Note 4 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Fixed Assets
|
|
|
|
|
|
|
|
Computers
|
|
$
|
119
|
|
$
|
69
|
|
Furniture, fixtures, and equipment
|
|
|
305
|
|
|
246
|
|
Leasehold improvements
|
|
|
398
|
|
|
264
|
|
Total fixed assets
|
|
|
822
|
|
|
579
|
|
Less: accumulated depreciation
|
|
|
(498)
|
|
|
(371)
|
|
Total fixed assets, net
|
|
|
324
|
|
|
208
|
|
Project Assets (not placed in service)
|
|
|
|
|
|
|
|
Rio Grande
|
|
|
77,224
|
|
|
62,866
|
|
Rio Bravo
|
|
|
11,322
|
|
|
10,152
|
|
Total project assets
|
|
|
88,546
|
|
|
73,018
|
|
Total property, plant and equipment, net
|
|
$
|
88,870
|
|
$
|
73,226
|
Depreciation expense for the three and nine months ended September 30, 2018 was $50 thousand and $127 thousand, respectively. Depreciation expense for the three and nine months ended September 30, 2017 was $26 thousand and $
78
thousand, respectively.
Note 5 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Employee compensation expense
|
|
$
|
3,062
|
|
$
|
1,851
|
|
Project asset costs
|
|
|
6,056
|
|
|
3,317
|
|
Invitation to bid contract costs
|
|
|
4,418
|
|
|
—
|
|
Accrued legal services
|
|
|
180
|
|
|
141
|
|
Accrued equity issuance costs
|
|
|
301
|
|
|
—
|
|
Other accrued liabilities
|
|
|
539
|
|
|
547
|
|
Total accrued liabilities and other current liabilities
|
|
$
|
14,556
|
|
$
|
5,856
|
Note 6 – Preferred Stock and Common Stock Warrants
Preferred Stock
In August 2018, we sold and issued a total of 51,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), together with associated warrants (the “Series A Warrants”), to
(i) York Capital Management Global Advisors, LLC, severally on behalf of certain funds or accounts managed by it or its affiliates (“York”), (ii) Valinor Management, L.P., severally on behalf of certain funds or accounts for which it is investment manager (“Valinor”), (iii) Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP), severally on behalf of certain funds or accounts managed by it or its affiliates (“Bardin Hill,” and together with York and Valinor, the “Fund Purchasers”) and (iv) HGC NEXT INV LLC (“HGC”)
for an aggregate purchase price of $50 million. In connection with the issuance of Series A Convertible Preferred Stock and pursuant to backstop commitment agreements with the Fund Purchasers dated April 11, 2018, as subsequently amended on August 3, 2018, we also issued a total of 413,658 shares of Company common stock to the Fund Purchasers. Each Fund Purchaser is a Company stockholder and, pursuant to that certain Agreement and Plan of Merger, dated as of April 17, 2017, by and between the Company, each Fund Purchaser and/or one or more of its affiliates, and the other parties named therein, three individuals, two individuals, and one individual from York, Valinor, and Bardin Hill, respectively, were appointed to the Company’s board of directors.
In September 2018, we sold and issued a total of 29,636 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock,” and together with the Series A Preferred Stock, the “Preferred Stock”), together with associated warrants (the “Series B Warrants,” and together with the Series A Warrants, the “Warrants”), to
certain funds managed by BlackRock (collectively, the “Series B Preferred Stock Purchasers”)
for an aggregate purchase price of $29.055 million.
Each share of Preferred Stock has a stated value of $1,000. The Series A Preferred Stock ranks pari passu with the Series B Preferred Stock, and the Preferred Stock ranks senior to the Company common stock
and each other class or series of capital stock of the Company, subject to certain exceptions, in respect of payment of dividends and distribution of assets upon liquidation. Upon a defined liquidation, holders of the Series A Preferred Stock are entitled to receive the greater of (i) (a) $1,000 per share of Preferred Stock plus (b) any accrued but unpaid dividends on such share of Preferred Stock as of immediately prior to such liquidation and (ii) the amount that would be payable to the holders of the Preferred Stock had such holders converted their shares of Preferred Stock into shares of Company common stock immediately prior to such liquidation event and prior to payment of any amounts on Company common stock.
The Company has the option to convert all, but not less than all, of the Preferred Stock into shares of Company common stock at a strike price of $7.50 per share of Company common stock (the “Conversion Price”) on any date on which the volume weighted average trading price of shares of Company common stock for each trading day during any 60 of the prior 90 trading days is equal to or greater than 175% of the Conversion Price, in each case subject to certain terms and conditions. Furthermore, the Company must convert all of the Preferred Stock into shares of Company common stock at the Conversion Price on the earlier of (i) ten (10) business days following a FID Event (as defined in the certificates of designations of the Preferred Stock) and (ii) the date that is the tenth (10th) anniversary of the closings of the issuances of the Preferred Stock, as applicable.
The shares of Preferred Stock
bear dividends
at a rate of 12% per annum, which are cumulative and accrue daily
from the date of issuance on the $1,000 stated value. Such dividends are payable quarterly and may be paid in cash or in-kind. As of September 30, 2018, we have accrued cumulative preferred dividends of $0.7 million.
The holders of Preferred Stock vote on an “as-converted” basis
with the holders of the Company common stock on all matters brought before the holders of Company common stock. In addition,
the holders of Preferred Stock have separate class voting rights with respect to certain matters affecting their rights.
The Preferred Stock do not qualify as a liability instruments under Accounting Standards Codification (“ASC”) 480 –
Distinguishing Liabilities from Equity,
because they are not mandatorily redeemable. However, as SEC Regulation S-X, Rule 5-02-27 does not permit a probability assessment for a change of control provision, the Preferred Stock must be presented as mezzanine equity between liabilities and stockholders’ equity on our consolidated balance sheets because a change of control event, although not considered probable, could force the Company to redeem the Preferred Stock for cash or assets of the Company. At each balance sheet date, we must re-evaluate whether the Preferred Stock continue to qualify for equity classification.
Warrants
The Series A Warrants issued to HGC represent the right to acquire in the aggregate 50 basis points (0.50%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share. The Series A Warrants issued to each of the Fund Purchasers represent the right to acquire approximately 21 basis points (0.21%) in the aggregate of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share. The Series B Warrants issued to the Series B Preferred Stock Purchasers
represent
the right to acquire in the aggregate a number of shares of Company common stock equal to (a)(i) the aggregate purchase price for the Series B Preferred Stock divided by (ii) $35 million, multiplied by (b)(i) 0.5% multiplied by (ii) the number of fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share.
The Warrants have a fixed three-year term commencing on the closings of the issuances of the associated Preferred Stock. The Warrants may only be exercised by the holders thereof at the expiration of such three-year term; however, the Company can force exercise of the Warrants prior to expiration of such term if the volume weighted average trading price of shares of Company common stock for each trading day during any 60 of the prior 90 trading days is equal to or greater than 175% of the Conversion Price and, in the case of the Series B Warrants, also if the Company simultaneously elects to force a mandatory exercise of all other warrants then-outstanding and unexercised and held by
any holder of parity stock (as defined in the Certificate of Designations of Series B Convertible Preferred Stock).
Pursuant to
ASC 815-40,
Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock
, the fair value of the Warrants was recorded as a non-current liability on our consolidated balance sheet on the issuance dates. The Company revalued the Warrants as of September 30, 2018 and recognized a gain of approximately $83 thousand.
Net cash proceeds were allocated on a fair value basis to the Series A Warrants and Series B Warrants and on a relative fair value basis to the Company common stock, Series A Preferred Stock and Series B Preferred Stock. As described below, $2.5 million of the $41.1 million allocated to the Series A Preferred was allocated to additional paid-in capital to give effect to the intrinsic value of a beneficial conversion feature (“BCF”). The allocation of net cash proceeds is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of Proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-in Capital
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A
|
|
Series B
|
|
|
|
|
Beneficial
|
|
|
|
|
|
|
Series A
|
|
Series B
|
|
Convertible
|
|
Convertible
|
|
Common
|
|
Conversion
|
|
|
|
|
|
|
Warrants
|
|
Warrants
|
|
Preferred
|
|
Preferred
|
|
Stock
|
|
Feature
|
|
Gross proceeds
|
|
$
|
79,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity issuance costs
|
|
|
(2,104)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds - Initial Fair Value Allocation
|
|
$
|
76,951
|
|
$
|
4,859
|
|
$
|
2,746
|
|
$
|
41,079
|
|
$
|
26,159
|
|
$
|
2,108
|
|
$
|
—
|
|
Allocation to BCF
|
|
|
|
|
|
—
|
|
|
—
|
|
|
(2,530)
|
|
|
—
|
|
|
—
|
|
|
2,530
|
|
Per balance sheet upon issuance
|
|
|
|
|
$
|
4,859
|
|
$
|
2,746
|
|
$
|
38,549
|
|
$
|
26,159
|
|
$
|
2,108
|
|
$
|
2,530
|
Beneficial Conversion Feature
ASC 470-20-20 –
Debt – Debt with conversion and Other Options
(“ASC 470-20”) defines a BCF as a nondetachable conversion feature that is in the money at the issuance date. The Company was required by ASC 470-20 to allocate a portion of the proceeds from the Series A Preferred Stock equal to the intrinsic value of the BCF to additional paid-in capital. The intrinsic value of the BCF is calculated at the issuance date as the difference between the “accounting conversion price” and the market price of shares of Company common stock multiplied by the number of shares of Company common stock into which the Series A Preferred Stock is convertible. The accounting conversion prices of $5.58 per share and $6.24 per share for the Fund Purchasers and HGC, respectively, is different than the contractual conversion price of $7.50 per share. The “accounting conversion price” is derived by dividing the proceeds allocated to the Series A Preferred Stock by the number of shares of Company common stock into which the Series A Preferred Stock is convertible. We are recording the accretion of the $2.5 million Series A Preferred Stock discount attributable to the BCF as a deemed dividend using the effective yield method over the period prior to the expected conversion date.
Note 7 — Net Loss Per Share
The following table (in thousands, except for loss per share) reconciles basic and diluted weighted average common shares outstanding for the three and nine months ended September 30, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
106,639
|
|
|
103,870
|
|
|
106,476
|
|
|
99,124
|
|
Dilutive unvested stock, convertible preferred stock and common stock warrants
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Diluted
|
|
|
106,639
|
|
|
103,870
|
|
|
106,476
|
|
|
99,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per common share
|
|
$
|
(0.10)
|
|
$
|
(0.14)
|
|
$
|
(0.29)
|
|
$
|
(0.19)
|
Potentially dilutive securities not included in the diluted net loss per share computations because their effect would have been anti-dilutive were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Unvested stock
(1)
|
|
|
513
|
|
|
—
|
|
|
483
|
|
|
—
|
|
Convertible preferred stock
|
|
|
3,322
|
|
|
—
|
|
|
1,119
|
|
|
—
|
|
Common stock warrants
|
|
|
12,507
|
|
|
12,059
|
|
|
12,225
|
|
|
12,059
|
|
Total dilutive common shares
|
|
|
16,342
|
|
|
12,059
|
|
|
13,827
|
|
|
12,059
|
|
|
(1)
|
|
Does not include 16.3 million shares for the three and nine months ended September 30, 2018, respectively, of unvested stock because the performance conditions had not yet been satisfied.
|
Note 8 — Share-based Compensation
We have granted shares of Company common stock and restricted stock to employees, consultants and a non-employee director under our 2017 Omnibus Incentive Plan (the “2017 Plan”) and in connection with the special meeting of stockholders on July 24, 2017.
Total share-based compensation consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
Nine months ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Share-based compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity awards
|
|
$
|
2,451
|
|
$
|
8,830
|
|
$
|
13,169
|
|
$
|
8,830
|
|
Liability awards
|
|
|
(1,153)
|
|
|
2,305
|
|
|
977
|
|
|
2,305
|
|
Total share-based compensation
|
|
|
1,298
|
|
|
11,135
|
|
|
14,146
|
|
|
11,135
|
|
Capitalized share-based compensation
|
|
|
183
|
|
|
(659)
|
|
|
(1,415)
|
|
|
(659)
|
|
Total share-based compensation expense
|
|
$
|
1,481
|
|
$
|
10,476
|
|
$
|
12,731
|
|
$
|
10,476
|
Certain employee contracts provided for cash bonuses upon a positive final investment decision (“FID”) in the Project (the “FID Bonus”). In January 2018, the nominating, corporate governance and compensation committee of the board of directors approved, and certain employees party to such contracts accepted, an amendment to such contracts whereby the FID Bonuses would be settled in shares of Company common stock equal to 110% of the FID Bonus. The associated liability for FID Bonuses to be settled in shares of Company common stock of $0.8 million is included in share-based compensation liability in our Consolidated Balance Sheets at September 30, 2018.
Note 9 — Income Taxes
Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at September 30, 2018 and December 31, 2017. Due to NextDecade LLC’s previous pass-through status and our full valuation allowance, we have not recorded a provision for federal or state income taxes during the three and nine months ended September 30, 2018 and 2017.
Note 10 — Commitments and Contingencies
Operating Leases
In June 2018, we executed a 24-month lease agreement for our corporate headquarters office space with a lease commencement date of September 24, 2018. Annual lease payments under this agreement, net of rent abatements and rent credits, are zero, $0.7 million and $0.9 million in 2018, 2019 and 2020, respectively.
Legal Proceedings
From time to time the Company may be subject to various claims and legal actions that arise in the ordinary course of business. As of September 30, 2018, management is not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse event may not occur.
Other
In April 2018, we entered into an agreement with an intrastate pipeline company with assets near our Terminal which incentivizes the pipeline company to procure, permit and install a valve on an intrastate pipeline near our Terminal. We agreed that, upon the later of (i) March 31, 2019 and (ii) thirty days after the valve has been installed, we will reimburse the pipeline company a cash amount equal to 50% of the costs incurred in connection with the valve, up to a maximum payment by us not to exceed $2 million.
During the third quarter of 2018, we conducted a competitive engineering, procurement and construction (“EPC”) bid process. In connection with the EPC bid process, we entered into agreements with potential EPC contractors that provide for payments to be made by us to the EPC contractors as bid milestones are achieved (“Invitation to bid contract costs”). As of September 30, 2018, we have incurred approximately $4.4 million of Invitation to bid contract costs. Future potential payments for Invitation to bid contract costs are up to $2.1 million in 2018 and up to $14.9 million in 2019.
Note 11 — Recent Accounting Pronouncements
The following table provides a brief description of recent accounting standards that have not been adopted by the Company as of September 30, 2018:
|
|
|
|
|
|
|
|
|
Standard
|
|
Description
|
|
Expected Date of Adoption
|
|
Effect on our Consolidated Financial Statements or Other Significant Matters
|
|
ASU 2016‑02,
Leases (Topic 842)
|
|
This standard requires a lessee to recognize leases on its balance sheet by recording a lease liability representing the obligation to make future lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. A lessee is permitted to make an election not to recognize lease assets and liabilities for leases with a term of 12 months or less. The standard also modifies the definition of a lease and requires expanded disclosures. This standard may be early adopted, and must be adopted using a modified retrospective approach with certain available practical expedients.
|
|
January 1, 2019
|
|
We continue to evaluate the effect of this standard on our Consolidated Financial Statements. Preliminarily, we anticipate a material impact from the requirement to recognize all leases in our Consolidated Balance Sheets and no impact to cash flows. Because this assessment is preliminary and the accounting for leases is subject to significant judgment, this conclusion could change as we finalize our assessment. We have not yet determined the impact of the adoption of this standard upon our results of operations, whether we will elect to early adopt this standard or which, if any, practical expedients we will elect upon transition.
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This Quarterly Report on Form 10‑Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
All statements other than statements of historical fact contained in this
Quarterly Report on Form 10‑Q
, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” “likely,” “continue,” “design” and other words and terms of similar expressions, are intended to identify forward-looking statements.
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from those expressed in our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements are subject to change and inherent risks and uncertainties, including those described in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K. You should consider our forward-looking statements in light of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to:
|
|
·
our ability to maintain the listing of our securities on a securities exchange or quotation medium;
|
|
|
·
changes adversely affecting the business in which we are engaged;
|
|
|
·
general economic conditions;
|
|
|
·
our development liquefied natural gas (“LNG”) liquefaction and export projects;
|
|
|
·
our ability to secure additional debt and equity financing in the future to complete the terminal at the Port of Brownsville in southern Texas (the “Terminal”) and an associated 137-mile pipeline to supply gas to the Terminal (the “Pipeline” together with the Terminal, the “Project”);
|
|
|
·
the accuracy of estimated costs for the Project;
|
|
|
·
the governmental approval of construction and operation of the Project;
|
|
|
·
the successful completion of the Project by third-party contractors;
|
|
|
·
our
ability to generate cash;
|
|
|
·
the development risks, operational hazards, regulatory approvals applicable to Rio Grande’s and Rio Bravo’s construction and operations activities;
|
|
|
·
our anticipated competitive advantage;
|
|
|
·
the global demand for and price of natural gas (versus the price of imported LNG);
|
|
|
·
t
he availability of LNG vessels worldwide;
|
|
|
·
legislation and regulations relating to the LNG industry;
|
|
|
·
negotiations for the Terminal site lease and right-of-way options for the Pipeline route;
|
|
|
·
compliance with environmental laws and regulations; and
|
|
|
·
the result of future financing efforts.
|
Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts us, or should your underlying assumptions prove incorrect, our actual results may vary materially from those anticipated in our
forward-looking statements, and our business, financial condition, and results of operations could be materially and adversely affected.
The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q. You should not rely upon forward-looking statements as predictions of future events. In addition, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements.
Except as required by applicable law, we do not undertake any obligation to publicly correct or update any forward-looking statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in our most recent Annual Report on Form 10-K as well as other filings we have made and will make with the Securities and Exchange Commission (the “SEC”) and our public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
Overview
NextDecade Corporation is a LNG development company focused on LNG export projects and associated pipelines. We have focused and continue to focus our development activities on the Project. We believe we maintain key competitive advantages involving engineering, commercial, and gas supply considerations. We submitted a pre-filing request for the Project to the Federal Energy Regulatory Commission (“FERC”) in March 2015 and filed a formal application with the FERC in May 2016. We believe we have robust commercial offtake and gas supply strategies in place and we estimate that the Project will commence commercial operations as early as 2023.
Unless the context requires otherwise, references to “NextDecade,” “the Company,” “we,” “us,” and “our” refer to NextDecade Corporation and its consolidated subsidiaries.
Recent Developments
Receipt of FERC Scheduling Notice and Draft Environmental Impact Statement
On August 31, 2018, the FERC issued a notice of schedule for environmental review of the Project. According to the notice, the FERC will issue its final Environmental Impact Statement (“EIS”) on April 26, 2019, based on issuance of the draft EIS in October 2018. The FERC subsequently issued the draft EIS on October 12, 2018. The FERC has established a Federal Authorization Decision Deadline of July 25, 2019, 90 days from the scheduled issuance of the final EIS.
Engineering, Procurement, and Construction Contract
During the third quarter of 2018 we conducted a competitive engineering, procurement and construction (“EPC”) bid process. We received expressions of interest (the “EOIs”) from multiple EPC contractors to participate in the EPC process. We reviewed the EOIs against a series of selection criteria and issued formal invitations to bid to Bechtel Oil, Gas and Chemicals, Inc., Fluor Enterprises, Inc. and McDermott International, Inc. See additional information relating to the invitations to bid in Note 10 –
Commitments and Contingencies
of our Notes to Consolidated Financial Statements. We expect to execute a final EPC contract in the third quarter of 2019.
Preferred Equity Offerings
Series A Convertible Preferred Stock Offering
In August 2018, we sold and issued a total of 51,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), together with associated warrants (the “Series A Warrants”), to (i) York Capital Management Global Advisors, LLC, severally on behalf of certain funds or accounts managed by it or its affiliates, (ii) Valinor Management, L.P., severally on behalf of certain funds or accounts for which it is investment manager, (iii) Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP), severally on behalf of certain funds or accounts managed by it or its affiliates and (iv) HGC NEXT INV LLC for an aggregate purchase price of $50 million (the “Series A Preferred Equity Offering”). For further descriptions of the Series A Preferred Stock and the Series A Warrants, see
Note 6 –
Preferred Stock and Common Stock Warrants
of our Notes to Consolidated
Financial Statements, and for additional details on the Series A Preferred Equity Offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the SEC on August 7, 2018.
Series B Convertible Preferred Stock Offering
In September 2018, we sold and issued a total of 29,636 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), together with associated warrants (the “Series B Warrants”), to certain funds managed by BlackRock for an aggregate purchase price of $29.055 million (the “Series B Preferred Equity Offering”). For further descriptions of the Series B Preferred Stock and the Series B Warrants, see
Note 6 –
Preferred Stock and Common Stock Warrants
of our Notes to Consolidated Financial Statements, and for additional details on the Series B Preferred Equity Offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the SEC on August 24, 2018.
Liquidity and Capital Resources
Capital Resources
We have funded and continue to fund the development of the Project and general working capital needs through our cash on hand and proceeds from the issuance of equity. As discussed above in “Recent Developments – Preferred Equity Offerings,” in August 2018, we sold and issued a total of 51,000 shares of Series A Preferred Stock, together with associated warrants, for an aggregate purchase price of $50 million, and in September 2018, we sold and issued a total of 29,636 shares of Series B Preferred Stock, together with associated warrants, for an aggregate purchase price of $29.055 million. Our capital resources consisted of approximately $33.9 million of cash and cash equivalents and $60.1 million of investment securities as of September 30, 2018.
Sources and Uses of Cash
The following table summarizes the sources and uses of our cash for the periods presented (in thousands):
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|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2018
|
|
2017
|
|
Operating cash flows
|
|
$
|
(12,646)
|
|
$
|
(7,992)
|
|
Investing cash flows
|
|
|
(66,560)
|
|
|
16,030
|
|
Financing cash flows
|
|
|
77,383
|
|
|
24,147
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(1,823)
|
|
|
32,185
|
|
Cash and cash equivalents – beginning of period
|
|
|
35,703
|
|
|
12,524
|
|
Cash and cash equivalents – end of period
|
|
$
|
33,880
|
|
$
|
44,709
|
Operating Cash Flows
Operating cash outflows during the nine months ended September 30, 2018 and 2017 were $12.6 million and $8.0 million, respectively. The increase in operating cash outflows during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017 was primarily related to additional employees, increased professional fees and travel costs, and increased marketing and conference sponsorship costs.
Investing Cash Flows
Investing cash outflows during the nine months ended September 30, 2018 of $66.6 million consisted of cash used for the development of the Project of $11.5 million and an investment of $55.1 million in a cash management fund. The investing cash inflows during the nine months ended September 30, 2017 of $16.0 million were primarily the result of $26.8 million of cash acquired from our reverse recapitalization in July 2017 offset by cash used in the development of the Project of $10.7 million.
Financing Cash Flows
Financing cash inflows during the nine months ended September 30, 2018 and 2017 were $77.4 million and $24.1 million, respectively. The increase in financing cash inflows is due to $79.1 million of proceeds from the issuance of preferred equity offset by $1.7 million of equity issuance costs.
Capital Development Activities
We are primarily engaged in developing the Project, which will require significant additional capital to support further project development, engineering, regulatory approvals and compliance, and commercial activities in advance of a final investment decision (“FID”) made to finance and construct the Project. Even if successfully completed, the Project will not begin to operate and generate significant cash flows until at least several years from now, which management currently estimates being as early as 2023. Construction of the Project would not begin until, among other requirements for project financing, the FERC issues an order granting the necessary authorizations under the Natural Gas Act and once all required federal, state and local permits have been obtained.
We estimate that we will receive all regulatory approvals and begin construction to support the commencement of commercial operations as early as 2023.
As a result, our business success will depend, to a significant extent, upon our ability to obtain the funding necessary to construct the Project, to bring it into operation on a commercially viable basis and to finance our staffing, operating and expansion costs during that process.
We have engaged SG Americas Securities, LLC (a business unit of Société Générale) and Macquarie Capital (USA) Inc. to advise and assist us in raising capital for post-FID construction activities.
We currently expect that the long-term capital requirements for the Project will be financed predominately through project financing and proceeds from future debt and equity offerings by us. There can be no assurance that we will succeed in
securing additional debt and/or equity financing in the future to complete the Project or, if successful, that the capital we raise will not be expensive or dilutive to stockholders. Additionally, if
these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all.
Results of Operations
The following table summarizes costs, expenses and other income for the periods indicated (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
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|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
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|
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
|
Revenues
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
General and administrative expenses
|
|
|
6,214
|
|
|
14,014
|
|
|
(7,800)
|
|
|
25,533
|
|
|
18,392
|
|
|
7,141
|
|
Invitation to bid contract costs
|
|
|
4,418
|
|
|
—
|
|
|
4,418
|
|
|
4,418
|
|
|
—
|
|
|
4,418
|
|
Land option and lease expenses
|
|
|
297
|
|
|
250
|
|
|
47
|
|
|
797
|
|
|
733
|
|
|
64
|
|
Depreciation expense
|
|
|
50
|
|
|
26
|
|
|
24
|
|
|
127
|
|
|
78
|
|
|
49
|
|
Operating loss
|
|
|
(10,979)
|
|
|
(14,290)
|
|
|
3,311
|
|
|
(30,875)
|
|
|
(19,203)
|
|
|
(11,672)
|
|
Gain on common stock warrant liabilities
|
|
|
83
|
|
|
—
|
|
|
83
|
|
|
83
|
|
|
—
|
|
|
83
|
|
Interest income, net
|
|
|
222
|
|
|
145
|
|
|
77
|
|
|
475
|
|
|
236
|
|
|
239
|
|
Other
|
|
|
(6)
|
|
|
(12)
|
|
|
6
|
|
|
(45)
|
|
|
(31)
|
|
|
(14)
|
|
Net loss attributable to NextDecade Corporation
|
|
|
(10,680)
|
|
|
(14,157)
|
|
|
3,477
|
|
|
(30,362)
|
|
|
(18,998)
|
|
|
(11,364)
|
|
Deemed dividends on Series A Convertible Preferred Stock
|
|
|
271
|
|
|
—
|
|
|
271
|
|
|
271
|
|
|
—
|
|
|
271
|
|
Net loss attributable to common stockholders
|
|
$
|
(10,951)
|
|
$
|
(14,157)
|
|
$
|
3,206
|
|
$
|
(30,633)
|
|
$
|
(18,998)
|
|
$
|
(11,635)
|
Our consolidated net loss was $10.7 million, or $0.10 per share (basic and diluted), for the three months ended September 30, 2018, compared to a net loss of $14.2 million, or $0.14 per share (basic and diluted), for the three months ended September 30, 2017. The $3.5 million decrease in net loss was primarily a result of decreased general and administrative expenses partially offset by an increase in invitation to bid contract costs discussed separately below.
Our consolidated net loss was $30.4 million, or $0.29 per share (basic and diluted), for the nine months ended September 30, 2018, compared to a net loss of $19.0 million, or $0.19 per share (basic and diluted), for the nine months ended September 30, 2017. The $11.4 million increase in net loss was primarily a result of increased general and administrative expenses and invitation to bid contract costs discussed separately below.
General and administrative expenses during the three months ended September 30, 2018 decreased $7.8 million compared to the same period in 2017 due to a reduction in share-based compensation expense of $9.1 million as a result of changes in the probability and expected timing of achievement of performance conditions partially offset by increases in the number of employees and amount of marketing and conference sponsorship costs of $1.1 million.
General and administrative expenses during the nine months ended September 30, 2018 increased $7.1 million compared to the same period in 2017 primarily due to (i) increases in the number of employees, professional fees, travel, and marketing and conference sponsorship costs of $4.9 million and (ii) increase in share-based compensation expense of approximately $2.2 million.
During the third quarter of 2018, we conducted a competitive EPC bid process. In connection with the EPC bid process, we entered into agreements with potential EPC contractors that provide for payments to be made by us to the EPC contractors as bid milestones are achieved (“Invitation to bid contract costs”). As of September 30, 2018, we incurred approximately $4.4 million of Invitation to bid contract costs, no such costs were incurred during the comparable periods in 2017.
Gain on common stock warrant liabilities for the three and nine months ended September 30, 2018 is primarily due to a decrease in the share price of Company common stock from the date the warrants were issued to the remeasurement date at September 30, 2018.
Interest income, net during the three and nine months ended September 30, 2018 increased $0.1 million and $0.2 million, respectively, compared to the same periods in 2017 due to increased yield and higher average balances maintained in our cash and cash equivalent and investment securities accounts.
Deemed dividends on the Series A Preferred Stock for the three and nine months ended September 30, 2018 represents the accretion of the beneficial conversion feature associated with the Series A Preferred Stock issued in the third quarter of 2018.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of September 30, 2018.
Summary of Critical Accounting Estimates
The preparation of our Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. There have been no significant changes to our critical accounting estimates from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017.
Recent Accounting Standards
For descriptions of recently issued accounting standards, see
Note 11 –
Recent Accounting Pronouncements
of our Notes to Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of “our disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the fiscal quarter ended September 30, 2018. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2018, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
During the most recent fiscal quarter, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.