Business context and reporting period
Filing identity: The supplied filing is Kayne Anderson Acquisition Corp.’s Form 10-Q for the quarter ended June 30, 2017, not a filing identified as Kinetik Holdings Inc. Investors should verify the company and filing match their intended review.
Kayne Anderson Acquisition Corp. was a blank-check company seeking an energy-industry business combination. It completed its IPO in April 2017 and had not begun operating or generated revenue by quarter-end. The statements cover the three and six months ended June 30, 2017; the filing provides no prior-year comparable operating period.
Financial performance and position
- Revenue: $0 for both the quarter and six-month period.
- Net loss: $733,270 for both periods, or $0.07 per share. Expenses included $1,063,946 in general and administrative costs, $43,000 in franchise taxes, and $170,349 in income tax expense; $544,025 of trust-account investment income partly offset these costs. No operating margin is meaningful because the company had no revenue.
- Cash flow: Operating activities used $327,160 in the first six months. Financing activities provided $378,665,211, including IPO and private-warrant proceeds; $377,321,120 was deposited into the trust account. Cash outside the trust increased to $1,024,431.
- Liquidity and assets: At June 30, total assets were $379,083,680, including $377,865,145 in the trust account and $1,218,535 in current assets. Current liabilities were $1,147,349. Trust funds were generally restricted pending a business combination or specified redemption/liquidation events.
- Debt and obligations: The $265,000 sponsor note was repaid at the IPO closing; no other debt was reported. The company recorded $13,206,239 of deferred underwriting compensation, payable only if it completes a business combination. Stock subject to possible redemption was classified outside stockholders’ equity at $359,730,090. Stockholders’ equity was $5,000,002.
Changes versus prior period
Compared with December 31, 2016, cash rose from $7,500 to $1,024,431 and total assets increased from $45,734 to $379,083,680, primarily reflecting the April IPO and establishment of the trust account. The company reported a six-month net loss of $733,270; the filing does not provide prior-year earnings for comparison.
Outlook, commentary, and risks
- Management reported significant due-diligence costs for a potential acquisition it is no longer pursuing. It expected higher public-company and prospective-deal expenses and no operating revenue before a business combination.
- The company had 24 months from the IPO closing to complete a business combination; otherwise it generally must redeem public shares and liquidate. A target or successful transaction was not assured. A target must meet the stated 80% of trust-assets fair-value test, subject to the filing’s exclusions.
- Management said outside-trust cash should cover anticipated needs before a transaction and that it did not expect to raise additional public funds beforehand. The sponsor could provide loans of up to $1.5 million, some potentially convertible into warrants.
- Potential transaction financing through stock or debt could dilute holders, add senior claims, or constrain future operations. Trust assets could also face creditor claims. Trust investments were limited to short-term U.S. government obligations; management considered interest-rate exposure immaterial.
- Management concluded disclosure controls were effective and reported no material change in internal control. The filing reported no legal proceedings and no material changes to previously disclosed risk factors.
Key facts investors should verify
- Confirm that Kayne Anderson Acquisition Corp., rather than Kinetik Holdings Inc., is the intended issuer and filing.
- Verify the trust balance, redemption terms, and restrictions on use of trust funds.
- Review the business-combination deadline, redemption mechanics, and deferred underwriting fee payable upon a completed transaction.
- Assess the abandoned acquisition diligence costs, remaining outside-trust cash, and any subsequent sponsor financing or transaction developments.