CAS 10-Q
Simplify China A Shares PLUS Income ETF (CAS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from to
Commission File No.
| (Exact name of registrant as specified in its charter) |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| (Address of Principal Executive Offices, including zip code) |
| (Registrant’s telephone number, including area code) |
| N/A |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| Redeemable Warrants, each whole warrant exercisable for one share of Class A Common Stock for $11.50 per share | CAS.WS | New York Stock Exchange | ||
| Units, each consisting of one share of Class A Common Stock and one-half of one Redeemable Warrant | CAS.U | 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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 |
| ☒ | 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
As of August 13, 2021,
there were
1
CASCADE ACQUISITION CORP.
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
2
Part I. Financial Information
Item 1. Financial Statements
CASCADE ACQUISITION CORP.
CONDENSED BALANCE SHEETS
June 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Cash and marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities – accrued expenses | $ | $ | ||||||
| Warrant liability | ||||||||
| Deferred underwriting fee payable | ||||||||
| Total Liabilities | ||||||||
| Commitments | ||||||||
| Temporary Equity | ||||||||
| Class A common stock, $0.0001 par value, subject to possible redemption, | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
CASCADE ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2021 | 2021 | |||||||
| Formation and operating costs | $ | $ | ||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (loss): | ||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||
| Unrealized loss on marketable securities held in Trust Account | ( | ) | ||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Other income (loss), net | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | ||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ||||||||
| Basic and diluted net (loss) income per share, Non-redeemable common stock | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
CASCADE ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
Class A Common Stock | Class B Common Stock | Additional Paid-in | Retained Earnings (Accumulated | Total Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit) | Equity | ||||||||||||||||||||||
| Balance — December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
| Change in value of Class A common stock subject to redemption | ( | ) | ( | ) | — | ( | ) | ( | ) | |||||||||||||||||||
| Net income | — | — | ||||||||||||||||||||||||||
| Balance – March 31, 2021 | ||||||||||||||||||||||||||||
| Change in value of Class A common stock subject to redemption | — | |||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | ||||||||||||||||||||||
| Balance – June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
5
CASCADE ACQUISITION CORP.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2021
(UNAUDITED)
| Cash Flows from Operating Activities: | ||||
| Net income | $ | |||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||
| Change in fair value of warrant liability | ( | ) | ||
| Changes in operating assets and liabilities: | ||||
| Prepaid expenses | ||||
| Accrued expenses | ||||
| Net cash used in operating activities | ( | ) | ||
| Net Change in Cash | ( | ) | ||
| Cash – Beginning | ||||
| Cash – Ending | $ | |||
| Non-cash investing and financing activities: | ||||
| Change in value of Class A common stock subject to possible redemption | $ | |||
The accompanying notes are an integral part of the unaudited condensed financial statements.
6
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Cascade Acquisition Corp. (the “Company”) was incorporated in Delaware on August 14, 2020. The Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”).
The Company is not limited to a particular industry or geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of June 30, 2021, the Company had not commenced any operations. All activity from inception through June 30, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below, and the search for a target for its initial Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income and unrealized gains and losses from the proceeds derived from the Initial Public Offering, along with income or loss from the change in fair value of the derivative liability.
The registration statement for the Company’s
Initial Public Offering was declared effective on November 19, 2020. On November 24, 2020, the Company consummated the Initial Public
Offering of
Simultaneously with the closing of the Initial
Public Offering, the Company consummated the sale of
Following the closing of the Initial Public Offering
on November 24, 2020, an amount of $
On December 9, 2020, pursuant to the full
exercise of the underwriters’ over-allotment option, the Company consummated the sale of an additional
Transaction costs amounted to $
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination
with one or more target businesses that together have an aggregate fair market value of at least
7
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The Company will provide its holders of the outstanding
Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the
completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination
or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
The Company will proceed with a Business Combination
only if the Company has net tangible assets of at least $
Notwithstanding the above, if the Company seeks
stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and
Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other
person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more
than an aggregate of
The Sponsor has agreed (a) to waive its
redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination,
(b) to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by
May 24, 2022 (or until November 24, 2022 if the Company extends the period of time to consummate a Business Combination) and (c) not
to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s
obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem
The Company will have until May 24, 2022 to complete
a Business Combination. However, if the Company anticipates that it may not be able to consummate a Business Combination by May 24, 2022,
the Company may extend the period of time to consummate a Business Combination by an additional six months (until November 24, 2022) to
complete a Business Combination (the “Combination Period”).
If the Company is unable to complete a Business
Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as
promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable
in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust
Account and not previously released to the Company to pay its tax obligations (less up to $
8
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The Sponsor has agreed to waive its liquidation
rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However,
if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions
from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed
to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not
complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held
in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible
that the per share value of the assets remaining available for distribution will be less than the amount of funds deposited into the Trust
Account ($
Liquidity and Going Concern
As of June 30, 2021, the Company had $793,427
in its operating bank accounts, $232,379,830 in securities held in the Trust Account to be used for a Business Combination or to repurchase
or redeem its common stock in connection therewith and working capital of $
Until the consummation of a Business Combination, the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire, and structuring, negotiating and consummating the Business Combination.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until May 24, 2022 to consummate the proposed Business Combination. It is uncertain that the Company will be able to consummate the proposed Business Combination by this time. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial statements. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 24, 2022. The Company intends to complete the proposed Business Combination before the mandatory liquidation date. However, there can be no assurance that the Company will be able to consummate any business combination by May 24, 2022. In addition, the Company may need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. the Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through the liquidation date of May 24, 2022.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The accompanying condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.
9
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in Amendment No. 1 to the Annual Report on Form 10-K for the period ended December 31, 2020 filed with the SEC on June 29, 2021. The December 31, 2020 condensed balance sheet data was derived from audited financial statements. The operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may 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 independent registered public accounting firm 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 election to opt out is irrevocable. The Company has 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 emerging growth company, can 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 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.
The Company will remain an emerging growth company
until the earliest of (i)
Use of Estimates
The preparation of unaudited condensed financial statements in conformity with GAAP requires the Company’s 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 financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
10
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of six months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 320 “Investments - Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed balance sheet and adjusted for the amortization or accretion of premiums or discounts.
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 480 “Distinguishing Liabilities from Equity” (“ASC
480”). Class A common stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at
fair value. 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, common stock are classified as stockholders’ equity. 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 uncertain future events. Accordingly, at June 30, 2021 and December 31, 2020,
Warrant Liability
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815-40-15-7D, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our condensed statements of operations. The Private Warrants and the Public Warrants (as described in Note 3) for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price on the New York Stock Exchange was used as the fair value of each relevant date.
11
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements 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. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
The Company may be subject to potential examination
by federal, state and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing
and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal, state and city tax laws. The
Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve
months. The effective tax rate differs from the statutory tax rate of
On March 27, 2020, the CARES Act was enacted in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits. Given the Company’s full valuation allowance position and capitalization of all costs, the CARES Act did not have an impact on the financial statements.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed
by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. The Company has
not considered the effect of the warrants sold in the Initial Public Offering and the private placement to purchase an aggregate of
The Company’s statements of operations include a presentation of income (loss) per common share subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per share of common stock, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account by the weighted average number of shares of common stock subject to possible redemption outstanding since original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable shares of common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on the non-redeemable share’s proportionate interest.
12
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The following table reflects the calculation of basic and diluted net income (loss) per share common stock (in dollars, except share amounts):
| For the Three Months ended June 30, 2021 | For the Six Months ended June 30, 2021 | |||||||
| Class A Common stock subject to possible redemption | ||||||||
| Numerator: Earnings allocable to Class A common stock subject to possible redemption | ||||||||
| Interest earned on marketable securities held in Trust Account | $ | $ | ||||||
| Unrealized gain on marketable securities held in Trust Account | ( | ) | ||||||
| Less: Interest income and unrealized gains (losses) available to pay taxes | ( | ) | ( | ) | ||||
| Net income (loss) allocable to Class A common stock subject to redemption | $ | $ | ||||||
| Denominator: Weighted Average Class A common stock subject to possible redemption | ||||||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | $ | ||||||
| Non-Redeemable Common stock | ||||||||
| Numerator: Net income (loss) minus Net Earnings allocable to common stock subject to redepmtion | ||||||||
| Net Income (loss) | $ | ( | ) | $ | ||||
| Less: Net income allocable to Class A common stock subject to possible redemption | ||||||||
| Non-Redeemable Net income (Loss) | $ | ( | ) | $ | ||||
| Denominator: Weighted Average shares of Non-Redeemable common stock | ||||||||
| Basic and diluted weighted average shares outstanding, Non-Redeemable common stock | ||||||||
| Basic and diluted net income (loss) per share, Non-Redeemable common stock | $ | ( | ) | $ | ||||
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal
Depository Insurance Coverage of $
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.
13
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering, the
Company sold
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On August 24, 2020, the Company issued an aggregate
of
The Sponsor has agreed that, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A) one year after the completion of a Business Combination and (B) subsequent to a 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 a Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.
14
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
Promissory Note — Related Party
On August 14, 2020, the Company issued an unsecured
promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal
amount of $
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the initial stockholders or an affiliate of the initial stockholders or certain of the Company’s directors
and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company
completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released
to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that
a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital
Loans, but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms
of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working
Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion,
up to $
Related Party Extension Loans
As discussed in Note 1, the Company may extend
the period of time to consummate a Business Combination by an additional six months (until November 24, 2022 to complete a Business Combination).
In order to extend the time available for the Company to consummate a Business Combination, the Sponsor or its affiliates or designees
must deposit into the Trust Account $
15
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on November 19, 2020, the holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants issued upon conversion of the Working Capital Loans) will be entitled to registration rights. The holders of these securities are entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
Jay Levine, the Company’s Chief Executive
Officer, Gene Weil, a director of the Company, and certain affiliates of the Sponsor and Waterfall Asset Management, LLC purchased an
aggregate of
Consulting agreement
On January 30, 2021, we entered into a consulting
agreement with a service provider, pursuant to which the service provider will provide us with consulting services in connection with
our search for a potential merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination.
We agreed to pay the service provider an initial fee of $
16
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
NOTE 7. STOCKHOLDERS’ EQUITY
Preference Shares — The Company
is authorized to issue
Class A Common stock — The
Company is authorized to issue
Class
B Common stock — The Company is authorized to issue
Holders of the Class B common stock will have the right to elect all of the Company’s directors prior to a Business Combination. Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required by law.
The
shares of Class B common stock will automatically convert into shares of Class A common stock at the time of the consummation
of a Business Combination at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Founder
Shares will equal, in the aggregate, on an as-converted basis,
NOTE 8. WARRANTS
As of June 30, 2021 and December 31, 2020, the
Company had
Public Warrants may only be exercised for a whole
number of shares. No fractional shares will be issued upon exercise of the Public Warrants. 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.
The Public Warrants will expire
The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating thereto is available, subject to the Company satisfying its obligations with respect to registration, or a valid exemption from registration is available. No warrant will be exercisable for cash or on a cashless basis, and the Company will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder, or an exemption is available.
17
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the issuance, under the Securities Act, of the Class A common stock issuable upon exercise of the warrants, and the Company will use its commercially reasonable efforts to cause the same to become effective within 60 business days after the closing of a Business Combination and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock are, at the time of any exercise of a warrant, not listed on a national securities exchange such that they satisfy 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, the Company will not be required to file or maintain in effect a registration statement, but will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available.
Redemption of Warrants When the Price per share of Class A Common stock Equals or Exceeds $18.00 — Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of Warrants When the Price per share of Class A Common Stock Equals or Exceeds $10.00 — Once 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 based on the redemption date and the “fair market value” of the Class A common stock; and |
| ● | if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted). |
The exercise price and number of shares of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. 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 Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
18
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
In addition, if (x) the Company issues additional Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A common stock (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 Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, 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 a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of its 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 Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that, so long as they are held by the Sponsor or its permitted transferees: (1) they will not be redeemable by the Company; (2) they (including the common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by the Sponsor until 30 days after the completion of a Business Combination; (3) they may be exercised by the holders on a cashless basis; (4) they (including the common stock issuable upon exercise of these warrants) are entitled to registration rights; and (5) they can only be exercised during the period (A) commencing on the later of: (i) the date that is thirty (30) days after the first date on which the Company completes its Business Combination, and (ii) the date that is twelve (12) months from the date of the closing of the Initial Public Offering, and (B) terminating at the earliest to occur of (x) 5:00 p.m., New York City time on the date that is seven years after the date on which the Company completes its Business Combination, and (y) the liquidation of the Company in accordance with the Company’s Amended and Restated Certificate of Incorporation, as amended from time to time, if the Company fails to complete a Business Combination.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC Topic 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
19
CASCADE ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2021
(UNAUDITED)
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | June 30, 2021 | Level | December 31, 2020 | ||||||||||||
| Assets: | ||||||||||||||||
| Marketable securities held in Trust Account | 1 | $ | 1 | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Warrant Liability – Public Warrants | 1 | $ | 3 | $ | ||||||||||||
| Warrant Liability – Private Warrants | 2 | $ | 3 | $ | ||||||||||||
The warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the accompanying balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within the change in fair value of warrant liabilities in the statements of operations.
The Public and Private warrants were valued as
of November 24, 2020 and December 31, 2020 using a Monte Carlo simulation, which is considered to be a Level 3 fair value measurement.
The Monte Carlo simulation’s primary unobservable input utilized in determining the fair value of the Warrants is the probability
of consummation of the Business Combination. The probability assigned to the consummation of the Business Combination was
The following table presents the quantitative information regarding Level 3 fair value measurements at December 31, 2020:
| Expected volatility | % | |||
| Risk-free interest rate | % | |||
| Expected term (years) | ||||
| Fair value per share of Class A common stock | $ |
The subsequent measurements of the Public Warrants
after the detachment of the Public Warrants from the Units are classified as Level 1 due to the use of the quoted price in an active market
(the New York Stock Exchange) under the ticker CAS.WS. For the Private warrants, because of the provision in the Public and Private
warrant agreements described in Note 8 regarding the Company’s ability to redeem the warrants when the trading price of the warrants
equals or exceeds $
The following table presents the changes in the fair value of warrant liabilities:
| Private Placement | Public | Warrant Liabilities | ||||||||||
| Fair value as of January 1, 2021 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of March 31, 2021 | ||||||||||||
| Change in valuation inputs or other assumptions | ||||||||||||
| Fair value as of June 30, 2021 | $ | $ | $ | |||||||||
Transfers in the amount of $
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly Report”) to “we,” “us,” “Cascade” or the “Company” refer to Cascade Acquisition Corp. References to our “management” refer to our officers and directors, and references to the “Sponsor” refer to Cascade Acquisition Holdings, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Amendment No 1 to the Annual Report on Form 10-K/A for the year ended December 31, 2020 filed with the U.S. Securities and Exchange Commission (the “SEC”) on June 29, 2021. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
We are a blank check company incorporated in the Delaware on August 14, 2020 formed for the purpose of effecting a merger, amalgamation, share exchange, asset acquisition, share purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash derived from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our shares, debt or a combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
21
Results of Operations
We have neither engaged in any operations nor generated any operating revenues to date. All activity for the period from August 14, 2020 (inception) through June 30, 2021 relates to the Company’s formation and the initial public offering, which is described below, and the search for a target for its initial Business Combination. We do not expect to generate any operating revenues until after the completion of a Business Combination, at the earliest. We expect to generate non-operating income in the form of interest income and unrealized gains or losses on marketable securities held after the Initial Public Offering. We expect that we will incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination, along with income or loss from the change in fair value of the derivative liability.
For the three months ended June 30, 2021, we have a net loss of $3,115,097, which consists of operating and formation costs of $1,066,874 a non-cash change in fair value of derivative liability of $2,053,870, and an unrealized loss on marketable securities held in the Trust Account of $19,592, partially offset by interest income on marketable securities held in the Trust Account of $25,239.
For the six months ended June 30, 2021, we had net income of $5,701,676, which consisted of operating and formation costs of $1,397,575 offset by a non-cash change in fair value of derivative liability of $7,015,950 and interest income on marketable securities held in the Trust Account of $83,301.
Liquidity and Going Concern
On November 24, 2020, we consummated the Initial Public Offering of 20,000,000 Units at a price of $10.00 per Unit, generating gross proceeds of $200,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 7,317,000 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $7,317,000.
On December 9, 2020, in connection with the underwriters’ election to fully exercise of their over-allotment option, we consummated the sale of an additional 3,000,000 Units and the sale of an additional 900,000 Private Placement Warrants, generating total gross proceeds of $30,900,000.
Following the Initial Public Offering, the full exercise of the over-allotment option by the underwriters’ and the sale of the Private Placement Warrants, a total of $232,300,000 was placed in the Trust Account and we had $1,782,072 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $11,166,437 in transaction costs, including $3,917,000 of underwriting fees, $6,854,750 of deferred underwriting fees and $394,687 of other offering costs.
For the six months ended June 30, 2021 cash used in operating activities was $484,281. Net income of $5,701,676 was affected by non-cash items including the change in fair value of warrant liability of $7,015,950, and interest earned on marketable securities held in the Trust Account of $83,301. Changes in operating assets and liabilities provided $913,294 of cash for operating activities.
22
As of June 30, 2021, we had cash and marketable securities held in the Trust Account of $232,379,830. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account, which interest shall be net of taxes payable and excluding deferred underwriting commissions, to complete our Business Combination. We may withdraw interest from the Trust Account to pay taxes, if any (less up to $100,000 of interest to pay dissolution expenses). Through June 30, 2021, we did not withdraw any interest earned on the Trust Account to pay our taxes. To the extent that our share capital or debt is used, in whole or in part, as consideration to complete a Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had cash of $793,427, and working capital of $146,608 (after adding back $69,399 in franchise tax payable as that liability, which is included in accrued expenses in the accompanying condensed balance sheet, is allowed to be settled using the trust account). We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The loans would be repaid upon consummation of a Business Combination, without interest.
In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” the Company has until May 24, 2022 to consummate the proposed Business Combination. It is uncertain that the Company will be able to consummate the proposed Business Combination by this time. Additionally, the Company may not have sufficient liquidity to fund the working capital needs of the Company through one year from the issuance of these financial statements. If a business combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the liquidity condition and mandatory liquidation, should a business combination not occur, and potential subsequent dissolution, raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after May 24, 2022. The Company intends to complete the proposed Business Combination before the mandatory liquidation date. However, there can be no assurance that the Company will be able to consummate any business combination by May 24, 2022. In addition, the Company may need to raise additional capital through loans or additional investments from our Sponsor, stockholders, officers, directors or third parties. The Company’s officers, directors and Sponsor may, but are not obligated to, loan the Company funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional financing. If the Company is unable to raise additional capital, the Company may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all. These conditions raise substantial doubt about the Company’s ability to continue as a going concern through the liquidation date of May 24, 2022.
23
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities.
Jay Levine, our Chief Executive Officer, Gene Weil, a director, and certain affiliates of our Sponsor and Waterfall Asset Management, LLC purchased an aggregate of 2.75% of the Units in the Initial Public Offering, and certain other investors identified by our Sponsor purchased an aggregate of 14.3% of the Units in the Initial Public Offering, in each case at the Initial Public Offering price, for an aggregate of 3,415,000 Units. The underwriters did not receive any underwriting discounts or commissions on the Units purchased by such parties.
The underwriters are entitled to a deferred fee of $0.35 per Unit, excluding the Units purchased by the parties described above, or $6,854,750 in the aggregate. Subject to the terms of the underwriting agreement, (i) the deferred fee will be placed in the Trust Account and released to the underwriters only upon the completion of a Business Combination and (ii) the deferred fee will be waived by the underwriters in the event that we do not complete a Business Combination. Up to 50% of the deferred underwriting commissions may be paid at the sole discretion of its management team to the underwriters in the allocations determined by its management team and/or to third parties not participating in the Initial Public Offering (but who are members of the Financial Industry Regulatory Authority) that assist us in consummating our initial Business Combination.
On January 30, 2021, we entered into a consulting agreement with a service provider, pursuant to which the service provider will provide us with consulting services in connection with our search for a potential merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination. We agreed to pay the service provider an initial fee of $41,668 and $20,834 per month thereafter up to a period of 16 months. Effective August 13, 2021, we terminated the agreement. An aggregate of $135,419.70 was paid under the agreement, and no further fees are due upon termination.
24
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A Common Stock Subject to Redemption
We account for our shares of 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 is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features 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) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the shares of Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
Warrant Liability
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company accounts for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815-40-15-7D, under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our condensed statements of operations. The Private Warrants and the Public Warrants (as described in Note 3) for periods where no observable traded price was available are valued using a Monte Carlo simulation. For periods subsequent to the detachment of the Public Warrants from the Units, the Public Warrant quoted market price on the New York Stock Exchange was used as the fair value of each relevant date.
25
Net Income (Loss) Per Common Stock
Net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and the private placement to purchase an aggregate of 19,717,000 shares in the calculation of diluted loss per share, since the inclusion of such warrants would be anti-dilutive.
The Company’s statements of operations include a presentation of income (loss) per common share subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per share of common stock, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account by the weighted average number of shares of common stock subject to possible redemption outstanding since original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable shares of common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on the non-redeemable share’s proportionate interest.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, “Debt—Debt with Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company early adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required for smaller reporting companies.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure.
As of June 30, 2021, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based upon the evaluation, our principal executive officer and principal financial officer concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective solely as a result of the material weakness that existed in our internal control over financial reporting as described below, and which continues to exist as of June 30, 2021.
Material Weakness in Internal Control over Financial Reporting
On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies(“SPACs”) (the “Public Statement”). In the Public Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on SPACs’ balance sheets as opposed to equity. Since their issuance on November 24, 2020, our warrants to purchase common stock (the “Warrants”) were accounted for as equity within our balance sheets and, based on our application of Financial Accounting Standards Board("FASB") Accounting Standard Codification ("ASC") Topic 815-40, Derivatives and Hedging, Contracts in Entity's Own Equity ("ASC 815-40"), our statement of operations did not include subsequent non-cash changes in estimated fair value of the Warrants. The views expressed in the Public Statement were not consistent with our historical interpretation of specific provisions within our warrant agreement, dated as of November 19, 2020 ("warrant agreement"), and our application of ASC 815-40 to the warrant agreement. As a result of these developments, the Company reviewed its treatment of the Warrants and filed an Amendment No. 1 to the Annual Report on Form 10-K filed on June 29, 2021 (the “10-K/A”). The 10-K/A provided for the restatement of the warrants as a liability for the affected period as described therein. As a result of the SEC’s Public Statement, the Company has changed their go-forward treatment of the Warrants. The results found in this Form 10-Q are consistent with this treatment.
In connection with above-mentioned restatement, we identified a material weakness in our internal control over financial reporting resulting from a lack of independent review of technical accounting matters. During the first quarter of 2021, we have undertaken specific remediation actions to address the control deficiencies in our financial reporting. We added new control activities, modified existing controls, and enhanced the documentation that evidences that controls are performed.
Changes in Internal Control over Financial Reporting
During the most recently completed fiscal quarter, there were no change in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. In light of the restatement of our financial statements included in our Form 10-K/A, we plan to enhance 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 financial statements. Our plans at this time include 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. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
Factors that could cause our actual results to differ materially from those in this Quarterly Report on Form 10-Q are any of the risks described in Part I, Item 1A, Risk Factors of our Form 10-K/A filed with the SEC on June 29, 2021. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our Form 10-K/A.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Use of Proceeds
On November 24, 2020, we consummated our Initial Public Offering of 20,000,000 units and issued an additional 3,000,000 units on December 9, 2020 pursuant to the exercise of the underwriters’ over-allotment option in full. Each unit consists of one public share and one-half of one public warrant, with each whole public warrant entitling the holder thereof to purchase one public share for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to the Company of $230,000,000.
We paid a total of $3,917,000 in underwriting discounts and commissions, excluding a deferred underwriting discount of $6,854,750 and approximately $394,687 for other costs and expenses related to the Initial Public Offering.
A total of $232,300,000, comprised of the net proceeds from the Initial Public Offering, the sale of over-allotment units, and a portion of the proceeds from the sale of the private placement warrants, was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A., maintained by Continental, acting as trustee. The proceeds held in the trust account may be invested by the trustee only in U.S. government securities with a maturity of 185 days or less or in money market funds investing solely in U.S. government treasury obligations and meeting certain conditions under Rule 2a-7 under the Investment Company Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
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ITEM 6. EXHIBITS.
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | Furnished. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CASCADE ACQUISITION CORP. | ||
| Date: August 13, 2021 | /s/ Jay Levine | |
| Name: | Jay Levine | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: August 13, 2021 | /s/ Daniel Hirsch | |
| Name: | Daniel Hirsch | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) | ||
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