFE to purchase 10,184,811 shares of Class A Common Stock. Assuming a price of $10 per share, the SBWW Warrant has an estimated fair value of approximately $101.8 million.

Additionally, concurrently with and contingent upon the LC Facility Termination Extension, PubCo will issue to SBG or its designees one or more warrants (collectively, the “LC Warrant”) to purchase a number of shares of Class A Common Stock (rounded to the nearest whole share) equal to 14,431,991 multiplied by the Exchange Ratio, subject to the terms set forth therein, at a price per share equal to $0.01 divided by the Exchange Ratio (rounded to the nearest full cent). The LC Warrant would expire on the tenth anniversary of the date of issuance.

Additionally, as a result of and upon the Closing, in accordance with the applicable terms of the warrants to purchase Class A common stock of the Company and the warrants to purchase Series H-3 preferred stock of the Company and/or Series H-4 preferred stock of the Company (collectively, the “Company Warrants”), the Company Warrants were converted into the right to receive a warrant to purchase shares of Class A Common Stock upon the same terms and conditions as are in effect with respect to such Company Warrants immediately prior to the effective time of the Merger (the “Converted Company Warrants”) except that (i) such Converted Company Warrants relate to that whole number of shares of Class A Common Stock (rounded down to the nearest whole share) equal to the number of shares of Company capital stock subject to such Company Warrants, multiplied by the Exchange Ratio, and (ii) the exercise price per share for each such Converted Company Warrants is equal to the exercise price per share of such Company Warrants in effect immediately prior to the effective time of the Merger, divided by the Exchange Ratio (the exercise price per share, as so determined, being rounded up to the nearest full cent).

 

15


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

Additionally, outstanding warrants to purchase an aggregate of 23,873,333 shares of Class A Common Stock, comprising 16,100,000 public warrants and 7,773,333 private placement warrants, that were outstanding and held by equityholders of PubCo prior to the Closing will become exercisable in accordance with the terms of the warrant agreement governing those securities. Such warrants will become exercisable 30 days after the completion of the Business Combination. To the extent such warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to the holders of Class A Common Stock and increase the number of shares eligible for resale in the public market.

Amended and Restated Registration Rights Agreement

On October 20, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, PubCo entered into the Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with BowX Sponsor, LLC (the “Sponsor”), certain stockholders of PubCo and certain stockholders of the Company. Pursuant to the Registration Rights Agreement, PubCo agreed to register for resale, pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), certain shares of Class A Common Stock and other equity securities of PubCo that are held by the parties thereto from time to time. In certain circumstances, various parties to the Registration Rights Agreement can collectively demand up to nine underwritten offerings and are entitled to piggyback registration rights, in each case subject to certain limitations set forth in the Registration Rights Agreement.

Stockholders Agreement

On October 20, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, PubCo entered into the Stockholders Agreement (the “Stockholders Agreement”) with the Sponsor, SBWW, SVFE and Benchmark Capital Partners VII (AIV), L.P. Pursuant to the Stockholders Agreement, so long as each such holder of Class A Common Stock continues to hold a specified amount of Class A Common Stock, then each such holder has the right to designate for nomination by the Board the number of candidates for election to the Board specified in the Stockholders Agreement. The Stockholders Agreement also provides that (i) so long as certain Insight Partners investors continue to hold a specified amount of Class A Common Stock, then Insight Partners has the right to designate a director and (ii) so long as certain Starwood Capital investors continue to hold a specified amount of Class A Common Stock, then Starwood Capital has the right to designate a board observer.

Indemnification Agreements

On October 20, 2021, PubCo entered into separate indemnification agreements with its directors and executive officers. These agreements, among other things, require PubCo to indemnify its directors and executive officers for certain liabilities and expenses, including attorneys’ fees, judgments, fines, and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of its directors or executive officers or any other company or enterprise to which the person provides services at its request.

WeWork Partnership

On October 20, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, the partnership agreement for the WeWork Partnership (the “LPA”) was amended at the Closing to implement mechanical changes to reflect the conversion of shares of capital stock of Legacy WeWork to shares of Class A Common Stock of PubCo (including the

 

16


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

conversion of shares of Legacy WeWork Class C Common Stock into shares of Class C Common Stock of PubCo). Specifically, the number of outstanding partnership interests (including all WeWork Partnerships Profits Interest Units) was adjusted to equal the number of shares of the corresponding class of common stock of PubCo (which, in the case of the WeWork Partnerships Profits Interest Units, is the Class C Common Stock of PubCo), taking into account the Exchange Ratio in the Merger. The distribution threshold and catch-up base amount for the WeWork Partnerships Profits Interest Units were also equitably adjusted to maintain the pre-Business Combination economics of the WeWork Partnerships Profits Interest Units. The distribution threshold for Adam Neumann’s WeWork Partnerships Profits Interest Units was also adjusted downward based on closing date pricing of the Business Combination.

Following the Business Combination, vested WeWork Partnerships Profits Interest Units can, at the election of the holder of the WeWork Partnerships Profits Interest Units, be (a) converted into WeWork Partnership Class A Common Units or (b) exchanged (along with the corresponding shares of PubCo Class C Common Stock) for (at PubCo’s election) shares of Class A Common Stock or cash of an equivalent value, assuming that the trading price of a share of Class A Common Stock exceeds the per-unit distribution threshold for these WeWork Partnerships Profits Interest Units (which generally represents the liquidation value of a share of WeWork Class A Common Stock on the date such WeWork Partnerships Profits Interest Units were granted). The exchange value takes into account, among other things, the value of a share of Class A Common Stock and the catch-up base amount of the WeWork Partnerships Profits Interest Units being exchanged. A catch-up base amount is similar to an option exercise price and represents, for each WeWork Partnerships Profits Interest Unit exchanged, the value of a share of common stock that the holder of WeWork Partnerships Profits Interest Units will not receive upon exchange. A higher value and a lower catch-up base amount each generally will result in more shares of Class A Common Stock being issued to the exchanging holder (except the number of shares of Class A Common Stock issuable upon exchange of each WeWork Partnerships Profits Interest Unit can never be greater than one). On October 21, 2021, Adam Neumann elected to convert his WeWork Partnerships Profits Interest Units into WeWork Partnership Class A Common Units.

2021 Equity Incentive Plan

On October 20, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, the adoption and approval of the WeWork Inc. 2021 Equity Incentive Plan (the “Equity Incentive Plan”) was ratified by the Board. The Equity Incentive Plan is designed to provide an additional incentive to persons whose contributions are essential to the success of the business and to attract and retain competent and dedicated persons whose efforts will result in long-term profitability. The Equity Incentive Plan is administered by the Board or an authorized committee thereof comprised of non-employee directors (the “plan administrator”). The purpose of the Equity Incentive Plan is to assist eligible employees in acquiring a stock ownership interest in the Company, to align such employees’ interests with those of our stockholders, and to encourage such employees to remain in the employment of the Company.

The Equity Incentive Plan provides that the number of shares of Class A Common Stock initially reserved for issuance thereunder shall be equal to 5% of the Aggregate Fully Diluted Company Capital Stock (as defined in the Merger Agreement) as of the Closing, subject to adjustment as provided by Section 5 of the Equity Incentive Plan (the “Equity Incentive Plan Share Reserve”). The Equity Incentive Plan Share Reserve is equal to 39,657,781 shares.

2021 Employee Stock Purchase Plan

On October 20, 2021, in connection with the consummation of the Business Combination and as contemplated by the Merger Agreement, the adoption and approval of the WeWork Inc. 2021 Employee Stock Purchase Plan (the “ESPP”) was ratified by the Board. The ESPP is designed to allow eligible employees of the Company to purchase shares of Class A Common Stock with their accumulated payroll deductions. The ESPP is administered by the Board or an authorized committee thereof comprised of non-employee directors (the “ESPP administrator”). The ESPP is divided into two components: the “423 Component” and the “Non-423 Component.” The 423 Component is intended to qualify under Section 423 of the Internal Revenue Code of 1986, as amended (the “Code”). The Non-423 Component is not intended to qualify under Section 423 of the Code and may generally be used to grant stock options to certain non-U.S. employees and other employees designated by the ESPP administrator. The purpose of the ESPP is to assist eligible employees in acquiring a stock ownership interest in the Company, to align such employees’ interests with those of our stockholders, and to encourage such employees to remain in the employment of the Company. The equity offers under the ESPP are intended to assist the Company in recruiting and retaining highly qualified employees.

 

17


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

The ESPP provides that the number of shares of Class A Common Stock initially reserved for issuance thereunder shall be equal to 1% of the Aggregate Fully Diluted Company Capital Stock as of the Closing, subject to adjustment as provided by Section 16 of the ESPP (the “ESPP Share Reserve”). The ESPP Share Reserve is equal to 7,931,556 shares.

The foregoing description is not complete and is supplemented by the 8-K/A and the Current Reports on Form 8-K filed by PubCo on September 29, 2021, October 18, 2021 and October 26, 2021, for the Merger Agreement, the Subscription Agreements, the Backstop Subscription Agreement, the Credit Support Letter, the A&R Senior Secured Note Purchase Agreement, the First Warrants, the Registration Rights Agreement, the Stockholders Agreement, the form of indemnification agreement, the LPA, the Equity Incentive Plan and the ESPP and the transactions contemplated thereby.

Note 2. Summary of Significant Accounting Policies

Basis of Quarterly Presentation and Principles of Consolidation — The accompanying unaudited condensed consolidated financial statements and notes to the condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial reporting. In accordance with such rules and regulations, certain information and accompanying note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, although the Company believes the disclosures included herein are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are considered necessary for the fair presentation of the financial position of the Company at September 30, 2021 and the results of operations for the interim periods presented. The operating results for the periods presented are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020, included in Legacy WeWork’s Annual Report for the year ended December 31, 2020.

Other than the changes described below, no material changes have been made to the Company’s significant accounting policies disclosed in Note 2, Summary of Significant Accounting Policies, in its Annual report issued on March 19, 2021, for the year ended December 31, 2020.

The Company operates as a single operating segment. See Note 18 for further discussion on the Company’s segment reporting.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and VIEs for which the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

The Company is required to consolidate entities deemed to be VIEs in which the Company is the primary beneficiary. The Company is considered to be the primary beneficiary of a VIE when the Company has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses or receive benefits that could potentially be significant to the VIE.

JapanCo, WeCap Manager, WeCap Holdings Partnership and LatamCo (each as defined and discussed in Note 5) are the Company’s only consolidated VIEs as of September 30, 2021. In March 2020, in connection with the sale of the property held by the 424 Fifth Venture (the “424 Fifth Venture Transaction”), redemption payments were made to the noncontrolling interest holders in the 424 Fifth

 

18


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

Venture and the 424 Fifth Venture became a wholly owned subsidiary of the Company and is no longer a VIE. In April 2020, in connection with the SoftBank Transactions, the Company completed the acquisition of the noncontrolling interest in PacificCo (as defined in Note 5) and PacificCo became a wholly owned subsidiary of the Company and is no longer a VIE. In September 2020, the Company transferred its variable interest and control over the Creator Fund to an affiliate of SBG and the Creator Fund was deconsolidated from the Company’s financial statements. In October 2020, the Company restructured its ownership interests in ChinaCo (as defined in Note 5) such that the Company is no longer the primary beneficiary of ChinaCo and as a result, beginning on October 2, 2020, ChinaCo was deconsolidated (the “ChinaCo Deconsolidation”) and the Company’s remaining ordinary share investment represents an unconsolidated VIE that is accounted for as an equity method investment. In September 2021, LatamCo (as defined in Note 5) entered into an agreement with an affiliate of SBG for the sale of a 71.0% interest in LatamCo and became a consolidated VIE. See Note 5 for further discussion of these transactions. See Note 6 for discussion of the Company’s non-consolidated VIEs.

A noncontrolling interest in a consolidated subsidiary represents the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. Noncontrolling interests are presented as a separate component of equity in the condensed consolidated balance sheets and the presentation of net income in the condensed consolidated statements of comprehensive loss, is modified to present earnings and other comprehensive income attributed to controlling and noncontrolling interests.

The Company’s convertible preferred stock and noncontrolling interests that are redeemable upon the occurrence of an event that is not solely within the control of the Company are classified outside of permanent equity. As it is not probable that amounts will become redeemable, no remeasurement is required. The Company will continue to monitor the probability of redemption. The Company’s noncontrolling interests that have redemption features within the Company’s control are classified within permanent equity and are described further below.

The redemption value of the WeWork Partnerships Profits Interest Units (as discussed in Note 14) that were awarded to former members of management are measured based upon the aggregate redemption value and takes into account the proportion of employee services rendered under the WeWork Partnerships Profits Interest Units vesting provisions. The redemption value will vary from period to period based upon the fair value of the Company, whereby the intrinsic value (per-unit fair value of the Company is greater than the per-unit distribution threshold) will be reflected as noncontrolling interests in the equity section of the condensed consolidated balance sheets with a corresponding entry to additional paid-in-capital. The intrinsic value of the WeWork Partnership Profits Interests will be remeasured each period until the WeWork Partnerships Profits Interests are converted to shares or cash. On October 21, 2021, in connection with the transactions discussed in Note 1, Adam Neumann elected to convert his WeWork Partnerships Profits Interest Units into WeWork Partnership Class A Common Units.

The Company’s other noncontrolling interests represent substantive profit-sharing arrangements and profits and losses are attributed to the controlling and noncontrolling interests using the hypothetical-liquidation-at-book-value method.

Use of Estimates — The preparation of the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amount of revenues and expenses during the reporting periods.

Estimates inherent in the current financial reporting process inevitably involve assumptions about future events. Actual results could differ from those estimates. Since December 2019, a novel strain of coronavirus, referred to as the COVID-19 virus, has spread to countries in which we operate. COVID-19 has become a global pandemic. Authorities in jurisdictions where our locations are located have at times issued stay-at-home orders, restrictions on certain activities such as travel and on the types of businesses that may continue to operate. As the pandemic has adversely affected and may continue to

 

19


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

adversely affect our revenues and expenditures, the extent and duration of these restrictions and overall macroeconomic impact of the pandemic will have an effect on estimates used in the preparation of financial statements. This includes the net operating income assumptions in our long-lived asset impairment testing, the ultimate collectability of accounts receivable due to the effects of COVID-19 on the financial position of our members, the timing of capital expenditures and fair value measurement changes for assets and liabilities that the Company measures at fair value.

Our liquidity forecasts are based upon continued execution of the Company’s operational restructuring program and also includes management’s best estimate of the impact that the outbreak of COVID-19, including the Delta or other variants, may continue to have on our business and our liquidity needs; however, the extent to which our future results and liquidity needs are further affected by the continued impact of COVID-19 will largely depend on the continued duration of closures, and delays in location openings, the success of ongoing vaccination efforts, the effect on demand for our memberships, any permanent shifts in working from home, how quickly we can resume normal operations and our ongoing lease negotiations with our landlords, among others. We believe continued execution of our operational restructuring program and our current liquidity position will be sufficient to help us mitigate the continued near-term uncertainty associated with COVID-19, however our assessment assumes a recovery in our revenues and occupancy beginning in the second half of 2021 with a gradual return toward pre-COVID levels. If revenues continue to decline during 2021 and/or we do not experience a recovery consistent with our projected timing, additional capital sources may be required, the timing and source of which are uncertain. There is no assurance we will be successful in securing the additional capital infusions if needed.

Restricted Cash - Restricted cash consists primarily of amounts provided to banks to secure letters of credit issued under certain of the Company’s credit agreements as required by various leases. Transfers between restricted and unrestricted cash accounts are not reported within the statements of cash flows. Only restricted cash receipts or payments from restricted cash directly to third parties are reported in the statements of cash flows as either an operating, investing or financing activity, depending on the nature of the transaction.

Allowance for Doubtful Accounts — The Company adopted ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) on January 1, 2020. In accordance with the revised guidance, management determines an allowance that reflects its best estimate of the accounts receivable due from members, related parties, landlords and others that it expects will not be collected. Management considers many factors in considering its reserve with respect to these accounts receivable, including historical data, experience, creditworthiness, income trends, as well as current and forward looking conditions. Recorded liabilities associated with members’ service retainers are also considered when estimating the allowance for doubtful accounts as we have the contractual right to apply members’ service retainers to outstanding receivables.

Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded as a reduction of bad debt expense when received. As of September 30, 2021 and December 31, 2020, the Company recorded $77.5 million and $107.8 million, respectively, as an allowance for doubtful accounts on accounts receivable and accrued revenue.

Income Taxes — The Company calculates its quarterly income tax provision pursuant to Accounting Standard Codification (“ASC”) 740-270, Income Taxes — Interim Reporting, which provides that a Company cannot recognize a tax benefit in its annual effective tax rate for any jurisdiction with a pre-tax book loss and full valuation allowance (“excluded jurisdictions”). For the three and nine months ended September 30, 2021, the Company recorded an income tax (benefit) provision of $(2.3) million and $5.0 million, respectively, resulting in effective tax rates of (0.27)% and 0.13%, respectively. For the three and nine months ended September 30, 2020, the Company recorded an income tax provision of $5.6 million and $21.7 million, respectively, resulting in effective tax rates of 0.56% and 0.82%, respectively.

 

20


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

The Company analyzed its various tax positions and did not identify any material uncertain tax positions for the three and nine months ended September 30, 2021 and 2020.

The Company files U.S. federal, U.S. state and foreign income tax returns. Depending on the statute of limitation of the specific jurisdictions in which we operate, three to ten years of the Company’s income tax returns remain subject to examination. Globally, the Company is involved in various tax matters, and various annual filings in certain jurisdictions are under examination.

Stock-Based Compensation — Stock-based compensation expense attributable to equity awards granted to employees and non-employees is measured at the grant date based on the fair value of the award. For employee awards, the expense is recognized on a straight-line basis over the requisite service period for awards that actually vest, which is generally the period from the grant date to the end of the vesting period. For non-employee awards, the expense for awards that actually vest is recognized based on when the goods or services are provided.

The Company generally estimates the fair value of stock option awards granted using the Black-Scholes-Merton option-pricing formula (the “Black-Scholes Model”) and a single option award approach. This model requires various significant judgmental assumptions in order to derive a final fair value determination for each type of award, including the expected term, expected volatility, expected dividend yield, risk-free interest rate, and fair value of the Company’s stock on the date of grant. The expected option term for options granted is calculated using the “simplified method.” This election was made based on the lack of sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is based on similar entities whose stock prices are publicly traded. The Company uses the historical volatilities of similar entities due to the lack of sufficient historical data for the Company’s common stock price. Dividend yields are based on the Company’s history and expected future actions. The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award was granted with a maturity equal to the expected term of the stock option award. All grants of stock options generally have an exercise price equal to or greater than the fair market value of the Company’s common stock on the date of grant.

In situations where the exercise price of a stock option is greater than the fair market value of the Company’s common stock on the date of grant, the Company estimates the fair value of stock option awards granted using the binomial model. The binomial model incorporates assumptions regarding anticipated employee exercise behavior, expected stock price volatility, dividend yield and risk-free interest rate. Anticipated employee exercise behavior and expected post-vesting cancellations over the contractual term used in the binomial model are primarily based on historical exercise patterns. These historical exercise patterns indicate that exercise behavior between employee groups is not significantly different. For our expected stock price volatility assumption, the Company weights historical volatility and implied volatility and uses daily observations for historical volatility, while our implied volatility assumptions are based on actively traded options related to our common stock. The expected term is derived from the binomial model, based on assumptions incorporated into the binomial model as described above.

The Company estimated the fair value of the WeWork Partnerships Profits Interest Units awards in connection with the modification of the original stock options using the Hull-White model and a binomial lattice model in order to apply appropriate weight and consideration of the associated distribution threshold and catch-up base amount. The Hull-White model requires similar judgmental assumptions as the Black-Scholes Model used for valuing the Company’s options.

During the periods in which the Company was privately held and there was no public market for our stock, the fair value of the Company’s equity is approved by the Company’s Board of Directors or the Compensation Committee thereof as of the date stock-based awards are granted. In estimating the fair value of our stock, the Company uses a third-party valuation specialist and considers factors it believes are material to the valuation process, including but not limited to, the price at which recent equity was issued by the Company to independent third parties or transacted between third parties, actual and projected financial results, risks, prospects, economic and market conditions, and estimates of weighted average cost of capital. The Company believes the combination of these factors provides an appropriate estimate of the expected fair value of the Company and reflects the best estimate of the fair value of the Company’s common stock at each grant date.

 

21


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

The Company has elected to recognize forfeitures of stock-based compensation awards as they occur. For awards subject to performance conditions, no compensation cost will be recognized before the performance condition is probable of being achieved. Recognition of any compensation expense relating to stock grants that vest contingent on an initial public offering or “Acquisition” (as defined in the 2015 Plan detailed in Note 14) will be deferred until consummation of such initial public offering or Acquisition.

Fair Value Measurements — The Company applies fair value accounting for all financial assets and liabilities and certain non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring and nonrecurring basis. Assets and liabilities measured at fair value every reporting period include investments in cash equivalents, available-for-sale debt securities, certain embedded derivatives requiring bifurcation, certain warrants issued classified as a liability in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and contingent consideration liabilities relating to business combinations. Other assets and liabilities are subject to fair value measurements only in certain circumstances, including purchase accounting applied to assets and liabilities acquired in a business combination, impaired cost and equity method investments and long-lived assets that are written down to fair value when they are impaired.

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company assumes the highest and best use of non-financial assets by market participants and the market-based risk measurements or assumptions that market participants would use in pricing assets or liabilities, such as inherent risk, transfer restrictions and credit risk. Assets and liabilities are classified using a fair value hierarchy, which prioritizes the inputs used to measure fair value according to three levels, and bases the categorization of fair value measurements within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 — Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 — Inputs that reflect quoted prices for identical assets or liabilities in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted prices that are observable for the assets or liabilities or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 — Unobservable inputs that the Company incorporates in its valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

See Note 11 for additional discussion on the Company’s fair value measurements.

Recently Adopted Accounting Pronouncements

In April 2020, the FASB issued interpretive guidance in response to questions it received about how to account for the concessions many lessors are providing or are expecting to provide to lessees in response to the operational and financial challenges lessees are facing as a result of the COVID-19 pandemic. The question-and-answer document states entities can elect not to evaluate whether a concession provided by a lessor to a lessee in response to the COVID-19 pandemic is a lease modification. An entity that elects not to evaluate whether a concession is a modification can then elect to account for the concession as if it were contemplated in the existing contract. Entities may make these elections for any lessor-provided COVID-19-related relief (e.g., deferral of lease payments, cash payments, reduction of future lease payments) that does not result in a substantial increase in the rights of the lessor or the obligations of the lessee.

 

22


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

The Company has elected to treat short-term COVID-19 related concessions or deferrals provided to our members whose contracts qualify as a lease in accordance with ASC 842, Leases (“ASC 842”) as if it were contemplated in the existing contract and member concessions and deferrals that are expected to extend greater than 12 months or change the other terms of member leases are treated as modifications. The Company elected to treat short-term COVID-19 related rent concessions received from our landlords as variable lease expense and short-term lease deferrals as if there is no change in the contract. COVID-19 related concessions and deferrals that are expected to extend greater than 12 months or change the other terms in the lease are treated as modifications and a full re-valuation of the right-of-use asset and liability is performed.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies accounting for income taxes by removing certain exceptions from the general principles in Topic 740 and clarifying certain aspects of the current guidance to promote consistency among reporting entities. The Company adopted ASU 2019-12 as of January 1, 2021, which did not have a material impact on its condensed consolidated financial statements.

Note 3. Restructuring, Impairments and Gains on Sale

In September 2019, the Company initiated an operational restructuring program that included a change in executive leadership and plans for cost reductions that aim to improve the Company’s operating performance. Throughout 2020, the Company has made significant progress towards it operational restructuring goals including divesting or winding down various non-core operations not directly related to our core space-as-a-service offering, significant reductions in costs associated with selling, general and administrative expenses. During the nine months ended September 30, 2021, the Company successfully terminated leases associated with a total of 78 previously open locations and 3 pre-open locations. Management is continuing to evaluate our real estate portfolio in connection with its ongoing restructuring efforts and expects to exit additional leases.

During 2021, the Company anticipates there will be additional restructuring and related costs consisting primarily of lease termination charges, other exit costs and costs related to ceased use buildings and one-time employee termination benefits, as the Company is still in the process of finalizing its operational restructuring plans.

Restructuring and other related costs totaled $15.9 million and $19.0 million during the three months ended September 30, 2021 and 2020, respectively, and $482.0 million and $155.2 million during the nine months ended September 30, 2021 and 2020, respectively. The details of these net charges are as follows:

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
                          

(Amounts in thousands)

   2021     2020     2021     2020  
                          

One-time employee terminations (1)

   $ 3,758   $ 19,122   $ 548,860   $ 172,154

Ceased use buildings

     33,378     —         99,123     —    

Gains on lease terminations, net

     (31,373     (4,529     (211,368     (36,215

Other, net

     10,171     4,371     45,364     19,242
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   $ 15,934   $ 18,964   $ 481,979   $ 155,181
  

 

 

   

 

 

   

 

 

   

 

 

 
                                  

 

(1)

In connection with the Settlement Agreement, as described in Note 17, SBG purchased 30,139,971 shares of Class B Common Stock of the Company from We Holdings LLC, which is Adam Neumann’s affiliated investment vehicle, for a price per share of $19.19, representing an aggregate purchase price of approximately $578.4 million. The Company recorded $428.3 million of restructuring and other related costs in its consolidated statement of operations for the nine months ended

 

23


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

  September 30, 2021, which represents the excess between the amount paid from a principal shareholder of the Company to We Holding LLC and the fair value of the stock purchased. Also, in connection with the Settlement Agreement the WeWork Partnerships Profits Interest Units held by Adam Neumann in the WeWork Partnership became fully vested and were amended to have a catch-up base amount of $0. The per unit distribution thresholds for the WeWork Partnerships Profits Interest Units were also amended to initially be $10.00 and may be subject to upward adjustment based on a third party valuation of fair market value and may be subject to downward adjustment based on closing date pricing if a de-SPAC or initial public offering were to occur. Legacy WeWork has received a third party valuation of fair market value of the WeWork Partnerships Profits Interest Units, which confirmed that no upward adjustment is needed to be $10.00 per unit distribution threshold. As a result of this modification, the Company recorded $102.0 million of restructuring and other related costs in its consolidated statement of operations for the nine months ended September 30, 2021.

As of September 30, 2021, net restructuring liabilities totaled approximately $60.2 million, including $60.8 million in accounts payable and accrued expenses, $7.8 million in other liabilities, net of $8.4 million in receivables from landlords in connection with lease terminations, included in other current assets in the consolidated balance sheet. A reconciliation of the beginning and ending restructuring liability balances is as follows:

 

(Amounts in thousands)

   One-time
Employee
Benefits
    Legal
Settlement
Benefits (1)
    Other     Total
Restructuring
Costs
 

Restructuring liability balance — December 31, 2020

   $ 16,119   $ —     $ 12,756   $ 28,875

Restructuring and other related costs expensed during the period

     18,589     530,271     (66,881     481,979

Cash payments of restructuring liabilities, net (2)

     (28,933     —         (309,457     (338,390

Non-cash impact — primarily asset and liability write-offs and stock-based compensation

     (2,054     (530,271     420,108     (112,217
  

 

 

   

 

 

   

 

 

   

 

 

 

Restructuring liability balance — September 30, 2021

   $ 3,721   $ —     $ 56,526   $ 60,247
  

 

 

   

 

 

   

 

 

   

 

 

 
                                  

 

(1)

For further details on the costs in connection with the Settlement Agreement recorded in restructuring and other related costs for the nine months ended September 30, 2021, see footnote 1 to the preceding table.    

(2)

Includes cash payments received from the landlord for terminated leases of $18.0 million for the nine months ended September 30, 2021.

In connection with the operational restructuring program and related changes in the Company’s leasing plans and planned or completed disposition or wind down of certain non-core operations and projects, the Company has also recorded various other non-routine write-offs, impairments and gains on sale of goodwill, intangibles and various other long-lived assets.

During the three and nine months ended September 30, 2021, the Company also performed its quarterly impairment assessment for long-lived assets. As a result of the COVID-19 pandemic and the resulting declines in revenue and operating income experienced by certain locations as of September 30, 2021, we identified certain assets whose carrying value was now deemed to have been partially impaired. We evaluated our estimates and assumptions related to our locations’ future revenue and cash flows, and performed a comprehensive review of our locations’ long-lived assets for impairment, including both property and equipment and operating lease right-of-use assets, at an individual location level. Key assumptions used in estimating the fair value of our location assets in connection with our impairment analyses are revenue growth, lease costs, market rental rates, changes in local real estate markets in which we operate, inflation, and the overall economics of the real estate industry. Our assumptions account for the estimated impact of the COVID-19 pandemic. As a result, during the three and nine months ended September 30, 2021, the Company recorded none and $31.5 million, respectively, in impairments, primarily as a result of decreases in projected cash flows primarily attributable to the impact of COVID-19.

 

24


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

Non-routine gains and impairment charges totaled $87.5 million and $629.1 million during the three and nine months ended September 30, 2021, respectively, and are included on a net basis as impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations. The details of these net charges are as follows:

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
                           

(Amounts in thousands)

   2021      2020     2021     2020  
                           

Impairment of assets held for sale

   $ —      $ 268   $ —     $ 120,273

Impairment and write-off of long-lived assets associated with restructuring

     87,541      155,961     598,481     579,024

Impairment of long-lived assets primarily associated with COVID-19

     —          104,324     31,461     166,637

Gain on sale of assets

     —          (6,928     (816     (56,350
  

 

 

    

 

 

   

 

 

   

 

 

 

Total

   $ 87,541    $ 253,625   $ 629,126   $ 809,584
  

 

 

    

 

 

   

 

 

   

 

 

 
                                   

The table above excludes certain routine impairment charges for property and equipment write-offs relating to excess, obsolete, or slow-moving inventory of furniture and equipment, early termination of leases and cancellation of other deals or projects occurring in the ordinary course of business totaling none and $0.7 million, respectively, during the three months ended September 30, 2021 and 2020, and totaling $0.03 million and $3.5 million, respectively, during the nine months ended September 30, 2021 and 2020, respectively, included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

In connection with the Company’s operational restructuring program, the Company has divested or wound down certain non-core operations not directly related to its space-as-a-service during the nine months ended September 30, 2020.

In January 2020, the Company sold Teem for total cash consideration of $50.5 million. The Company recorded a gain on the sale of $37.2 million, included in the impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2020.

In March 2020, the Company sold Managed by Q for total cash consideration of $28.1 million. Of the total consideration, $2.5 million was heldback at closing and is included as a disposition proceeds holdback receivable within other current assets on the accompanying condensed consolidated balance sheet as of September 30, 2020. As of September 30, 2021, $2.2 million of the holdback was released and $0.3 million included as a disposition proceeds holdback receivable within other current assets on the accompanying condensed consolidated balance sheet. The Company recorded a gain on the sale in the amount of none and $8.9 million, included in the impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively. The gain on sale in 2020 was recognized after a $20.7 million impairment of intangible assets and a $145.0 million impairment of goodwill associated with Managed by Q that was recorded during the year ended December 31, 2019.

In March 2020, the Company also sold 91% of the equity of Meetup for total cash consideration of $9.5 million and the remaining 9% was retained by the Company. Upon closing, Meetup was deconsolidated and the Company’s 9% interest in the equity of Meetup is reflected within equity method and other investments on the accompanying condensed consolidated balance sheet as of September 30, 2020. Prior to the sale, the Company recorded an impairment loss of none and $26.1 million, on the assets held for sale, included in the impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively.

In March 2020, the Company completed the sale of the real estate investment held by the 424 Fifth Venture and recognized an impairment loss on the assets sold totaling none and $53.7 million, included in impairment/(gain on sale) of goodwill, intangibles and other assets on the accompanying condensed consolidated statements of operations during the three and nine months ended September 30, 2020, respectively. Of the total consideration, $15.0 million was heldback at closing of which $10.0 million was received as of September 30, 2021. See Note 5 for further details.

 

25


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

In May 2020, the Company sold SpaceIQ for a total cash consideration of $9.6 million. Prior to the sale, the Company recorded an impairment loss of of none and $23.1 million, respectively, on the assets held for sale, included in the impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively.

In July 2020, the Company sold certain non-core corporate equipment for total cash consideration of $45.9 million. Prior to the sale, the Company recorded an impairment loss of none and $14.3 million, respectively, on the assets held for sale, included in the impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2020, respectively.

In August 2020, the Company sold Flatiron LLC, Designation Labs LLC, SecureSet Academy LLC, Flatiron School UK Limited and Flatiron School Australia Pty Ltd (collectively “Flatiron”) for total cash consideration of $28.5 million. Prior to the sale, the Company recorded an impairment loss of $0.3 million and $3.0 million, during the three and nine months ended September 30, 2020 respectively, and also recorded a gain on sale of $6.0 million during the three and nine months ended September 30, 2020 each included in impairment/(gain on sale) of goodwill, intangibles and other assets in the accompanying condensed consolidated statements of operations.

There were no dispositions or intangible asset or goodwill impairments during the three and nine months ended September 30, 2021.

Note 4. Other Current Assets

Other current assets consists of the following:

 

      September 30,      December 31,  

(Amounts in thousands)

   2021      2020  
               

Net receivable for value added tax (“VAT”)

   $ 134,478    $ 107,104

Prepaid member referral fees and deferred sales incentive compensation (Note 12)

     46,382      31,617

Prepaid lease cost

     43,606      61,232

Straight-line revenue receivable

     34,548      35,418

Prepaid software

     30,502      19,981

Deposits held by landlords

     23,091      25,574

Disposition proceeds holdback amounts receivable (Note 3 and 5)

     5,323      17,500

Deposits on property and equipment

     3,375      3,161

Other prepaid expenses and current assets

     80,845      50,585
  

 

 

    

 

 

 

Total other current assets

   $ 402,150    $ 352,172
  

 

 

    

 

 

 
                   

Note 5. Consolidated VIEs and Noncontrolling Interests

ARK/WPI Combination

WeWork Capital Advisors LLC (formerly known as “ARK Capital Advisors LLC”, the “WeCap Manager”) is a majority-owned subsidiary of the Company and its controlled affiliates. The WeCap Manager is also owned in part by Rhône Group L.L.C. and its affiliates (other than the WeCap Manager) (“Rhône” and, together with the Company, the “Sponsor Group”), a global alternative asset management firm with assets under management across its private equity and real estate platforms.

 

26


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

In August 2019, the Company reorganized its real estate acquisition platform (such platform, following the ARK/WPI combination described herein, and inclusive of the investment vehicles sponsored, co-sponsored, managed, or co-managed by the WeCap Manager and Sponsor Group, “WeCap Investment Group”). Through this reorganization (the “ARK/WPI combination”), the Company acquired from Rhône a controlling financial interest in the WeCap Manager, the management company for the WeCap Investment Group in exchange for a 20% noncontrolling interest in the WeCap Manager. The WeCap Manager is the surviving entity resulting from the merger of the legacy entity that previously managed WeWork Property Investors LP, including its parallel and related vehicles (collectively the “WPI Fund”), which was indirectly owned 50% by us and 50% by affiliates of Rhône and was unconsolidated prior to the ARK/WPI combination, and the wholly owned and consolidated legacy entity that previously managed the ARK Master Fund LP (the “ARK Master Fund”) including its parallel and related vehicles. Following the ARK/WPI combination, the Company consolidates the WeCap Manager. The portion of consolidated equity attributable to Rhône’s interest in the WeCap Manager is reflected as a noncontrolling interest in the equity section of the accompanying condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

Through its 80% equity ownership interest, the Company is entitled to a corresponding share of the income earned by the WeCap Manager, primarily in the form of customary management fees, subject to provisions of the governing documents of the WeCap Manager relating to funding of losses incurred by the WeCap Manager. During the three and nine months ended September 30, 2021, the WeCap Manager recognized $3.7 million and $10.7 million, respectively, in management fee income, classified as other revenue as a component of the total revenue on the accompanying condensed consolidated statements of operations. During the three and nine months ended September 30, 2020, the WeCap Manager recognized $5.1 million and $14.4 million, respectively, in management fee income.

The post-reorganization WeCap Investment Group also includes the Company’s general partner interests in WeWork Caesar Member LLC (“Waller Creek”) DSQ, WPI Fund and ARK Master Fund (each as defined in Note 6), which are held through a limited partnership created as part of the ARK/WPI combination (the “WeCap Holdings Partnership”) in which Rhône also participates to the extent provided by the governing documents of the WeCap Holdings Partnership. The Company consolidates the WeCap Holdings Partnership. Net carried interest distributions earned in respect of the WeCap Investment Group from its investments are distributable to the Company and Rhône, indirectly through the WeCap Holdings Partnership, based on percentages that vary by the WeCap Investment Group vehicle and range from a 50% to 85% share to the Company of total net carried interest distributions received by the WeCap Holdings Partnership (after a profit participation allocation to certain personnel associated with the WeCap Manager). The portion of consolidated equity attributable to Rhône’s interest in the WeCap Holdings Partnership is reflected as a noncontrolling interest in the equity section of the accompanying condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

Primarily because our investments through the WeCap Holdings Partnership in the underlying real estate acquisition vehicles generally represent a small percentage of the total capital invested by third parties, and the terms on which we have agreed to provide services and act as general partner are consistent with the market for similar arrangements, the underlying real estate acquisition vehicles managed by the WeCap Manager are generally not consolidated in our financial statements (subject to certain exceptions based on the specific facts of the particular vehicle). The Company accounts for its share of the underlying real estate acquisition vehicles as unconsolidated investments under the equity method of accounting. See Note 6 for additional details regarding the holdings of WeCap Holdings Partnership.

 

27


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

424 Fifth Venture

In February 2019, a consolidated subsidiary of the Company (the “424 Fifth Venture”) closed on the acquisition of a $852.8 million real estate investment located in New York City (the “424 Fifth Property”). The acquisition of real estate by the 424 Fifth Venture was accounted for as an asset acquisition and the purchase price was allocated among the assets purchased, including land of $356.5 million and building of $496.3 million. As of December 31, 2019, the real estate was under development and as a result was included within the Company’s construction in progress balance within the property and equipment table detailed in Note 5.

Just prior to the redemption of the noncontrolling interest holders in March 2020 described below, the consolidated 424 Fifth Venture was owned 17.2% by the Company, 44.8% by the WPI Fund and 38.0% by another investor. Prior to redemption, the portion of consolidated equity attributable to the interest of the 424 Fifth Venture’s other investors was reflected as noncontrolling interests within the equity section of the accompanying consolidated balance sheet as of December 31, 2019. Upon completion of the redemption of the noncontrolling interest holders in March 2020, the 424 Fifth Venture became a wholly owned subsidiary of the Company.

In March 2020, the 424 Fifth Property was sold by the 424 Fifth Venture to an unrelated third party for a gross purchase price of approximately $978.1 million. Included in the sale was $356.5 million in land and $653.8 million in construction in progress associated with the investment. The $930.2 million in net cash proceeds received at closing were net of closing costs and holdbacks. Of the total consideration, $15.0 million was heldback at closing, of which $10.0 million was received as of March 31, 2021. The Company recognized an impairment loss on the assets sold totaling none and $53.7 million, included in impairment/(gain on sale) of goodwill, intangibles and other assets on the accompanying condensed consolidated statements of operations during the three and nine months ended September 30, 2020, respectively.

The underlying debt facility that secured the 424 Fifth Property since acquisition was extinguished upon the sale (see Note 10 for further details). In March 2020, in connection with the sale of the 424 Fifth Property, the Company also made a payment of $128.0 million to the 424 Fifth Venture and the 424 Fifth Venture made redemption payments to the noncontrolling interest holders totaling $315.0 million including a return of capital of $272.2 million and a return on their capital of $42.8 million.

The sale and debt extinguishment also resulted in the termination in March 2020 of the Company’s original development management agreements over the property, its 20 year master lease of the property, its $1.2 billion lease guaranty, various loan guarantees, various loan covenant requirements and various partnership guarantees and indemnities entered into in connection with the original acquisition.

Upon the sale of the property, a wholly owned subsidiary of the Company entered into an escrow and construction agreement with the buyer for approximately $0.2 billion to finalize the core and shell infrastructure work of the property. These funds were held in escrow upon closing of the sale and are available to pay construction costs, contingencies and cost overruns. The $0.2 billion is expected to be earned by the Company over 12-18 months as the development is completed. During the three and nine months ended September 30, 2021, the Company recognized approximately $29.8 million and $52.7 million in revenue related to this development agreement, included as a component of other revenues. During the three and nine months ended September 30, 2020, the Company recognized approximately $25.6 million and $36.6 million, respectively. At closing, WeWork Companies LLC provided the buyer a guaranty of completion for the core and shell construction work of the property and the Company is obligated for any overruns if the amounts in escrow are not sufficient to cover the required construction costs.

 

28


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

Creator Fund

During 2018, the Company launched a fund (the “Creator Fund”) that previously made investments in recipients of WeWork’s “Creator Awards” and other investments through use of a venture capital strategy. A wholly-owned subsidiary of the Company was the managing member of the Creator Fund. As of September 17, 2020, the Creator Fund had received contributions from SoftBank Group Capital Limited totaling $72.4 million, representing 99.99% of the interest of the Creator Fund. No contributions were received during the three and nine months ended September 30, 2021.

In September 2020, the Company agreed to transfer its rights as managing member and all of its other rights, titles, interests, obligations and commitments in respect of the Creator Fund to an affiliate of SBG. Accordingly, the Company no longer has a variable interest in the Creator Fund and is no longer the primary beneficiary and the Company has deconsolidated the net assets of the Creator Fund and removed the carrying amount of the noncontrolling interest from the consolidated balance sheet as of December 31, 2020. As substantially all of the net assets of the Creator Fund were previously allocated to the noncontrolling interests, no gain or loss was recognized on deconsolidation of the Creator Fund. In connection with this transaction, the parties also agreed that WeWork would not be required to reimburse SBG for the $21.6 million Creator Awards production services reimbursement obligation payable to an affiliate of SBG as of December 31, 2019, as described in Note 17. As SBG is a principal shareholder of the Company, the forgiveness of this obligation was accounted for as a capital contribution and reclassified from liabilities to additional paid-in-capital during the year ended December 31, 2020.

ChinaCo

During 2017 and 2018, a consolidated subsidiary of the Company (“ChinaCo”) sold to investors $500.0 million of Series A Preferred Stock at a price of $10.00 per share and a liquidation preference of $10.00 per share and $500.0 million of Series B Preferred Stock at a price of $18.319 per share and a liquidation preference of $18.319 per share. The portion of consolidated equity attributable to ChinaCo’s Series A and B Preferred shareholders were reflected as redeemable noncontrolling interests, within the mezzanine section of the accompanying consolidated balance sheet as of December 31, 2019. As of December 31, 2019, ChinaCo had also issued a total of 45,757,777 Class A Ordinary Shares in connection with an acquisition of naked Hub Holdings Ltd. (“naked Hub”) that occurred during 2018 and an additional 2,000,000 Class A Ordinary Shares to a consultant as described in Note 9. The portion of consolidated equity attributable to ChinaCo’s Class A Ordinary shareholders were reflected as noncontrolling interests, within the equity section of the accompanying consolidated balance sheet as of December 31, 2019.

Pursuant to the terms of the shareholders’ agreement of ChinaCo, as long as certain investors remain shareholders of ChinaCo, ChinaCo will be the exclusive operator of the Company’s businesses in the “Greater China” territory, defined in the agreement to include China, Hong Kong, Taiwan and Macau.

In August 2020, a wholly owned subsidiary of Legacy WeWork made a short-term loan to ChinaCo totaling $25.0 million (the “ChinaCo Loan”). In connection with ChinaCo’s 2018 acquisition of naked Hub, as of December 31, 2019, ChinaCo also had a $191.1 million obligation to reimburse a wholly owned subsidiary of Legacy WeWork for Legacy WeWork shares issued to the sellers of naked Hub (the “Parent Note”). As ChinaCo was consolidated as of December 31, 2019, the Parent Note was eliminated against the Company’s receivables in the Company’s consolidated financial statements.

In September 2020, the shareholders of ChinaCo and an affiliate of TrustBridge Partners (“TBP”), also an existing shareholder of ChinaCo, executed a restructuring and Series A subscription agreement (the “ChinaCo Agreement”). Pursuant to the ChinaCo Agreement, TBP agreed to subscribe for a new series of ChinaCo shares for $100.0 million in total gross proceeds to ChinaCo, received in connection with the initial investment closing on October 2, 2020 (the “Initial Investment Closing”) and an additional $100.0 million in gross proceeds to ChinaCo, with such additional shares issued and proceeds to be received at the earlier of 1 year following the Initial Investment Closing or such earlier date as determined

 

29


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

by the ChinaCo board, to the extent such funds are necessary to support the operations of ChinaCo (the “Second Investment Closing”). The ChinaCo Agreement also included the restructuring of the ownership interests of all other preferred and ordinary shareholders’ interests into new ordinary shares of ChinaCo and the conversion of the $191.1 million Parent Note and certain other net intercompany payables totaling approximately $42.0 million, payable by ChinaCo to various wholly owned subsidiaries of Legacy WeWork into new ordinary shares of ChinaCo such that subsequent to the Initial Investment Closing in October 2020, and as of December 31, 2020, WeWork held 21.6% of the total shares issued by ChinaCo. On September 29, 2021, TBP provided $100.0 million to ChinaCo, effectuating the Second Investment Closing. The Company’s remaining interest was diluted down to 19.7% in connection with the Second Investment Closing. Prior to the Second Investment Closing TBP held a total of 50.5% of the total shares issued by ChinaCo subsequent to the Initial Investment Closing. As of September 30, 2021, and following the Second Investment Closing, TBP holds 55.0% of the total shares. TBP’s shares are preferred shares which have a liquidation preference totaling $100.0 million and $200.0 million as of the Initial Investment Closing and the Second Investment Closing, respectively.

Upon Initial Investment Closing on October 2, 2020, ChinaCo received the $100.0 million in gross proceeds from TBP and a portion of those proceeds were used to repay WeWork $25.0 million for the ChinaCo Loan. In addition, pursuant to the terms of the ChinaCo Agreement, the rights of the ChinaCo shareholders were also amended such that upon the Initial Investment Closing, WeWork no longer retained the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. As a result, WeWork was no longer the primary beneficiary of ChinaCo and ChinaCo was deconsolidated from the Company’s consolidated financial statements on October 2, 2020 (the “ChinaCo Deconsolidation”). The Company’s remaining 21.6% ordinary share investment was valued at $26.3 million upon deconsolidation and will be accounted for as an equity method investment as the Company has retained rights that allow it to exercise significant influence over ChinaCo as a related party.

During the fourth quarter of 2020, the Company recorded a loss on the ChinaCo Deconsolidation of $153.0 million included in impairment/(gain on sale) of goodwill, intangibles and other assets in the consolidated statement of operations calculated based on the difference between (i) the $26.3 million fair value of the Company’s retained equity method investment in ChinaCo plus the carrying amount of the noncontrolling interest in ChinaCo as of the date of the ChinaCo Deconsolidation, which was in a negative deficit position of $(22.6) million and (ii) the carrying value of ChinaCo’s net assets just prior to the ChinaCo Deconsolidation of $156.7 million.

The remeasurement loss recognized on deconsolidation primarily relates to the remeasurement of our retained equity method investment in ChinaCo, recorded at fair value upon deconsolidation, in comparison to the carrying value of the net intercompany receivables that were converted into equity in ChinaCo in conjunction with the ChinaCo restructuring that ultimately resulted in the ChinaCo Deconsolidation.

The net assets of ChinaCo that were deconsolidated on October 2, 2020, included a total of $344.3 million of goodwill related to ChinaCo’s 2018 acquisition of naked Hub. As this goodwill was integrated into the Company’s single reporting unit, upon deconsolidation of a portion of the reporting unit, the Company’s total goodwill was reallocated among the Company and ChinaCo on a relative fair value basis with $315.6 million of ChinaCo’s goodwill retained by the Company with a corresponding increase to additional paid-in capital and $28.7 million of ChinaCo’s goodwill was deconsolidated.    

See Note 17 for details regarding various related party fees payable by ChinaCo to the Company subsequent to the ChinaCo Deconsolidation.

 

30


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

ChinaCo contributed the following to the Company’s consolidated results of operations prior to its deconsolidation on October 2, 2020, in each case excluding amounts that eliminate in consolidation:

 

      Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
                            

(Amounts in thousands)

   2021      2020     2021      2020  
                            

Revenue

   $ —      $ 69,340   $ —      $ 206,261

Location operating expenses

     —          87,097     —          266,318

Restructuring and other related costs

     —          (47,642     —          (18,660

Impairments/(gain on sale) of goodwill, intangibles and other assets

     —          78,441     —          450,312

Depreciation and amortization

     —          10,862     —          39,208

Total Expenses

     —          149,527     —          819,527

Pre-tax loss

     —          (58,437     —          (598,727

Net loss

     —          (66,221     —          (609,820

Net (loss) income attributable to Legacy WeWork

     —          (32,733     —          (62,997
                                    

JapanCo

During 2017, a consolidated subsidiary of the Company (“JapanCo”) entered into an agreement with an affiliate of SBG for the sale of a 50.0% membership interest in JapanCo for an aggregate contribution of $500.0 million which will be funded over a period of time. As of December 31, 2018, JapanCo had received contributions totaling $300.0 million and during the year ended December 31, 2019, an additional $100.0 million was received. Pursuant to the terms of the agreement an additional $100.0 million was required to be contributed and was received during the third quarter of 2020. The portion of consolidated equity attributable to the outside investors’ interests in JapanCo are reflected as redeemable noncontrolling interests, within the mezzanine section of the accompanying condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. As long as the investors remain shareholders of JapanCo, JapanCo will be the exclusive operator of the Company’s WeWork branded space-as-a-service businesses in Japan. After July 13, 2024 and, prior to that date, in the event of default on the contributions to be made, the Company may elect to purchase, at fair value, all JapanCo membership interests held, other than any interests issued in connection with an equity incentive plan. The Company may elect to pay the buyout consideration in either cash, WeWork shares or a combination thereof.

PacificCo

During 2017, a consolidated subsidiary of the Company (“PacificCo”) sold $500.0 million of Series A-1 Preferred Stock at a price of $10.00 per share and a liquidation preference of $10.00 per share to an affiliate of SBG. PacificCo is the operator of the Company’s businesses in selected markets in Asia other than those included in the Greater China and Japan territories described above, including but not limited to Singapore, Korea, the Philippines, Malaysia, Thailand, Vietnam and Indonesia.

The initial closing occurred on October 30, 2017 and all of the PacificCo Series A-1 Preferred Stock was issued at that time, however the Company received contributions totaling $200.0 million at the initial closing and an additional $100.0 million during the year ended December 31, 2018. Pursuant to the terms of the agreement an additional $100.0 million was required to be contributed in each of 2019 and 2020. The Company received $100.0 million in August 2019 and the remaining $100.0 million scheduled to be received in 2020 was canceled effective upon our entry into a definitive agreement providing for the completion of the PacificCo Roll-up (as defined below) in connection with the SoftBank Transactions in March 2020.

In October 2019, in connection with the SoftBank Transactions, the Company, SBG and SoftBank Vision Fund agreed to use reasonable best efforts to negotiate and finalize the final forms for the exchange of all interests held by affiliates of SBG in PacificCo for 34,482,759 shares of the Company’s Series H-1 or H-2 Convertible Preferred Stock with a liquidation preference of $11.60 per share (the “PacificCo Roll-up”). On March 31, 2020, the Company signed the definitive agreements for the PacificCo Roll-up and in April 2020, the Company closed the PacificCo Roll-up and issued 34,482,759 shares of the Company’s Series H-1 Convertible Preferred Stock. Upon completion of the PacificCo Roll-up in April 2020, PacificCo became a wholly owned subsidiary of the Company and is no longer a VIE.

 

31


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

The 34,482,759 shares of Series H-1 Convertible Preferred Stock issued in connection with the PacificCo Roll-up had a fair value of $8.13 per share upon issuance to a affiliates of SBG in April 2020. As the share exchange represents an increase in the Company’s ownership of PacificCo while control of PacificCo was retained, the carrying amount of the noncontrolling interest was adjusted to reflect the change in the Company’s ownership interest in PacificCo and the Company accounted for the share exchange as an equity transaction with no gain or loss recognized on the acquisition of the noncontrolling interests.    

Just prior to the PacificCo Roll-up, the PacificCo noncontrolling interest had a carrying value on the Company’s balance sheet of $92.8 million, including $10.4 million in accumulated other comprehensive income previously allocated to the noncontrolling interest holders. Upon consummation of the PacificCo Roll-up, the noncontrolling interest was reduced by the entire $92.8 million carrying value and the $10.4 million of accumulated other comprehensive income was allocated to the Company to adjust for the change in ownership of PacificCo through a corresponding charge to additional paid-in capital. The difference between the $280.3 million fair value of the Series H-1 Convertible Preferred Stock issued as consideration and the $92.8 million carrying value of the noncontrolling interest was reflected as a charge to additional paid-in capital totaling $187.5 million.

LatamCo

During September 2021, a consolidated subsidiary of the Company (“LatamCo”) entered into an agreement with an affiliate of SBG for the sale of 71.0% interest (with up to 49.9% voting power) in LatamCo for an aggregate contribution of $80.0 million which will be funded through equity and secured promissory notes. As of September 30, 2021, LatamCo received contributions totaling $30.0 million and the remaining $50.0 million was received in October 2021. The portion of consolidated equity attributable to the outside investors’ interests in LatamCo are reflected as redeemable noncontrolling interest within the mezzanine section of the accompanying condensed consolidated balance sheet as of September 30, 2021. Upon formation of LatamCo, the Company contributed its businesses in Argentina, Mexico, Brazil, Colombia and Chile (collectively, the “Greater Latin American territory”), committed to fund $12.5 million, and remains as guarantor on certain lease obligations.

Pursuant to the terms of the agreement, the Company may be liable up to $26.5 million, for cost related to the termination of certain leases within the first 12 months of the agreement.     

Pursuant to the terms of the agreement, an additional $60.0 million may be received by LatamCo from the exercise of SoftBank Latin America’s (“SBLA”) call options during the first and second year of operations. Further, SBLA maintains sell-out rights based on the performance of LatamCo, exercisable between September 1, 2025 and August 31, 2026, and the Company holds subsequent buy-out rights exercisable between September 1, 2027 and August 31, 2028. The stock associated with SBLA’s sell-out rights is not currently redeemable and thus has been recorded based on the fair value at the time of issuance. Subsequent adjustment of the amount presented in mezzanine equity to its redemption amount is unnecessary given it is not probable that the instrument will become redeemable. If redemption becomes probable, the units will be recorded at redemption value.

Provided that certain investors remain shareholders of LatamCo, LatamCo will be the exclusive operator of the Company’s businesses in the Greater Latin American territory.

Consolidated Variable Interest Entities

As of September 30, 2021, JapanCo, WeCap Manager, WeCap Holdings Partnership, and LatamCo are the Company’s only consolidated VIEs. As of December 31, 2020, JapanCo, WeCap Manager, and WeCap Holdings Partnership are the Company’s only consolidated VIEs. The Company is considered to be the primary beneficiary as we have the power to direct the activities of the VIEs that most significantly

 

32


LEGACY WEWORK

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2021

(UNAUDITED)

 

impact the VIEs’ economic performance and the right to receive benefits that could potentially be significant to the VIEs. As a result, these entities remain consolidated subsidiaries of the Company and the interests owned by the other investors and the net income or loss and comprehensive income or loss attributable to the other investors are reflected as redeemable noncontrolling interests and noncontrolling interests on our condensed consolidated balance sheets, statements of operations and statements of comprehensive loss, respectively.

The following table includes selected condensed consolidated financial information as of September 30, 2021 and December 31, 2020 of our consolidated VIEs, as included in our condensed consolidated financial statements, as of the periods they were considered VIEs and in each case, after intercompany eliminations.

 

      September 30, 2021      December 31, 2020  
                           

(Amounts in thousands)

   Asia JVs(1)     Other VIEs(2)      Asia JVs(1)     Other VIEs(2)  
                           

Consolidated VIE balance sheets information:

         

Cash and cash equivalents

   $ 71,706   $ 28,948    $ 161,411   $ 5,194

Property and equipment, net

     397,156     290,393      445,599     —    

Restricted cash

     10,143     —          10,000     —    

Total assets

     1,903,203     983,031      2,096,389     13,834

Long-term debt, net

     (12     —          30,638     —    

Total liabilities

     1,620,725     877,981      1,693,267     573

Redeemable stock issued by VIEs

     500,000     30,000      500,000     —    

Total net assets(3)

     (217,522     75,050      (96,878     13,261
                                   

The following tables include selected condensed consolidated financial information for the three and nine months ended September 30, 2021 and 2020 of our consolidated VIEs, as included in our condensed consolidated financial statements, for the periods they were considered VIEs and in each case, after intercompany eliminations.

 

      September 30, 2021     September 30, 2020  
                          

(Amounts in thousands)

    Asia JVs(1)      Other VIEs(2)      Asia JVs(1)      Other VIEs(2)  
                          

Consolidated VIE statements of operations information:

 

Net income (loss) for the three months ended

   $ (33,345   $ (11,828   $ (121,703   $ 2,475

Net income (loss) for the nine months ended

   $ (97,454   $ (11,544   $ (721,300   $ (9,202
                                  

 

      Nine Months Ended
September 30, 2021
    Nine Months Ended
September 30, 2020
 
                          

(Amounts in thousands)

    Asia JVs(1)      Other VIEs(2)      Asia JVs(1)      Other VIEs(2)