SEC Filing Summary
Important identification note: The supplied filing is Capitol Acquisition Corp. II’s Form 10-Q for the quarter ended September 30, 2013; it is not a filing under the name Lindblad Expeditions Holdings, Inc. The summary below reflects the filing text provided.
Business context and reporting period
Capitol Acquisition Corp. II was a development-stage blank-check company formed to pursue a business combination. It reported no specific transaction under consideration and said it was actively searching for a target. The filing covers the three and nine months ended September 30, 2013, with comparisons to 2012. Its IPO closed May 15, 2013.
Financial results and position
- Revenue: None for the three- and nine-month periods ended September 30, 2013 or the comparable 2012 periods.
- Net loss: $272,745 for Q3 2013 versus $1,701 in Q3 2012; $472,771 for the first nine months of 2013 versus $2,269 in the comparable 2012 period. The filing attributes operating costs mainly to professional and consulting fees and Delaware franchise tax. Interest income was $19,017 in Q3 and $25,070 for the first nine months of 2013.
- Margins: Not meaningful because the company had no revenue.
- Cash flow: For the first nine months of 2013, operating activities used $421,999 and investing activities used $200.0 million, principally reflecting placement of IPO proceeds into trust. Financing activities provided $200.985 million. Cash at September 30 was $542,190, up from $2,577 at year-end 2012.
- Liquidity and assets: The company reported $200.0 million of restricted trust funds for a business combination or public-share redemptions, plus $23,070 of trust interest available for working capital and taxes. Total assets were $200.666 million; current assets were $652,101.
- Debt and liabilities: Current liabilities totaled $186,817, principally accounts payable and accrued expenses. The $150,000 related-party note outstanding at year-end 2012 was repaid at the IPO closing. No debt remained at September 30, 2013.
- Capitalization: 25 million common shares were issued and outstanding; 18,798,215 shares were classified as subject to possible redemption at a value of $187.982 million. The company also had 15.6 million warrants outstanding.
Material changes versus the prior comparable period
- Operating costs rose substantially after the IPO: nine-month 2013 costs were $497,841 versus $2,269 in the first nine months of 2012. The company said its activity shifted to evaluating business-combination candidates and anticipated higher public-company compliance and due-diligence expenses.
- The May 2013 IPO sold 20 million units for gross proceeds of $200 million, and a concurrent private placement of sponsor warrants raised $5.6 million. The resulting trust balance accounts for the sharp increase in assets and cash flows compared with 2012.
- Q3 2013 net loss increased to $272,745 from $1,701 in Q3 2012; nine-month net loss increased to $472,771 from $2,269.
Outlook, risks, contingencies, and unusual items
- Management stated it would not generate operating revenue until completing a business combination. It expected limited interest income, higher public-company and diligence costs, and substantially increased expenses; no numerical earnings or transaction guidance was provided.
- The company had until February 15, 2015 to complete a business combination, extendable to May 15, 2015 if it had entered into a qualifying transaction agreement or letter of intent by the earlier deadline. If it failed to complete a transaction, it would liquidate and distribute the trust account to public shareholders, subject to applicable claims and expenses.
- Public shareholders could redeem shares for their pro rata share of the trust, initially $10 per share plus eligible interest. A business combination required at least $5 million of net tangible assets after redemptions, as well as approval by a majority of public shares voted. The target had to meet Nasdaq’s 80%-of-trust fair-value test at agreement execution, less taxes payable.
- Management warned that low yields on permitted short-term U.S. government investments could limit working-capital interest and make it harder to fund the search and transaction process. Up to $1.75 million of trust interest, net of taxes, could be released for working capital; none had been released by September 30, 2013. Affiliate financing was possible but not committed.
- Trust assets might not be protected from third-party claims. Officers had agreed to cover certain claims in specified circumstances, but the filing cautioned that their ability to satisfy those obligations was not assured.
- Commitments included a 4% deferred underwriting commission payable only upon a completed business combination, consulting arrangements with aggregate annual fees of $330,000 and success fees of $450,000 (plus a possible discretionary $20,000), and office and administrative-service payments. The filing reported no off-balance-sheet arrangements and no material subsequent events.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter. It stated that short-term Treasury investments did not create material interest-rate exposure.
Important facts for investors to verify
- Confirm the issuer identity: the supplied 10-Q is for Capitol Acquisition Corp. II, not Lindblad Expeditions Holdings, Inc.
- Verify the company’s business-combination status, applicable deadline, and any later transaction or liquidation developments.
- Review the trust balance, redemption terms, restrictions on release of trust interest, and exposure to creditor claims.
- Assess the cost and terms of deferred underwriting commissions, consulting success fees, warrants, and potential dilution.
- Check subsequent filings for changes to cash needs, target-search progress, and the risks associated with completing a business combination.