Limbach Holdings, Inc. quarterly report, Q3 FY2014

Filing identity and reporting period

Important identity discrepancy: Although the request identifies Limbach Holdings, Inc., the supplied Form 10-Q is for 1347 Capital Corp., a blank-check company. It covers the quarter ended September 30, 2014; the company was incorporated on April 15, 2014, so no prior-year comparable period is presented.

Business context and financial results

1347 Capital had not begun operations or generated operating revenue. It was seeking a business combination, with an intended focus on businesses operating in or serving the insurance industry. The quarter’s activity primarily reflected public-company costs and evaluation of potential acquisition candidates.

Quarterly expenses included $25,000 for affiliate-provided administrative services, $26,355 for audit and review, and $14,237 for directors’ and officers’ insurance. Interest income was $3,198 for both the quarter and inception-to-date period. Profit margins are not meaningful because the company had no revenue.

Financial position and liquidity

• At September 30, 2014, total assets were $46.57 million, including $46.00 million held in trust and $473,695 of cash outside the trust.
• Trust assets comprised $45.99 million in U.S. Treasury bills and $10,465 in cash.
• Liabilities totaled $180,985, including a $125,000 non-interest-bearing sponsor note payable no later than consummation of a business combination. The company reported no long-term debt or off-balance-sheet arrangements.
• Working capital outside the trust was supported by $473,695 cash and anticipated release of approximately $40,000 of trust interest, net of taxes. Management believed available funds would support operations for at least 21 months, assuming no business combination during that time.
• Operating cash outflow for the quarter was $367,830; investing cash outflow was $46.00 million, reflecting funds placed in trust. Financing cash inflow was $46.76 million, primarily from the IPO and private placements.

Material developments and comparison

The company completed its IPO in July 2014: 4.6 million public units were sold for $46 million gross proceeds after full exercise of the underwriters’ over-allotment option. Private placements generated additional proceeds. Offering costs were approximately $1.8 million, including $1.38 million of underwriting discounts. As the company was formed in April 2014, the filing provides no prior-year comparable results to assess year-over-year changes.

Of 4.6 million public shares, 4,099,999 were classified outside permanent equity as subject to possible redemption, with a reported carrying value of approximately $41.0 million. Total stockholders’ equity was $5.39 million. The charter prohibits redemptions that would reduce net tangible assets below $5,000,001.

Outlook, risks, and unusual items

• The company had 18 months from the offering closing to complete a business combination, extendable to 24 months if it had entered into a qualifying letter of intent or definitive agreement within 18 months. If it fails to complete a transaction, public shares are to be redeemed from trust assets; associated public rights and warrants would expire worthless.
• Management estimated future spending of approximately $150,000 for transaction search and due diligence, $67,500 for SEC reporting, $210,000 for affiliate administrative services over up to 21 months, and $77,000 for general working capital and reserves. Management cautioned that lower-than-expected trust interest or higher-than-expected costs could leave insufficient operating funds and require additional financing.
• A $1.61 million fee to the underwriters’ representative is payable upon a completed business combination, subject to possible allocation to other advisers. The affiliate administrative-services fee is $10,000 monthly.
• Key risks include failure to complete a transaction, possible dilution or senior securities issued to finance one, and third-party claims against trust assets that could reduce public-stockholder recoveries. The filing states there were no material changes to the risk factors in the IPO registration statement.
• Management reported disclosure controls as effective and no material change in internal control over financial reporting. The company reported no legal proceedings.

Important facts for investors to verify

• Confirm the filing issuer: this document is for 1347 Capital Corp., not Limbach Holdings, Inc.
• Verify current trust assets, redemption provisions, and the business-combination deadline and any extension conditions.
• Assess whether cash outside the trust and permitted interest releases are sufficient to cover the stated operating and transaction-cost estimates.
• Review potential dilution, redemption levels, sponsor-related arrangements, and the representative’s transaction fee in any proposed business combination.
• Confirm the sponsor note’s repayment source and any additional financing or third-party claims that could affect funds available to public stockholders.