Filing identity and reporting period
Important mismatch: The supplied filing is for Kayne Anderson Acquisition Corp. (a blank-check company), not Kinetik Holdings Inc. It is a Form 10-Q for the quarter ended March 31, 2018. The filing describes a search for an energy-sector business combination; it does not report Kinetik operating results.
Financial results and liquidity
- Revenue: None. The company said it would not generate operating revenue before completing a business combination.
- Quarterly results: Net income was $714,711, compared with no revenue or net income in Q1 2017. Trust-account investment income of $1,171,260 was partly offset by general and administrative expense of $168,267, franchise tax expense of $50,013, and income tax expense of $238,269. Basic and diluted earnings per share were $0.06 and $0.02, respectively.
- Cash flow: Operating activities used $159,206; cash declined from $479,055 at year-end 2017 to $319,849 at March 31, 2018. The company paid $523,050 of income and franchise taxes during the quarter.
- Assets and liquidity: Total assets were $380.2 million, including $379.8 million in the trust account and $319,849 in cash outside the trust. The filing stated that $2,503,955 was available for additional taxes. Trust funds were generally restricted pending a business combination or a specified redemption or liquidation event.
- Debt and obligations: No sponsor borrowings were outstanding at quarter-end. A sponsor promissory note provided for up to $500,000 in non-interest-bearing working-capital loans as needed. The company reported no off-balance-sheet arrangements or contractual obligations; $13.2 million of deferred underwriting compensation was payable only if a business combination closed.
- Margins: Not meaningful because the company had no operating revenue.
Changes, outlook, risks, and unusual items
- Trust investments increased from $379.2 million at December 31, 2017 to $379.8 million at March 31, 2018; redemption-classified Class A shares increased to 36,098,425 from 36,026,954.
- The sponsor’s affiliate waived the $5,000 monthly administrative-services fee effective January 1, 2018. The sponsor also agreed to provide working-capital loans of up to $500,000, although none had been drawn by quarter-end.
- The company had to complete a business combination within 24 months of the April 4, 2017 offering close or redeem public shares and liquidate. Management disclosed substantial doubt about the company’s ability to continue as a going concern if it did not complete a transaction by the deadline. The filing stated that the company could not assure successful completion.
- Management’s stated target focus was the energy industry. A transaction could be funded with trust cash, equity, debt, or a combination; the filing discussed potential dilution and debt-related risks. No transaction-specific guidance or operating forecast was provided.
- The filing reported effective disclosure controls and no material change in internal control over financial reporting. It reported no legal proceedings and no material changes to the risk factors in the prior Form 10-K.
Key facts for investors to verify
- Confirm the issuer and reporting period: this filing is Kayne Anderson Acquisition Corp.’s Q1 2018 report, not a Kinetik Holdings filing.
- Verify the business-combination deadline, transaction status, redemption terms, and trust-account balance against subsequent filings.
- Assess available operating cash outside the trust, potential working-capital borrowing, and the going-concern disclosure.
- Review potential dilution from founder shares, warrants, and any transaction-related equity or debt issuance.