Note 4 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
Fixed Assets
|
|
|
|
|
|
|
|
Computers
|
|
$
|
225
|
|
$
|
164
|
|
Furniture, fixtures, and equipment
|
|
|
343
|
|
|
316
|
|
Leasehold improvements
|
|
|
420
|
|
|
420
|
|
Total fixed assets
|
|
|
988
|
|
|
900
|
|
Less: accumulated depreciation
|
|
|
(583)
|
|
|
(542)
|
|
Total fixed assets, net
|
|
|
405
|
|
|
358
|
|
Project Assets (not placed in service)
|
|
|
|
|
|
|
|
Rio Grande
|
|
|
84,001
|
|
|
80,407
|
|
Rio Bravo
|
|
|
11,620
|
|
|
11,305
|
|
Total project assets
|
|
|
95,621
|
|
|
91,712
|
|
Total property, plant and equipment, net
|
|
$
|
96,026
|
|
$
|
92,070
|
Depreciation expense for each of the three months ended March 31, 2019 and 2018 was $41 thousand and $29 thousand, respectively.
Note 5 — Leases
We currently lease approximately 25,600 square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on September 30, 2020.
In January 2017, NextDecade LLC executed surface lease agreements with the City of Texas City and the State of Texas for a 994‑acre site for the Galveston Bay Terminal (collectively, the “Galveston Bay Leases”). The term of the Galveston Bay Leases is 36 months with an option to extend for an additional 12 months.
On March 6, 2019, Rio Grande entered into a lease agreement with the Brownsville Navigation District of Cameron County, Texas (“BND”), pursuant to which Rio Grande has agreed to lease approximately 984 acres of land situated in Cameron County, Texas for the purposes of constructing, operating and maintaining the Terminal.
The initial term of the lease is for 30 years (the “Primary Term”), which will commence on the date specified in a written notice by Rio Grande to BND (the “Effective Date Notice”), if given, confirming that Rio Grande or a Rio Grande affiliate has made a FID for the first phase of the Terminal. The Effective Date may be no later than November 6, 2019 (the “Outside Effective Date”), provided, however , that in the event Rio Grande does not deliver the Effective Date Notice prior to the Outside Effective Date due to reasons unrelated to an act or omission of its own or its inability to secure one or more of the required permits for the Terminal, then the Outside Effective Date will be automatically extended on a month-to-month basis for a maximum of six months. Rio Grande has the option to renew and extend the term of the lease beyond the Primary Term for up to two consecutive renewal periods of ten years each provided that it has not caused an event of default under the lease
.
In adopting Topic 842, the Company has elected the “package of practical expedients,” which permits it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company also elected the use-of-hindsight and the practical expedient pertaining to land easements. The Company elected not to apply
Topic 842
to arrangements with original lease terms of 12 months or less. At lease commencement date, the Company estimated the lease liability and the right-of-use assets at present value, at inception, of $2.3 million. On January 1, 2019, upon adoption of
Topic 842
, the Company recorded right-of-use assets of $1.6 million, lease liabilities of $1.9 million, eliminated deferred rent of $0.1 million and recorded a cumulative-effect adjustment of $0.2 million.
The Company determines if a contractual arrangement represents or contains a lease at inception. Operating leases with lease terms greater than twelve months are included in Operating lease right-of-use assets and Operating lease liabilities in the Consolidated Balance Sheets.
Other information related to our operating leases for the three months ended March 31, 2019 is as follows (in thousands):
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities:
|
|
|
|
|
|
Cash flows from operating activities
|
|
$
|
258
|
|
|
Noncash right-of-use assets recorded for operating lease liabilities:
|
|
|
|
|
|
Adoption of Topic 842
|
|
|
1,562
|
|
|
In exchange for new operating lease liabilities during the period
|
|
|
—
|
|
Note 6 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
Employee compensation expense
|
|
$
|
2,252
|
|
$
|
3,130
|
|
Project asset costs
|
|
|
1,091
|
|
|
2,014
|
|
Valve installation incentive
(1)
|
|
|
—
|
|
|
2,000
|
|
Accrued legal services
|
|
|
306
|
|
|
313
|
|
Other accrued liabilities
|
|
|
538
|
|
|
896
|
|
Total accrued liabilities and other current liabilities
|
|
$
|
4,187
|
|
$
|
8,353
|
|
|
(1)
|
|
In April 2018, we entered into an agreement with an intrastate pipeline company with assets near the Terminal which incentivizes such pipeline company to procure, permit and install a valve on an intrastate pipeline near the Terminal. We agreed that, upon the later of (i) March 31, 2019 and (ii) thirty days after the date on which the valve was installed, we will reimburse such 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 $2.0 million.
Such valve was installed in 2018 and we reimbursed such pipeline company $2.0 million in the first quarter of 2019.
|
Note 7 – Preferred Stock and
Common Stock Warrants
Preferred Stock
In August 2018, we sold an aggregate of 50,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock), at $1,000 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate as origination fees to the purchasers of the Series A Preferred Stock. In September 2018, we sold an aggregate of 29,055 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 “Convertible Preferred Stock”), at $1,000 per share for an aggregate purchase price of $29.055 million and we issued an additional 581 shares of Series B Preferred Stock in aggregate as origination fees to the purchasers of the Series B Preferred Stock. Warrants were issued together with the shares of Series A Preferred Stock and the Series B Preferred Stock (collectively, “Common Stock Warrants”).
The shares of Convertible 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. During the three months ended March 31, 2019, the Company paid-in-kind $1.6 million and $0.9 million of dividends to the holders of the Series A Preferred Stock and the Series B Preferred Stock, respectively. On March 22, 2019, the Company declared dividends to the holders of the Convertible Preferred Stock as of the close of business on March 15, 2019. On April 15, 2019, the Company paid-in-kind $1.6 million and $0.9 million of dividends to the holders of the Series A Preferred Stock and the Series B Preferred Stock, respectively.
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
|
|
|
|
|
March 31,
|
|
|
|
|
2019
|
|
2018
|
|
|
Unvested stock
(1)
|
|
|
490
|
|
|
464
|
|
|
Convertible preferred stock
|
|
|
11,127
|
|
|
—
|
|
|
Common Stock Warrants
|
|
|
1,376
|
|
|
—
|
|
|
IPO Warrants
(2)
|
|
|
12,082
|
|
|
12,082
|
|
|
Total potentially dilutive common shares
|
|
|
25,075
|
|
|
12,546
|
|
|
|
(1)
|
|
Does not include 10.8 million shares and 26.4 million shares for the three months ended March 31, 2019 and 2018, respectively, of unvested stock because the performance conditions had not yet been satisfied.
|
|
|
(2)
|
|
The IPO Warrants were issued in connection with our initial public offering in 2015. The IPO Warrants are exercisable at a price of $11.50 per share and expire on July 24, 2022. The Company may redeem the IPO Warrants at a price of $0.01 per IPO Warrant upon 30 days’ notice only if the last sale price of our common stock is at least $17.50 per share for any 20 trading days within a 30-trading day period. If the Company redeems the IPO Warrants in this manner, the Company will have the option to do so on a cashless basis with the issuance of an economically equivalent number of shares of Company common stock.
|
Note 9 — Share-based Compensation
We have granted shares of Company common stock and restricted Company common stock to employees, consultants and a non-employee director under our 2017 Omnibus Incentive Plan (the “2017 Plan”) and in connection with our special meeting of stockholders held on July 24, 2017.
Total share-based compensation consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
Share-based compensation:
|
|
|
|
|
|
|
|
Equity awards
|
|
$
|
5,884
|
|
$
|
12,440
|
|
Liability awards
|
|
|
—
|
|
|
(47)
|
|
Total share-based compensation
|
|
|
5,884
|
|
|
12,393
|
|
Capitalized share-based compensation
|
|
|
(546)
|
|
|
(159)
|
|
Total share-based compensation expense
|
|
$
|
5,338
|
|
$
|
12,234
|
On January 1, 2019, we adopted Accounting Standards Update (“
ASU”) 2018-07,
Compensation-Stock Compensation
(“ASU 2018-07”). This standard simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. Upon adoption of this standard, we reclassified $2.1 million from Share-based compensation liability to Additional paid-in-capital in our Consolidated Balance Sheets.
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 $0.4 million is included in Share-based compensation liability in our Consolidated Balance Sheets at March 31, 2019 and December 31, 2018.
Note 10 — Income Taxes
Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at March 31, 2019 and December 31, 2018. Due to our full valuation allowance, we have not recorded a provision for federal or state income taxes during each of the three months ended March 31, 2019 and 2018.
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,” “would,” “could,” “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” and 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 and applications for customary tax incentives.
|
Should one or more of the foregoing risks or uncertainties materialize in a way that negatively impacts us, or should the 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 in the State of Texas. We have focused and continue to focus our development activities on the Project and have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Project that we expect will result in demand for contracted capacity at the Terminal, which would allow us to seek construction financing to develop the Project. We believe the Project possesses competitive advantages in several important areas, including, engineering, commercial, regulatory, and gas supply. We submitted a pre-filing request for the Project to the FERC in March 2015 and filed a formal application with the FERC in May 2016. We also believe we have robust commercial offtake and gas supply strategies in place and we estimate that the Project could 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
LNG Sale and Purchase Agreement
In March 2019, we entered into a 20-year sale and purchase agreement (“SPA”) with Shell NA LNG LLC (“Shell”) for the supply of two million tons per annum of liquefied natural gas from the Terminal.
Pursuant to the SPA, Shell will purchase LNG on a free-on-board basis starting from the commercial operation date of the Terminal, currently expected in 2023, with approximately three-quarters of the purchased LNG volume indexed to Brent and the remaining volume indexed to domestic United States gas indices, including Henry Hub.
The Shell SPA becomes effective upon the satisfaction of certain conditions precedent, which include a positive final investment decision (“FID”) in the Project.
Rio Grande Site Lease
On March 6, 2019, Rio Grande entered into a lease agreement with the Brownsville Navigation District of Cameron County, Texas (“BND”), pursuant to which Rio Grande has agreed to lease approximately 984 acres of land situated in Cameron County, Texas for the purposes of constructing, operating, and maintaining the Terminal.
The initial term of the lease is for 30 years (the “Primary Term”), which will commence on the date specified in a written notice by Rio Grande to BND (the “Effective Date Notice”), if given, confirming that Rio Grande or a Rio Grande affiliate has made a FID for the first phase of the Terminal. The Effective Date may be no later than November 6, 2019, subject to certain exceptions. Rio Grande has the option to renew and extend the term of the lease beyond the Primary Term for up to two consecutive renewal periods of ten years each provided that it has not caused an event of default under the lease
.
Engineering, Procurement, and Construction Contract
During the third quarter of 2018, we initiated 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 bid process. We reviewed the EOIs against a series of selection criteria and issued formal invitations to bid to Bechtel Oil, Gas, and Chemicals, Inc. (“Bechtel”), Fluor Corporation (“Fluor”) and McDermott International, Inc. (“McDermott”).
On April 22, 2019 we received EPC bid packages from each of Bechtel and Fluor, two of the global LNG market’s leading EPC contractors. The technical and commercial bid packages, which were received on-schedule, are for fully wrapped lump-sum separated turnkey (“LSTK”) EPC contracts for the Terminal. Following detailed evaluations of the Bechtel and Fluor EPC bid packages, we expect to select a contractor and execute a fully wrapped LSTK EPC contract in the third quarter of 2019.
See additional information relating to the EPC bid submissions in
Note 13 –
Subsequent Events
of our Notes to Consolidated Financial Statements.
Receipt of Final Environmental Impact Statement
On April 26, 2019, we received our final environmental impact statement (“FEIS”) from the FERC for the Terminal and the Pipeline. The FEIS was prepared in compliance with the requirements of the National Environmental Policy Act (“NEPA”), the Council on Environmental Quality regulations for implementing NEPA, and FERC regulations.
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. Our capital resources consisted of approximately $5.6 million of cash and cash equivalents and $56.1 million of investment securities as of March 31, 2019.
Sources and Uses of Cash
The following table summarizes the sources and uses of our cash for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
Operating cash flows
|
|
$
|
(8,007)
|
|
$
|
(5,797)
|
|
Investing cash flows
|
|
|
10,678
|
|
|
(5,201)
|
|
Financing cash flows
|
|
|
(271)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
2,400
|
|
|
(10,998)
|
|
Cash and cash equivalents – beginning of period
|
|
|
3,169
|
|
|
35,703
|
|
Cash and cash equivalents – end of period
|
|
$
|
5,569
|
|
$
|
24,705
|
Operating Cash Flows
Operating cash outflows during the three months ended March 31, 2019 and 2018 were $8.0 million and $5.8 million, respectively. The increase in operating cash outflows during the three months ended March 31, 2019 compared to the three months ended March 31, 2018 was primarily related to additional employees, increased professional fees and travel costs, and increased marketing and conference sponsorship costs.
Investing Cash Flows
Investing cash inflows (outflows) during the three months ended March 31, 2019 and 2018 were $10.7 million and $(5.2) million, respectively. The investing cash inflows during the three months ended March 31, 2019 were primarily the result of the sale of $17.0 million of investment securities partially offset by cash used in the development of the Project
of $5.9 million. The investing cash outflows for three months ended March 31, 2018 were the result of cash used in the development of the Project of $5.2 million.
Financing Cash Flows
Financing cash outflows during the three months ended March 31, 2019 and 2018 were $0.3 million and zero, respectively. For the three months ended March 31, 2019 financing cash outflows were primarily the result of shares of Company common stock repurchased related to share-based compensation.
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 FID made to finance and construct the Project. Even if successfully completed, the Project will not begin to operate and generate 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.
Contractual Obligations
There have been no material changes to our contractual obligations from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018, except for our commitment of $0.9 million at March 31, 2019 for the implementation of the first phase of a new enterprise resource planning system as compared to zero at December 31, 2018.
Results of Operations
The following table summarizes costs, expenses and other income for the periods indicated (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
Change
|
|
Revenues
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
General and administrative expenses
|
|
|
12,019
|
|
|
16,001
|
|
|
(3,982)
|
|
Land option and lease expenses
|
|
|
428
|
|
|
250
|
|
|
178
|
|
Depreciation expense
|
|
|
41
|
|
|
29
|
|
|
12
|
|
Operating loss
|
|
|
(12,488)
|
|
|
(16,280)
|
|
|
3,792
|
|
Loss on Common Stock Warrant liabilities
|
|
|
(197)
|
|
|
—
|
|
|
(197)
|
|
Interest income, net
|
|
|
466
|
|
|
122
|
|
|
344
|
|
Other
|
|
|
176
|
|
|
(42)
|
|
|
218
|
|
Net loss attributable to NextDecade Corporation
|
|
|
(12,043)
|
|
|
(16,200)
|
|
|
4,157
|
|
Preferred stock dividends
|
|
|
(4,972)
|
|
|
—
|
|
|
(4,972)
|
|
Deemed dividends on Series A Convertible Preferred Stock
|
|
|
(551)
|
|
|
—
|
|
|
(551)
|
|
Net loss attributable to common stockholders
|
|
$
|
(17,566)
|
|
$
|
(16,200)
|
|
$
|
(1,366)
|
Our consolidated net loss was $12.0 million, or $0.16 per share (basic and diluted), for the three months ended March 31, 2019 compared to a net loss of $16.2 million, or $0.15 per share (basic and diluted), for the three months ended March 31, 2018. The $4.2 million decrease in net loss was primarily a result of decreased general and administrative expenses and increased interest income discussed separately below.
General and administrative expenses during the three months ended March 31, 2019 decreased $4.0 million compared to the same period in 2018 primarily due to a decrease in share-based compensation expense of $6.9 million partially offset by an increase in expenses related to additional employees, increased professional fees and travel costs, and increased marketing and conference sponsorship costs.
Loss on Common Stock Warrant liabilities for the three months ended March 31, 2019 is primarily due to an increase in the share price of Company common stock from December 31, 2018 to the remeasurement date at March 31, 2019. There were no liability classified common stock warrants during the three months ended March 31, 2018.
Interest income, net during the three months ended March 31, 2019 increased $0.3 million, compared to the same period in 2018 due to increased yield and higher average balances maintained in our cash, cash equivalent and investment securities accounts.
Preferred stock dividends of $5.0 million consisted of dividends paid-in kind of $2.5 million related to the issuance of 1,561 additional shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and 919 additional shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” on January 15, 2019 and $2.5 million of dividends declared on March 22, 2019. There was no Series A Preferred Stock or Series B Preferred Stock issued or outstanding during the three months ended March 31, 2018.
Deemed dividends on the Series A Preferred Stock for the three months ended March 31, 2019 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 March 31, 2019.
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, 2018.
Recent Accounting Standards
For descriptions of recently issued accounting standards, see
Note 12 –
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 March 31, 2019. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2019, 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.