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.
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