Filing summary
Entity and period: The supplied filing is Kayne Anderson Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2017, not a filing for Kinetik Holdings Inc. Kayne Anderson was a blank-check company seeking an energy-sector business combination and had not commenced operations by quarter-end.
Financial results and liquidity
- Operations: Revenue, general and administrative expense, and net income or loss were each reported as zero for the quarter. Basic and diluted loss per share was reported as $(0.00); weighted-average shares were 9,433,028. Offering costs were deferred rather than recognized as operating expense.
- Balance sheet: At March 31, cash was $249 and deferred offering costs were $602,312, for total assets of $602,561. Current liabilities were $579,937, including a $265,000 sponsor note and $314,937 in accrued formation and offering costs. Stockholders’ equity was $22,624.
- Cash flow: Operating cash flow was zero. Financing cash flow was a net use of $7,251, consisting of $245,000 in sponsor-note proceeds and $252,251 of offering-cost payments. Ending cash was $249.
- Debt and liquidity: The sponsor note was non-interest-bearing and was repaid upon the April 4, 2017 offering close. The company reported approximately $1.2 million outside the trust account as of April 30 for diligence and ongoing expenses. The filing provides no operating-margin measure; there was no operating revenue.
Subsequent events and changes
After quarter-end, the company completed its public offering: 37,732,112 units at $10 each, generating $377,321,120 in gross proceeds. It also sold 6,364,281 private-placement warrants to its sponsor for $9,546,422. The filing reports $377,321,120 deposited in the trust account. The sponsor forfeited 629,472 founder shares following the partial exercise of the underwriters’ over-allotment option. These transactions materially changed the company’s capitalization and liquidity after the reporting date; they are not reflected in the March 31 balance sheet.
Outlook, risks, and contingencies
- The company intended to pursue a business combination in the energy industry, but gave no specific transaction guidance and could not assure investors it would complete a transaction.
- It generally had 24 months from the offering close to complete a business combination; otherwise, it must redeem public shares and wind up, subject to applicable law. The proposed target must meet the stated 80% trust-asset fair-value test.
- Public shareholders may have redemption rights in connection with a transaction. Trust-account funds may be subject to creditor claims that could have priority over public shareholders.
- Management identified potential dilution from issuing equity and risks associated with issuing debt, including repayment burdens, covenant restrictions, and reduced financial flexibility.
- The company expected public-company compliance and acquisition-diligence expenses. It paid an affiliate $5,000 per month for administrative support. No off-balance-sheet arrangements, quarter-end contractual obligations, or legal proceedings were reported.
- Management concluded disclosure controls and procedures were effective as of March 31, 2017; it reported no material change in internal control over financial reporting. The company was an emerging growth company and elected the extended transition period for new accounting standards.
Investor verification priorities
- Verify the issuer identity: the filing is for Kayne Anderson Acquisition Corp., whereas the request names Kinetik Holdings Inc.
- Confirm the offering proceeds, amounts placed in trust, and the approximately $1.2 million available outside the trust account, including the timing and use of proceeds.
- Review subsequent filings for a business-combination agreement, redemptions, financing, and compliance with the 24-month deadline.
- Assess potential dilution, founder-share and warrant terms, and the deferred underwriting discount payable upon a completed business combination.