Filing summary
Registrant and period: This is a Form 10-Q for Capitol Acquisition Corp. II for the quarter ended September 30, 2014, not a filing identified in the document as Lindblad Expeditions Holdings, Inc. The company described itself as a blank-check company searching for a business combination; it had no operating business or revenue.
Financial results and position
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | $0 in 2014 and 2013 | $0 in 2014 and 2013 |
| Operating expenses | $247,524 in 2014; $291,762 in 2013 | $791,507 in 2014; $497,841 in 2013 |
| Net loss | $239,365 in 2014; $272,745 in 2013 | $744,979 in 2014; $472,771 in 2013 |
| Basic and diluted loss per share | $(0.04) in both years | $(0.12) in 2014; $(0.08) in 2013 |
For the nine-month comparison, operating expenses rose about 59% and net loss rose about 58%; for the quarter, both operating expenses and net loss declined year over year. No revenue-based margins are meaningful. Interest income partly offset operating losses.
- Cash and near-cash: At September 30, cash was $177,008, marketable securities were $10,001, and approximately $1,829 of trust-account interest was available for working capital and taxes.
- Trust: $200 million was restricted for a business combination or public-share redemptions. The company reported total assets of $200.3 million.
- Liquidity and cash flow: Nine-month operating cash use was $637,022, versus $421,999 in 2013. Cash declined by $135,290 to $177,008. Management reported approximately $179,000 in available cash, including trust interest available for use.
- Debt and liabilities: Current liabilities were $829,182, including $470,000 due to related parties and $315,000 of accrued franchise tax. The related-party notes are unsecured and non-interest-bearing; they are payable upon a business combination or may be converted into warrants. The filing reports no other conventional debt balance.
Outlook, risks, and other material items
The company said it had no specific transaction under consideration and was actively searching for a target. It had to complete a business combination by February 15, 2015, with an extension to May 15, 2015 if it had entered into a qualifying agreement by the earlier deadline. Management believed available funds would meet needs through the applicable deadline, but additional sponsor or insider funding was discretionary, not committed beyond the stated loan commitments.
- If no transaction is completed by the deadline, the company would dissolve and distribute the trust account pro rata to public shareholders, initially approximately $10 per share plus eligible interest. Trust funds could still be exposed to third-party claims; management disclosed no assurance that protections or officer obligations would fully cover such claims.
- Public shareholders could redeem shares in connection with a proposed transaction. The target or targets generally had to meet the stated 80% fair-market-value test, and the company had to retain at least $5 million in net tangible assets at closing.
- Low Treasury yields constrained interest income; the filing cited an approximately 0.04% effective annualized rate. Management said short-term investments limited interest-rate risk and reported no off-balance-sheet arrangements or hedging activities.
- Related-party and transaction costs included $7,500 per month for office and support services, consulting agreements with aggregate annual fees of $330,000 and a $450,000 success fee upon a business combination, and a possible additional discretionary $20,000 success fee. Deferred underwriting commissions of $8 million were payable only upon a business combination.
- Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Registrant identity: Confirm the filing belongs to the intended issuer; the supplied metadata names Lindblad Expeditions Holdings, Inc., while the filing identifies Capitol Acquisition Corp. II.
- Whether a qualifying letter of intent or transaction agreement was executed before February 15, 2015, and the resulting completion deadline.
- Available working capital, remaining insider-loan capacity, and whether any additional funding was actually provided.
- Trust balance, shareholder redemption terms, and potential claims against trust assets.
- Related-party consulting, office-service, success-fee, and warrant-conversion terms and their potential dilution or cash impact.