Custom Truck One Source(CTOS) - 2019 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents Capitol Investment Corp. IV's unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows, with notes on policies and the NESCO merger Condensed Consolidated Balance Sheets The balance sheet shows a slight increase in total assets to $410.8 million as of March 31, 2019, primarily due to an increase in cash and marketable securities held in the Trust Account Condensed Consolidated Balance Sheet Highlights (in USD) | Account | March 31, 2019 (Unaudited) | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | $410,796,340 | $408,197,214 | | Cash and marketable securities in Trust Account | $410,026,800 | $407,727,618 | | Total Liabilities | $15,014,473 | $14,178,375 | | Convertible promissory notes – related parties | $750,000 | $0 | | Total Shareholders' Equity | $5,000,004 | $5,000,005 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2019, the company reported a net income of $1.76 million, a significant increase from $0.96 million in the same period of 2018, driven by higher interest income Statement of Operations Summary (in USD) | Metric | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Operating costs | $536,154 | $413,244 | | Loss from operations | ($536,154) | ($413,244) | | Interest income | $2,274,691 | $1,367,437 | | Net income | $1,763,028 | $955,374 | Condensed Consolidated Statements of Changes in Shareholders' Equity Total shareholders' equity remained constant at approximately $5.0 million for the three months ended March 31, 2019, as net income was offset by changes in redeemable ordinary shares - For the three months ended March 31, 2019, net income of $1,763,028 was offset by a change in the value of ordinary shares subject to possible redemption of ($1,763,029), resulting in total shareholders' equity remaining stable at $5,000,004[15] Condensed Consolidated Statements of Cash Flows For the first quarter of 2019, net cash used in operating activities was $461,280, offset by $750,000 from financing activities, leading to a net increase in cash of $288,720 Cash Flow Summary (in USD) | Cash Flow Activity | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($461,280) | ($506,633) | | Net cash provided by investing activities | $0 | $750,000 | | Net cash provided by financing activities | $750,000 | $0 | | Net Change in Cash | $288,720 | $243,367 | | Cash – Ending | $756,973 | $745,292 | Notes to Unaudited Condensed Consolidated Financial Statements The notes clarify the company's blank check nature, detailing convertible promissory notes, deferred underwriting fees, and the significant subsequent merger agreement with NESCO Holdings I, Inc - The company is a blank check company incorporated on May 1, 2017, with the objective of completing a Business Combination, and all activity through March 31, 2019, relates to its formation, IPO, and search for a target, including the proposed combination with NESCO Holdings I, Inc[20][21] - On March 22, 2019, the company issued $750,000 of unsecured, non-interest bearing convertible promissory notes to related parties, payable upon the consummation of a Business Combination, convertible into warrants at $1.50 per warrant[36] - On April 7, 2019, the company entered into an Agreement and Plan of Merger with NESCO Holdings, LP, involving the company domesticating as a Delaware corporation and acquiring Nesco through a series of mergers, with the transaction expected to close in the second quarter of 2019[46][47][53] Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and results of operations, noting no operating revenue, net income from Trust Account interest, sufficient liquidity, and the pending Nesco merger Results of Operations The company generated no operating revenue, with net income for the three months ended March 31, 2019, increasing to $1.76 million from $0.96 million due to higher interest income - The company will not generate operating revenues until it completes a business combination, with expenses primarily related to public company compliance and due diligence[58] Income Comparison (Q1 2019 vs Q1 2018) | Metric | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | Interest Income | $2,274,691 | $1,367,437 | | Operating Costs | ($536,154) | ($413,244) | | Net Income | $1,763,028 | $955,374 | Liquidity and Capital Resources As of March 31, 2019, the company had $756,973 in cash outside the Trust Account and $410 million within it, with operations financed by IPO proceeds, interest income, and a $750,000 loan from related parties - As of March 31, 2019, the company had $756,973 in cash outside the Trust Account and $410,026,800 in cash and marketable securities held within the Trust Account[61][67] - In March 2019, related parties (Lenders) loaned the company an aggregate of $750,000 for working capital, with these loans being non-interest bearing and convertible into warrants upon a business combination[69] - The company may need additional financing to complete its initial business combination if the transaction requires more cash than available in the Trust Account or if redemptions are significant[71] Critical Accounting Policies The company's critical accounting policies involve significant management estimates, including classifying redeemable ordinary shares as temporary equity and applying the two-class method for earnings per share - Ordinary shares subject to possible redemption are classified as temporary equity because the redemption events are outside of the company's control[77] - The company uses the two-class method for calculating earnings per share, adjusting net income for the portion attributable to redeemable shares, as they only participate in Trust Account earnings[78] Quantitative and Qualitative Disclosures About Market Risk The company has minimal exposure to market risk, as its funds are invested in short-term U.S. government treasury bills or money market funds, making interest rate risk immaterial - The company's investments are limited to short-term U.S. government treasury securities, resulting in no material exposure to interest rate risk[80] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of March 31, 2019, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2019, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[82] - There were no changes during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[83] Part II. Other Information Unregistered Sales of Equity Securities and Use of Proceeds This section details the issuance of unregistered equity securities, including founder shares and private placement warrants, and the use of proceeds from the company's IPO - In May 2017, the company issued 10,062,500 founder shares to its Sponsors for $25,000 under a Section 4(a)(2) exemption[86] - Simultaneously with the IPO, the company sold 6,533,333 Private Placement Warrants to sponsors and directors at $1.50 each, raising $9.8 million in a private placement[88] - Of the gross proceeds from the IPO and private placement, $402.5 million was placed in the Trust Account, with total underwriting discounts and commissions of $22,137,500[90] Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - The exhibits filed with this report include CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, along with XBRL data files[91] Part III. Signatures Signatures The report is duly signed on May 8, 2019, by Mark D. Ein, Chairman and Chief Executive Officer, and L. Dyson Dryden, President and Chief Financial Officer, on behalf of Capitol Investment Corp. IV - The Form 10-Q was signed and authorized on May 8, 2019, by the company's CEO and CFO[94][95]