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EXCEL - IDEA: XBRL DOCUMENT - Hicks Acquisition CO II, Inc. | Financial_Report.xls |
EX-31.2 - EX-31.2 - Hicks Acquisition CO II, Inc. | c23287exv31w2.htm |
EX-32.1 - EX-32.1 - Hicks Acquisition CO II, Inc. | c23287exv32w1.htm |
EX-31.1 - EX-31.1 - Hicks Acquisition CO II, Inc. | c23287exv31w1.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2011
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number: 000-54151
HICKS ACQUISITION COMPANY II, INC.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
80-0611167 (I.R.S. Employer Identification No.) |
100 Crescent Court, Suite 1200, Dallas, Texas 75201
(214) 615-2300
(Address, including zip code, and telephone number, including area code,
of registrants principal executive offices)
(214) 615-2300
(Address, including zip code, and telephone number, including area code,
of registrants principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o
As of November 3, 2011, the registrant had 17,142,857 shares of its common stock, par value
$0.0001 per share, outstanding.
HICKS ACQUISITION COMPANY II, INC.
TABLE OF CONTENTS
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EX-32.1 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
EX-101 DEFINITION LINKBASE DOCUMENT |
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PART I FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
HICKS ACQUISITION COMPANY II, INC.
(A Development Stage Company)
(A Development Stage Company)
CONDENSED BALANCE SHEETS
September 30, | ||||||||
2011 | December 31, | |||||||
(unaudited) | 2010 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,204,808 | $ | 1,547,684 | ||||
Cash equivalents held in trust |
149,374,902 | 149,303,023 | ||||||
Other assets |
65,429 | 170,255 | ||||||
Total assets |
$ | 150,645,139 | $ | 151,020,962 | ||||
Liabilities and Stockholders Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 407,546 | $ | 291,243 | ||||
Accounts payable and accrued expenses related party |
2,592 | 5,712 | ||||||
Deferred underwriters commission |
4,500,000 | 4,500,000 | ||||||
Total current liabilities |
4,910,138 | 4,796,955 | ||||||
Common stock, subject to possible redemption (at fair
value): 14,302,337 shares at September 30, 2011 and
14,544,181 shares at December 31, 2010 |
140,734,996 | 141,223,998 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $0.0001 par value. Authorized
1,000,000 shares; none issued or outstanding at
September 30, 2011 or December 31, 2010 |
| | ||||||
Common stock, $0.0001 par value. Authorized
500,000,000 shares, 17,142,857 shares issued and
outstanding (less 14,302,337 shares subject to
possible redemption) at September 30, 2011 and
17,464,286 shares issued and outstanding (less
14,544,181 shares subject to possible redemption) at
December 31, 2010 |
284 | 292 | ||||||
Additional paid-in capital |
5,769,129 | 5,280,120 | ||||||
Deficit accumulated during the development stage |
(769,408 | ) | (280,403 | ) | ||||
Total stockholders equity |
5,000,005 | 5,000,009 | ||||||
Total liabilities and stockholders equity |
$ | 150,645,139 | $ | 151,020,962 | ||||
See accompanying notes to condensed financial statements.
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HICKS ACQUISITION COMPANY II, INC.
(A Development Stage Company)
(A Development Stage Company)
Condensed Statements of Operations
(unaudited)
Nine Months | June 15, 2010 | June 15, 2010 | ||||||||||||||||||
Three Months Ended | Ended | (inception) to | (inception) to | |||||||||||||||||
September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
2011 | 2010 | 2011 | 2010 | 2011 | ||||||||||||||||
Formation and operating costs |
$ | | $ | | $ | | $ | 5,000 | $ | 8,852 | ||||||||||
Professional fees |
48,428 | 26,280 | 205,879 | 84,360 | 395,581 | |||||||||||||||
Other general and administrative
expenses |
95,869 | 2,613 | 284,472 | 2,677 | 375,473 | |||||||||||||||
Loss from operations before
other income (expense) and
income tax expense |
(144,297 | ) | (28,893 | ) | (490,351 | ) | (92,037 | ) | (779,906 | ) | ||||||||||
Other income (expense): |
||||||||||||||||||||
Interest income |
38,958 | 34 | 137,042 | 61 | 190,918 | |||||||||||||||
State taxes, other than income taxes |
(45,000 | ) | | (135,696 | ) | | (180,420 | ) | ||||||||||||
Total other income (expense) |
(6,042 | ) | 34 | 1,346 | 61 | 10,498 | ||||||||||||||
Loss before income tax expense |
(150,339 | ) | (28,859 | ) | (489,005 | ) | (91,976 | ) | (769,408 | ) | ||||||||||
Income tax expense |
| | | | | |||||||||||||||
Net loss |
$ | (150,339 | ) | $ | (28,859 | ) | $ | (489,005 | ) | $ | (91,976 | ) | $ | (769,408 | ) | |||||
Loss per common share: |
||||||||||||||||||||
Basic and diluted |
$ | (0.01 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.06 | ) | |||||
Average common shares outstanding: |
||||||||||||||||||||
Basic and diluted |
17,142,857 | 3,285,714 | 17,219,388 | 3,285,714 | 13,685,442 | |||||||||||||||
See accompanying notes to condensed financial statements.
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HICKS ACQUISITION COMPANY II, INC.
(A Development Stage Company)
(A Development Stage Company)
Condensed Statement of Stockholders Equity
Deficit | ||||||||||||||||||||
accumulated | ||||||||||||||||||||
Additional | during the | |||||||||||||||||||
Common Stock | paid-in | development | Stockholders | |||||||||||||||||
Shares | Amount | capital | stage | equity | ||||||||||||||||
Initial capital from founding stockholders
for cash |
3,285,714 | $ | 329 | $ | 24,671 | $ | | $ | 25,000 | |||||||||||
Surrender of founding stockholder shares |
(821,428 | ) | (82 | ) | 82 | | | |||||||||||||
Sale of 15,000,000 units, net of
underwriters commissions and offering costs |
15,000,000 | 1,500 | 141,477,910 | | 141,479,410 | |||||||||||||||
Proceeds from issuance of sponsor warrants |
| | 5,000,000 | | 5,000,000 | |||||||||||||||
Common stock subject to possible
redemption of 14,544,181 shares (at fair
market value) |
| (1,455 | ) | (141,222,543 | ) | | (141,223,998 | ) | ||||||||||||
Net loss |
| | | (280,403 | ) | (280,403 | ) | |||||||||||||
Balance at December 31, 2010 |
17,464,286 | 292 | 5,280,120 | (280,403 | ) | 5,000,009 | ||||||||||||||
Surrender of founding stockholder shares |
(321,429 | ) | (32 | ) | 32 | | | |||||||||||||
Net loss |
| | | (489,005 | ) | (489,005 | ) | |||||||||||||
Change in shares subject to possible
redemption to 14,302,337 shares (at fair
market value) |
| 24 | 488,977 | | 489,001 | |||||||||||||||
Balance at September 30, 2011 (unaudited) |
17,142,857 | $ | 284 | $ | 5,769,129 | $ | (769,408 | ) | $ | 5,000,005 | ||||||||||
See accompanying notes to condensed financial statements.
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HICKS ACQUISITION COMPANY II, INC.
(A Development Stage Company)
(A Development Stage Company)
Condensed Statements of Cash Flows
(unaudited)
June 15, 2010 | June 15, 2010 | |||||||||||
Nine Months Ended | (inception) to | (inception) to | ||||||||||
September 30, 2011 | September 30, 2010 | September 30, 2011 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (489,005 | ) | $ | (91,976 | ) | $ | (769,408 | ) | |||
Change in operating assets and liabilities: |
||||||||||||
Accounts payable and accrued expenses |
113,183 | 22,000 | 207,145 | |||||||||
Other current assets |
104,825 | (18,379 | ) | (65,431 | ) | |||||||
Net cash used in operating activities |
(270,997 | ) | (88,355 | ) | (627,694 | ) | ||||||
Cash flows from investing activities: |
||||||||||||
Purchase of cash equivalents held in trust |
| | (149,250,000 | ) | ||||||||
Proceeds from sale of cash equivalents held in trust |
63,132 | | 63,132 | |||||||||
Interest earned on cash equivalents held in trust |
(135,011 | ) | | (188,033 | ) | |||||||
Net cash used in investing activities |
(71,879 | ) | | (149,374,901 | ) | |||||||
Cash flows from financing activities: |
||||||||||||
Proceeds from note payable related party |
| 225,000 | 225,000 | |||||||||
Payment on note payable related party |
| | (225,000 | ) | ||||||||
Proceeds from the sale of common stock to founders |
| 25,000 | 25,000 | |||||||||
Proceeds from the sale of sponsor warrants |
| | 5,000,000 | |||||||||
Proceeds from initial public offering, net of
underwriters commission and offering costs paid |
| (89,199 | ) | 146,182,403 | ||||||||
Net cash provided by financing activities |
| 160,801 | 151,207,403 | |||||||||
(Decrease)/Increase in cash and cash equivalents |
(342,876 | ) | 72,446 | 1,204,808 | ||||||||
Cash and cash equivalents at beginning of period |
1,547,684 | | | |||||||||
Cash and cash equivalents at end of period |
$ | 1,204,808 | $ | 72,446 | $ | 1,204,808 | ||||||
Supplemental disclosure of noncash activities: |
||||||||||||
Accrual of deferred underwriters commission |
$ | | $ | | $ | 4,500,000 | ||||||
Cash paid during the period for: |
||||||||||||
Interest |
$ | | $ | | $ | | ||||||
Income taxes |
$ | | $ | | $ | |
See accompanying notes to condensed financial statements.
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HICKS ACQUISITION COMPANY II, INC.
(a Development Stage Company)
(a Development Stage Company)
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
(Unaudited)
Note 1 Interim Financial Information
These unaudited condensed financial statements as of September 30, 2011, the results of operations
for the three months ended September 30, 2011 and 2010, the nine months ended September 30, 2011,
the period from June 15, 2010 (inception) to September 30, 2010 and the period from June 15, 2010
(inception) through September 30, 2011, and cash flows for the nine months ended September 30,
2011, the period from June 15, 2010 (inception) to September 30, 2010 and the period from June 15,
2010 (inception) through September 30, 2011, have been prepared in accordance with U.S. Generally
Accepted Accounting Principles (GAAP) for interim financial information and with the instructions
to Form 10-Q. Accordingly, they do not include all of the information and notes required by GAAP
for complete financial statements of Hicks Acquisition Company II, Inc. (the Company). In the
opinion of management, all adjustments necessary for a fair presentation have been included and are
of a normal recurring nature. Interim results are not necessarily indicative of the results that
may be expected for the year.
These unaudited condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission (the SEC) on March 11, 2011.
Note 2 Organization and Nature of Business Operations
The Company is a blank check company formed in Delaware on June 15, 2010 for the purpose of
effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses.
The Companys sponsor is HH-HACII, L.P. (the Sponsor). Through September 30, 2011, the Companys
efforts have been limited to activities relating to the organization of the Company, the Offering
(as defined below), identifying and evaluating prospective acquisition candidates and general
corporate matters. The Company has not generated any revenues, other than interest income earned
on the proceeds held in the trust account established in connection with the Offering. The Company
has selected December 31 as its fiscal year-end.
The registration statement for the Companys initial public offering (the Offering) was declared
effective October 8, 2010. The Company consummated the Offering on October 14, 2010 and received
proceeds of approximately $145.25 million, net of the underwriters commissions of $3.00 million
and offering costs and other expenses of $1.75 million. In the Offering, the Company sold to the
public 15,000,000 Units (as defined below in Note 4) at a price of $10.00 per Unit. Simultaneously
with the consummation of the Offering, the Company consummated the private sale of 6,666,667
warrants (Sponsor Warrants) to the Sponsor at a price of $0.75 per Sponsor Warrant, generating
gross proceeds, before expenses, of $5.00 million (the Private Placement). Net proceeds received
by the Company from the consummation of both the Offering and Private Placement totaled
approximately $150.25 million, net of underwriters commissions and offering costs. $149.25 million
of the net proceeds were placed in a trust account at JPMorgan Chase Bank, N.A. with Continental
Stock Transfer & Trust Company acting as trustee. The remaining $1.00 million of net proceeds were
held outside of the trust and were placed in a money market account with JPMorgan Chase Bank, N.A.
Except for a portion of the interest income earned on the trust account balance that may be
released to the Company to pay any income and franchise taxes and to fund the Companys working
capital requirements, and any amounts necessary to purchase up to 15% of the Companys shares of
common stock issued as part of the Units described in Note 4 (the Public Shares) if the Company
seeks stockholder approval for its initial business combination, none of the funds held in the
trust account will be released until the earlier of the completion of the Companys initial
business combination and the redemption of 100% of the Public Shares if the Company is unable to
consummate a
business combination by July 14, 2012 (subject to the requirements of law). The proceeds deposited
in the trust account could become subject to the claims of the Companys creditors, if any, which
could have priority over the claims of the holders of Public Shares (the Public Stockholders).
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The Companys management has broad discretion with respect to the specific application of the net
proceeds of the Offering, although substantially all of the net proceeds of the Offering are
intended to be generally applied toward effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with one or more
businesses. The Companys efforts in identifying prospective target businesses are not limited to a
particular industry, geographic region or minimum transaction value for purposes of consummating an
initial business combination. Instead, the Company is focusing on various industries and target
businesses that may provide significant opportunities for growth.
The Company will provide its stockholders with the opportunity to redeem their Public Shares for
cash equal to their pro rata share of the aggregate amount then on deposit in the trust account,
less franchise and income taxes payable, upon the consummation of the Companys initial business
combination, subject to the limitations described herein. There will be no redemption rights with
respect to outstanding warrants, which will expire worthless in the event the Company does not
consummate a business combination. Unlike many other blank check companies that hold stockholder
votes and conduct proxy solicitations in conjunction with their initial business combinations and
provide for related redemptions of public shares for cash upon consummation of such initial
business combinations even when a vote is not required by law, the Company intends to consummate
its initial business combination and conduct the redemptions without a stockholder vote pursuant to
Rule 13e-4 and Regulation 14E of the Securities Exchange Act of 1934, as amended (the Exchange
Act), which regulate issuer tender offers, and the Company will file tender offer documents with
the SEC. The tender offer documents will contain substantially the same financial and other
information about the Companys initial business combination and the redemption rights as is
required under Regulation 14A of the Exchange Act, which regulates the solicitation of proxies. In
the event the Company conducts redemptions pursuant to the tender offer rules, its offer to redeem
shares shall remain open for at least 20 business days, in accordance with Rule 14e-1(a) under the
Exchange Act. If, however, a stockholder vote is required by law, or the Company decides to hold a
stockholder vote for business or other legal reasons, the Company will, like other blank check
companies, conduct the redemptions pursuant to the proxy rules and not pursuant to the tender offer
rules. If accepting all properly submitted redemption requests would cause the net tangible assets
of the Company to be less than $5,000,001 or such greater amount necessary to satisfy a closing
condition for the relevant business combination, the Company would not proceed with such redemption
and the related business combination and may instead search for an alternate business combination.
If the Companys initial business combination is not completed, then Public Stockholders exercising
their redemption rights will not be entitled to receive redemption payments. If the Company holds a
vote to approve its initial business combination, a Public Stockholder, together with any affiliate
of such stockholder or any other person with whom such stockholder is acting in concert or as a
group (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its
shares with respect to more than an aggregate of 10% of the shares sold in the Offering.
If the Company seeks stockholder approval, the Company will consummate its initial business
combination only if a majority of the outstanding shares of common stock voted are voted in favor
of the business combination. In such case, the Initial Stockholders (as defined below in Note 6)
have agreed to vote their Founder Shares (as defined below in Note 6) in accordance with the
majority of the votes cast by the Public Stockholders and to vote any Public Shares purchased
during or after the Offering in favor of the Companys initial business combination. In addition,
the Initial Stockholders have agreed to waive their redemption rights with respect to their Founder
Shares and any Public Shares they may hold in connection with the consummation by the Company of a
business combination.
If the Company does not effect a business combination by July 14, 2012, the Company will:
| cease all operations except for the purpose of winding up; |
| as promptly as reasonably possible, redeem 100% of the Public Shares, at a per-share
price, payable in cash, equal to the aggregate amount then on deposit in the trust account,
including interest but net of franchise and income taxes payable and less up to $100,000 of
such net interest that may be released to the Company from the trust account to pay
dissolution expenses, divided by the number of then outstanding Public Shares, together
with the contingent right to receive, following the Companys dissolution, a pro rata share
of the balance of the Companys net assets that would otherwise be payable to holders of
the Companys common
stock under Delaware law, if any; and |
| as promptly as reasonably possible following such redemption, subject to the approval
of the Companys remaining stockholders and the Companys board of directors, dissolve and
liquidate; |
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subject in each case to the Companys obligations under Delaware law to provide for claims of
creditors and the requirements of other applicable law.
The Initial Stockholders have agreed to waive their redemption rights with respect to their Founder
Shares if the Company fails to consummate a business combination within the 21-month time period,
although the Initial Stockholders will be entitled to redemption with respect to any Public Shares
they hold if the Company fails to consummate a business combination within such time period. In the
event of a liquidation, it is likely that the per-share value of the residual assets remaining
available for distribution (including trust account assets) will be less than the initial public
offering price per share in the Offering.
Note 3 Summary of Significant Accounting Policies
(a) Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or
less to be cash equivalents. At times, cash and cash equivalents may be in excess of the Federal
Deposit Insurance Corporation insurance limit. The Company maintains its accounts with financial
institutions with high credit ratings.
(b) Cash Equivalents Held in Trust
Cash equivalents held in trust are with JPMorgan Chase Bank, N.A., and Continental Stock Transfer &
Trust Company serves as the trustee. The cash equivalents held in trust at September 30, 2011 and
December 31, 2010 are invested in the JPMorgan Liquid Assets Money Market Fund, which meets the
requirements of Rule 2a-7 under the Investment Company Act of 1940, as amended.
(c) Fair Value of Financial Instruments
Unless otherwise disclosed, the fair values of financial instruments, including cash and cash
equivalents and the cash equivalents held in trust, approximate their carrying amount due primarily
to their short-term nature.
Common Stock, Subject to Possible Redemption, is stated at fair market value at September 30, 2011
and December 31, 2010. The fair market value is different from the per Public Share amount held in
the trust account.
(d) Loss per Common Share
Loss per share is computed by dividing net loss applicable to common stockholders by the weighted
average number of common shares outstanding for the period. The weighted average common shares
issued and outstanding of 17,142,857 for the three months ended September 30, 2011 takes into
effect the 17,142,857 shares outstanding at the beginning of such three month period. The weighted
average common shares issued and outstanding of 3,285,714 for the three months ended September 30,
2010 takes into effect the 3,285,714 shares outstanding at the beginning of such three month
period. The weighted average common shares issued and outstanding of 17,219,388 for the
nine months ended September 30, 2011 takes into effect the 17,464,286 shares outstanding at the
beginning of the period and the surrender of 321,429 of such shares by the Initial Stockholders to
the Company for cancellation on March 7, 2011 in connection with the underwriters election to not
exercise their over-allotment option. The weighted average common shares issued and outstanding of
3,285,714 for the period from June 15, 2010 (inception) to September 30, 2010 takes into effect the
3,285,714 shares originally issued at inception. The weighted average common shares issued and
outstanding of 13,685,442 for the period from June 15, 2010 (inception) through September 30, 2011
takes into effect the 3,285,714 shares originally outstanding, the surrender of 821,428 of such
shares on October 8, 2010 by the Initial Stockholders due to the reduction in the size of the
Offering, the 15,000,000 shares sold in the Offering and outstanding since October 14, 2010 and the
surrender of 321,429 shares of common
stock by the Initial Stockholders to the Company for cancellation on March 7, 2011 in connection
with the underwriters election to not exercise their over-allotment option.
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The 21,666,667 warrants issued in the Offering and the Private Placement are contingently issuable
shares and are excluded from the calculation of diluted earnings per share because they are
anti-dilutive.
(e) 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 revenue and expenses during the reporting period. Actual results could differ from those
estimates.
(f) Income Taxes
Deferred income taxes are provided for the differences between the bases of assets and liabilities
for financial reporting and income tax purposes. A valuation allowance is established when
necessary to reduce deferred tax assets to the amount expected to be realized.
The Company evaluates the uncertainty in tax positions taken or expected to be taken in the course
of preparing the Companys financial statements to determine whether the tax positions are more
likely than not of being sustained by the applicable tax authority. Tax positions deemed not to
meet the more likely than not threshold would be recorded as a tax expense in the current period.
The Company has no uncertain tax positions at September 30, 2011.
(g) Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if
currently adopted, would have a material effect on the Companys financial statements.
Note 4 Initial Public Offering
On October 14, 2010, the Company sold to the public 15,000,000 units (Units) at a price of $10.00
per Unit. Each Unit consists of one share of the Companys common stock, par value $0.0001 per
share, and one warrant. Each warrant entitles the holder to purchase one share of the Companys
common stock at a price of $12.00 per share, subject to adjustment. The warrants will become
exercisable on the later of 30 days after the completion of the Companys initial business
combination or October 14, 2011, provided in each case that the Company has an effective
registration statement under the Securities Act of 1933, as amended, covering the shares of common
stock issuable upon exercise of the warrants and a current prospectus relating to them is
available, and will expire five years after the completion of the Companys initial business
combination, or earlier upon redemption or liquidation. Once the warrants become exercisable, the
Company may redeem the outstanding warrants, in whole and not in part, at a price of $0.01 per
warrant upon a minimum of 30 days prior written notice of redemption, only in the event that the
last sales price of the Companys common stock equals or exceeds $18.00 per share for any 20
trading days within the 30-trading day period ending on the third business day before the Company
sends the notice of redemption to the warrant holders.
The underwriters were granted a 45-day option to purchase up to an additional 2,250,000 Units to
cover over-allotment, if any. The option expired on November 22, 2010 and was not exercised.
Note 5 Related Party Transactions
(a) Note Payable Related Party
The Company issued an aggregate of $225,000 in an unsecured promissory note to Thomas O. Hicks, the
Companys founder and chairman of the board, on June 15, 2010. The note was non-interest bearing
and was paid in full on October 14, 2010.
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(b) Services Agreement
The Company has agreed to pay $10,000 a month for office space, administrative services and
secretarial support to Hicks Holdings Operating LLC, an affiliate of the Companys founder and
chairman of the board, Mr. Hicks. Services commenced on October 14, 2010 and will terminate upon
the earlier of the consummation by the Company of an initial business combination and the
liquidation of the Company.
(c) Sponsor Warrants
On October 14, 2010, the Sponsor purchased an aggregate of 6,666,667 warrants at price of $0.75 per
warrant (for a total purchase price of $5.00 million) from the Company in the Private Placement.
Mr. Hicks, the Companys founder and chairman of the board, is the sole member of HH-HACII GP, LLC,
which is the general partner of the Sponsor. In addition, all of the Companys executive officers
are limited partners of the Sponsor. The Sponsor will be permitted to transfer the Sponsor Warrants
held by it to the Companys officers, directors, and other persons or entities affiliated with the
Sponsor and in certain other limited circumstances, but the transferees receiving such securities
will be subject to the same agreements with respect to such securities as the Sponsor. Otherwise,
the Sponsor Warrants will not be transferable, assignable or salable by the Sponsor until 30 days
after the completion of the Companys initial business combination. The Sponsor Warrants will be
non-redeemable so long as they are held by the Sponsor or the Sponsors permitted transferees. The
Sponsor Warrants may be exercised for cash or on a cashless basis. Otherwise, the Sponsor Warrants
have terms and provisions that are identical to those of the warrants being sold as part of the
Units in the Offering.
(d) Accounts Payable and Accrued Expenses
Related party accounts payable and accrued expenses of $2,592 and $5,712 at September 30, 2011 and
December 31, 2010, respectively, relate primarily to travel costs.
Note 6 Founder Shares
On June 15, 2010, the Sponsor purchased 3,285,714 shares of common stock (Founder Shares) for an
aggregate purchase price of $25,000, or $0.0076 per share. On July 30, 2010, the Sponsor
transferred an aggregate of 32,856 Founder Shares to William A. Montgomery and William F. Quinn,
each of whom serve on the Companys board of directors. The Sponsor, together with Messrs.
Montgomery and Quinn, are referred to as the Initial Stockholders. On October 8, 2010, in
connection with the decrease in the size of the Offering on that date, the Initial Stockholders
returned to the Company, for no consideration, 821,428 Founder Shares for cancellation so that the
Initial Stockholders would collectively own 12.5% of the Companys issued and outstanding shares
after the Offering.
The Founder Shares are identical to the shares of common stock included in the Units sold in the
Offering except that:
| the Founder Shares are subject to certain transfer restrictions, as described in more
detail below; and |
| the Initial Stockholders have agreed to waive their redemption rights with respect to
their Founder Shares and Public Shares in connection with the consummation of the Companys
initial business combination and to waive their redemption rights with respect to their
Founder Shares if the Company fails to consummate its initial business combination within
21 months from the closing of the Offering, although they will be entitled to redemption
rights with respect to any Public Shares they hold if the Company fails to consummate its
initial business combination within such time period. |
If the Company submits its initial business combination to the Public Stockholders for a vote, the
Initial Stockholders have agreed to vote their Founder Shares in accordance with the majority of
the votes cast by the Public Stockholders and to vote any Public Shares purchased during or after
the Offering in favor of the Companys initial business combination.
With certain limited exceptions, the Founder Shares are not transferable, assignable or salable
(except to the Companys officers and directors and other persons or entities affiliated with the
Initial Stockholders, each of whom will be subject to the same transfer restrictions) until the
earlier of one year after the completion of the Companys initial business combination or earlier
if, subsequent to the Companys business combination, the last sales price of the Companys common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends,
reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day
period commencing at least 150 days after the Companys initial business combination and the date
on which the Company consummates a subsequent liquidation, merger, stock exchange or other similar
transaction which results in all of the Companys stockholders having the right to exchange their
shares of common stock for cash, securities or other property.
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Simultaneously with the closing of the Offering, the Initial Stockholders agreed to forfeit up to
321,429 Founder Shares to the extent that the over-allotment option was not exercised in full by
the underwriters, as described in Note 4. The over-allotment option was not exercised and the
shares were forfeited on March 7, 2011. In addition, a portion of the Founder Shares in an amount
equal to 2.5% of the Companys issued and outstanding shares immediately after the Offering will be
subject to forfeiture by the Initial Stockholders in the event the last sales price of the
Companys stock does not equal or exceed $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any
30-trading day period within 24 months following the closing of the Companys initial business
combination.
Note 7 Stockholders Equity
(a) Preferred Stock
The Company is authorized to issue up to 1,000,000 shares of preferred stock, par value $0.0001 per
share, with such designations, voting and other rights and preferences as may be determined from
time to time by the Companys board of directors. No preferred shares were issued or outstanding at
September 30, 2011 and December 31, 2010.
(b) Common Stock
The authorized common stock of the Company includes up to 500,000,000 shares. Holders of shares of
common stock are entitled to one vote for each share of common stock. In addition, holders of
shares of common stock are entitled to receive dividends when, as and if declared by the Companys
board of directors. The Company had 17,142,857 shares issued and outstanding at September 30, 2011
and 17,464,286 shares issued and outstanding at December 31, 2010.
ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
References to the Company, us or we refer to Hicks Acquisition Company II, Inc. The following
discussion and analysis of the Companys financial condition and results of operations should be
read in conjunction with the condensed financial statements and the notes thereto contained
elsewhere in this report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this report, including, without
limitation, statements regarding our financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements. When used in this
report, words such as anticipate, believe, estimate, expect, intend and similar
expressions, as they relate to us or our management, identify forward-looking statements. Such
forward-looking statements are based on the beliefs of management, as well as assumptions made by,
and information currently available to, our management. 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 (the SEC). 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.
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Overview
We are a blank check company formed on June 15, 2010 for the purpose of effecting a merger, capital
stock exchange, asset acquisition, stock purchase, reorganization or similar business combination
with one or more businesses. We are not limited to a particular industry, geographic region or
minimum transaction value for purposes of consummating an initial business combination, except that
we will not effect a business combination with another blank check company or a similar type of
company with nominal operations or with an entity that is affiliated with HH-HACII, L.P. (the
Sponsor) and engaged in the business of owning or operating a professional sports team as its
principal business.
Results of Operations
Through September 30, 2011, our efforts have been limited to activities relating to the
organization of the Company, our initial public offering, identifying and evaluating prospective
acquisition candidates and general corporate matters. We have not generated any revenues, other
than interest income earned on the proceeds held in the trust account established in connection
with our initial public offering. As of September 30, 2011, approximately $149.37 million was held
in the trust account (including $4.50 million of deferred underwriting discounts and commissions,
$5.00 million from the sale of the Sponsor Warrants and approximately $188,000 in interest earned
less approximately $63,000 withdrawn to pay Delaware taxes) and we had cash outside of trust of
approximately $1.2 million and approximately $410,000 in accounts payable and accrued expenses. Up
to $2.25 million in interest income on the balance of the trust account (net of franchise and
income taxes payable) may be available to us to fund our working capital requirements. Other than
the deferred underwriting discounts and commissions, no amounts are payable to the underwriters of
our initial public offering in the event of a business combination.
Liquidity and Capital Resources
On October 14, 2010, we consummated our initial public offering of 15,000,000 units at a price of
$10.00 per unit and received net proceeds of approximately $145.25 million, net of the
underwriters commissions of $3.00 million and offering costs and other expenses of $1.75 million.
Simultaneously with the consummation of our initial public offering, we consummated the private
sale of 6,666,667 warrants (the Sponsor Warrants) to the Sponsor at a price of $0.75 per warrant,
generating gross proceeds, before expenses, of $5.00 million. Net proceeds received by the Company
from the consummation of both our initial public offering and private placement of the Sponsor
Warrants totaled approximately $150.25 million, net of underwriters commissions and offering
costs. $149.25 million of the net proceeds were placed in a trust account at JPMorgan Chase Bank,
N.A. with Continental Stock Transfer & Trust Company acting as trustee. All of our funds in the
trust account are invested in money market funds meeting certain conditions under Rule 2a-7 under
the Investment Company Act of 1940, as amended (the Investment Company Act). The remaining $1.00
million of net proceeds were held outside of the trust and were placed in a money market account
with JPMorgan Chase Bank, N.A. For a description of the proceeds generated in our initial public
offering and private placement of the Sponsor Warrants and a discussion of the use of such
proceeds, we refer you to Part II, Item 2 of this report and Note 2 and Note 4 of the unaudited
condensed financial statements included in Part I, Item 1 of this report.
For the nine months ended September 30, 2011, we disbursed an aggregate of approximately $355,000
out of the proceeds of our initial public offering not held in trust for the following purposes:
| $90,000 to Hicks Holdings Operating LLC, an entity owned and controlled by Thomas O.
Hicks, our founder and chairman of the board, for office space, administrative services
and secretarial support; |
| $31,000 of expenses for travel related costs; and |
| $234,000 of expenses in legal, accounting and filing fees relating to our SEC reporting
obligations, general corporate matters, and miscellaneous expenses. |
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We believe we will have sufficient available funds outside of the trust account to operate through
July 14, 2012, which is the date that is 21 months after the closing of our initial public
offering, assuming that a business combination is not consummated during that time. However, we
cannot assure you this will be the case. Over this time period, we currently anticipate incurring
expenses for the following purposes:
| due diligence and investigation of prospective target businesses; |
| legal and accounting fees relating to our SEC reporting obligations and general
corporate matters; |
| structuring and negotiating a business combination, including the making of any down
payment or the payment of any exclusivity or similar fees and expenses; and |
| other miscellaneous expenses. |
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet
arrangements. 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 entered into 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 a monthly fee of $10,000 for office space and general and
administrative services payable to Hicks Holdings Operating LLC, an affiliate of our founder and
chairman of the board. We began incurring this fee on October 14, 2010, and will continue to incur
this fee monthly until the completion of our initial business combination.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity with generally
accepted accounting principles (GAAP) 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 as our critical accounting policies:
Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or
less to be cash equivalents.
Cash Held in Trust
A total of $149.25 million, including approximately $139.75 million of the net proceeds from our
initial public offering, $5.00 million from the sale of the Sponsor Warrants and $4.50 million of
deferred underwriting discounts and commissions, was placed in a trust account at JPMorgan Chase
Bank, N.A., with Continental Stock Transfer & Trust Company serving as trustee. The trust proceeds
are invested in money market funds meeting certain conditions under Rule 2a-7 under the Investment
Company Act. As of September 30, 2011, the balance in the trust account was approximately $149.37
million, which includes approximately $188,000 of interest earned since the inception of the trust
less $63,000 withdrawn to pay Delaware taxes.
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Loss per Common Share
Loss per share is computed by dividing net loss applicable to common stockholders by the weighted
average number of common shares outstanding for the period. The weighted average common shares
issued and outstanding of 17,142,857 for the three months ended September 30, 2011 takes into
effect the 17,142,857 shares outstanding at the beginning of such three month period. The weighted
average common shares issued and outstanding of 3,285,714
for the three months ended September 30, 2010 takes into effect the 3,285,714 shares outstanding at
the beginning of such three month period. The weighted average common shares issued and outstanding
of 17,219,388 for the nine months ended September 30, 2011 takes into effect the 17,464,286 shares
outstanding at the beginning of the period and the surrender of an aggregate of 321,429 of such
shares by the Sponsor, William A. Montgomery and William F. Quinn (collectively, the Initial
Stockholders) to the Company for cancellation on March 7, 2011 in connection with the
underwriters election to not exercise their over-allotment option. The weighted average common
shares issued and outstanding of 3,285,714 for the period from June 15, 2010 (inception) to
September 30, 2010 takes into effect the 3,285,714 shares originally issued at inception. The
weighted average common shares issued and outstanding of 13,685,442 for the period from June 15,
2010 (inception) through September 30, 2011 takes into effect the 3,285,714 shares originally
outstanding, the surrender of 821,428 of such shares on October 8, 2010 by the Initial Stockholders
due to the reduction in the size of our initial public offering, the 15,000,000 shares sold in our
initial public offering and outstanding since October 14, 2010 and the surrender of 321,429 shares
of common stock by the Initial Stockholders to the Company for cancellation on March 7, 2011 in
connection with the underwriters election to not exercise their over-allotment option.
The 21,666,667 warrants issued in our initial public offering and the private placement of the
Sponsor Warrants are contingently issuable shares and are excluded from the calculation of diluted
earnings per share because they are anti-dilutive.
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 revenue and expenses during the reporting period. Actual results could differ from those
estimates.
Income Taxes
Deferred income taxes are provided for the differences between the bases of assets and liabilities
for financial reporting and income tax purposes. A valuation allowance is established when
necessary to reduce deferred tax assets to the amount expected to be realized.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not effective, accounting standards, if
currently adopted, would have a material effect on the Companys financial statements.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Market risk is the sensitivity of income to changes in interest rates, foreign exchanges, commodity
prices, equity prices and other market driven rates or prices. We are not presently engaged in and,
if we do not consummate a suitable business combination prior to the prescribed liquidation date of
the trust account, we may not engage in, any substantive commercial business. Accordingly, we are
not and, until such time as we consummate a business combination, we will not be, exposed to risks
associated with foreign exchange rates, commodity prices, equity prices or other market driven
rates or prices. The net proceeds of our initial public offering held in the trust account may be
invested by the trustee only in U.S. governmental treasury bills 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. Given our limited risk in our exposure to government securities and money market
funds, we do not view the interest rate risk to be significant.
ITEM 4. | CONTROLS AND PROCEDURES |
Disclosure controls and procedures are controls and other procedures that are designed to ensure
that information required to be disclosed in our reports filed or submitted under the Securities
Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and
reported within the time periods specified in the
SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in company reports filed or
submitted under the Exchange Act is accumulated and communicated to management, including our Chief
Executive Officer and Chief Financial Officer, to allow timely decisions regarding required
disclosure.
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As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and
Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures as of September 30, 2011. Based upon their evaluation,
our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were effective.
During the most recently completed fiscal quarter, there has been no change in our internal control
over financial reporting that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
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 are any
of the risks described in our Annual Report on Form 10-K filed with the SEC on March 11, 2011. Any
of these factors could result in a significant or material adverse effect on our results of
operations or financial condition. Additional risk factors not presently known to us or that we
currently deem immaterial may also impair our business or results of operations.
As of November 3, 2011, there have been no material changes to the risk factors disclosed in our
Annual Report on Form 10-K filed with the SEC on March 11, 2011, except we may disclose changes to
such factors or disclose additional factors from time to time in our future filings with the SEC.
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Unregistered Sales of Equity Securities
None.
Use of Proceeds from Initial Public Offering
On October 14, 2010, we consummated our initial public offering of 15,000,000 units, with each unit
consisting of one share of our common stock and one warrant to purchase one share of our common
stock at an exercise of $12.00 per share. The warrants will become exercisable on the later of (i)
30 days after the completion of our initial business combination and (ii) 12 months from the
closing of our initial public offering. The warrants expire five years after the completion of our
initial business combination or earlier upon redemption or liquidation. Once the warrants become
exercisable, the warrants will be redeemable in whole and not in part at a price of $0.01 per
warrant upon a minimum of 30 days notice if, and only if, the last sale prices of our common stock
equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on
the third business day before we send the notice of redemption. The units in the public offering
were sold at an offering price of $10.00 per unit, generating total gross proceeds of $150,000,000.
Citigroup Global Markets Inc. acted as sole bookrunning manager and as representative of Deutsche
Bank Securities Inc. The securities sold in the offering were registered under the Securities Act
of 1933, as amended (the Securities Act), on a registration statement on Form S-1 (No.
333-167809). The SEC declared the registration statement effective on October 8, 2010.
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We paid a total of $3.00 million in underwriting discounts and commissions and approximately $1.75
million in other costs and expenses related to the offering. In addition, the underwriters agreed
to defer $4.50 million in
underwriting discounts and commissions, which amount will be payable upon the consummation of our
initial business combination if consummated. We repaid Mr. Hicks, our founder and chairman of the
board, $225,000 in satisfaction of an outstanding promissory note after the closing of our initial
public offering.
We also consummated the simultaneous private sale of the Sponsor Warrants at a price of $0.75 per
warrant (for an aggregate purchase price of $5,000,000). The Sponsor Warrants (including the common
stock issuable upon exercise of the Sponsor Warrants) will not be transferable, assignable or
salable until 30 days after the completion of our initial business combination (except, among
certain other limited exceptions, to our officers and directors and other persons or entities
affiliated with the Sponsor) and they will not be redeemable by the Company so long as they are
held by our Sponsor or its permitted transferees. Otherwise, the Sponsor Warrants have terms and
provisions that are identical to those of the warrants sold as part of the units in our initial
public offering, except that the Sponsor Warrants may be exercised by the holders on a cashless
basis. The sale of the Sponsor Warrants was made pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act.
After deducting the underwriting discounts and commissions and the offering expenses, the total net
proceeds from our initial public offering were $150.25 million and $149.25 million (or
approximately $9.95 per unit sold in the initial public offering) was placed in a trust account.
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4. | REMOVED AND RESERVED |
ITEM 5. | OTHER INFORMATION |
None.
ITEM 6. | EXHIBITS |
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly
Report on Form 10-Q.
Exhibit | ||||
Number | Description | |||
3.1 | Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Companys Current Report on Form
8-K (File No. 000-54151), filed with the Securities and Exchange
Commission on October 15, 2010). |
|||
3.2 | Amended and Restated By-laws (incorporated by reference to Exhibit
3.2 to the Companys Current Report on Form 8-K (File No.
000-54151), filed with the Securities and Exchange Commission on
October 15, 2010). |
|||
4.1 | Specimen Unit Certificate (incorporated by reference to Exhibit
4.1 to Amendment No. 1 to the Companys Registration Statement on
Form S-1 (File No. 333-167809), filed with the Securities and
Exchange Commission on August 4, 2010). |
|||
4.2 | Specimen Common Stock Certificate (incorporated by reference to
Exhibit 4.2 to Amendment No. 1 to the Companys Registration
Statement on Form S-1 (File No. 333-167809), filed with the
Securities and Exchange Commission on August 4, 2010). |
|||
4.3 | Specimen Warrant Certificate (incorporated by reference to Exhibit
4.3 to Amendment No. 1 to the Companys Registration Statement on
Form S-1 (File No. 333-167809), filed with the Securities and
Exchange Commission on August 4, 2010). |
|||
4.4 | Warrant Agreement, dated as of October 8, 2010, by and between the
Company and Continental Stock Transfer & Trust Company
(incorporated by reference to Exhibit 4.1 to the Companys Current
Report on Form 8-K (File No. 000-54151), filed with the Securities
and Exchange Commission on October 15, 2010). |
|||
31.1 | * | Certification of the Chief Executive Officer required by Rule
13a-14(a) or Rule 15d-14(a). |
||
31.2 | * | Certification of the Chief Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a). |
||
32.1 | * | Certification of the Chief Executive Officer and Chief Financial
Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
1350. |
* | Filed herewith. |
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SIGNATURES
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 3, 2011 | HICKS ACQUISITION COMPANY II, INC. |
|||
/s/ Christina Weaver Vest | ||||
Name: | Christina Weaver Vest | |||
Title: | President, Chief Executive Officer and Chief Financial Officer |