LINDBLAD EXPEDITIONS HOLDINGS, INC. quarterly report, Q2 FY2014

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

  1. Confirm the intended issuer: this source identifies Capitol Acquisition Corp. II, not Lindblad Expeditions Holdings, Inc.
  2. Verify whether a target agreement was signed and whether the February 15, 2015 deadline extension applied.
  3. Assess remaining operating liquidity, the terms and availability of committed insider loans, and the treatment of the $250,000 notes if no transaction closes.
  4. Review trust-account protections, potential third-party claims, redemption mechanics, deferred fees, warrant dilution, and liquidation outcomes.