Custom Truck One Source, Inc. quarterly report, Q2 FY2017

Business context and reporting period

Important identity discrepancy: The supplied filing is for Capitol Investment Corp. IV, not Custom Truck One Source, Inc. It describes a Cayman Islands blank-check company formed to pursue a business combination. The filing covers the quarter ended June 30, 2017; its financial statements report activity from inception on May 1 through June 30, 2017. The company had not commenced operations by quarter-end and identified itself as a shell company.

Financial results and position

  • Revenue: None reported; the company expected no operating revenue before completing a business combination.
  • Profit: Net loss was $5,050, consisting of formation and operating costs. Basic and diluted loss per share was reported as $0.00 (rounded).
  • Cash flow: Operating cash use was $5,050; financing provided $240,000; ending cash was $234,950.
  • Balance sheet: Cash was $234,950, deferred offering costs $77,985, and total assets $312,935. Current liabilities were $292,985, including a $250,000 related-party note and $5,000 of officer advances. Shareholders’ equity was $19,950.
  • Debt and liquidity: The $250,000 non-interest-bearing CEO note was payable upon specified events and was repaid when the IPO closed on August 21, 2017. At June 30, cash was funded primarily by founder-share proceeds, officer advances, and the related-party note.
  • Margins: Not meaningful; no revenue was reported.

Changes versus prior period

No comparable prior-period operating results are presented; this was the company’s first reporting period. The filing reports formation-stage activity only.

Outlook, risks and subsequent events

  • The company completed its IPO after quarter-end, on August 21, 2017, selling 40.25 million units at $10 each for $402.5 million in gross proceeds. It also sold 6.53 million private-placement warrants for $9.8 million.
  • Following the offering, $402.5 million was placed in a trust account, and the company reported $1.05 million of cash outside the trust for working capital. Substantially all trust funds were intended to support a business combination.
  • The company was searching for a target after the IPO but provided no target-specific guidance or forecast. It stated there was no assurance a business combination would be completed.
  • If it fails to complete a business combination by August 21, 2019, it must redeem public shares and wind up. Trust assets could be reduced by creditor claims or bankruptcy-related claims; actual redemption proceeds could therefore be below $10 per public share.
  • Other notable obligations included deferred underwriting commissions of $14.09 million payable upon a completed business combination, and affiliate office and support fees of up to $20,000 per month beginning August 15, 2017.
  • Management said it did not expect to need additional funds before a business combination, but warned that cost overruns could leave insufficient working capital; sponsor-related parties could, but were not obligated to, provide loans.
  • Management assessed disclosure controls as effective at a reasonable-assurance level and reported no material change in internal control over financial reporting during the period.

Key facts for investors to verify

  1. Confirm the intended issuer: the provided 10-Q is for Capitol Investment Corp. IV, not Custom Truck One Source, Inc.
  2. Distinguish June 30, 2017 financial figures from the August 2017 IPO and trust-account funding, which occurred after the reporting date.
  3. Review the business-combination deadline, redemption terms, potential creditor claims against trust assets, and deferred underwriting fee.
  4. Check subsequent filings for the eventual business combination, use of trust funds, and any additional financing or related-party loans.