Filing identity and period
Important mismatch: The request identifies Custom Truck One Source, Inc., but the supplied Form 10-Q is for Capitol Investment Corp. IV, a Cayman Islands blank-check company. This summary describes the filing provided, not Custom Truck One Source. The report covers the quarter ended September 30, 2017; the company was incorporated May 1, 2017 and completed its IPO on August 21, 2017.
Business context and financial results
Capitol Investment Corp. IV had not begun operating a business. Its purpose was to identify and complete a business combination; activity through September 30 related to formation, the IPO, and searching for a target. It reported no operating revenue.
| Metric | Three months ended September 30, 2017 | May 1–September 30, 2017 |
|---|---|---|
| Operating and formation costs | $167,016 | $172,066 |
| Net loss | $167,016 | $172,066 |
| Basic and diluted loss per share | $0.02 | $0.02 |
| Cash used in operating activities | Not separately provided | $266,926 |
At September 30, cash outside the trust was $948,017, prepaid expenses and other current assets were $164,762, and cash held in the trust was $402.5 million. Current liabilities totaled $75,002, including $5,100 due to a related party. Total liabilities were $14.16 million, including a $14.09 million deferred underwriting fee payable upon a business combination. There was no long-term debt reported. Temporary equity included 38,445,027 Class A shares subject to possible redemption, valued at $384.45 million. Shareholders’ equity was $5.00 million.
Capital, liquidity, and material changes
The August IPO sold 40.25 million units at $10 each, raising $402.5 million gross; a concurrent private placement of warrants raised $9.8 million. The company placed $402.5 million in the trust account. It reported $948,017 of cash outside the trust at quarter-end, compared with $1,052,665 following the IPO after offering costs. The filing gives no prior-year comparable quarter, so year-over-year performance comparisons are unavailable; the business had only recently formed and completed its IPO.
Offering-related costs were reported as $22.70 million in the financial statement note, including $8.05 million of paid underwriting fees and $14.09 million of deferred underwriting fees; the MD&A describes $22.70 million in total IPO-related costs. The company also incurred $30,000 for office and administrative services from executive-affiliated entities during the period, all recorded in accounts payable and accrued expenses at September 30.
Outlook, risks, and contingencies
- Management intended to use substantially all trust funds toward a business combination and expected public-company compliance and due-diligence expenses to increase. It believed outside-trust cash would be sufficient before a transaction, but warned that cost overruns could leave it short.
- The company had to complete a business combination by August 21, 2019 or redeem public shares and liquidate. No assurance was given that a transaction would be completed. If a transaction requires more cash, the company may need additional financing or issue securities or debt.
- Trust assets may be exposed to creditor claims or bankruptcy proceedings, potentially reducing shareholder recoveries below the anticipated $10 per public share. Executive officers’ indemnification obligations may not be collectible.
- Upon a business combination, the company owed a $14.09 million deferred underwriting fee. Three consulting arrangements also provided for aggregate annual fees of $560,000 and a $1.09 million success fee upon a completed transaction.
- Management reported no off-balance-sheet arrangements and no material market or interest-rate exposure as of quarter-end. Disclosure controls were assessed as effective at a reasonable assurance level; no material change in internal control was reported.
Key facts for investors to verify
- Confirm the intended issuer: the supplied filing is for Capitol Investment Corp. IV, not Custom Truck One Source, Inc.
- Check whether and when Capitol completed a business combination, and the resulting transaction terms, financing, and share redemptions.
- Verify trust-account balances, redemption value, creditor protections, and payment of the deferred underwriting fee.
- Review the related-party administrative and consulting arrangements, including amounts paid or accrued and any subsequent changes.
- Assess the company’s limited operating history: results reflect formation and transaction-search costs, not an operating business.