UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
OR
For the transition period from to
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of each Exchange on which Registered | ||
| Units, each consisting of one share of Class A common stock and one-third of one warrant | CAP.U | The New York Stock Exchange | ||
| Warrants, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50 per share | CAP.WS | The New York Stock Exchange |
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.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company | |||
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of July 27, 2021,
CAPITOL INVESTMENT CORP. V
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2021
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
CAPITOL INVESTMENT CORP. V
CONDENSED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Marketable securities held in Trust Account | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES, TEMPORARY EQUITY AND PERMANENT EQUITY (DEFICIT) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Advances from related parties | ||||||||
| Promissory note – related party | ||||||||
| Total Current Liabilities | ||||||||
| Deferred underwriting payable | ||||||||
| Warrant liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Temporary Equity | ||||||||
| Class A common stock subject to possible redemption | ||||||||
| Permanent Equity (Deficit) | ||||||||
| Preferred stock, $ | ||||||||
| Class A common stock, $ | — | |||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Permanent Equity (Deficit) | ( | ) | ||||||
| TOTAL LIABILITIES, TEMPORARY EQUITY AND PERMANENT EQUITY (DEFICIT) | $ | $ | ||||||
The accompanying notes are an integral part of the financial statements.
1
CAPITOL INVESTMENT CORP. V
CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Formation and operating costs | $ | $ | $ | $ | ||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income: | ||||||||||||||||
| Interest earned on marketable securities held in Trust Account | ||||||||||||||||
| Change in fair value of warrant liabilities | ||||||||||||||||
| Unrealized gain on marketable securities held in Trust Account | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Income (loss) before benefit from (provision for) income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Benefit from (provision for) income taxes | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | ||||||||||||||||
| Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | ( | ) | $ | $ | $ | ||||||||||
| Basic and diluted weighted average shares, non-redeemable common stock | ||||||||||||||||
| Basic and diluted net loss per share, non-redeemable common stock | $ | $ | $ | $ | ||||||||||||
The accompanying notes are an integral part of the financial statements.
2
CAPITOL INVESTMENT CORP. V
CONDENSED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND PERMANENT EQUITY (DEFICIT)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021
| Class A | Class B | Additional | Total Permanent | |||||||||||||||||||||||||||||||||
| Common Stock | Common Stock (1) | Paid-in | Accumulated | Equity | Temporary Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | Shares | Amount | ||||||||||||||||||||||||||||
| Balance – January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Change in value of Class A common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||||||
| Balance – March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Change in value of Class A common stock subject to possible redemption | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||
| Balance – June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020
| Class A | Class B | Additional | Total Permanent | |||||||||||||||||||||||||||||||||
| Common Stock | Common Stock (1) | Paid-in | Accumulated | Equity | Temporary Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | Shares | Amount | ||||||||||||||||||||||||||||
| Balance – January 1, 2020 | $ | $ | ( | ) | $ | — | ||||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||
| Balance – March 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| Net loss | — | — | ( | ) | ( | ) | — | |||||||||||||||||||||||||||||
| Balance – June 30, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||||||
| (1) |
The accompanying notes are an integral part of the financial statements.
3
CAPITOL INVESTMENT CORP. V
CONDENSED STATEMENTS OF CASH FLOWS
| Six Months Ended | ||||||||
| June 30, 2021 | June 30, 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Interest earned on marketable securities held in Trust Account | ( | ) | ||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account for franchise taxes | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Advances from related party | ||||||||
| Proceeds from promissory notes – related party | ||||||||
| Payment of offering costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net Change in Cash | ( | ) | ||||||
| Cash – Beginning | ||||||||
| Cash – Ending | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Offering costs included in accrued offering costs | $ | $ | ||||||
| Offering costs paid by Sponsor in exchange for issuance of founder shares | ||||||||
| Change in value of Class A common stock subject to possible redemption | ||||||||
The accompanying notes are an integral part of the financial statements.
4
NOTE 1 — DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Capitol Investment Corp. V (the “Company”) was originally incorporated in the Cayman Islands on May 1, 2017 as a blank check company. In May 2019, the Company was redomesticated from the Cayman Islands to the state of Delaware. The Company’s objective is to acquire, through a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a “Business Combination”).
As of June 30, 2021, the Company had not commenced any operations. All activity through June 30, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”), which is described below. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
The registration statement
for the Company’s Initial Public Offering was declared effective on December 1, 2020. On December 4, 2020, the Company consummated
the Initial Public Offering of
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the private placement of
Transaction costs amounted
to $
Following the closing of
the Initial Public Offering on December 4, 2020, an amount of $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully.
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.
5
In connection with any proposed
initial Business Combination, the Company will either (1) seek stockholder approval of such initial Business Combination at a meeting
called for such purpose or (2) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a
tender offer (and thereby avoid the need for a stockholder vote), in each case where stockholders may seek to convert their Public Shares
into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid.
If the Company determines to engage in a tender offer, such tender offer will be structured so that each stockholder may tender any or
all of his, her or its Public Shares rather than some pro rata portion of his, her or its shares. In that case, the Company will
file tender offer documents with the U.S. Securities and Exchange Commission (the “SEC”) which will contain substantially
the same financial and other information about the initial Business Combination as is required under the SEC’s proxy rules. The
decision as to whether the Company will seek stockholder approval of a proposed Business Combination or will allow stockholders to sell
their shares to it in a tender offer will be made by the Company based on a variety of factors such as the timing of the transaction or
whether the terms of the transaction would otherwise require it to seek stockholder approval. Notwithstanding the foregoing, if the Company
seeks stockholder approval of an initial Business Combination, a public stockholder, together with any affiliate of his or any other person
with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) will be restricted from seeking redemption rights with respect to
The Company’s certificate
of incorporation was amended prior to the Initial Public Offering to provide that the Company will continue in existence only until December
4, 2022 or during any extended time that the Company has to consummate a Business Combination beyond December 4, 2022 as a result of a
stockholder vote to amend its amended and restated certificate of incorporation. If the Company has not completed a Business Combination
by such date, the Company will (i) cease all operations except for the purpose of winding down, (ii) as promptly as reasonably
possible but not more than ten business days thereafter, redeem
6
On March 2, 2021, Capitol
announced that it entered into a definitive merger agreement for its initial business combination with Doma Holdings, Inc., or Doma, a
leading force for disruptive change in the residential real estate industry. Doma uses machine intelligence to replace large portions
of the antiquated residential real estate closing process with instant technology solutions. Doma’s machine intelligence algorithms
are being trained and optimized on
Liquidity
As of June 30, 2021, the
Company had $
In February 2021, the Sponsors
and the independent directors collectively committed to provide the Company an aggregate of $
The Company may raise additional capital through loans or additional investments from the Sponsors or its stockholders, officers, directors, or third parties. The Company’s officers and directors and the Sponsors may, but are not obligated to (except as described above), loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs.
Based on the foregoing, the Company believes it will have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or July 15, 2022.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2 — SUMMARY OF 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 of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
7
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020 as filed with the SEC on May 11, 2021, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2020. The interim results for the six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.
Emerging Growth Company and Smaller Reporting Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s condensed financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Additionally, the Company
is a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take
advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.
The Company will remain a smaller reporting company until the last day of the fiscal year in which
Use of Estimates
The preparation of financial statements in conformity with GAAP 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 revenues and expenses during the reporting period.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
8
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of June 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At June 30, 2021 and December 31, 2020, the assets in the Trust Account were held in cash and money market funds invested in U.S. government treasury obligations.
Convertible Debt
The Company accounts for conversion options embedded in convertible notes in accordance with ASC 815-15. ASC 815-15 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free standing derivative financial instruments.
The Company reviews the terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.
As of June 30, 2021, the embedded derivatives relating to the convertible debt was deemed to be immaterial.
Warrant Liabilities
The Company evaluated the Public Warrants and Private Placement Warrants (collectively, “Warrants”, which are discussed in Note 3, Note 4, Note 7 and Note 8) in accordance with ASC 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity”, and concluded that a provision in the Warrant Agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are recorded as derivative liabilities on the condensed balance sheet and measured at fair value at inception (on the date of the IPO) and at each reporting date in accordance with ASC 820, “Fair Value Measurement”, with changes in fair value recognized in the consolidated statement of operations in the period of change.
Class A Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.
9
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital and accumulated deficit.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions 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. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of June 30, 2021 and December 31, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net Income (Loss) per Common Share
Net income (loss) per common
share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. The Company applies
the two-class method in calculating earnings per share. Shares of common stock subject to possible redemption at June 30, 2021 and December 31,
2020, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of basic net income
(loss) per common share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company
has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase
The Company’s condensed statement of operations includes a presentation of income (loss) per share for common shares subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted, for common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account by the weighted average number of common stock subject to possible redemption outstanding since the original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net loss, adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period. Non-redeemable common stock includes Founder Shares and non-redeemable Class A common stock as these shares do not have any redemption features. Non-redeemable common stocks participate in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
10
The following table reflects the calculation of basic and diluted net income (loss) per common stock (in dollars, except per share amounts):
| Three Months Ended | ||||||||
| June 30, 2021 | June 30, 2020 | |||||||
| Class A common stock subject to possible redemption | ||||||||
| Numerator: Earnings allocable to Class A common stock subject to possible redemption | ||||||||
| Interest earned on marketable securities held in Trust Account, net of franchise taxes | $ | $ | ||||||
| Net income allocable to Class A common stock subject to possible redemption | $ | $ | ||||||
| Denominator: Weighted Average Class A common stock subject to possible redemption | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Non-Redeemable Common Stock | ||||||||
| Numerator: Earnings allocable to non-redeemable common stock | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Less: Net income allocable to Class A common stock subject to possible redemption | ||||||||
| Non-redeemable net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Denominator: Weighted Average Non-redeemable common stock | ||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ||||||||
| Basic and diluted net income (loss) per share, Non-redeemable common stock | $ | ( | ) | $ | ( | ) | ||
| Six Months Ended | ||||||||
| June 30, 2021 | June 30, 2020 | |||||||
| Class A common stock subject to possible redemption | ||||||||
| Numerator: Earnings allocable to Class A common stock subject to possible redemption | ||||||||
| Interest earned on marketable securities held in Trust Account, net of franchise taxes | $ | $ | ||||||
| Net income allocable to Class A common stock subject to possible redemption | $ | $ | ||||||
| Denominator: Weighted Average Class A common stock subject to possible redemption | ||||||||
| Basic and diluted weighted average shares outstanding | ||||||||
| Basic and diluted net income per share | $ | $ | ||||||
| Non-Redeemable Common Stock | ||||||||
| Numerator: Earnings allocable to non-redeemable common stock | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Less: Net income allocable to Class A common stock subject to possible redemption | ||||||||
| Non-redeemable net income (loss) | $ | $ | ( | ) | ||||
| Denominator: Weighted Average Non-redeemable common stock | ||||||||
| Basic and diluted weighted average shares outstanding, Non-redeemable common stock | ||||||||
| Basic and diluted net income (loss) per share, Non-redeemable common stock | $ | $ | ( | ) | ||||
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times,
may exceed the Federal Depository Insurance Coverage of $
Fair Value of Financial Instruments
The Company follows the guidance in ASC Topic 820, “Fair Value Measurement”, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
11
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
See Note 8 for additional information on assets and liabilities measured at fair value.
Recent Accounting Standards
In August 2020, the FASB issued ASU No. 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s financial statements.
NOTE 3 — INITIAL PUBLIC OFFERING
Pursuant to the Initial Public
Offering, the Company sold
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The Warrants are exercisable commencing on the later of 30 days after the Company’s completion of a Business Combination and 12 months from the closing of the Initial Public Offering and expire five years from the completion of a Business Combination. Only whole Warrants are exercisable. No fractional Warrants will be issued upon separation of the Units and only whole Warrants will trade.
Redemption of Warrants
When the Price Per Share of Class A Common Stock Equals or Exceeds $18.00.
The Company will not redeem the Warrants as described above unless a registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon a cashless exercise of the Warrants is then effective and a current prospectus relating to those shares of Class A common stock is available throughout the 30-day redemption period, except if the Warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.
Redemption of Warrants
When the Price Per Share of Class A Common Stock Equals or Exceeds $10.00.
The “fair market value”
of Class A common stock will mean the volume-weighted average price of the Class A common stock for the ten trading days immediately
following the date on which the notice of redemption is sent to the holders of Warrants. In no event will the Warrants be exercisable
in connection with this redemption feature for more than
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In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete a Business Combination and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such Warrants. Accordingly, the Warrants may expire worthless.
NOTE 4 — PRIVATE PLACEMENT
Simultaneously with the closing
of the Initial Public Offering, the Company’s Sponsors and independent directors purchased
NOTE 5 — RELATED PARTY TRANSACTIONS
Administrative Services Agreement
The Company presently occupies
office space provided by two affiliates of the Company’s executive officers. Such affiliates have agreed that, until the Company
consummates a Business Combination, they will make such office space, as well as certain office and secretarial services, available to
the Company, as may be required by the Company from time to time. The Company agreed, commencing on December 1, 2020, to pay such affiliates
an aggregate of up to $
Advances from Related Party
As of June 30, 2021, the Sponsor
paid for certain operating costs on behalf of the Company amounting to $
Promissory Notes — Related Party
The Company issued an aggregate
of $
In February 2021, the Sponsors
and the independent directors collectively committed to provide the Company an aggregate of $
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NOTE 6 — COMMITMENTS AND CONTINGENCIES
Registration Rights
Pursuant to a registration rights agreement entered into on December 1, 2020, the holders of the shares of Class B common stock, Private Placement Warrants and any warrants that may be issued upon conversion of working capital loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of working capital loans) will be entitled to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of an initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Contingent Fee Arrangement
The Company has entered into
a fee arrangement with a service provider pursuant to which certain fees incurred by the Company will be deferred and become payable only
if the Company consummates a Business Combination. If a Business Combination does not occur, the Company will not be required to pay these
contingent fees. As of June 30, 2021, the amount of these contingent fees was approximately $
Related Party Loans
In order to fund working
capital deficiencies or finance transaction costs in connection with an intended initial Business Combination, the Company’s Sponsors,
officers and directors or their respective affiliates may, but are not obligated to, loan the Company funds as may be required on a non-interest
bearing basis. If the Company completes its initial Business Combination, the Company would repay such loaned amounts. In the event that
the initial Business Combination does not close, the Company may use a portion of the working capital held outside the Trust Account to
repay such loaned amounts but no proceeds from the Trust Account would be used for such repayment. Up to $
Underwriting Agreement
The underwriters are entitled
to a deferred underwriting discount of
Consulting Agreements
In December 2020, subsequent
to the consummation of the Initial Public Offering, the Company entered into three 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
shareholder approval for an initial Business Combination. We entered into an additional consulting agreement for similar services in March
2021. These agreements provide for an aggregate monthly fee of $
Subscription Agreements
On March 2, 2021,
Capitol entered into subscription agreements (the “Subscription Agreements”) with certain investors (collectively, the
“PIPE Investors”), pursuant to, and on the terms and subject to the conditions of which, the PIPE Investors have
collectively subscribed for
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NOTE 7— PERMANENT EQUITY AND TEMPORARY EQUITY
Preferred Stock
The
Company is authorized to issue
Common Stock
The
Company is authorized to issue
In
connection with the organization of the Company, in May 2017, a total of
The holders of the founder shares have agreed that the founder shares will not be transferred, assigned or sold until one year after the date of the consummation of an initial Business Combination or earlier if, subsequent to an initial Business Combination, (i) the last sales price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (ii) the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company’s stockholders having the right to exchange their common stock for cash, securities or other property.
The
Class B common stock will automatically convert into Class A common stock on the first business day following the consummation
of the Company’s initial Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares
of Class A common stock, or equity-linked securities convertible or exercisable for shares of Class A common stock, are issued
or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of an initial Business Combination,
the ratio at which the Class B common stock will convert into Class A common stock will be adjusted so that the number of shares
of Class A common stock issuable upon conversion of such Class B common stock will equal, in the aggregate,
As
of June 30, 2021, and December 31, 2020, there were
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The
Company determined the common stock subject to redemption to be equal to the redemption value of approximately $
NOTE 8 — FAIR VALUE MEASUREMENTS
The following tables present information about the Company’s assets that are measured at fair value on a recurring basis at June 30, 2021 and at December 31, 2020, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Level | June 30, 2021 | |||||
| Assets: | |||||||
| Marketable securities held in Trust Account(1) | 1 | $ | |||||
| Liabilities: | |||||||
| Private Placement Warrants(2) | 2 | ||||||
| Public Warrants(2) | 1 | ||||||
| Description | Level | December 31, 2020 | |||||
| Assets: | |||||||
| Marketable securities held in Trust Account(1) | 1 | $ | |||||
| Liabilities: | |||||||
| Private Placement Warrants(2) | 3 | ||||||
| Public Warrants(2) | 3 | ||||||
| (1) |
| (2) |
Warrants
The Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statement of operations.
Subsequent Measurement
The Warrants are measured at fair value on a recurring basis and were initially measured at fair value as Level 3 financial liabilities using a Monte Carlo simulation model through December 31, 2020. The subsequent measurement of the Public Warrants as of June 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market under the ticker CAP.WS. As the transfer of Private Placement Warrants to anyone outside of a small group of individuals who are permitted transferees would result in the Private Placement Warrants having substantially the same terms as the Public Warrants, the Company determined that the fair value of each Private Placement Warrant is equivalent to that of each Public Warrant, with an insignificant adjustment for short-term marketability restrictions. As such, the Private Placement Warrants are classified as Level 2.
As
of June 30, 2021, and December 31, 2020, the aggregate fair values of the Private Placement Warrants were $
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The following table presents the changes in the fair value of warrant liabilities:
| Private Placement | Public | Warrant Liabilities | ||||||||||
| Fair value as of December 31, 2020 | $ | $ | $ | |||||||||
| Change in valuation inputs or other assumptions(1)(2) | ( | ) | ( | ) | ( | ) | ||||||
| Fair value as of June 30, 2021 | $ | $ | $ | |||||||||
| (1) | |
| (2) |
NOTE 9 — SUBSEQUENT EVENTS
On
July 15, 2021, the Company issued an aggregate of $
In
July 2021, the Sponsors committed to provide the Company an additional $
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Based upon this review, other than as described in these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.
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Item 2. Management’s Discussion and Analysis
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Capitol Investment Corp. V. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Forward-Looking Statements
All statements other than statements of historical fact included in this Form 10-Q including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-Q, words such “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions, as they relate to us or our management, identify forward looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. References to “we”, “us”, “our” or the “Company” are to Capitol Investment Corp. V, except where the context requires otherwise. Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. No assurance can be given that results in any forward-looking statement will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. The cautionary statements made in this Quarterly Report on Form 10-Q should be read as being applicable to all forward-looking statements whenever they appear herein. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act. Actual results could differ materially from those contemplated by the forward looking statements as a result of certain factors detailed in our filings with the Securities and Exchange Commission. All subsequent written or oral forward looking statements attributable to us or persons acting on our behalf are qualified in their entirety by this paragraph.
Overview
We are a blank check company formed for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses or entities. We are not limited to any particular industry or geographic location in selecting a target business with which to engage in a business combination.
We consummated the Offering on December 4, 2020. All activity through December 4, 2020 relates to our formation, the Offering (as defined below) and simultaneous private placement of private placement warrants, as described below, our search for a target business with which to complete an initial business combination and activities in connection with the proposed business combination with Doma Holdings, Inc. (“Doma”).
Recent Developments
Doma
On March 2, 2021, we entered into a definitive merger agreement (the “Merger Agreement”) with Capitol V Merger Sub, Inc., a Delaware corporation and our direct wholly owned subsidiary (“Merger Sub”), and Doma. The Merger Agreement, among other things, provides that:
| ● | we will amend and restate our amended and restated certificate of incorporation to, among other things, change the name of the Company to Doma Holdings, Inc.; |
| ● | we will replace our bylaws by adopting amended and restated bylaws for the post-combination company; |
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| ● | we have entered into various subscription agreements with certain third-party investors (the “PIPE Investors”) pursuant to which the PIPE Investors have committed to make private investments in public equity in the form of Class A common stock in the aggregate amount of $300 million, for which the PIPE Investors will receive an aggregate of 30 million shares of common stock in the combined company (“New Doma Common Stock”); and |
| ● | (i) without any action on the part of any holder of our warrant, each warrant that is issued and outstanding immediately prior to the closing of the initial business combination with Doma will become a warrant of the post-combination company, exercisable for New Doma Common Stock in accordance with its terms; and (ii) without any action on the part of the holders of our Class B common stock, each share of Class B common stock that is issued and outstanding immediately prior to the closing of the initial business combination with Doma will automatically convert into one share of New Doma Common Stock. |
The business combination with Doma will be consummated subject to certain conditions as further described in the Merger Agreement. In connection with the proposed business combination, the special meeting of the stockholders of the Company will be held at 10:00 a.m., New York City time, on July 27, 2021, in virtual format.
Doma is a leading force for disruptive change in the residential real estate industry. Doma uses machine intelligence to replace large portions of the antiquated residential real estate closing process with instant technology solutions. Doma’s machine intelligence algorithms are being trained and optimized on 30 years of historical anonymized closing transaction data, allowing Doma to make underwriting decisions in less than a minute and significantly reduce the time, effort and cost of the entire process. It is expected that Mark D. Ein will join the combined company’s board of directors upon completion of the transaction.
Additional information regarding Doma and the potential business combination with Doma is available in the definitive proxy statement/prospectus filed by the Company with the SEC on July 2, 2021.
Promissory Notes
On March 12, 2021, April 20, 2021 and July 15, 2021, the directors of the Company agreed to loan the Company an aggregate of $400,000, $300,000 and $370,000, respectively, for an aggregate of $1,070,000. The promissory notes are provided to cover certain expenses related to the business combination pursuant to a promissory note (the “Note”). Each Promissory Note is non-interest bearing and is payable at the consummation by the Company of a business combination. Upon consummation of a business combination, the lenders will have the option to convert up to $2,000,000 of the principal balance of such Promissory Notes into warrants at a price of $1.50 per warrant. The terms of any such warrants would be identical to the warrants issued by the Company in the Offering except that such warrants will be non-redeemable by the Company and will be exercisable for cash or on a “cashless” basis, in each case, so long as such warrants are held by the initial holder or such holder’s permitted transferees. If a business combination is not consummated, all outstanding amounts under any Promissory Notes issued to the lenders will be forgiven except to the extent that the Company has funds available to it outside of its trust account established in connection with the Offering to repay such amounts.
Results of Operations
We will not generate any operating revenues until the closing and completion of our business combination. We are incurring 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 June 30, 2021, we had net loss of $330,831, which consists of operating costs of $858,357, offset by change in fair value of warrant liabilities of $520,000, interest income on marketable securities held in the trust account of $5,686 and unrealized gain on marketable securities held in the trust account of $1,840.
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For the six months ended June 30, 2021, we had net income of $5,854,968, which consists of interest income on marketable securities held in the trust account of $53,045, gain from the change in fair value of warrant liabilities of $7,800,000, offset by operating costs of $1,998,077.
For the three months ended June 30, 2020, we had a net loss of $277, which consists of operating costs.
For the six months ended June 30, 2020, we had a net loss of $297, which consists of operating costs.
Liquidity and Capital Resources
Until the consummation of the Offering, our only source of liquidity was an initial purchase of ordinary shares by Capitol Acquisition Management V LLC and Capitol Acquisition Founder V LLC (collectively, the “Sponsors”), and loans and advances from related parties.
On December 4, 2020, we consummated our initial public offering (the “Offering”) of 34,500,000 Units. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $345,000,000. Simultaneously with the consummation of the Offering on December 4, 2020, we completed a private placement of 5,833,333 private placement warrants at a purchase price of $1.50 per private placement warrant, to our Sponsors and our independent directors, generating gross proceeds to us of $8,750,000. Approximately $338.1 million of the net proceeds from the Offering and $6.9 million of the proceeds from the sale of the private placement warrants have been deposited in a trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee, established for the benefit of our public stockholders. After paying expenses associated with the Offering and the private placement, we had approximately $1.0 million of cash held outside the trust account for working capital.
Except for the withdrawal from the trust account of interest earned on the funds held therein necessary to pay taxes, if any, the funds in the trust account will not be released to us until the earlier of the completion of a business combination or our liquidation upon our failure to consummate a business combination within the required time period (which may not occur until December 4, 2022).
For the six months ended June 30, 2021, cash used in operating activities was $1,385,848. Net income of $5,854,968 was affected by interest earned on marketable securities held in the trust account of $53,045, a gain from the change in fair value of warrant liabilities of $7,800,000 and changes in operating assets and liabilities, which provided of $612,229 of cash.
For the six months ended June 30, 2020, cash used in operating activities was $2,232. Net loss of $297 was offset by changes in operating assets and liabilities, which provided $1,935 of cash from operating activities.
As of June 30, 2021, we had cash and marketable securities held in the trust account of $345,013,964. We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account not previously released to us (less taxes payable and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay our taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2021, we had cash of $0 outside of the trust account. On July 15, 2021, our directors provided a $370,000 loan to us, to be held outside the trust account. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses and structure, negotiate and complete a business combination.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsors, officers and directors or their respective affiliates may, but are not obligated to, loan us funds as may be required on a non-interest basis.
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In February 2021, the Sponsors and the independent directors collectively committed to provide us an aggregate of $970,000 in loans. In May 2021, the Sponsors and the independent directors collectively committed to provide an additional $756,000 in loans. In July 2021, the Sponsors provided a commitment to provide an additional 627,000 in loans. As of June 30, 2021, the Company had an outstanding balance of $700,000 under such promissory notes (none of which had been converted to warrants). On July 15, 2021, we issued an additional $370,000 under such promissory notes. These loans, as well as any future loans that may be made by our officers and directors (or their affiliates), will be evidenced by notes and if we complete our initial business combination, we would repay such loaned amounts. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $2,000,000 of such loans may be convertible into warrants of the post-business combination entity at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our sponsors, officers, directors or their respective affiliates as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.
Based on the loan commitment provided by the Sponsors and the independent directors, we believe we will have sufficient cash to meet the Company’s working capital needs through the earlier of consummation of a Business Combination or July 15, 2022.
We may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account or because we become obligated to redeem a significant number of our public shares upon completion of the business combination, in which case we may issue additional securities or incur debt in connection with such business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.
Off-balance sheet financing arrangements
We did not have any off-balance sheet arrangements as of June 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay two affiliates of our executive officers an aggregate monthly fee of $20,000 for office space and secretarial support provided to the Company. We began incurring these fees on December 4, 2020 and will continue to incur these fees monthly until the earlier of the completion of a business combination and the Company’s liquidation.
The underwriters are entitled to a deferred underwriting discount of 3.5% of the gross proceeds of the Offering or an aggregate of $12,075,000, which were placed in the trust account.
We entered into a fee arrangement with a service provider pursuant to which certain fees incurred by us will be deferred and become payable only if we consummate a business combination. If a business combination does not occur, we will not be required to pay these contingent fees. As of June 30, 2021, the amount of these contingent fees was approximately $2,963,000. There can be no assurances that we will complete a business combination.
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In December 2020, subsequent to the consummation of our Offering, we entered into three consulting arrangements for services to help identify and introduce us to potential targets and provide assistance with due diligence, deal structuring, documentation and obtaining shareholder approval for an initial business combination. We entered into an additional consulting agreement for similar services in March 2021. These agreements provide for an aggregate monthly fee of $74,167 and aggregate success fees of $1,380,000 payable upon the consummation of an initial business combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures 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, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
We account for the warrants issued in connection with our initial public offering in accordance with Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging—Contracts in Entity’s Own Equity” (“ASC 815”), under which the warrants do not meet the criteria for equity classification and must be recorded as liabilities. As the warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants are measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statement of operations in the period of change.
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our balance sheets.
Net Loss per Common Share
We apply the two-class method in calculating earnings per share. Net loss per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, by the weighted average number of shares of Class A redeemable common stock outstanding for the periods. Net loss per common share, basic and diluted for and Class B non-redeemable common stock is calculated by dividing net loss less income attributable to Class A redeemable common stock, by the weighted average number of shares of Class B non-redeemable common stock outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The net proceeds of the Offering and the sale of the private placement warrants held in the trust account may be invested only in U.S. government treasury obligations with a maturity of 180 days or less or in 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. Due to the short-term nature of these investments, we believe there is no associated material exposure to interest rate risk.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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.
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 quarter ended June 30, 2021, 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 not effective, due solely to the material weakness in our internal control over financial reporting as described in our Annual Report on Form 10-K/A for the year ended December 31, 2020, as filed on May 11, 2021. In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the most recently completed 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Our Sponsors were issued an aggregate of 8,625,000 founder shares, or Class B common stock, (after taking into account (i) a stock dividend of approximately 0.17 shares of Class B common stock for each share of Class B common stock effectuated in October 2017, (ii) a stock dividend of one share of Class B common stock for each outstanding share of Class B common stock effectuated in May 2019 and (iii) an approximately 0.8571-for-1 reverse stock split with respect to our Class B common stock effectuated in November 2020) for which we received a capital contribution of an aggregate of $25,000. Our Sponsors subsequently transferred a portion of these founders’ shares to certain individuals, including our independent directors, for the same per share purchase price originally paid for such shares.
On December 4, 2020, we consummated the Offering of 34,500,000 Units. Each Unit consists of one share of our Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant, with each whole Warrant entitling the holder thereof to purchase one whole share of Class A common stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to us of $345,000,000.
Simultaneously with the consummation of the Offering on December 4, 2020, we completed the Private Placement of 5,833,333 Private Placement Warrants at a purchase price of $1.50 per Private Placement Warrant, to our Sponsors and our independent directors, generating gross proceeds to us of $8,750,000.
Approximately $338.1 million of the net proceeds from the Offering and $6.9 million of the proceeds from the sale of the Private Placement Warrants have been deposited in a trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee, established for the benefit of our public stockholders. After paying expenses associated with the Offering and the Private Placement, we had approximately $1.0 million of cash held outside of the trust account for working capital.
Except for the withdrawal from the trust account of interest earned on the funds held therein necessary to pay our taxes, if any, the funds in the trust account will not be released to us until the earlier of the completion of a business combination or our liquidation upon our failure to consummate a business combination within the required time period (which may not occur until December 4, 2022).
We incurred a total of $6,900,000 in underwriting discounts and commissions at the closing of the Offering (up to an additional $12,075,000 of deferred underwriting expenses may be paid upon the completion of a business combination) and $494,085 for other costs and expenses related to our formation, transaction costs, and the Offering.
We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account not previously released to us (less taxes payable and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay our taxes, if any. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a business combination.
For a description of the use of the proceeds generated in our Offering, see Part I, Item 2 of this Form 10-Q.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
| Exhibit No. | Description | |
| 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. | |
| 101.INS | XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
26
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 INVESTMENT CORP. V | ||
| Date: July 27, 2021 | By: | /s/ Mark D. Ein |
| Name: | Mark D. Ein | |
| Title: | Chief Executive Officer (Principal Executive Officer) | |
| By: | /s/ L. Dyson Dryden | |
| Name: | L. Dyson Dryden | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |
27
Exhibit 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934
I, Mark D. Ein, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Capitol Investment Corp. V;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: July 27, 2021 | /s/ Mark D. Ein |
| Mark D. Ein | |
| Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934
I, L. Dyson Dryden, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Capitol Investment Corp. V;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation, and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: July 27, 2021 | /s/ L. Dyson Dryden |
| L. Dyson Dryden | |
| Chief Financial Officer |
Exhibit 32
Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. § 1350
Solely for the purposes of complying with 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, we, the undersigned Chief Executive Officer and Chief Financial Officer of Capitol Investment Corp. V (the “Company”), respectively, hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2021 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| /s/ Mark D. Ein | |
| Mark D. Ein | |
| Chief Executive Officer | |
| (Principal executive officer) | |
| /s/ L. Dyson Dryden | |
| L. Dyson Dryden | |
| Chief Financial Officer | |
| (Principal financial and accounting officer) | |
| Date: July 27, 2021 |