Company Quick10K Filing
Nextdecade
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 107 $654
10-Q 2019-11-05 Quarter: 2019-09-30
10-Q 2019-08-06 Quarter: 2019-06-30
10-Q 2019-05-07 Quarter: 2019-03-31
10-K 2019-03-06 Annual: 2018-12-31
10-Q 2018-11-09 Quarter: 2018-09-30
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-09 Quarter: 2018-03-31
10-K 2018-03-08 Annual: 2017-12-31
10-Q 2017-11-08 Quarter: 2017-09-30
10-Q 2017-08-09 Quarter: 2017-06-30
10-Q 2017-05-15 Quarter: 2017-03-31
10-K 2017-03-10 Annual: 2016-12-31
10-Q 2016-11-14 Quarter: 2016-09-30
10-Q 2016-08-15 Quarter: 2016-06-30
10-Q 2016-05-20 Quarter: 2016-03-31
10-K 2016-04-01 Annual: 2015-12-31
10-Q 2015-11-03 Quarter: 2015-09-30
10-Q 2015-08-13 Quarter: 2015-06-30
10-Q 2015-05-18 Quarter: 2015-03-31
8-K 2020-01-24 Enter Agreement, Regulation FD, Exhibits
8-K 2019-12-27 Officers
8-K 2019-11-21 Regulation FD, Exhibits
8-K 2019-10-24 Enter Agreement, Sale of Shares, Regulation FD, Exhibits
8-K 2019-10-01 Other Events, Exhibits
8-K 2019-08-07 Regulation FD
8-K 2019-07-12 Shareholder Vote, Exhibits
8-K 2019-06-04 Officers, Other Events
8-K 2019-05-24 Enter Agreement, Regulation FD
8-K 2019-05-17 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-04-01 Regulation FD
8-K 2019-03-06 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2019-02-11 Regulation FD
8-K 2018-09-25 Shareholder Vote
8-K 2018-09-05 Officers
8-K 2018-08-28 Officers, Regulation FD, Exhibits
8-K 2018-08-24 Enter Agreement, Sale of Shares, Regulation FD, Other Events, Exhibits
8-K 2018-08-24 Enter Agreement, Sale of Shares, Regulation FD, Other Events, Exhibits
8-K 2018-08-03 Enter Agreement, Sale of Shares, Regulation FD, Exhibits
8-K 2018-06-15 Shareholder Vote
8-K 2018-04-24 Regulation FD
8-K 2018-04-11 Enter Agreement, Sale of Shares, Exhibits
8-K 2018-02-20 Other Events
8-K 2018-02-13 Regulation FD
8-K 2018-01-23 Officers, Exhibits
NEXT 2019-09-30
Part I - Financial Information
Item 1. Financial Statements.
Note 1 - Background and Basis of Presentation
Note 2 - Prepaid Expenses and Other Current Assets
Note 3 - Investment Securities
Note 4 - Property, Plant and Equipment
Note 5 - Leases
Note 6 - Other Non-Current Assets
Note 7 - Accrued Liabilities and Other Current Liabilities
Note 8 - Preferred Stock and Common Stock Warrants
Note 9 - Net Loss per Share
Note 10 - Share-Based Compensation
Note 11 - Income Taxes
Note 12 - Commitments and Contingencies
Note 13 - Recent Accounting Pronouncements
Note 14 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 ex_161820.htm
EX-10.2 ex_161189.htm
EX-31.1 ex_155807.htm
EX-31.2 ex_155808.htm
EX-32.1 ex_155809.htm
EX-32.2 ex_155810.htm

Nextdecade Earnings 2019-09-30

NEXT 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
GPOR 782 6,465 2,858 1,556 387 526 981 2,961 25% 3.0 8%
XOG 737 4,253 2,339 1,014 0 114 732 2,266 0% 3.1 3%
NOG 736 1,494 1,105 725 635 175 252 1,595 88% 6.3 12%
GTE 658 2,032 985 311 0 105 134 1,200 0% 8.9 5%
NEXT 654 165 20 0 0 -41 -41 649 -15.8 -25%
DMLP 631 128 5 76 49 54 65 610 64% 9.4 42%
WTI 620 868 1,203 548 0 174 203 1,189 0% 5.9 20%
LPI 603 2,620 1,276 921 0 369 681 1,582 0% 2.3 14%
DNR 566 4,732 3,461 1,380 0 374 793 3,009 0% 3.8 8%
CRK 548 2,283 1,677 487 0 155 416 1,768 0% 4.3 7%

10-Q 1 next20190817_10q.htm FORM 10-Q next20190817_10q.htm
 

 

Table of Contents



    

UNITED STATES 

 SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

  

FORM 10-Q

  

(MARK ONE) 

  

      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For the quarterly period ended September 30, 2019

  

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  

For the transition period from                    to                    

  

Commission File No. 001-36842

  

NEXTDECADE CORPORATION 

(Exact name of registrant as specified in its charter)

  

 

 

 

Delaware

    

46-5723951

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

  

1000 Louisiana Street, Suite 3900, Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

  

(713) 574-1880

(Registrant’s telephone number, including area code)

  

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class:

    

Trading Symbol:

    

Name of each exchange on which registered:

Common Stock, $0.0001 par value

 

NEXT

 

The Nasdaq Stock Market LLC

  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒   No ☐

  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

  

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐    

Smaller reporting company

 

Emerging growth company

  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☒

  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

  

As of November 1, 2019, the issuer had 120,762,858 shares of common stock outstanding.

  



 

 

  

 

NEXTDECADE CORPORATION 

 

FORM 10-Q FOR THE QUARTER ENDED September 30, 2019

 

TABLE OF CONTENTS 

 

 

Page

Organizational Structure 

 

 

 

Part I. Financial Information 

1

Item 1. Consolidated Financial Statements 

1

Consolidated Balance Sheets 

1

Consolidated Statements of Operations 

2

Consolidated Statements of Stockholders’ Equity, Series A and Series B Convertible Preferred Stock  

3

Consolidated Statements of Cash Flows 

4

Notes to Consolidated Financial Statements 

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 

12

Item 3. Quantitative and Qualitative Disclosures About Market Risk 

16

Item 4. Controls and Procedures 

17

Part II. Other Information 

18

Item 1. Legal Proceedings 

18

Item 1A. Risk Factors 

18

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

18

Item 3. Defaults Upon Senior Securities 

18

Item 4. Mine Safety Disclosures 

18

Item 5. Other Information 

18

Item 6. Exhibits 

19

Signatures 

20

  

  

 

 

Organizational Structure 

 

The following diagram depicts our abbreviated organizational structure as of September 30, 2019 with references to the names of certain entities discussed in this Quarterly Report on Form 10-Q.

 

 

Unless the context requires otherwise, references to “NextDecade,” the “Company,” “we,” “us” and “our” refer to NextDecade Corporation (Nasdaq: NEXT) and its consolidated subsidiaries.

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

NextDecade Corporation 

Consolidated Balance Sheets 

(in thousands, except per share data) 

(unaudited) 

   

September 30,

   

December 31,

 
   

2019

   

2018

 

Assets

               

Current assets

               

Cash and cash equivalents

  $ 3,841     $ 3,169  

Investment securities

    40,374       72,453  

Prepaid expenses and other current assets

    1,288       1,310  

Total current assets

    45,503       76,932  

Property, plant and equipment, net

    119,918       92,070  

Operating lease right-of-use assets, net

    1,336        
Other non-current assets     3,071        

Total assets

  $ 169,828     $ 169,002  
                 

Liabilities, Series A and Series B Convertible Preferred Stock and Stockholders’ Equity

               

Current liabilities

               

Accounts payable

  $ 1,400     $ 719  

Share-based compensation liability

    182       3,018  

Accrued liabilities and other current liabilities

    19,911       8,353  

Current operating lease liabilities

    1,512        

Total current liabilities

    23,005       12,090  

Non-current common stock warrant liabilities

    10,343       7,441  

Non-current operating lease liabilities

    10        

Total liabilities

    33,358       19,531  
                 

Commitments and contingencies (Note 12)

               
                 

Series A Convertible Preferred Stock, $1,000 per share liquidation preference, Issued and outstanding: 56,491 shares and 51,720 shares at September 30, 2019 and December 31, 2018, respectively

    46,186       40,091  

Series B Convertible Preferred Stock, $1,000 per share liquidation preference, Issued and outstanding: 54,019 shares and 29,636 shares at September 30, 2019 and December 31, 2018, respectively

    48,188       26,159  
                 

Stockholders’ equity

               
Common stock, $0.0001 par value Authorized: 480.0 million shares at September 30, 2019 and December 31, 2018, Issued and outstanding: 107.2 million shares and 106.9 million shares at September 30, 2019 and December 31, 2018, respectively     11       11  

Treasury stock: 137,860 shares and 6,425 shares at September 30, 2019 and December 31, 2018, respectively, at cost

    (685 )     (35 )

Preferred stock, $0.0001 par value Authorized: 0.9 million, after designation of the Series A and Series B Convertible Preferred Stock, Issued and outstanding: none at September 30, 2019 and December 31, 2018, respectively

           

Additional paid-in-capital

    162,590       180,862  

Accumulated deficit

    (119,820 )     (97,617 )

Total stockholders’ equity

    42,096       83,221  

Total liabilities, Series A and Series B Convertible Preferred Stock and stockholders’ equity

  $ 169,828     $ 169,002  

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

NextDecade Corporation 

Consolidated Statements of Operations 

(in thousands, except per share data)

(unaudited)

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 

Revenues

  $     $     $     $  

Operating expenses

                               
General and administrative expense     3,579       6,214       10,405       25,533  
Invitation to bid contract costs           4,418       10,163       4,418  
Land option and lease expense     754       297       1,750       797  
Depreciation expense     80       50       164       127  

Total operating expenses

    4,413       10,979       22,482       30,875  

Total operating loss

    (4,413 )     (10,979 )     (22,482 )     (30,875 )

Other income (expense)

                               
Gain (loss) on common stock warrant liabilities     873       83       (965 )     83  
Interest income, net     319       222       1,193       475  
Other     (7 )     (6 )     264       (45 )

Total other (expense) income

    1,185       299       492       513  

Net loss attributable to NextDecade Corporation

    (3,228 )     (10,680 )     (21,990 )     (30,362 )
Preferred stock dividends     (2,849 )           (7,821 )      
Deemed dividends on Series A Convertible Preferred Stock     (286 )     (271 )     (1,324 )     (271 )

Net loss attributable to common stockholders

  $ (6,363 )   $ (10,951 )   $ (31,135 )   $ (30,633 )
                                 
Net loss per common share - basic and diluted   $ (0.06 )   $ (0.10 )   $ (0.29 )   $ (0.29 )
                                 
Weighted average shares outstanding - basic and diluted     107,181       106,639       107,062       106,476  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

NextDecade Corporation 

Consolidated Statement of Stockholders’ Equity, Series A and Series B Convertible Preferred Stock

(in thousands) 

(unaudited)

 

 

   

For the Three Months Ended September 30, 2019

 
    Common Stock   Treasury Stock                   Accumulated             Series A     Series B  
           

Par

                   

Additional

           

Other

   

Total

    Convertible     Convertible  
           

Value

                   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders’

    Preferred     Preferred  
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Equity

   

Stock

   

Stock

 

Balance at June 30, 2019

    107,169     $ 11       103     $ (466 )   $ 170,374     $ (116,592 )   $     $ 53,327     $ 44,263     $ 46,987  
Share-based compensation                             (4,648 )                 (4,648 )            
Restricted stock vesting     88                                           -              
Shares repurchased related to share-based compensation     (34 )           34       (219 )                       (219 )            
Preferred stock dividends                             (2,850 )                 (2,850 )     1,637       1,201  
Deemed dividends - accretion of beneficial conversion feature                             (286 )                 (286 )     286        
Net loss                                   (3,228 )           (3,228 )            

Balance at September 30, 2019

    107,223     $ 11       137     $ (685 )   $ 162,590     $ (119,820 )   $     $ 42,096     $ 46,186     $ 48,188  

 

 

   

For the Nine Months Ended September 30, 2019

 
    Common Stock   Treasury Stock                   Accumulated             Series A     Series B  
           

Par

                   

Additional

           

Other

   

Total

   

Convertible

    Convertible  
           

Value

                   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders’

    Preferred     Preferred  
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Equity

   

Stock

    Stock  

Balance at December 31, 2018

    106,856     $ 11       6     $ (35 )   $ 180,862     $ (97,617 )   $     $ 83,221     $ 40,091     $ 26,159  

Adoption of ASC Topic 842

                                  (213 )           (213 )            

Adoption of ASU 2018-07

                            2,116                   2,116              

Share-based compensation

                            (11,738 )                 (11,738 )            

Restricted stock vesting

    498                         495                   495              

Shares repurchased related to share-based compensation

    (131 )           131       (650 )                       (650 )            

Issuance of Series B Convertible Preferred Stock

                                                          19,009  

Preferred stock dividends

                            (7,821 )                 (7,821 )     4,771       3,020  

Deemed dividends - accretion of beneficial conversion feature

                            (1,324 )                 (1,324 )     1,324        

Net loss

                                  (21,990 )           (21,990 )            

Balance at September 30, 2019

    107,223     $ 11       137     $ (685 )   $ 162,590     $ (119,820 )   $ -     $ 42,096     $ 46,186     $ 48,188  

 

   

For the Three Months Ended September 30, 2018

 
    Common Stock   Treasury Stock                   Accumulated             Series A     Series B  
           

Par

                   

Additional

           

Other

   

Total

    Convertible     Convertible  
           

Value

                   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders’

    Preferred     Preferred  
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Equity

   

Stock

   

Stock

 

Balance at June 30, 2018

    106,398     $ 11           $     $ 169,454     $ (75,339 )   $     $ 94,126     $     $  

Share-based compensation

                            2,453                   2,453              

Restricted stock vesting

    13                                                        

Shares repurchased related to share-based compensation

    (3 )           3       (19 )                       (19 )            

Issuance of Series A preferred stock

    414                         4,638                   4,638       38,549        

Issuance of Series B preferred stock

                                                          26,159  

Deemed dividends - accretion of beneficial conversion feature

                            (271 )                 (271 )     271        

Net loss

                                  (10,680 )           (10,680 )            

Balance at September 30, 2018

    106,822     $ 11       3     $ (19 )   $ 176,274     $ (86,019 )   $     $ 90,247     $ 38,820     $ 26,159  

 

 

   

For the Nine Months Ended September 30, 2018

 
    Common Stock   Treasury Stock                   Accumulated             Series A     Series B  
           

Par

                   

Additional

           

Other

   

Total

    Convertible     Convertible  
           

Value

                   

Paid-in

   

Accumulated

   

Comprehensive

   

Stockholders’

    Preferred     Preferred  
   

Shares

   

Amount

   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Equity

   

Stock

   

Stock

 

Balance at December 31, 2017

    106,275     $ 11           $     $ 158,738     $ (55,617 )   $ (40 )   $ 103,092     $     $  

Share-based compensation

                            13,169                   13,169              

Restricted stock vesting

    136                                                        

Shares repurchased related to share-based compensation

    (3 )           3       (19 )                       (19 )            

Issuance of Series A preferred stock

    414                         4,638                   4,638       38,549        

Issuance of Series B preferred stock

                                                          26,159  

Deemed dividends - accretion of beneficial conversion feature

                            (271 )                 (271 )     271        

Adoption of ASU 2016-01

                                  (40 )     40                    

Net loss

                                  (30,362 )           (30,362 )            

Balance at September 30, 2018

    106,822     $ 11       3     $ (19 )   $ 176,274     $ (86,019 )   $     $ 90,247     $ 38,820     $ 26,159  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

NextDecade Corporation

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

   

Nine Months Ended

 
   

September 30,

 
   

2019

   

2018

 

Operating activities:

               

Net loss attributable to NextDecade Corporation

  $ (21,990 )   $ (30,362 )

Adjustment to reconcile net loss to net cash used in operating activities

               

Depreciation

    164       127  

Share-based compensation expense

    (12,537 )     12,731  

(Gain) loss on common stock warrant liabilities

    965       (83 )

(Gain) loss on investment securities

    (276 )     28  

Realized gain on investment securities

    (39 )      

Amortization of right-of-use asset

    673        

Changes in operating assets and liabilities:

               

Prepaid expenses

    323       295  

Accounts payable

    84       (42 )

Operating lease liabilities

    (803 )      

Accrued expenses and other liabilities

    153       4,660  

Net cash used in operating activities

    (33,283 )     (12,646 )

Investing activities:

               

Acquisition of property, plant and equipment

    (18,609 )     (11,460 )

Proceeds from sale of investment securities

    48,500        

Purchase of investment securities

    (16,106 )     (55,100 )

Net cash provided by (used in) investing activities

    13,785       (66,560 )

Financing activities:

               

Proceeds from equity issuance

    20,945       79,055  

Preferred stock dividends

    (30 )      
Equity issuance costs     (95 )     (1,653 )

Shares repurchased related to share-based compensation

    (650 )     (19 )

Net cash provided by financing activities

    20,170       77,383  

Net increase (decrease) in cash and cash equivalents

    672       (1,823 )

Cash and cash equivalents – beginning of period

    3,169       35,703  

Cash and cash equivalents – end of period

  $ 3,841     $ 33,880  
                 

Non-cash investing activities:

               

Accounts payable for acquisition of property, plant and equipment

  $ 964     $ 656  

Accrued liabilities for acquisition of property, plant and equipment

    15,316       6,056  

Non-cash financing activities:

               
Accounts payable for equity issuance costs   $     $ 150  
Accrued liabilities for equity issuance costs     103       301  

Paid-in-kind dividends on Series A and Series B Convertible Preferred Stock

    7,791        

Accretion of deemed dividends on Series A Convertible Preferred Stock

    1,324       271  

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

NextDecade Corporation 

Notes to Consolidated Financial Statements

(unaudited) 

 

 

Note 1 — Background and Basis of Presentation

 

NextDecade Corporation engages in development activities related to the liquefaction and sale of liquefied natural gas (“LNG”). We have focused and continue to focus our development activities on the Rio Grande LNG terminal facility at the Port of Brownsville in southern Texas (the “Terminal”) and an associated 137-mile Rio Bravo pipeline to supply gas to the Terminal (the “Pipeline” and together with the Terminal, the “Project”). In January 2017, we also secured a 994-acre site near Texas City, Texas for another potential LNG terminal (the “Galveston Bay Terminal”).

 

Basis of Presentation 

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2018. In our opinion, all adjustments, consisting only of normal recurring items, which are considered necessary for a fair presentation of the unaudited consolidated financial statements, have been included.  The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the operating results for the full year.

 

During the first quarter of 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“Topic 842”), which requires lessees to recognize a right-of-use asset and a lease liability for all operating leases.  The Company adopted Topic 842 using a prospective transition approach, which applies the provisions of Topic 842 at the effective date without adjusting the comparative periods presented, with certain practical expedients available to ease the burden of adoption.  See Note 5 – Leases for additional information.

 

 

 

Note 2 — Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consisted of the following (in thousands):

 

  

   

September 30,

   

December 31,

 
   

2019

   

2018

 

Rio Grande LNG site option

  $ 73     $ 508  

Short-term security deposits

    49       18  

Prepaid insurance

    371       233  

Prepaid marketing and sponsorships

    65       242  
Prepaid rent     79       10  

Prepaid subscriptions

    137       26  
Equity issuance costs     198        

Other

    316       273  

Total prepaid expenses and other current assets

  $ 1,288     $ 1,310  

  

 

Note 3 — Investment Securities

 

We invest in Class L shares of the JPMorgan Managed Income Fund.  The JPMorgan Managed Income Fund has an average maturity of approximately one year, duration of approximately six months, and approximately 7% of such fund’s holdings are AAA-rated with 0% non-investment grade rated. 

 

Investment securities consisted of the following (in thousands):

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 
   

Fair value

   

Cost

   

Fair value

   

Cost

 

JPMorgan Managed Income Fund

  $ 40,374     $ 40,238     $ 72,453     $ 72,567  

 

 

 

Note 4 — Property, Plant and Equipment

 

Property, plant and equipment consisted of the following (in thousands):

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 

Fixed Assets

               

Computers

  $ 392     $ 164  

Furniture, fixtures, and equipment

    472       316  

Leasehold improvements

    546       420  

Total fixed assets

    1,410       900  

Less: accumulated depreciation

    (706 )     (542 )

Total fixed assets, net

    704       358  

Project Assets (not placed in service)

               

Rio Grande

    107,160       80,407  

Rio Bravo

    12,054       11,305  

Total project assets

    119,214       91,712  

Total property, plant and equipment, net

  $ 119,918     $ 92,070  

 

Depreciation expense was $80 thousand and $50 thousand for the three months ended September 30, 2019 and 2018, respectively, and $164 thousand and $127 thousand during the nine months ended September 30, 2019 and 2018, respectively.  

 

 

Note 5 — Leases

 

We currently lease approximately 38,300 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.  Such option was included in the measurement of Operating lease right-of-use assets and Operating lease liabilities.

 

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 positive final investment decision (“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. 

 

 

Operating lease right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is derived from information available at the lease commencement date and represents the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. The right-of-use assets and lease liabilities may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease arrangements that include both lease and non-lease components. The Company accounts for non-lease components separately from the lease component.

 

Operating lease right-of-use assets as of September 30, 2019 are as follows (in thousands):

 

Office leases

  $ 797  

Land leases

    539  

Total operating lease right-of-use assets, net

  $ 1,336  

 

Operating lease liabilities as of September 30, 2019 are as follows (in thousands):

 

Office leases

  $ 935  

Land leases

    577  

Total current lease liabilities

    1,512  

Non-current office leases

    10  

Non-current land leases

     

Total lease liabilities

  $ 1,522  

 

Operating lease expense is as follows (in thousands):

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30, 2019

   

September 30, 2019

 

Office leases

  $ 232     $ 381  

Land leases

    328       815  

Total operating lease expense

    560       1,196  

Short-term lease expense

    38       78  

Land option expense

    156       476  

Total land option and lease expense

  $ 754     $ 1,750  

 

Maturity of operating lease liabilities as of September 30, 2019 are as follows (in thousands, except lease term and discount rate):

 

2019 (remaining)

  $ 188  

2020

    1,412  

2021

    3  

2022

     

2023

     

Thereafter

     

Total undiscounted lease payments

    1,603  

Discount to present value

    (81 )

Present value of lease liabilities

  $ 1,522  
         

Weighted average remaining lease term - years

    1.1  

Weighted average discount rate - percent

    12.0  

 

Other information related to our operating leases for the nine months ended September 30, 2019 is as follows (in thousands):

 

Cash paid for amounts included in the measurement of operating lease liabilities:

       

Cash flows from operating activities

  $ 969  

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

    446  

 

 

 

Note 6 — Other Non-Current Assets 

 

Other non-current assets consisted of the following (in thousands):

 

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 

Permitting costs (1)

  $ 1,151     $ -  

Enterprise resource planning system

    1,920       -  

Total other non-current assets

  $ 3,071     $ -  

 

(1) Permitting costs primarily represent costs incurred in connection with our permit application to the United States Army Corps of Engineers and the cost of wetlands and habitat mitigation measures that may be caused by the construction of the Project.

 

 

Note 7 — Accrued Liabilities and Other Current Liabilities

 

Accrued liabilities and other current liabilities consisted of the following (in thousands):

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 

Employee compensation expense

  $ 3,148     $ 3,130  

Project asset costs

    15,396       2,014  

Valve installation incentive(1)

    -       2,000  

Accrued legal services

    534       313  

Other accrued liabilities

    833       896  

Total accrued liabilities and other current liabilities

  $ 19,911     $ 8,353  

 

(1) 

In April 2018, we entered into an agreement with an intrastate pipeline company with assets near the Terminal which incentivizes the 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 would reimburse the pipeline company a cash amount equal to 50% of the costs incurred in connection with the valve, up to a maximum payment of $2.0 million. Such valve was installed in 2018 and we reimbursed the pipeline company $2.0 million in the first quarter of 2019.

  

 

 

Note 8 – 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 and May 2019, we sold an aggregate of 29,055 shares and 20,945 shares, respectively, 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 a combined purchase price of $50 million and we issued an additional 999 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 Convertible Preferred Stock (the “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 nine months ended September 30, 2019, the Company paid-in-kind $4.8 million and $3.0 million of dividends to the holders of the Series A Preferred Stock and the Series B Preferred Stock, respectively.  On October 15, 2019, the Company paid-in-kind $1.7 million and $1.6 million of dividends to the holders of the Series A Preferred Stock and the Series B Preferred Stock, respectively, as of the close of business on September 15, 2019.

 

Common Stock Warrants 

 

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 Common Stock Warrants was recorded as a non-current liability on our Consolidated Balance Sheet on the issuance dates.  The Company revalues the Common Stock Warrants at each balance sheet date and recognized a gain of $0.9 million and a loss of  approximately $1.0 million during each of the three and nine months ended September 30, 2019, respectively. The Common Stock Warrants are included in Level 3 of the fair value hierarchy.

 

The Common Stock Warrants have a fixed three-year term commencing on the closings of each issuance of the associated Convertible Preferred Stock.  The Common Stock 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 Common Stock 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 (as defined in the certificate of designations of the applicable Convertible Preferred Stock) and, in the case of the warrants issued together with the Series B Preferred Stock (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. 

 

The Company used a Monte Carlo simulation model to estimate the fair value of the Common Stock Warrants using the following assumptions:

 

   

September 30,

   

December 31,

 
   

2019

   

2018

 

Stock price

  $ 5.76     $ 5.40  

Exercise price

  $ 0.01     $ 0.01  

Risk-free rate

    1.6 %     2.5 %

Volatility

    27.0 %     33.1 %

Term (years)

    2.1       2.7  

 

 

Beneficial Conversion Feature 

 

ASC 470-20-20 – Debt – Debt with conversion and Other Options (“ASC 470-20”) defines a beneficial conversion feature (“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. 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. Deemed dividends on the Series A Preferred Stock was $0.3 million for each of the three months ended September 30, 2019 and 2018, and $1.3 million and $0.3 million for each of the nine months ended September 30, 2019 and 2018, respectively.

 

Initial Fair Value Allocation 

 

Net cash proceeds from the sale of the Series B Preferred Stock in May 2019 were allocated on a fair value basis to the Series B Warrants and on a relative fair value basis to the Series B Preferred Stock.

 

The allocation of the net cash proceeds is as follows (in thousands):

 

           

Allocation of Proceeds

 
                   

Series B

 
           

Series B

   

Preferred

 
           

Warrants

   

Stock

 

Gross proceeds

  $ 20,945                  

Equity issuance costs

                     

Net proceeds - Initial Fair Value Allocation

  $ 20,945     $ 1,936     $ 19,009  

Per balance sheet upon issuance

          $ 1,936     $ 19,009  

 

 

Note 9 — Net Loss Per Share

 

The following table (in thousands, except for loss per share) reconciles basic and diluted weighted average common shares outstanding for each of the three and nine months ended September 30, 2019 and 2018:

 

   

Three months ended

   

Nine months ended

 
   

September 30,

   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 

Weighted average common shares outstanding:

                               
Basic     107,181       106,639       107,062       106,476  

Dilutive unvested stock, Convertible Preferred Stock, Common Stock Warrants and IPO Warrants

                       

Diluted

    107,181       106,639       107,062       106,476  
                                 

Basic and diluted net loss per share attributable to common stockholders

  $ (0.06 )   $ (0.10 )   $ (0.29 )   $ (0.29 )

 

 

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,

 
   

2019

   

2018

   

2019

   

2018

 
Unvested stock (1)     989       513       768       483  
Convertible Preferred Stock     14,678       3,322       12,829       1,119  
Common Stock Warrants     1,801       425       1,576       143  
IPO Warrants(2)     12,082       12,082       12,082       12,082  

Total potentially dilutive common shares

    29,550       16,342       27,255       13,827  

 


(1) 

Does not include 3.2 million shares for each of the three and nine months ended September 30, 2019 and 16.3 million shares for the three and nine months ended September 30, 2018, of unvested stock because the performance conditions had not yet been satisfied as of September 30, 2019 and 2018, respectively.

(2) 

In 2015, the Company issued warrants in connection with its initial public offering (the “IPO Warrants”).  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 Company 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 10 — 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

   

Nine months ended

 
   

September 30,

   

September 30,

 
   

2019

   

2018

   

2019

   

2018

 

Share-based compensation:

                               

Equity awards

  $ (4,648 )   $ 2,451     $ (11,738 )   $ 13,169  
Liability awards           (1,153 )     (20 )     977  

Total share-based compensation

    (4,648 )     1,298       (11,758 )     14,146  
Capitalized share-based compensation     (71 )     183       (780 )     (1,415

)

Total share-based compensation expense

  $ (4,719 )   $ 1,481     $ (12,538 )   $ 12,731  

 

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 FID in the Project (the “FID Bonus”).  In January 2018, the compensation committee, formerly 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 $0.2 million and $0.4 million is included in Share-based compensation liability in our Consolidated Balance Sheets at September 30, 2019 and December 31, 2018, respectively.

  

  

  

 

Note 11 — Income Taxes

 

Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at September 30, 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 and nine months ended September 30, 2019 and 2018.

 

 

Note 12 — Commitments and Contingencies

 

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, 2019, 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 effect will not occur.

 

Engineering, Procurement and Construction Contract 

 

 During the second quarter of 2019, we issued a limited notice to proceed (“LNTP”) to Bechtel Oil, Gas and Chemicals, Inc. (“Bechtel”) under that certain Fixed Price Turnkey Agreement for the Engineering, Procurement and Construction of Trains 1 and 2 of the Rio Grande Natural Gas Liquefaction Facility by and between Rio Grande and Bechtel, dated as of May 24, 2019 (the "EPC Contract").  In connection with the issuance of the LNTP, we were committed to spend approximately $30.3 million in 2019, of which $5.0 million was paid as of September 30, 2019 and an additional $15.0 million was settled with the issuance of approximately 2.1 million shares of Company common stock subsequent to September 30, 2019.

 

Permitting Costs

 

During the third quarter of  2019, we entered into agreements with third parties for wetland and habitat mitigation measures. In connection with the wetland and habitat mitigation measures, we are committed to spend approximately $3.4 million in 2019 and $5.5 million in 2020.  

 

 

  

  

 

Note 13 — Recent Accounting Pronouncements

 

The following table provides a brief description of recent accounting standards that were adopted by the Company as of September 30, 2019:

 

Standard

 

Description

 

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 have adopted this accounting standard using a prospective transition approach, which applies the provisions of the new guidance at the effective date without adjusting the comparative periods presented. Upon adoption of this standard, we recognized operating lease right-of use assets of $1.6 million and operating lease liabilities of $1.9 million.  See Note 5 - Leases of our Notes to Consolidated Financial Statements for additional details.

ASU 2018-07, Compensation-Stock Compensation (Topic 718)

 

This standard simplifies aspects of share-based compensation issued to non-employees by making the guidance consistent with accounting for employee share-based compensation. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor's own operations by issuing share-based payment awards. This standard may be early adopted, and must be adopted using a modified retrospective approach.

 

January 1, 2019

 

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.  The fair value of share based compensation awards to non-employees will not be remeasured subsequent to December 31, 2018.  

ASU 2018-15, Intangibles, Goodwill and Other Internal Use Software (Subtopic 350-40)

 

The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update.  Accordingly, the amendments in this update require an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. These amendments may be early adopted and are required to be applied retrospectively or prospectively to all implementation costs incurred after the date of adoption.   July 1, 2019   Upon adoption of this standard, we capitalized approximately $1.9 million of implementation costs incurred for our Enterprise Resource Planning system.  The capitalized costs will be amortized over the hosting period. 
             

  

  

  

 

 

 

Note 14 — Subsequent Events

 

On October 1, 2019, we issued 2,119,728 shares of Company common stock to BDC Oil and Gas Holdings, LLC (“BDC Oil and Gas”),  an affiliate of Bechtel. The shares of Company common stock were issued in lieu of a cash payment of $15.0 million in amounts invoiced by Bechtel pursuant to the EPC Contract.

 

On October 24, 2019, the Company entered into a Common Stock Purchase Agreement (the "Stock Purchase Agreement") with Ninteenth Investment Company LLC, an affiliate of Mubadala Investment Company PJSC (the "Purchaser"), pursuant to which the Company agreed to sell, and the Purchaser agreed to purchase, an aggregate of $50.0 million of shares of Company common stock.  The offering of such shares of Company common stock and other transactions contemplated by the Stock Purchase Agreement closed on October 28, 2019.  At closing, the Company received proceeds of $50.0 million and issued 7,974,482 shares of Company common stock to the Purchaser.

  

 

 

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:

 

 

● 

progress in the development of our liquefied natural gas (“LNG”) liquefaction and export projects and the timing of that progress;

 

 

government approval of construction and operation of 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”) and the timing of that approval;

 

 

the successful completion of the Project by third-party contractors;

 

 

our ability to secure additional debt and equity financing in the future to complete the Project;

 

 

the accuracy of estimated costs for the Project;

 

 

statements that the Project, when completed, will have certain characteristics, including amounts of liquefaction capacities;

 

 

the development risks, operational hazards, regulatory approvals applicable to Rio Grande’s and Rio Bravo’s construction and operations activities;

 

 

our anticipated competitive advantage and technological innovation which may render our anticipated competitive advantage obsolete;

 

 

the global demand for and price of natural gas (versus the price of imported LNG);

 

 

the availability of LNG vessels worldwide;

 

 

negotiations for the Terminal site lease and right-of-way options for the Pipeline route;

 

 

changes in legislation and regulations relating to the LNG industry, including environmental laws and regulations that impose significant compliance costs and liabilities;

 

 

risks related to doing business in and having counterparties in foreign countries;

 

 

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;

 

 

management of growth;

 

 

general economic conditions;

 

 

our ability to generate cash;

 

 

●  

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

 

Common Stock Purchase Agreement

 

On October 24, 2019, the Company entered into a Common Stock Purchase Agreement (the “Stock Purchase Agreement”) with Ninteenth Investment Company LLC, an affiliate of Mubadala Investment Company PJSC (the “Purchaser”), pursuant to which the Company agreed to sell, and the Purchaser agreed to purchase, an aggregate of $50.0 million of shares of the Company common stock. The offering of such shares of Company common stock (the “Offering”) and the other transactions contemplated by the Stock Purchase Agreement closed on October 28, 2019.  At closing, the Company received proceeds of $50.0 million and issued 7,974,482 shares of Company common stock to the Purchaser.

 

For additional details on the Offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2019.

 

Significant Events

 

LNG Sale and Purchase Agreement 

 

In March 2019, we entered into a 20-year sale and purchase agreement (the “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, were for fully wrapped lump-sum separated turnkey (“LSTK”) EPC contracts for the Terminal. 

 

On May 24, 2019, we entered into two LSTK EPC agreements with Bechtel for the construction of (i) two LNG trains with expected aggregate production capacity up to approximately 11.74 million tonnes per annum (“mtpa”), two 180,000m3 full containment LNG tanks, one marine loading berth, related utilities and facilities, and all related appurtenances thereto, together with certain additional work options (the “Trains 1 and 2 EPC Agreement”) and (ii) an LNG train with expected production capacity of up to approximately 5.87 mtpa, related utilities and facilities, and all related appurtenances  thereto (the “Train 3 EPC Agreement” and together with the Trains 1 and 2 EPC Agreement, the “EPC Agreements”).  We agreed to pay to Bechtel a contract price of $7.042 billion for the work under the Trains 1 and 2 EPC Agreement and a contract price of $2.323 billion for the work under the Train 3 EPC Agreement.  Bechtel will perform limited notice to proceed (“LNTP”) activities until January 1, 2020 and agreed to accept approximately 2.1 million shares of Company common stock as payment for LNTP activities.

 

 

Series B Convertible Preferred Stock Purchase Agreements

 

On May 24, 2019, pursuant to the Series B Convertible Preferred Stock Purchase Agreements, dated as of May 17, 2019 (the “Series B Stock Purchase Agreements”), with (i) York Tactical Energy Fund, L.P. and York Tactical Energy Fund PIV-AN, L.P., (ii) First Series of HDML Fund I, LLC, Bardin Hill Event Driven Master Fund, LP, and HCN LP, (iii) Valinor Capital Partners, L.P. and Valinor Capital Partners Offshore Master Fund, L.P and (iv) HGC NEXT INV LLC we sold an aggregate of $20.945 million of shares of the Company’s Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock”), together with associated warrants.  Such warrants represent the right to acquire approximately 30 basis points (0.30%) 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.   

 

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. 

 

U.S. Fish and Wildlife Service Final Biological Opinion

 

On October 1, 2019, the U.S. Fish and Wildlife Service issued the final biological opinion to the FERC, concluding that the construction of the Project will not likely jeopardize the continued existence of the ocelot or the Gulf coast jaguarundi.

 

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 $3.8 million of cash and cash equivalents and $40.4 million of investment securities as of September 30, 2019

 

Sources and Uses of Cash

 

The following table summarizes the sources and uses of our cash for the periods presented (in thousands):

 

   

Nine Months Ended

 
   

September 30,

 
   

2019

   

2018

 

Operating cash flows

  $ (33,283 )   $ (12,646 )

Investing cash flows

    13,785       (66,560 )

Financing cash flows

    20,170       77,383  
                 

Net increase (decrease) in cash and cash equivalents

    672       (1,823 )

Cash and cash equivalents – beginning of period

    3,169       35,703  

Cash and cash equivalents – end of period

  $ 3,841     $ 33,880  

 

Operating Cash Flows 

 

Operating cash outflows during the nine months ended September 30, 2019 and 2018 were $33.3 million and $12.7 million, respectively.  The increase in operating cash outflows during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018 was primarily related to invitation to bid contract costs, additional employees, increased professional fees and travel costs, and increased marketing and conference sponsorship costs.

 

Investing Cash Flows 

 

Investing cash inflows (outflows) during the nine months ended September 30, 2019 and 2018 were $13.8 million and $(66.6) million, respectively. The investing cash inflows during the nine months ended September 30, 2019 were primarily the result of the sale of $48.5 million of investment securities partially offset by cash used in the development of the Project of $18.6 million and the purchase of investment securities of $16.1 million. The investing cash outflows for nine months ended September 30, 2018 were primarily the result of cash used in the development of the Project of $11.5 million and the purchase of investment securities of $55.1 million.

 

Financing Cash Flows 

 

Financing cash inflows during the nine months ended September 30, 2019 and 2018 were $20.2 million and $77.4 million, respectively. For the nine months ended September 30, 2019 financing cash inflows were primarily the result of the sale of Series B Preferred Stock for $20.9 million partially offset by $0.7 million of common stock repurchased related to share-based compensation. For the nine months ended September 30, 2018 financing cash inflows were primarily the result of $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 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 obligation of $25.3 million at September 30, 2019 for limited notice to proceed activities as compared to zero at December 31, 2018 and our obligation of $7.7 million at September 30, 2019 for wetland and habitat mitigation measures 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

   

For the Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2019

   

2018

   

Change

   

2019

   

2018

   

Change

 

Revenues

  $     $     $     $     $     $  

General and administrative expense

    3,579       6,214       (2,635 )     10,405       25,533       (15,128 )

Invitation to bid contract costs

    -       4,418       (4,418 )     10,163       4,418       5,745  

Land option and lease expense

    754       297       457       1,750       797       953  

Depreciation expense

    80       50       30       164       127       37  

Operating loss

    (4,413 )     (10,979 )     6,566       (22,482 )     (30,875 )     8,393  

Gain (loss) on common stock warrant liabilities

    873       83       790       (965 )     83       (1,048 )

Interest income, net

    319       222       97       1,193       475       718  

Other

    (7 )     (6 )     (1 )     264       (45 )     309  

Net loss attributable to NextDecade Corporation

    (3,228 )     (10,680 )     7,452       (21,990 )     (30,362 )     8,372  

Preferred stock dividends

    (2,849 )     -       (2,849 )     (7,821 )     -       (7,821 )

Deemed dividends on Series A Convertible Preferred Stock

    (286 )     (271 )     (15 )     (1,324 )     (271 )     (1,053 )

Net loss attributable to common stockholders

  $ (6,363 )   $ (10,951 )   $ 4,588     $ (31,135 )   $ (30,633 )   $ (502 )

 

Our consolidated net loss was $3.2 million, or $0.06 per common share (basic and diluted), for the three months ended September 30, 2019 compared to a net loss of $10.7 million, or $0.10 per common share (basic and diluted), for the three months ended September 30, 2018.  The $7.5 million decrease in net loss was primarily a result of decreased invitation to bid contract costs and a decrease in general and administrative expense discussed separately below.

 

Our consolidated net loss was $22.0 million, or $0.29 per common share (basic and diluted), for the nine months ended September 30, 2019 compared to a net loss of $30.4 million, or $0.29 per common share (basic and diluted), for the nine months ended September 30, 2018.  The $8.4 million decrease in net loss was primarily a result of a decrease in general and administrative expense discussed separately below, partially offset by an increase in invitation to bid contract costs and loss on common stock warrant liabilities.

 

General and administrative expense during the three months ended September 30, 2019 decreased $2.6 million compared to the same period in 2018 primarily due to a decrease in share-based compensation expense of $6.2 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.  The decrease in share-based compensation expense is primarily a result of forfeitures of restricted stock during the three months ended September 30, 2019.

 

 

General and administrative expense during the nine months ended September 30, 2019 decreased $15.1 million compared to the same period in 2018 primarily due to a decrease in share-based compensation expense of $25.3 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.  The decrease in share-based compensation expense is primarily a result of forfeitures of restricted stock during the nine months ended September 30, 2019.

 

For the three and nine months ended September 30, 2019, we incurred approximately zero and $10.2 million, respectively of  invitation to bid contract costs as a result of our receipt of bid packages from Bechtel and Fluor and the execution of the EPC Agreements with Bechtel discussed under Significant Events above, compared to  $4.4 million of invitation to bid contract costs incurred during each of the same periods in 2018.

 

The gain on common stock warrant liabilities of $0.9 million for the three months ended September 30, 2019 is primarily due to an decrease in the share price of Company common stock from December 31, 2018 to the re-measurement date at September 30, 2019 as compared to a $0.1 million gain during each of the three and nine months ended September 30, 2018 due to a decrease in the share price of the Company common stock from the initial valuation dates to September 30, 2018.

 

Loss on common stock warrant liabilities of $1.0 million for the nine months ended September 30, 2019 is primarily due to an increase in the share price of Company common stock from December 31, 2018 to the re-measurement date at September 30, 2019.

 

Interest income, net during the three and nine months ended September 30, 2019 increased $0.1 million and $0.7 million, respectively, compared to the same periods in 2018 due to increased yield and higher average balances maintained in our cash, cash equivalent and investment securities accounts.

 

Preferred stock dividends for the three and nine months ended September 30, 2019 of $2.8 million and $7.8 million, respectively, consisted of dividends paid-in kind to holders of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and Series B Preferred Stock.  There were no dividends declared to the holders of Series A Preferred Stock or Series B Preferred Stock during the three or nine months ended September 30, 2018.

 

Deemed dividends on the Series A Preferred Stock for the three and nine months ended September 30, 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 September 30, 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 13 – 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, 2019. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 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.

 

 

 

PART II – OTHER INFORMATION

 

Item 1.   Legal Proceedings

 

None.

 

Item 1A. Risk Factors

 

There were no changes to the risk factors previously disclos