LINDBLAD EXPEDITIONS HOLDINGS, INC. - Quarter Report: 2014 March (Form 10-Q)

f10q0314_capitolacquisition.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the period ended March 31, 2014

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35898

CAPITOL ACQUISITION CORP. II

(Exact Name of Registrant as Specified in Its Charter)

Delaware		27-4749725
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

509 7th Street, N.W., Washington, D.C. 20004

(Address of principal executive offices)

202-654-7060

(Issuer’s telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o

Non-accelerated filer	x	Smaller reporting company	o
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

As of May 7, 2014, 25,000,000 shares of common stock, par value $0.0001 per share were issued and outstanding.

CAPITOL ACQUISITION CORP. II

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2014

TABLE OF CONTENTS

	Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets		3
Condensed Statements of Operations		4
Condensed Statements of Changes in Stockholders’ Equity		5-6
Co Condensed Statements of Comprehensive Loss		7
Condensed Statements of Cash Flows		8
Notes to Unaudited Condensed Financial Statements		9-15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16-17
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk		17-18
Item 4. Controls and Procedures		18
Part II. Other Information
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 6. Exhibits		20
Signatures		21

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Capitol Acquisition Corp. II

(a development stage company)

Condensed Balance Sheets

	March 31, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash	$	123,008		$	312,298
Investment in marketable securities		9,986			9,973
Cash and cash equivalents held in trust account, interest income available for working capital and taxes		36,800			33,561
Accrued interest receivable		1,111			4,333
Prepaid expenses and other current assets		58,792			53,917
Total current assets		229,697			414,082

Cash and cash equivalents held in trust account, restricted		200,000,000			200,000,000
Other assets		13,400			13,400
Total assets	$	200,243,097		$	200,427,482

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses	$	22,926		$	13,023
Accrued franchise tax payable		225,000			180,000
Deferred rent		6,700			4,020
Total current liabilities		254,626			197,043

Commitments and contingencies

Common stock, subject to possible redemption, 18,798,215 shares at redemption value		187,982,148			187,982,148

Stockholders’ equity
Preferred stock, $0.0001 per share, 1,000,000 shares authorized, none issued or outstanding		-			-
Common stock, $0.0001 par value, 200,000,000 shares authorized; 25,000,000 shares issued and outstanding at March 31, 2014 (1) and December 31, 2013 (1)		620			620
Additional paid-in-capital		12,975,932			12,975,932
Deficit accumulated during development stage		(970,246	)		(728,265	)
Accumulated other comprehensive income		17			4
Total stockholders’ equity		12,006,323			12,248,291
Total liabilities and stockholders’ equity	$	200,243,097		$	200,427,482

(1)

Share amounts include 1,125,000 shares that are subject to forfeiture if the last sales price of the Company’s stock does not equal or exceed $13.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period within four years following the closing of the Company’s initial business combination.

The accompanying notes are an integral part of these financial statements

Capitol Acquisition Corp. II

(a development stage company)

Condensed Statements of Operations

(unaudited)

	For the three months ended March 31, 2014			For the three months ended March 31, 2013			For the period from August 9, 2010 (inception) through March 31, 2014

Revenue	$	-		$	-		$	-

Formation and operating costs		264,978			4,400			1,020,877
Loss from operations		(264,978	)		(4,400	)		(1,020,877	)

Other income and (expense)
Interest expense		(7,020	)		-			(17,280	)
Interest income		30,017			-			67,911
Total other income		22,997			-			50,631

Net loss	$	(241,981	)	$	(4,400	)	$	(970,246	)

Weighted average number of common shares outstanding, basic and diluted (1)(2)		6,201,785			5,175,000

Basic and diluted net loss per share	$	(0.04	)	$	(0.00	)

(1)	Share amounts have been retroactively restated to reflect the contribution to the Company of 105,184 shares by the Company’s Sponsor on March 25, 2013 and a stock dividend of 0.2 shares for each outstanding share of common stock on May 9, 2013 (see Note 7)

(2)

The accompanying notes are an integral part of these condensed financial statements.

Capitol Acquisition Corp. II

(a development stage company)

Statements of Comprehensive Loss

	For the three months ended March 31, 2014			For the three months ended March 31, 2013			For the period from August 9, 2010 (inception) through March 31, 2014

Net loss	$	(241,981	)	$	(4,400	)	$	(970,246	)

Other comprehensive income, net of tax:

Unrealized gain on securities		13			-			17

Comprehensive loss	$	(241,968	)	$	(4,400	)	$	(970,229	)

The accompanying notes are an integral part of these condensed financial statements.

Capitol Acquisition Corp. II

(a development stage company)

Condensed Statement of Changes in Stockholders’ Equity

For the period from August 9, 2010 (Inception) through March 31, 2014

	Common Stock				Additional paid–in		Deficit accumulated during development			Accumulated other comprehensive		Total stockholders’
	Shares		Amount		capital		stage			income		equity

Balance, August 9, 2010 (inception)		-	$	-	$	-	$	-		$	-	$	-
Common stock issued at approximately $0.006 per share to initial stockholders on February 3, 2011(1) (2)		5,175,000		517		24,483		-			-		25,000
Net loss for the year ended December 31, 2011		-		-		-		(2,477	)		-		(2,477	)
Balance, December 31, 2011		5,175,000		517		24,483		(2,477	)		-		22,523
Net loss for the year ended December 31, 2012		-		-		-		(4,768	)		-		(4,768	)
Balance, December 31, 2012		5,175,000		517		24,483		(7,245	)		-		17,755
Sale of 20,000,000 units, net of underwriters’ discount and offering expenses (includes 18,798,215 shares subject to possible conversion) on May 15, 2013		20,000,000		2,000		195,331,700		-			-		195,333,700

The accompanying notes are an integral part of these condensed financial statements.

Capitol Acquisition Corp. II

(a development stage company)

Condensed Statement of Changes in Stockholders’ Equity (Continued)

For the period from August 9, 2010 (Inception) through March 31, 2014

	Common Stock						Additional paid–in			Deficit accumulated during development			Accumulated other comprehensive		Total stockholders’
	Shares			Amount			capital			stage			income		equity

Forfeiture of initial stockholders’ shares pursuant to partial exercise of underwriters’ over-allotment		(175,000	)		(17	)		17			-			-		-
Proceeds subject to possible conversion of 18,798,215 shares		-			(1,880	)		(187,980,268	)		-			-		(187,982,148	)
Proceeds from issuance of sponsor’s warrants, at $1 per warrant		-			-			5,600,000			-			-		5,600,000
Net loss for the year ended December 31, 2013		-			-			-			(721,020	)		-		(721,020	)
Other comprehensive income		-			-			-			-			4		4
Balance, December 31, 2013		25,000,000			620			12,975,932			(728,265	)		4		12,248,291
Net loss for the three months ended March 31, 2014 (Unaudited)		-			-			-			(241,981	)		-		(241,981	)
Other comprehensive income		-			-			-			-			13		13
Balance, March 31, 2014 (Unaudited)		25,000,000		$	620		$	12,975,932		$	(970,246	)	$	17	$	12,006,323

(1)	Share amounts have been retroactively restated to reflect the contribution to the Company of 105,184 shares by the Company’s Sponsor on March 25, 2013 and a stock dividend of 0.2 shares for each outstanding share of common stock on May 9, 2013 (see Note 7)

(2)	Share amounts include 1,125,000 shares that are subject to forfeiture if the last sales price of the Company’s stock does not equal or exceed $13.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period within four years following the closing of the Company’s initial business combination.

The accompanying notes are an integral part of these condensed financial statements.

Capitol Acquisition Corp. II

(a development stage company)

Condensed Statement of Cash Flows

(unaudited)

	For the three months ended March 31, 2014			For the three months ended March 31, 2013			For the period from August 9, 2010 (inception) through March 31, 2014
Cash Flows from Operating Activities
Net loss	$	(241,981	)	$	(4,400	)	$	(970,246	)

Adjustments to reconcile net loss to net cash used in operating activities
Deferred rent		2,680			-			6,700
Changes in operating assets and liabilities:
Prepaid expenses		(4,875	)		-			(58,792	)
Accrued interest receivable		3,222			-			(1,111	)
Other assets		-			-			(13,400	)
Accounts payable and accrued expenses		9,903			-			22,926
Accrued franchise tax payable		45,000			2,850			225,000
Net cash used in operating activities		(186,051	)		(1,550	)		(788,923	)
Cash Flows from Investing Activities
Trust Account, restricted		-			-			(200,000,000	)
Trust Account, interest income available for working capital and taxes		(3,239	)		-			(36,800	)
Purchase of marketable securities		-			-			(9,969	)
Net cash used in investing activities		(3,239	)		-			(200,046,769	)
Cash Flows from Financing Activities
Gross proceeds from initial public offering		-			-			200,000,000
Proceeds from related party		-			6,906			219,729
Repayment of due to related party		-			-			(219,729	)
Proceeds from notes payable, related party		-			-			150,000
Repayment of notes payable, related party		-			-			(150,000	)
Proceeds from issuance of stock to initial stockholders		-			-			25,000
Proceeds from issuance of sponsor’s warrants		-			-			5,600,000
Payment of underwriting discount and offering expenses		-			(6,886	)		(4,666,300	)
Net cash provided by financing activities		-			20			200,958,700
Net (decrease) increase in cash		(189,290	)		(1,530	)		123,008
Cash at beginning of period		312,298			2,577			-
Cash at end of period:	$	123,008		$	1,047		$	123,008

Supplemental Disclosure of Non-cash Investing and Financing Activities:
Accrual for offering costs charged to additional paid in capital	$	-		$	38,205		$	-

The accompanying notes are an integral part of these condensed financial statements.

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 1 — Organization, Plan of Business Operations and Liquidity

Capitol Acquisition Corp. II (a development stage company) (the “Company”) was incorporated in Delaware on August 9, 2010 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”).

The Company is considered to be a development stage company and as such, the financial statements are prepared in accordance with the Accounting Standards Codification (“ASC”) topic 915 “Development Stage Entities.” The Company is subject to all of the risks associated with development stage companies.

All activity through March 31, 2014 relates to the Company’s formation, initial public offering (“Offering”) and identifying and investigating prospective target businesses with which to consummate a Business Combination. The Company has selected December 31 as its fiscal year-end.

The registration statement for the Offering was declared effective on May 9, 2013. On May 10, 2013, the Company filed a new registration statement to increase the size of the Offering by 20% pursuant to Rule 462(b) under the Securities Act of 1933, as amended. On May 15, 2013, the Company consummated the Offering and received proceeds net of the underwriter’s discount and other offering expenses of $195,333,700 and simultaneously received $5,600,000 from the issuance of 5,600,000 warrants (“sponsor’s warrants”) in a private placement (the “Private Placement”). From the proceeds, $933,700 was available for working capital and tax purposes. The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Offering and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a Business Combination successfully. Furthermore, there is no assurance that the Company will be able to affect a Business Combination successfully.

Upon the closing of the Offering, $200,000,000 ($10.00 per share sold in the Offering), including the proceeds from the Private Placement, is held in a trust account (the “Trust Account”) and may be invested only in United States government securities having a maturity of 180 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended, that solely invests in U.S. government treasury obligations until the earlier of the consummation of a Business Combination or the Company’s redemption of 100% of the outstanding public shares if the Company has not consummated a Business Combination in the required time period.

The Company’s units are listed on the NASDAQ Capital Markets (“NASDAQ”). Pursuant to NASDAQ listing rules, the target business or businesses with which the Company completes a Business Combination must collectively have a fair market value equal to at least 80% of the balance of the funds in the Trust Account (less taxes payable) at the time of the execution of the definitive agreement for its initial Business Combination, although the Company may acquire a target business whose fair value significantly exceeds 80% of the Trust Account balance.

The Company, after signing a definitive agreement for the acquisition of a target business, is required to provide shareholders who acquired shares in the Public Offering (“Public Shareholders”) with the opportunity to redeem their public shares for a pro rata share of the Trust Account by means of conducting redemptions in conjunction with a proxy solicitation pursuant to the proxy rules. Each Public Shareholder will be entitled to receive a full pro rata portion of the amount then in the Trust Account ($10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released by the Company or necessary to pay taxes). The Company will consummate an initial Business Combination only if the Company has net tangible assets of at least $5 million upon consummation of the Business Combination and a majority of the outstanding public shares voted are voted in favor of the Business Combination.

In connection with any stockholder vote required to approve any Business Combination, the Company’s sponsor and the other initial stockholders of the Company (collectively, the “Initial Stockholders”) have agreed (i) to vote any of their respective shares in favor of the initial Business Combination and (ii) not to convert any of their respective shares. Public stockholders who convert their stock will continue to have the right to exercise any warrants they may hold if the Business Combination is consummated.

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 1 — Organization, Plan of Business Operations and Liquidity (continued)

The Company has until February 15, 2015 to complete the Business Combination, or May 15, 2015 if the Company has executed a letter of intent, agreement in principal or definitive agreement with respect to a Business Combination prior to February 15, 2015 but has not completed such Business Combination by February 15, 2015.

If the Company is unable to complete a Business Combination within the allotted time, the Company will automatically dissolve and as promptly as practicable liquidate the Trust Account and release only to Public Shareholders a pro rata share of the Trust Account (initially $10.00 per share), plus any remaining net assets. The Initial Stockholders have agreed to waive the right to participate in any distribution from the Trust Account, but not with respect to any units they acquire in the aftermarket.

Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. If the Company is unable to complete a Business Combination and is forced to dissolve and liquidate, the Company’s executive officers, by agreement, have agreed that they will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company. However, there can be no assurance that it will be able to satisfy those obligations should they arise.

The Company has experienced significant recurring net operating losses as well as negative cash flows from operations. The Company’s main source of liquidity was from the Offering and the Private Placement, proceeds from which have been used to fund the search for a prospective target business. The Company currently has a cash position of approximately $170,000, which includes approximately $37,000 held in the trust account that is available to the Company and approximately $10,000 invested in U.S. Treasury Bills. The Company has also received a commitment from its Chief Executive Officer, Mark D. Ein, and its Chief Financial Officer, L. Dyson Dryden, to provide loans to the Company of up to $615,000. These loans will be evidenced by notes and would either be repaid upon the consummation of a Business Combination or up to $500,000 of the notes may be converted into warrants. Based on the foregoing, the Company believes it has sufficient cash to meet its needs through February 15, 2015 (the Company’s liquidation date if no letter of intent has been executed). If the Company has executed a letter of intent, agreement in principal or definitive agreement with respect to a Business Combination, as discussed above, then the Company has until May 15, 2015. The Company’s sponsor, officers and directors or their affiliates may, but are not required to, loan the Company additional funds in any amount they deem reasonable at their discretion in the event the Company requires additional funds to complete a Business Combination.

Note 2 — Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered for a fair presentation have been included. These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and notes thereto for the fiscal year ended December 31, 2013 filed on March 6, 2014. The accounting policies used in preparing these unaudited condensed financial statements are consistent with those described in the December 31, 2013 audited financial statements. Operating results for the quarter ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014 or any other period.

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 2 — Significant Accounting Policies (continued)

Income Taxes

The Company accounts for income taxes under Accounting Standards Codification (“ASC”) 740, “Income Taxes” (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company is required to file income tax returns in the United States (federal) jurisdiction. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

The Company’s conclusions regarding uncertain tax positions may be subject to review and adjusted at a later date based upon ongoing analyses of tax laws, regulations, and interpretations thereof as well as other factors. Generally, federal and state authorities may examine the tax returns for three years from the date of filing; therefore the years ended December 31, 2013, 2012 and 2011 and the period from August 9, 2010 (inception) through December 31, 2010 remain subject to examination as of March 31, 2014. There are currently no ongoing income tax examinations.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the period from August 9, 2010 (inception) through March 31, 2014. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

Loss per Share

Basic loss per share is calculated using the weighted-average number of shares of common stock and diluted loss per share is computed on the basis of the average number of common stock outstanding plus the effect of outstanding warrants using the “treasury stock method.”

Common shares subject to possible conversion of 18,798,215 have been excluded from the calculation of basic and diluted earnings per share since such shares, if converted, only participate in their pro rata shares of the trust earnings.

Diluted loss per common share amounts, assuming dilution, gives the effect to dilutive options, warrants, and other potential common stock outstanding during the period. The Company has not considered the effect of its outstanding warrants in the calculation of diluted loss per shares since they are anti-dilutive.

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 2 — Significant Accounting Policies (continued)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which at times, may exceed the Federal depository insurance coverage. At March 31, 2014, the Company had not experienced losses on these accounts and management believes the Company was not exposed to significant risks on such accounts.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

Subsequent Events

Management of the Company evaluated events that have occurred after the balance sheet date of March 31, 2014 but before the condensed financial statements were available to be issued. Management did not identify any recognized or non-recognized subsequent event that would have required adjustment or disclosure in the financial statements.

Note 3 — Initial Public Offering and Insider Warrants

In connection with the Offering, on May 15, 2013, the Company sold 20,000,000 units at $10.00 per unit, including 2,000,000 units under the underwriters’ over-allotment option, generating gross proceeds of $200,000,000. On May 17, 2013, the underwriters in the Offering indicated to the Company that they would not exercise the remaining portion of the over-allotment option. As a result, on May 20, 2013, the Company’s Initial Stockholders forfeited an aggregate of 175,000 shares of common stock issued to them prior to the Offering. Each unit consists of one share of the Company’s common stock, $0.0001 par value, and one half of one redeemable warrant to purchase one share of common stock. The shares of common stock and the warrants included in the units traded as a unit from the Offering until July 1, 2013 when separate trading of common stock and warrants began. No fractional warrants will be issued and only whole warrants will trade. Holders now have the option to continue to hold units or separate their units into the component pieces. Each whole warrant entitles its holder, upon exercise, to purchase one share of common stock for $11.50 subject to certain adjustments, during the period commencing on the later of thirty days after the completion by the Company of its initial Business Combination or twelve months from the date of the consummation of the Offering and terminating on the five-year anniversary of the completion by the Company of its initial Business Combination or earlier upon redemption or liquidation of the Trust Account. At May 15, 2013, December 31, 2013, and March 31, 2014 there were 15,600,000 warrants outstanding, which include 5,600,000 sponsor’s warrants purchased by the Initial Stockholders in the Private Placement and 10,000,000 warrants purchased in connection with the sale of units related to the Offering.

The warrants may be redeemed by the Company, at its option, in whole and not in part, at a price of $0.01 per warrant at any time the warrants are exercisable, upon a minimum of 30 days’ prior written notice of redemption, if, and only if, the last sales price of the Company’s shares of common stock equals or exceeds $24.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within a 30 trading day period ending three business days before the Company sends the redemption notice; and if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants.

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 3 — Initial Public Offering and Insider Warrants (continued)

If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the fair market value by (y) the fair market value. The fair market value shall mean the average reported last sale price of the shares of common stock for the 5 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants.

Simultaneously with the consummation of the Offering, the Company consummated the Private Placement of 5,600,000 sponsor’s warrants at a price of $1.00 per warrant, generating total proceeds of $5,600,000. The sponsor’s warrants are identical to the warrants included in the units sold in the Offering except that the sponsor’s warrants: (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, in each case so long as they are held by the initial purchasers or any of their permitted transferees. The purchasers of the sponsor’s warrants have also agreed not to transfer, assign or sell any of the sponsor’s warrants, including the common stock issuable upon exercise of the sponsor’s warrants (except to certain permitted transferees), until 30 days after the completion of an initial Business Combination.

Note 4 — Investment in Marketable Securities and Fair Value of Financial Instruments

The Company accounts for securities owned in accordance with ASC 320, “Investments - Debt and Equity Securities.” ASC 320 requires investments in debt and equity securities to be classified as either “held to maturity,” “trading,” or “available for sale.” At March 31, 2014, management has classified $9,986 of marketable securities as available for sale, which are reported at fair market value, with unrealized gains and losses reported as a separate component of stockholders’ equity. Gains or losses on the sale of securities are recognized on a specific identification basis.

At March 31, 2014, Level 1 marketable securities consist of the following:

	Cost		Fair Value		Unrealized Gain*

United States Treasury Notes (matures in December, 2015)	$	9,969	$	9,986	$	17

* Included in other comprehensive income.

Note 5 — Offering Costs

Deferred offering costs consisted of legal, underwriting fees and other costs incurred that are directly related to the Offering and that were charged to stockholders’ equity upon the completion of the Offering (See Note 3).

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 6 — Commitments and Contingencies and Related Party Transactions

On May 10, 2013, the Company entered into an agreement with the underwriters (“Underwriting Agreement”). Pursuant to the Underwriting Agreement, the Company paid an underwriting discount of 2.0% of the gross proceeds of the Offering, or $4,000,000. The Company will also pay the underwriters in the Offering an additional deferred underwriting discount of 4.0% of the gross proceeds of the Offering (“Deferred Commissions”) which will be placed in the Trust Account and paid only upon consummation of a Business Combination.

An affiliate of the Company’s Chief Executive Officer has agreed that, until the Company consummates a Business Combination, it will make available to the Company certain office space and administrative and support services, as may be required by the Company from time to time. The Company has agreed to pay such affiliate $7,500 per month for such services commencing on May 9, 2013. Another affiliate of the Company’s Chief Executive Officer has agreed to provide certain administrative and support services and is reimbursed for all costs incurred. For the three months ended March 31, 2014 and 2013, the total amount paid to these affiliates for office space and administrative and support services was $23,283 and $0, respectively and for the period from August 9, 2010 (inception) through March 31, 2014, the total amount paid to these affiliates was $86,148.

The Company entered into two consulting arrangements for services to help identify and introduce the Company to potential targets and provide assistance with due diligence, deal structuring, documentation and obtaining stockholder approval for a Business Combination. These agreements provide for an aggregate annual fee of $330,000 and success fee of $450,000 upon the consummation of a Business Combination. Additionally, the Company may pay a discretionary success fee of $20,000 upon the closing of a Business Combination.

On May 23, 2013, the Company entered into a fifteen month office lease for office space in New York, New York, commencing on June 1, 2013. The lease calls for monthly rent of $6,700 plus additional fees for administrative support and includes free rent on the first, fifth and ninth month of the lease term. The rent has been straight-lined for financial statement purposes. For the three months ended March 31, 2014 and 2013, rent expense totaled $19,429 and $0, respectively, which includes $2,680 and $0, respectively due to the straight-lining of rent. For the period from August 9, 2010 (inception) through March 31, 2014, rent expense totaled $66,786, which includes $6,700 due to the straight-lining of the rent. Future minimum rent payments due in 2014 are $33,500.

Note 7 — Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2014 and December 31, 2013, there are no shares of preferred stock issued or outstanding.

Common Stock

The Company is authorized to issue 200,000,000 shares of common stock with a par value of $0.0001 per share.

In connection with the organization of the Company, on February 3, 2011, a total of 4,417,684 shares of the Company’s common stock were sold to Capital Acquisition Management 2 LLC (our “sponsor”) at a price of approximately $0.006 per share for an aggregate of $25,000. On March 25, 2013, the sponsor contributed an aggregate of 105,184 shares of the Company’s common stock to the Company at no cost for cancellation. Effective May 9, 2013, the Company’s Board of Directors authorized a stock dividend of 0.2 shares for each outstanding share of common stock, resulting in 5,175,000 shares outstanding. All references in the accompanying financial statements to the number of shares of common stock have been retroactively restated to reflect these transactions.

Capitol Acquisition Corp. II

(a development stage company)

Notes to Condensed Financial Statements

Note 7 — Stockholders’ Equity (continued)

Common Stock (continued)

On May 17, 2013, the underwriters in the Offering indicated to the Company that they would not exercise the remaining portion of the over-allotment option. As a result, on May 20, 2013, the Company’s Initial Stockholders forfeited an aggregate of 175,000 shares of Common Stock issued to them prior to the Offering. The shares that continue to be held by the Initial Stockholders includes 1,250,000 shares that are subject to forfeiture if the last sales price of the Company’s stock does not equal or exceed $13.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period within four years following the closing of the Company’s initial Business Combination.

Item 2. Management’s Discussion and Analysis.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other Securities and Exchange Commission (“SEC”) filings. References to “we”, “us”, “our” or the “Company” are to Capitol Acquisition Corp. II, except where the context requires otherwise. The following discussion should be read in conjunction with our condensed financial statements and related notes thereto included elsewhere in this report.

Overview

We are a blank check company in the development stage, formed on August 9, 2010 to acquire, through a merger, share exchange, asset acquisition, stock purchase, plan of arrangement, recapitalization, reorganization or other similar business combination, one or more businesses or entities. We do not have any specific initial business transaction under consideration, but we are actively searching for a target business.

We presently have no revenue, have had losses since inception from incurring formation costs and have no other operations other than the active solicitation of a target business with which to complete a business combination. We have relied upon the sale of our securities and loans from our officers and directors to fund our operations.

The registration statement for our initial public offering was declared effective on May 9, 2013. On May 10, 2013, we filed a new registration statement to increase the size of the initial public offering by 20% pursuant to Rule 462(b) under the Securities Act of 1933, as amended. On May 15, 2013, we consummated the offering and received proceeds net of the underwriter’s discount and other offering expenses of $195,333,700 and simultaneously received $5,600,000 from the issuance of 5,600,000 warrants (“sponsor’s warrants”) in a private placement (the “Private Placement”). From the net proceeds, $933,700 was available for working capital and tax purposes. Our management has broad discretion with respect to the specific application of the net proceeds of the offering and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination successfully.

Results of Operations

Our entire activity since inception up to the closing of our initial public offering on May 15, 2013 was in preparation for that event. Since the offering, our activity has been limited to the evaluation of business combination candidates, and we will not generate any operating revenues until the closing and completion of our initial business combination. We expect to generate small amounts of non-operating income in the form of interest income on cash and cash equivalents. Interest income is not expected to be significant in view of current low interest rates on risk-free investments (treasury securities). We currently incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the three months ended March 31, 2014 and 2013, we had net losses of $241,981 and $4,400, respectively and for the period from August 9, 2010 (inception) through March 31, 2014, we had cumulative net losses of $970,246. We incurred operating expenses for the three months ended March 31, 2014 and 2013 of $264,978 and $4,400, respectively, and for the period from August 9, 2010 (inception) through March 31, 2014 of $1,020,877. These costs consist mainly of professional and consulting fees, rent, office administrative costs and Delaware franchise tax. We incurred offering costs of $666,300 with regard to the offering which were netted against additional paid-in capital upon the consummation of the offering.

Liquidity and Capital Resources

As of March 31, 2014, we have cash of $123,008 and marketable securities of $9,986. In addition, we had $200,036,800 in cash and equivalents held in trust, of which $36,800 represents interest income earned to be used for working capital and tax purposes and $200,000,000 of restricted funds to be used for a business combination or to convert our common shares, in certain circumstances. Our activity from August 9, 2010 (inception) through May 15, 2013 was to prepare for our initial public offering. Since May 15, 2013 our efforts have been devoted to identifying an acquisition candidate. We intend to use the proceeds not held in the trust account plus the interest earned on the funds held in the trust account that may be released to us to fund our working capital requirements. We are allowed to have released to us up to $1,750,000 of the interest earned in the Trust Account (net of applicable taxes, if any) for working capital purposes during our search for an initial business combination. However, there is no assurance that we will be able to successfully effect a business combination. As of March 31, 2014, $30,000 of interest earned that can be utilized for working capital purposes has been released to us.

We will depend on sufficient interest being earned on the proceeds held in the Trust Account to provide us with additional working capital that we may need to identify one or more target businesses, conduct due diligence and complete a Business Combination, as well as to pay any franchise and income taxes that we may owe. The amounts in the Trust Account may be invested only in U.S. government treasury bills with a maturity of 180 days or less or money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. The current low interest rate environment may make it more difficult for such investments to generate sufficient funds, together with the amounts available outside the Trust Account, to locate, conduct due diligence, structure, negotiate and close a Business Combination.

We have experienced significant recurring net operating losses as well as negative cash flows from operations. Our main source of liquidity was from the Offering and the Private Placement, proceeds from which have been used to fund the search for a prospective target business. We currently have a cash position of approximately $170,000, which includes approximately $37,000 held in the trust account available to us and approximately $10,000 invested in U.S. Treasury Bills. Our Chief Executive Officer, Mark D. Ein, and our Chief Financial Officer, L. Dyson Dryden, have also committed to provide loans to us of up to $615,000. These loans will be evidenced by notes and would either be repaid upon the consummation of a business combination or up to $500,000 of the notes may be converted into warrants at a price of $1.00 per warrant, which warrants would be identical to the sponsor’s warrants. Based on the foregoing, we believe we have sufficient cash to meet our needs through February 15, 2015 (the Company’s liquidation date if no letter of intent has been executed). If the Company has executed a letter of intent, agreement in principal or definitive agreement with respect to a Business Combination, as discussed above, then the Company has until May 15, 2015. The Company’s sponsor, officers and directors or their affiliates may, but are not required to, loan the Company additional funds in any amount they deem reasonable at their discretion in the event the Company requires additional funds to complete a Business Combination.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2014.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

From our inception through March 31, 2014, our efforts have been limited to organizational activities, activities relating to our initial public offering and the search for an acquisition candidate; we have neither engaged in any operations nor generated any revenues.

Market risk is a broad term for the risk of economic loss due to adverse changes in the fair value of a financial instrument. These changes may be the result of various factors, including interest rates, foreign exchange rates, commodity prices and/or equity prices. Net proceeds from our initial public offering of $200.0 million (which includes $8.0 million of the proceeds attributable to the Underwriters’ deferred discount from the initial public offering) have been placed in a trust account at J. P. Morgan Securities, with Continental Stock Transfer & Trust Company acting as trustee. As of March 31, 2014, the balance of the trust account was $200.0 million. We are allowed to use $1.75 million (net of applicable tax obligations, if any) of the interest and dividends earned on the money in the Trust Account for working capital purposes. The proceeds held in trust are invested in United States Treasury Bills with a maturity of 180 days or less. As of March 31, 2014, the effective annualized interest rate payable on our Treasury Bills was approximately 0.05%. Due to the short-term nature of these investments and the low interest rates related to these types of investments, we believe there will be no material exposure related to interest rate risk. We do not believe that the effect of other changes, such as foreign exchange rates, commodity prices and/or equity prices currently pose significant market risk for us.

We have not engaged in any hedging activities since our inception. We do not currently expect to engage in any hedging activities.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2014, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were effective.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

In February 2011, we issued 4,417,684 shares of common stock to Capitol Acquisition Management 2 LLC (our “sponsor”) for $25,000 in cash, at a purchase price of approximately $0.006 share, in connection with our organization. Such shares were issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act as they were sold to an accredited investor. In March 2013, our sponsor contributed an aggregate of 105,184 shares of our common stock to our capital, resulting in our sponsor owning an aggregate of 4,312,500 founder’s shares. The sponsor received no consideration for this contribution. Such contribution was made solely to maintain the sponsor’s collective 20% ownership interest in our shares of common stock based on the then current size of our initial public offering. Thereafter, also in March 2013, our sponsor transferred an aggregate of 1,078,126 founder’s shares to our executive officers and directors. In April 2013, our sponsor and Dyson Dryden, our chief financial officer and a director, transferred an aggregate of 22,998 founder’s shares to Messrs. Calcano, Donaldson and Sodha, each a director, resulting in our sponsor owning an aggregate of 3,222,875 founder’s shares and Mr. Dryden owning an aggregate of 974,626 founder’s shares. The shares were transferred for the same per share consideration originally paid for by the transferors. In May 2013, we effected a stock dividend of 0.2 shares for each outstanding share of common stock, resulting in our sponsor and officers and directors holding an aggregate of 5,175,000 founder’s shares, of which 175,000 shares were subsequently forfeited.

On May 15, 2013, we consummated our initial public offering of 20,000,000 units, including 2,000,000 units under the underwriters’ over-allotment option, with each unit consisting of one share of common stock and one half of one warrant, each whole warrant to purchase one share of common stock. The shares of common stock and the warrants included in the units traded as a unit until July 1, 2013 when separate trading of common stock and warrants began. No fractional warrants will be issued and only whole warrants will trade. Holders now have the option to continue to hold units or separate their units into the component pieces. Each whole warrant entitles its holder, upon exercise, to purchase one share of common stock for $11.50 subject to certain adjustments, during the period commencing on the later of thirty days after the completion by the Company of its initial Business Combination or twelve months from the date of the consummation of the Offering and terminating on the five-year anniversary of the completion by the Company of its initial Business Combination or earlier upon redemption or liquidation of the Trust Account. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $200,000,000. Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. acted as the joint book-running managers of the initial public offering. Ladenburg Thalmann & Co. Inc. and Imperial Capital LLC served as co-managers. The units sold in the offering were registered under the Securities Act of 1933 on registration statements on Form S-1 (Nos. 333-187519 and 333-188503). The Securities and Exchange Commission declared the registration statement effective on May 9, 2013.

Simultaneously with the consummation of the offering, we consummated the private placement of 5,600,000 sponsor’s warrants at a price of $1.00 per warrant, generating total proceeds of $5,600,000. The sponsor’s warrants are identical to the warrants included in the units sold in the Offering except that the sponsor’s warrants: (i) will not be redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, in each case so long as they are held by the initial purchasers or any of their permitted transferees. The purchasers of the sponsor’s warrants have also agreed not to transfer, assign or sell any of the sponsor’s warrants, including the common stock issuable upon exercise of the sponsor’s warrants (except to certain permitted transferees), until 30 days after the completion of an initial Business Combination. These issuances were made pursuant to the exemption from registration contained in Section 4(2) of the Securities Act.

We incurred a total of $4,000,000 in underwriting discounts and commissions (not including deferred fees) and $666,300 for other costs and expenses related to the offering.

After deducting the underwriting discounts and commissions and the offering expenses, the total net proceeds to us from the offering were $200,933,700. Of this amount, $200,000,000 we received from the sale of units in the offering and private placement of sponsor’s warrants was deposited into the trust account.

For a description of the use of the proceeds generated in our initial public offering, see Part I, Item 2 of this Form 10-Q.

Item 6. Exhibits.

Exhibit No.		Description

10.1		Commitment Letter from CEO and CFO.

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CAPITOL ACQUISITION CORP. II

	By:	/s/ Mark D. Ein
		Mark D. Ein
		Chief Executive Officer (Principal executive officer)

	By:	/s/ L. Dyson Dryden
		L. Dyson Dryden
		Chief Financial Officer (Principal financial and accounting officer)

Date: May 7, 2014