Business context and reporting period
The supplied filing is a Form 10-Q for the quarter ended June 30, 2014, filed by Capitol Acquisition Corp. II, not Lindblad Expeditions Holdings, Inc. Capitol describes itself as a blank-check company searching for a business combination; it reports no operating revenue or business operations. The source text does not establish a connection to Lindblad.
Financial performance and position
- Revenue: $0 for the three and six months ended June 30, 2014, and the comparable 2013 periods.
- Net loss: $263,633 for Q2 2014 versus $195,625 in Q2 2013; $505,614 for the first six months of 2014 versus $200,025 in 2013. Six-month operating expenses rose to $543,983 from $206,078.
- Cash flow: Operating cash use was $447,854 for the first half of 2014, compared with $144,549 in 2013. Ending unrestricted cash was $121,555, down from $312,298 at year-end 2013.
- Liquidity and assets: At June 30, 2014, total assets were $200.3 million, including $200 million restricted in trust for a business combination or shareholder redemptions. The filing also reports $26,450 of trust interest available for working capital and $10,001 of marketable securities. Current liabilities were $568,610.
- Debt: The company received $250,000 in non-interest-bearing related-party notes in May 2014. They are payable upon a completed business combination, subject to conversion into warrants; repayment is limited if no combination is completed.
- Margins: Not meaningful, given no revenue.
Changes versus the prior comparable period
Q2 and first-half losses increased year over year, principally alongside higher operating expenses. First-half interest income increased to $54,569 from $6,053 in 2013, partly offsetting operating costs. The first-half 2014 cash-flow comparison is affected by the 2013 IPO and trust funding; 2014 financing cash flow included the $250,000 related-party advance.
Outlook, risks and unusual items
- Management said available liquidity, including committed officer and director loans of up to $615,000, was expected to fund operations through February 15, 2015; the deadline could extend to May 15, 2015 if the specified agreement milestones were met. Additional loans are discretionary, not guaranteed.
- No specific target was under consideration, and there was no assurance a business combination would be completed. Without a timely transaction, the company would liquidate and distribute trust funds to public shareholders, subject to claims and other terms.
- The trust may release up to $1.75 million of interest, net of applicable taxes, for working capital; $66,000 had been released by June 30, 2014. Management cited the low-yield environment as a constraint on available interest income.
- Other material terms include public-share redemption rights, an 80%-of-trust target-value test, a $5 million minimum net tangible asset condition at closing, deferred underwriting commissions payable only upon a completed transaction, and warrants that may dilute shareholders.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. It reported no off-balance-sheet arrangements and no material subsequent events requiring disclosure.
Important facts for investors to verify
- Confirm the intended issuer: this source identifies Capitol Acquisition Corp. II, not Lindblad Expeditions Holdings, Inc.
- Verify whether a target agreement was signed and whether the February 15, 2015 deadline extension applied.
- Assess remaining operating liquidity, the terms and availability of committed insider loans, and the treatment of the $250,000 notes if no transaction closes.
- Review trust-account protections, potential third-party claims, redemption mechanics, deferred fees, warrant dilution, and liquidation outcomes.