UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑KK/A
(Amendment No. 1)
(MARK ONE)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20172018
☐ 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 |
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(State or other jurisdiction of incorporation or organization) |
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(Address of principal executive offices) |
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Registrant’s telephone number, including area code: (713) 574-1880
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $ 0.0001 par value |
| The NASDAQ Stock Market LLC |
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(Title of Class) |
| (Name of each exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act: None
Redeemable Warrants, each to purchase one Share of Common Stock
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
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 and posted on its corporate Web site, if any,, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐
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 |
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| 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 ☒
The aggregate market value of the registrant’s Common Stock held by non-affiliates of the registrant was approximately $113.7$137.1 million as of June 30, 2017.29, 2018.
106,397,602110,035,774 shares of the registrant’s Common Stock, $0.0001 par value, were outstanding as of March 1, 2018.
Documents incorporated by reference: The definitive proxy statement for the registrant’s Annual Meeting of Stockholders (to be filed within 120 days of the close of the registrant’s fiscal year) is incorporated by reference into Part III.April 9, 2019.
TABLE OF CONTENTS
TABLE OF CONTENTS
1
Organizational StructureExplanatory Note
The following diagram depicts our abbreviated organizational structure as ofNextDecade Corporation (the “Company”) is filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 20172018 (the “Original Form 10-K”), which was filed with referencesthe Securities and Exchange Commission (the “SEC”) on March 6, 2018 solely to include information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K. This information was previously omitted from the Original Form 10-K in reliance on General Instruction G(3) to Form 10-K, which permits the information in the above referenced items to be incorporated in the Form 10-K by reference from a definitive proxy statement if such statement is filed no later than 120 days after the Company’s fiscal year end.
Pursuant to the namesrules of certain entities discussedthe SEC, Part IV, Item 15 has also been amended to contain the currently dated certifications from the Company’s principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. The certifications of the Company’s principal executive officer and principal financial officer are attached to this Amendment as Exhibits 31.1 and 31.2. Because no financial statements have been included in this annual report.Amendment and this Amendment does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4 and 5 of the certifications have been omitted. Part IV, Item 15 has also been amended to include certain exhibits required to be filed as part of this Amendment.
UnlessThis Amendment amends and restates in its entirety Items 10, 11, 12, 13 and 14 of Part III of the context requiresOriginal Form 10-K, and it deletes the reference on the cover of the Original Form 10-K to the incorporation by reference to portions of the definitive proxy statement into Part III of the Original Form 10-K. Except as described above, this Amendment does not otherwise referencesrevise, restate, modify or update any information in the Original Form 10-K. Accordingly, this Amendment should be read in conjunction with the Original Form 10-K and the Company’s other filings with the SEC subsequent to “NextDecade,” the “Company,” “we,” “us” and “our” refer to NextDecade Corporation and its consolidated subsidiaries.filing of the Original Form 10-K.
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Cautionary Statement Regarding Forward-Looking StatementsPart III
Item 10. Directors, Executive Officers and Corporate Governance
Identification of Directors
This Annual ReportCurrently, the board of directors (the “Board”) of the Company consists of eleven members. The Company’s Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) and its Amended and Restated Bylaws (the “Bylaws”) provide that the Board be classified into three classes. These classes are designated as Class A directors, Class B directors and Class C directors, with members of each class holding office for staggered three-year terms. Newly created directorships or vacancies on Form 10-K contains certain statements that are,the Board resulting from death, resignation, disqualification, removal or other causes may be deemed to be, “forward-looking statements” withinfilled by the meaningaffirmative vote of Section 27Aa majority of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21Eremaining directors then in office, even if less than a quorum of the Securities Exchange ActBoard is present, or by a sole remaining director. Each such director so chosen shall hold office until the Company’s next annual meeting of 1934,stockholders or until such director’s successor is duly elected and qualified or until such director’s earlier death, resignation or removal in accordance with the Bylaws.
There are currently four Class A directors, four Class B directors and three Class C directors. Each of the Class A directors, except for Koo Yung Lee, has a term that expires at the 2021 Annual Meeting of Stockholders or until such date that their successors are duly elected and qualified or until their earlier death, resignation or removal in accordance with the Bylaws. Mr. Lee has a term that expires at the 2019 Annual Meeting of Stockholders because he was appointed by the Board on September 5, 2018 to fill a newly created directorship and, pursuant to the Bylaws, directors appointed to fill newly created directorships shall hold office until the Company’s next annual meeting of stockholders, which, in his case, is the 2019 Annual Meeting of Stockholders. If Mr. Lee is elected by the stockholders at the 2019 Annual Meeting of Stockholders, Mr. Lee will serve the remainder of his term as amended (the “Exchange Act”)a Class A director until the 2021 Annual Meeting of Stockholders or until his successor is duly elected and qualified or until his earlier death, resignation or removal in accordance with the Bylaws. The four Class B directors have terms that expire at the 2019 Annual Meeting of Stockholders and the three Class C directors have terms that expire at the 2020 Annual Meeting of Stockholders or, in all cases, until such date that their successors are duly elected and qualified or until their earlier death, resignation or removal in accordance with the Bylaws.
The name, age as of Apri1 9, 2019, principal occupation, and other information highlighting the particular experience, qualifications, attributes and skills concerning of each director are set forth below.
Class A Directors
Matthew K. Schatzman, 53, is the Company’s Chief Executive Officer and has served in such position since February 2018. Mr. Schatzman has served as the Company’s President and as a member of the Board since September 2018. All statements other than statements of historical fact containedPrior to joining the Company, Mr. Schatzman served as President at MKS Energy, LLC, an advisory and consulting firm focused on liquefied natural gas (“LNG”), natural gas and crude oil markets, logistics and risk management from March 2018 until September 2018. He was previously Executive Vice President, Global Energy Marketing and Shipping at BG Group, a British multinational oil and gas company, from January 2012 until May 2014 and served as Senior Vice President, Energy Marketing from March 2007 until December 2011. Prior to that, he served in this Annual Report on Form 10‑Kvarious roles at Dynegy Inc. (“Dynegy”), including statements regarding our future resultsPresident and Chief Executive Officer of operationsDynegy’s wholesale business. Mr. Schatzman holds a Bachelor of Arts in Political Science from Yale University.
The Boardbelieves Mr. Schatzman’s marketing, logistics, risk management and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “should,” “can have,” “likely,” “continue,” “design” and other words and termsoperational leadership experience of similar expressions, are intended to identify forward-looking statements.over 30
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 describedyears with companies in the section entitled “Risk Factors”LNG, natural gas, oil and power generation industries, including BG Group and Dynegy, make him well-qualified to serve as a Company director.
Avinash Kripalani,35, has served as a Company director since July 2017. Mr. Kripalani served as a member of the board of managers of NextDecade LNG, LLC (“NextDecade”) from April 2016 until July 2017. Mr. Kripalani is a Managing Principal at Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP (“Bardin Hill”)), where he has worked since April 2008. Prior to Bardin Hill, he was a Consultant at IBM. Mr. Kripalani earned a Bachelor of Science in this Annual Report on Form 10-K. You should consider our forward-looking statementsEconomics and a Bachelor of Science and a Master of Science in lightSystems and Information Engineering from the University of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to:Virginia.
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The Board believes Mr. Kripalani’s experience as a private equity principal and in other senior executive leadership roles and relevant experience in private financing and strategic planning, as well as extensive industry knowledge, provides him with the qualifications and skills necessary to serve as a Company director. |
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You should not rely upon forward-looking statementsWilliam Vrattos, 49, has served as predictionsa Company director since July 2017. Mr. Vrattos served as a member of future events.the board of managers of NextDecade from June 2015 until July 2017. Mr. Vrattos joined York Capital Management Global Advisors, LLC (“YCMGA”) in January 2002 and is the Co-Managing Partner of YCMGA. Mr. Vrattos is a Co-Portfolio Manager of the York Credit Opportunities, York European Distressed Credit, York Global Credit Income funds and York Tactical Energy funds as well as a member of YCMGA’s executive committee. Prior to joining YCMGA, he worked at Georgica Advisors LLC as a Portfolio Manager specializing in media and communications equities and distressed securities and at Morgan Stanley & Co., Inc. as an investment banker. Mr. Vrattos is currently a member of the board of directors or advisory board, as applicable and in his capacity as a YCMGA employee, of all entities related to Entropy Investments, all entities incorporated pursuant to YCMGA’s partnerships with Costamare Inc. and Augustea Bunge Maritime, and India 2020. In addition, neither we nor anyhe serves on the Board of Trustees of The Buckley School, the Board of Trustees of Groton School, and the Board of the Museum of the City of New York. Mr. Vrattos received a Bachelor of Arts in English from Dartmouth College and a Master of Business Administration from Harvard Business School.
The Board believes Mr. Vrattos’ experience as a private equity principal and in other person assumes responsibilitysenior executive leadership roles with his respective firms’ investments in a wide range of industries, including valuable and relevant experience in private financing, strategic investing and restructuring, provide him with the qualifications and skills to serve as a Company director.
Koo Yung Lee, 55, has served as a Company director since September 2018 and was originally appointed to the Board, and is nominated for election at the Annual Meeting, pursuant to the terms of that certain Purchaser Rights Agreement, dated as of August 23, 2018, by and between the Company and HGC NEXT INV LLC (“HGC”). Since October 2018, Mr. Lee has served as Senior Executive Vice President of Hanwha Chemical Corporation, a company principally engaged in the manufacturing and sale of petrochemical products (“Hanwha Chemical”). From November 2018 until September 2018, Mr. Lee served as the Head of Corporate Strategy of Hanwha Chemical. From April 2015 until October 2018, Mr. Lee served as President of Hanwha Q CELLS America Inc. and from October 2012 until March 2015, he served as Chief Commercial Officer of Hanwha Q CELLS GmbH (together with Hanwha Q CELLS America Inc., “Hanwha Q CELLS”). Hanwha Q CELLS is a manufacturer of high-quality solar cells and photovoltaic modules. Mr. Lee received a Bachelor of Arts degree in Political Science from Yonsei University in Seoul, South Korea.
The Board believes Mr. Lee’s management experience, leadership capabilities, financial knowledge and business acumen as well as his broad understanding of business globally provide Mr. Lee with the qualifications and skills to serve as a Company director.
Class B Directors
Kathleen Eisbrenner, 58, has served as the Chairman of the Board since July 2017 and was appointed to the Board pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”) by and among the Company, Harmony Merger Sub, LLC, NextDecade and certain members of NextDecade and entities affiliated with such members. Mrs. Eisbrenner had served as the Company’s Chief Executive Officer from July 2017 through January 2018. Mrs. Eisbrenner founded NextDecade on June 4, 2010 and served as its Chief Executive Officer for a little over seven years. Mrs. Eisbrenner was formerly Executive Vice President at Royal Dutch Shell (“Shell”), where she was responsible 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 statement.
Please read “Risk Factors” contained in this Annual Report on Form 10-K for a more complete discussionmanagement of the riskscompany’s global LNG portfolio and uncertainties mentioned aboveLNG trading business, from September 2007 until December 2009. Prior to her time at Shell, Mrs. Eisbrenner was the founder and forChief Executive Officer of Excelerate Energy, focused on developing the floating storage regasification unit vessel and industry. Mrs. Eisbrenner is a discussionmember of other risksthe American Bureau of Shipping and uncertainties. All forward-looking statements attributable to us are expressly qualifiedJERA’s Fuel Business Expert Advisory Board and a past member of the National Petroleum Council and Junior Achievement of Southeast Texas. She is a former member of the Board of Chesapeake Energy. Mrs. Eisbrenner holds a Bachelor of Science in their entirety by these cautionary statementsCivil Engineering from the University of Notre Dame.
The Board believes that Mrs. Eisbrenner’s experience as a chief executive officer in the LNG industry and hereafterbroader energy industries and vast knowledge of energy-related operations provide her with valuable and relevant experience in our other filingsoperations, company management, customer strategy and leadership of complex organizations, as well as extensive industry knowledge, and provides her with the Securitiesqualifications and Exchange Commission (the “SEC”) and public communications. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
skills to serve as a Company director.
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Part IEric S. Rosenfeld, 61, has served as a Company director since May 2014. Mr. Rosenfeld served as Chairman of the Board and as the Company’s Chief Executive Officer from May 2014 until July 2017. Mr. Rosenfeld is currently chairman of the board of directors of CPI Aerostructures, Inc., a New York Stock Exchange (“NYSE”) listed company engaged in the contract production of structural aircraft parts principally for the U.S. Air Force and other branches of the U.S. armed forces. He became a director in April 2003 and chairman in January 2005. Since June 2017, Mr. Rosenfeld has served on the board of directors of Aecon Group Inc., a Toronto Stock Exchange (“TSX”) listed construction company. Mr. Rosenfeld has been the president and chief executive officer of Crescendo Partners, L.P., a New York-based investment firm, since its formation in November 1998. He has also been the senior managing member of Crescendo Advisors II, LLC since its formation in August 2000.
Our Formation
We were incorporatedMr. Rosenfeld also served as the chairman of the board and chief executive officer of Quartet Merger Corp. from April 2013 until its merger with Pangea in Delaware on May 21,October 2014 and were formedhas served as a director of Pangea since such time. Mr. Rosenfeld has also served on the board of directors of Cott Corporation, a NYSE listed beverage company, since June 2008. Since December 2012, Mr. Rosenfeld has been a board member of Absolute Software Corporation, a TSX listed provider of security and management for computers and ultra-portable devices.
Mr. Rosenfeld served as chairman of the purposeboard and chief executive officer of acquiring, throughTrio Merger Corp. from June 2011 until its merger with SAE in June 2013 and served as a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similardirector of SAE from June 2013 until July 2016. Mr. Rosenfeld served as the chairman of the board, chief executive officer and president of Rhapsody Acquisition Corp. from April 2006 until the completion of its business combination one or more businesses or entities. with Primoris Services Corporation (formerly known as Primoris Corporation (“Primoris”)) in July 2008. From July 2008 until May 2014, Mr. Rosenfeld served as a director of Primoris.
Mr. Rosenfeld is a regular guest lecturer at Columbia Business School and has served on numerous panels at Queen’s University Business Law School Symposia, McGill Law School, the World Presidents’ Organization and the Value Investing Congress. He is a senior faculty member at the Director’s College. He has also been a regular guest host on CNBC. Mr. Rosenfeld received a Bachelor of Arts in Economics from Brown University and a Master of Business Administration from the Harvard Business School.
The Board believes Mr. Rosenfeld is well-qualified to serve as a Company director due to his public company experience, operational experience and his business contacts.
David MagidOn, 33, has served as a Company director since July 24, 2017 oneand was appointed to the Board pursuant to the Merger Agreement. Mr. Magid joined York Capital Management, L.P. (“York”) in July 2013 and is a Vice President of our subsidiaries mergedYork. Prior to joining York, he worked at Credit Suisse as an analyst in Leveraged Finance, Origination, & Restructuring. Mr. Magid received a Bachelor of Arts in Economics and Politics from Brandeis University and a Master of Business Administration from Columbia Business School.
The Board believes Mr. Magid’s experience as a private equity principal and in other senior executive leadership roles with his respective firms’ investments in a wide range of industries and into NextDecade LLC,his valuable and relevant experience in private financing, strategic investing and restructuring provide him with the qualifications and skills to serve as a Company director.
David Galloliquefied natural gas,45, has served as a Company director since July 2017 and was appointed to the Board pursuant to the Merger Agreement. Mr. Gallo is the Founder, Portfolio Manager and Managing Partner of Valinor Management L.P., the investment manager of an equity long-short hedge fund (“LNG”Valinor”) development company founded, where he has worked since July 2007. Prior to founding Valinor, Mr. Gallo was a senior analyst at Bridger Capital and worked at investment firms including Tiger Management, Kohlberg Kravis Roberts & Co., and the Blackstone Group.
Mr. Gallo received his Bachelor of Science in 2010 to develop LNG export projectsEconomics, summa cum laude, from the Wharton School of the University of Pennsylvania and associated pipelineshis Master of Business Administration from Harvard Business School where he graduated as a Baker Scholar.
The Board believes Mr. Gallo’s experience as a managing partner of an investment firm and in other senior executive leadership and director roles as well as extensive industry experience and experience overseeing investments in the State of Texas. Prior to the merger with NextDecade LLC, we had no operations and our assets consisted of cash proceeds received in connection with our initial public offering.
Our first proposed LNG export facility, the Project, is well-positioned among the second wave of United States (“U.S”) LNG projects. We 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 will allow us to seek construction financing to develop the Project.
Our common stock trades on the Nasdaq Capital Market (“Nasdaq”) under the symbol “NEXT.”
As a result of our failure to satisfy the initial listing requirements of Nasdaq with respect to our warrants, on February 22, 2018, our warrants were delisted from trading on Nasdaq and began trading on the OTC Pink Market under the symbol “NEXTW.”
Company Overview
Our management is comprised of a team of industry leaders with extensive experience in LNG marketing and project development. We have focused and continue to focus our development activities on 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 Federal Energy Regulatory Commission (“FERC”) in March 2015 and filed a formal applicationsector provide him with the FERC in May 2016. We also believe we have robust commercial offtakequalifications and gas supply strategies in place and we estimate that the Project will commence commercial operationsskills to serve as early as 2023.
We believe that the Terminal, located on a 984-acre site in Brownsville, Texas, along with the Pipeline connecting the Terminal to the Agua Dulce market area, is well-positioned among the second wave of U.S. LNG projects. The Terminal is engineered to have liquefaction capacity of 27 million tons of LNG per annum (“mtpa”). It is located to take advantage of gas reserves in West and South Texas, benefiting from recent discoveries in the Permian Basin and Eagle Ford Shale. We plan to own, develop, and operate the Project. We have an exclusive option for a long-term lease with the Port of Brownsville for the Terminal site through November 5, 2019.
The Project will include up to six liquefaction trains (each with a nominal capacity of at least 4.5 mtpa/train), four LNG storage tanks (each with a capacity of 180,000 cubic meters), two marine jetties for ocean-going LNG vessels, one turning basin, and six truck loading bays for LNG and natural gas liquids. The Pipeline is expected to be comprised of twin, 137-mile-long, 42-inch-outside diameter, natural gas pipelines, three 180,000-horsepower compressor stations, two 30,000-horsepower interconnect booster stations, six mainline valve sites, four metering sites, and various ancillary facilities. The twin pipelines are expected to be rated to a maximum allowable operating pressure of 1,480 pounds per square inch and total deliverability of at least 4.5 Bcf/d. We are exploring design enhancements to increase throughput capacity for the Project.
We have leased a second 994-acre site on the Houston Ship Channel in Texas City for an expected two or three trains with at least 13.5 mtpa capacity (the “Galveston Bay Terminal”). We intend to use similar design and engineering as the Terminal as we retain rights to the design specifications and intellectual property associated with the Terminal.Company director.
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Capital Cost, Liquefaction Technology,Class C Directors
Brian Belke, 35, has served as a Company director since July 2017 and Engineeringwas appointed to the Board pursuant to the Merger Agreement. Mr. Belke served as member of the board of managers of NextDecade from June 2015 until July 2017. Mr. Belke is a Partner at Valinor where he has worked since June 2010. Prior to Valinor, Mr. Belke was an Equity Research Associate at Fidelity Investments. He is a Chartered Financial Analyst and is a member of the CFA Institute and the New York Society of Securities Analysts. Mr. Belke earned a Bachelor of Science in Management with concentrations in Finance and Accounting, summa cum laude, from Boston College, and a Master of Business Administration from Harvard Business School, where he graduated with High Distinction as a Baker Scholar.
Our expected engineering, procurement,The Board believes Mr. Belke’s experience as a partner of an investment firm and construction (“EPC”) contractor, CB&I LLC (“CB&I), has vastin other senior executive leadership roles as well as his extensive industry experience and experience overseeing investments in the LNG industry. CB&Isector provide him with the qualifications and skills to serve as a Company director.
Matthew Bonanno, 40, has served as a Company director since July 2017 and was appointed to the Board pursuant to the Merger Agreement. Mr. Bonanno joined YCMGA in July 2010 and is onea Partner of the world’s premier EPC firms, specializing in oilfirm and gas infrastructure projects. Founded in 1889, CB&I has been involved with LNG projects for more than 50 years, including constructionits Co-Head of North American Credit. Mr. Bonanno is a Co-Portfolio Manager of the first double-walled storage tank (1958)York Tactical Energy funds. Mr. Bonanno joined YCMGA from the Blackstone Group where he worked as an associate focusing on restructuring, recapitalization, and reorganization transactions. Prior to joining the first marine distribution terminal (1970). Additionally, CB&IBlackstone Group, Mr. Bonanno worked on financing and strategic transactions at News Corporation and as an investment banker at JP Morgan and Goldman Sachs. Mr. Bonanno, in his capacity as YCMGA employee, has an extraordinary recordserved as a member of the boards of directors of (i) Rever Offshore AS, (ii) all entities incorporated pursuant to YCMGA’s partnership with workplace safety; CB&I won the National Safety Council’s Green Cross for Safety in 2015.
BasedCostamare Inc. and Augustea Bunge Maritime, (iii) Vantage Drilling International, (iv) Linn Energy Inc., (v) Samson Resources II, LLC, (vi) Roan Resources, Inc., and (vii) Riviera Resources Inc. Mr. Bonanno also serves on the progress of its detailed engineering and cost optimization exercises to date, in conjunction with CB&I’s own work with Baker Hughes, a GE Company (the Terminal’s primary rotating equipment provider), we estimate construction costs for the first three liquefaction trainsboard of the TerminalChildren’s Scholarship Fund.
Mr. Bonanno received a Bachelor of $490/ton before owners’ costs, financing costs,Arts in History from Georgetown University and contingencies, with a target EPC cost reduction to $450/ton. Our FERC applications contemplate the Terminal’s entire six trainsMaster of production. We anticipate taking a positive final investment decision (“FID”) on the first phaseBusiness Administration in Finance from The Wharton School of the Project with three trains at the Terminal, though we can take an initial positive FID onUniversity of Pennsylvania.
The Board believes Mr. Bonanno’s experience as few as two trains.
CB&I has conducted front end engineeringa private equity partner and design (“FEED”) work on behalf of numerous LNG export projects globallyin other senior executive leadership roles and served as EPC contractor for Peru LNG, which commenced operationsrelevant experience in 2010corporate finance, mergers and has successfully delivered more than 430 cargoes,acquisitions, and reorganizations, as well as two LNG export projectshis extensive industry knowledge, provide him with the qualifications and skills to serve as a Company director.
L. Spencer Wells, 48, has served as a Company director since July 2017 and was appointed pursuant to the Merger Agreement. Mr. Wells has over 20 years of experience as a portfolio manager and financial analyst. Mr. Wells co-founded Drivetrain Advisors, LLC, a firm providing fiduciary services to the alternate investment community (“Drivetrain”), in December 2013, where he currently under constructionserves as a Partner. Prior to co-founding Drivetrain, Mr. Wells was employed by TPG Special Situations Partners (“TPG”) from 2010 to 2013, where he first served as Partner from September 2010 to January 2012, and then as a Senior Advisor from January 2012 to July 2013. Prior to TPG, Mr. Wells served as a Partner/Portfolio Manager for Silverpoint Capital, as a Director at the Union Bank of Switzerland and as a Vice President of Deutsche Bank AG.
Mr. Wells has served as a member of the boards of directors of (i) Advanced Emissions Solutions, Inc. since July 2014, (ii) Town Sports International Holdings, Inc. since March 2015, (iii) Vantage since February 2016, (iv) Samson since February 2018, (v) Telford Offshore Holdings Ltd. since February 2018, (vi) Jones Energy, Inc. since November 2018, and (vii) Telford Offshore Holdings, Ltd. since February 2018. Mr. Wells served as a member of the boards of directors of (i) Alinta Holdings from April 2013 to September 2013, (ii) each of CertusHoldings, Inc. and CertusBank, N.A. from August 2014 to April 2016, (iii) Navig8 Crude, Ltd. from May 2014 to May 2015, (iv) Global Geophysical Services, LLC from February 2015 to October 2016, (v) Syncora Holdings Ltd. from August 2015 to December 2016, (vi) Affinion Group, Inc. from November 2015 to July 2018, (vii) Lily Robotics. Inc. from January 2018 to September 2018 and (viii) Roust Corporation from February 2018 to December 2018.
Mr. Wells received a Bachelor of Arts in Psychology from Wesleyan University and a Master of Business Administration, with honors, from Columbia Business School.
The Board believes Mr. Wells’s public company experience, financial expertise, extensive industry experience and experience overseeing investments in the U.S. (the Cameron and Freeport projects). The Terminal is of substantially similar design to the Peru LNG project that CB&I completed several years ago. During the construction of Peru LNG, CB&I experienced a lost time incident rate of only 0.01 and successfully trained and hired thousands of local workers. Additionally, hundreds of workers from the Rio Grande Valley have been hired and trained by CB&I in recent years to work on other U.S. LNG project developments in Texas and Louisiana. We believe a well-trained workforce will be prepared to return to the Rio Grande Valley upon successful completion of those projects.
We have selected Air Products’ C3MR™ liquefaction technology, which is used in a wide array of LNG projects around the world, including in several LNG projects under construction in the U.S. With global expertise in LNG EPC projects, CB&I performed our FEED work for the Terminal. We are currently progressing design, regulatory, engineering, and commercial activities. We are finalizing detailed negotiations for a lump-sum turnkey (“LSTK”) EPC contract that includes performance, time, and cost guarantees, and we expect to execute the LSTK EPC contract in the second quarter of 2018. We believe that the combination of proven technology with one of the foremost LNG EPC contractors significantly mitigates design, construction, and execution risk and is expected to be viewed favorably by prospective customers and to facilitate attractively priced project financing.
Commercial
We are continuing commercial discussions with a variety of other parties ranging from large utilities and state-sponsored enterprises to portfolio and multinational commodity interests and expect to sign long-term binding offtake commitments prior to FID, leveraging the global relationships and extensive experience of our management team.
We believe our project locations will provide customers with access to low-cost natural gas from the Permian Basin and Eagle Ford Shale. Importantly, we have offered customers a choice of flexible offtake contracting models such as tolling, free on board or delivered ex-ship.
We believe traditional LNG buyers are seeking to diversify away from oil-linked contracts and are looking to increase destination flexibility. As a result, low-cost U.S. LNG is poised to capture market share, supported by the country’s abundant gas supply, existing pipeline infrastructure, political stability, and a competitive project execution environment.
Regulatory
We filed our formal applicationsector provides him with the FERC on May 5, 2016qualifications and expectskills to receiveserve as a Draft Environmental Impact Statement from the FERC as early as the second quarter of 2018. Final authorization of the Terminal under Section 3(a) of the Natural Gas Act, and of the Pipeline under Section 7(c) of the Natural Gas Act, is expected as early as the end of 2018. On September 7, 2016, we received authorization from the U.S. Department of Energy (the “DOE”) to export LNG to FTA countries on our own behalf and as agent for others, for a term of 30 years. A non-FTA authorization is expected shortly after completion of the FERC National Environmental Policy Act review process.Company director.
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Gas SupplyIdentification of Executive Officers
The Terminal names, ages as of April 9, 2019, position and other information concerning our executive officers are set forth below.
Name | Age | Position | ||
Matthew K. Schatzman | 53 | President and Chief Executive Officer | ||
Benjamin Atkins | 48 | Chief Financial Officer | ||
Krysta De Lima | 50 | General Counsel and Corporate Secretary |
Matthew K. Schatzman is locatedthe Company’s President and Chief Executive Officer. Mr. Schatzman was appointed President in Brownsville, Texas, benefiting from accessSeptember 2018 and became Chief Executive Officer in February 2018 as contemplated by the terms of his employment agreement with the Company dated September 8, 2017, as amended by that Amendment No. 1 to Employment Agreement effective January 1, 2019 (as amended, the “Schatzman Employment Agreement”). Please refer to the Permian Basin and Eagle Ford Shale. We expect to realize material benefits from providing our customers with access to these low-cost associated gas resources in Texas. Independent shale producers have created extraordinary efficiencies and improvements, including enhanced well recoveries through extended lateral lengths and hydraulic fracturing technology, rig productivity, and operating and lifecycle costs. However, U.S. demand has not risen proportionally with the growth in recoverable reserves.
For example, whereas U.S. demandsection titled “Identification of Directors” for natural gas has generally increased modestly year-over-year over the past few decades, the level of new discoveries and production has been remarkable. U.S. domestic demand for natural gas has increased from approximately 20 Tcf per year in 1980 to approximately 27 Tcf in 2015, a 35 percent increase. However, proved reserves of natural gas have increased by approximately 200 Tcf over the same period, a 100 percent increase. Due to technological advancements, almost all U.S. reserve basins are able to produce gas for a break-even cost of less than $3.00/MMBtu, which is less than the approximate price implied by gas forward curves for at least the next ten years.
The development of the Marcellus Shale and Utica Shale figures in the strategic importance of the Permian Basin and Eagle Ford Shale. In 2010, Marcellus production totaled approximately 2 Bcf/d; by the end of 2017, this number exceeded 23.7 Bcf/d. Currently, Marcellus production is greater than any individual country in the world except for Russia. This has caused the northeast to swing from an importer of natural gas (8 Bcf/d in 2010) to an exporter (-3.7 Bcf/d in 2017). There is more than 13 Bcf/d of northeast pipeline capacity scheduled to enter service during 2018 and Marcellus and Utica producers remain focused on moving volumes to more favorable Gulf Coast markets. This indicates that Texas production is increasingly less likely to flow towards northeast markets and expected to be consumed in or exported from the southwest or Gulf of Mexico regions.
The Permian Basin is expected to produce large quantities of associated gas, the production of which occurs as a byproduct with oil production. The State of Texas severely restricts the flaring of natural gas, so infrastructure will be required to transport this associated gas to Gulf Coast markets economically. In the fall of 2017, KinderMorgan announced it had enough binding customer commitments to proceed with the development of its Gulf Coast Express (“GCX”) project. The GCX project will move gas from the Waha area in the Permian Basin to Agua Dulce, Texas where the Project expects to receive gas supply. The GCX project is expected to have an estimated capacity of 1.9 Bcf/d and is expected to be in service by October 2019. This new high-pressure pipeline will provide a much needed exit strategy for incremental Permian gas supplies. Due to the production economics for the primary resource (oil), many Permian producers are expected to face sub-zero breakeven pricesadditional information with respect to Mr. Schatzman’s background and experience.
Benjamin Atkins, CFA, CPA, is the priceCompany’s Chief Financial Officer and was appointed to such office in July 2017. Mr. Atkins has served as Chief Financial Officer of NextDecade since November 2015. Mr. Atkins is responsible for the Company’s capital strategy, project financing, financial reporting, controls, budgeting, information technology, investor relations, tax reporting/incentives and insurance. Before joining the Company, Mr. Atkins served as Senior Vice President at GE Capital, where he worked from November 2005 to October 2015, focusing on investment and portfolio management roles for thermal power and midstream equity investments. Mr. Atkins previously worked at McKinsey & Company and as a manager in State Street Corporation’s Securities Finance division. Mr. Atkins is a Chartered Financial Analyst and a licensed Certified Public Accountant in Connecticut and Texas. He was valedictorian of his class at the United States Naval Academy and served as a nuclear engineer in the United States Navy submarine fleet. He earned a Master of Arts degree in Philosophy, Politics, and Economics from Oxford University.
Krysta De Lima is the Company’s General Counsel and Corporate Secretary and was appointed to such offices in July 2017. Ms. De Lima has served as General Counsel of NextDecade since July 2015. Ms. De Lima is responsible for all of the associated gas —Company’s legal and contractual matters. From October 2013 to June 2015, Ms. De Lima worked in Bechtel’s Oil, Gas and Chemicals business unit where she advised on major global engineering, procurement and construction contracts and transactions. Previously, from September 2001 to December 2012, Ms. De Lima served first as lead counsel, then as VP Legal and then as Chief of Staff of the Trinidad Asset within BG Group plc (“BG Group”) where she advised on upstream, midstream and downstream projects and investments, including on the development, commissioning and oversight of BG Group’s investments in all four operating LNG trains at Atlantic LNG in Trinidad. Prior to BG Group, Ms. De Lima worked in private practice at Arthur Andersen. Ms. De Lima holds a Bachelor of Laws from Kings College London and a DESS in European Law and Maîtrise in French Law from the Université of Paris I, Panthéon-Sorbonne. Ms. De Lima is qualified to practice law in New York, France, England, the British Virgin Islands and Trinidad and Tobago.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires Company directors, officers and persons owning more than ten percent (10%) of Company equity securities to file reports of ownership and changes of ownership with the SEC. To our knowledge and based solely on the Company’s review of the Forms 3 and 4 and any amendments thereto and certain written representations from certain reporting persons that no other words, producers should be ablereports were required, the Company believes that directors, officers and stockholders owning more than ten percent (10%) of Company equity securities complied with their Section 16(a) filing requirements applicable to economically produce oil even if they have to pay someone to takethem on a timely basis during the gas. We believe that the scope for incremental domestic gas demand may be limited, making large, stable sourcesfiscal year ended December 31, 2018.
Availability of gas demand, such as the Terminal, highly attractive to gas producers.Committee Charters and Codes of Ethics
The Permian Basin is approaching its 100thcharters for the Audit and Risk Committee (the “Audit Committee”), the Nominating, Corporate year of oil production. At present, production has reached a record 2.9 million barrels per day (MBPD), making itGovernance and Compensation Committee (the “NCGC Committee”) and the world’s second-most-prolific field, behind the formidable Ghawar in Saudi Arabia. The Texas side of the Permian Basin (excluding the portion underneath New Mexico) has already produced 30 billion barrels of crude and 75 trillion cubic feet (Tcf) of natural gas. Since 2012, Permian Basin production has increased by nearly 2 MBPD, which is a larger increase than any other oilfield in the world. The natural gas production volumes associated with this oil have been just as impressive. According to the U.S. Energy Information Administration, 2018 natural gas production in the Permian Basin is expected to rise to more than 9.2 MMcf/d from May 2016 levels of approximately 6.9 MMcf/d. Current oil production in the Permian has risen to more than 2.9 MBPD from 1.9 MBPD in May 2016. These comprise 33.0% and 53.0% increases, respectively, and both capital spending and production are expected to continue rising precipitously in the coming years. Significant gas production relative to anticipated takeaway capacity constraints (despite expected capacity growth), could lead to negative basis to Henry Hub that could benefit our projects relative to other second-wave U.S. LNG projects.
We believe that the Pipeline, projected to have at least eight interconnects with a combined 6.7 Bcf/d of receipt capacity, will have supply flexibility and be price competitive. Eastward takeaway capacity from the Permian is already expanding in the region, with high-profile plans over the next 12 to 18 months among key sponsors such as KinderMorgan, NAmerico and others. The combination of increased production and expanding takeaway capacity indicates that the Agua Dulce hub, from which the Pipeline is proposed to be routed, is expected to become increasingly liquid and remain competitively priced to Henry Hub. We believe our proximity to two major gas reserves basins, increasing takeaway capacity in the area, a significant influx of investment over the last 12 to 18 months,Operations Committee, as well as our existing contactsthe Company’s Corporate Governance Guidelines, Code of Conduct and Ethics (the “Code of Conduct”), Whistleblower Policy and Insider Trading Policy can be found, free of charge, on the Corporate Governance page under the “Investors” section of the Company’s website, www.next-decade.com. The Code of Conduct is applicable to all directors, officers and employees. The Company intends to disclose any changes to, or waivers from, the provisions of the Code of Conduct that would
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discussions with some of the largest regional operators, represent key elementsotherwise be required to be disclosed under Item 5.05 of a compelling feedgas strategy for partners and customers alike. We are continuing to advance substantive negotiations in these areas.
Employees
As of December 31, 2017, we had 23 full-time employees and 12 independent contractors. We hire independent contractors on an as needed basis and have no collective bargaining agreements with our employees. We believe that our employee relationships are satisfactory.
Offices
Our principal executive offices are located at 3 Waterway Square Place, Suite 400, The Woodlands, Texas, 77380, and our telephone number is (713) 574-1880.
Available Information
Our internet website address is www.next-decade.com. We routinely post important information for investors on our website. Within our website’s investors section, we make available free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with or furnished toon the SEC under applicable securities laws. These materials are made available as soon as reasonably practical after we electronically file such materials with or furnish suchCompany’s website. The Company will also provide printed copies of these materials to any stockholder or other interested person upon request to NextDecade Corporation, Attention: Krysta De Lima, General Counsel and Corporate Secretary, 1000 Louisiana Street, Suite 3900, Houston, Texas 77002. The information on the SEC. Information on ourCompany’s website is not, incorporated by reference into this report and shouldshall not be considereddeemed to be, a part of this document.
The public may also read and copy materials we filereport or incorporated into any other filings the Company makes with the SEC atSEC.
Stockholder Nominees for Director
There have been no material changes to the SEC’s Public Reference Room,procedures by which is located at 100 F Street, NE, Room 1580, Washington, DC 20549. You can obtain information onstockholders may recommend nominees to the operationBoard.
Audit Committee
The Audit Committee has been structured to comply with the requirements of Section 3(a)(58)(A) of the Public Reference Room by callingExchange Act. The Audit Committee is currently comprised of Messrs. Rosenfeld, Kripalani and Wells with Mr. Wells as Chairman of the SEC at 1-800-SEC-0330.Audit Committee. The SECBoard has also maintains a websitedetermined that contains reports, proxyeach of Messrs. Rosenfeld and information statementsWells qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act and other information regarding issuers that file electronically withpossesses the SEC at www.sec.govrequisite accounting or related financial management expertise as required under the listing standards of the Nasdaq Stock Market (“Nasdaq”).
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Item 1A.Risk Factors11. Executive Compensation
We are subject to uncertainties and risks due2018 SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid, payable, awarded, granted, given, or otherwise provided, directly or indirectly, by the Company or its subsidiaries, in U.S. dollars, to the nature of the business activities we conduct. The following information describes certain uncertainties and risks that could affect our business, financial condition or results of operations or could cause actual results to differ materially from estimates or expectations contained in our forward-looking statements on page 3 of this Annual Report on Form 10-K. This section does not describe all risks applicable to us, our industry or our business, and it is intended only as a summary of known material risks that are specific to us. We may experience additional risks and uncertainties not currently known to us or that we currently deem to be immaterial which may materially and adversely affect our business, financial condition and results of operations.Company’s named executive officers.
We are in the process of developing LNG liquefaction and export projects, and the success of such projects is unpredictable; as such, positive cash flows and even revenues will be several years away, if they occur at all.
We are not expected to generate cash flow, or even obtain revenues, unless and until the Project is operational, which is expected to be at least five years away, and, accordingly, distributions to investors may be limited, delayed, or non-existent.
Our cash flow and consequently our ability to distribute earnings is solely dependent upon the revenues Rio Grande and Rio Bravo receive from the Project and the transfer of funds by Rio Grande and Rio Bravo to NextDecade in the form of distributions or otherwise. Rio Grande’s and Rio Bravo’s ability to complete the Project, as discussed further below, will be dependent upon, among other things, our ability to obtain necessary regulatory approvals and raise the capital necessary to fund development of the Project.
Our ability to pay dividends is almost entirely dependent upon our ability to complete the Project and generate cash and net operating income from operations. We do not expect to generate any revenues until the completion of construction of the first phase of the Project. Upon such completion, financing and numerous other factors affecting the Project may reduce our cash flow. As a result, we may not make distributions of any amount or any distributions may be delayed.
Substantially all of our anticipated revenue will be dependent upon the Project. Due to our lack of asset diversification, adverse developments at or affecting the Project would have a significantly greater impact on our financial condition and results of operations than if we maintained a more diverse portfolio of assets.
We will be required to seek additional debt and equity financing in the future to complete the Project and may not be able to secure such financing on acceptable terms, or at all.
Since we will be unable to generate any revenue from our operations and expect to be in the development or construction stage for multiple years, we will need additional financing to provide the capital required to execute our business plan. We will need significant funding to develop and construct the Project as well as for working capital requirements and other operating and general corporate purposes.
There can be no assurance that we will be able to raise sufficient capital on acceptable terms, or at all. If sufficient capital is not available on satisfactory terms, we may be required to delay, scale back or eliminate the development of business opportunities, and our operations and financial condition may be adversely affected to a significant extent.
Debt financing, if obtained, may involve agreements that include liens on Project assets and covenants limiting or restricting our ability to take specific actions, such as paying dividends or making distributions, incurring additional debt, acquiring or disposing of assets and increasing expenses. Debt financing would also be required to be repaid regardless of our operating results.
Name Year Salary($) Bonus(1) ($) Stock Total($) Matthew K. Schatzman 2018 550,000 — 9,103,573 (3) 9,653,573 President and Chief Executive Officer(2) 2017 158,654 (4) — — 158,654 Kathleen Eisbrenner 2018 617,500 376,160 — 993,660 Chairman and Former Chief Executive Officer(2) 2017 508,750 432,438 42,144,551 (5) 43,085,739 Benjamin Atkins 2018 299,750 154,000 — 453,750 Chief Financial Officer 2017 275,000 116,875 6,333,713 (6) 6,725,588 Krysta De Lima 2018 299,750 167,000 — 466,750 General Counsel and Corporate Secretary 2017 275,000 116,875 4,709,689 (7) 5,101,564 (1) Annual bonuses are paid in the first quarter following the applicable year of service. (2) On January 23, 2018, the Board appointed Mr. Schatzman, President of the Company, as the Chief Executive Officer of the Company, effective February 1, 2018. Mrs. Eisbrenner, Chairman of the Board, continued as the Chief Executive Officer of the Company until such date. (3) The amount noted reflects the grant date fair value, based on the closing price of the Company’s common stock, par value $0.001 per share (“Common Stock”), on the date of grant of $8.16 per share, of (i) 14,692 shares of Common Stock granted to Mr. Schatzman on January 8, 2018 as his pro-rated portion of the 2017 annual bonus payable to him pursuant to the Schatzman Employment Agreement for the period September 18, 2017 through December 31, 2017 and (ii) 1,100,942 shares of restricted Common Stock granted to Mr. Schatzman on January 8, 2018 pursuant to the Schatzman Employment Agreement (the “2018 Schatzman Stock Award”). The amount does not reflect the value of 128,907 shares of Common Stock granted to Mr. Schatzman on January 29, 2019 as Mr. Schatzman’s 2018 annual bonus payable to him pursuant to the Schatzman Employment Agreement. Of the 2018 Schatzman Stock Award, (i) 48,450 of such shares vested on the date of grant, (ii) 210,498 of such shares will vest in three equal installments on the first, second, and third anniversaries of September 18, 2018, and (iii) the remainder becomes vested based upon the achievement of certain milestones described below under Outstanding Equity Awards at Fiscal 2018 Year-End. The 2018 Schatzman Stock Award was granted under the 2017 Omnibus Incentive Plan (the “2017 Equity Plan”). (4) Pursuant to the Schatzman Employment Agreement, Mr. Schatzman’s annual base salary for 2018 was $550,000. The amount noted reflects the pro-rated portion of Mr. Schatzman’s annual base salary for the period September 18, 2017 through December 31, 2017. (5) The amount noted reflects the grant date fair value, based on the closing price of the Common Stock on the date of grant, of $10.26 per share of each of (i) 2,072,369 2017 Additional Shares (as defined below) and (ii) 2,035,287 2017 Restricted Shares (as defined below) granted to Mrs. Eisbrenner on July 24, 2017. “2017 Additional Shares” means shares of Common Stock issuable upon the Company’s achievement of certain milestones as described below under Outstanding Equity Awards at Fiscal 2018 Year-End, and “2017 Restricted Shares” means shares of Common Stock issuable in respect of unvested profits interests (“Management Incentive Units”) granted under the NextDecade Incentive Plan (the “NextDecade Incentive Plan”). The NextDecade Incentive Plan was terminated on July 24, 2017. 2017 Restricted Shares are issuable upon the Company’s achievement of certain milestones based on the number of shares of Common Stock outstanding at such time, as described below under Outstanding Equity Awards at Fiscal 2018 Year-End. (6) The amount noted reflects the grant date fair value, based on the closing price of the Common Stock on the date of grant, of $10.26 per share of each of (i) 101,892 2017 Additional Shares and (ii) 515,429 2017 Restricted Shares granted to Mr. Atkins on July 24, 2017. See the footnotes to the Outstanding Equity Award at Fiscal 2018 Year-End table below.In addition, the ability to obtain financing for the Project is expected to be contingent upon, among other things, our ability to enter into sufficient long-term commercial agreements prior to the commencement of construction. For additional information regarding our ability to enter into sufficient long-term commercial agreements, see “— Our ability to generate cash is substantially dependent upon it entering into satisfactory contracts with third parties and the performance of those third parties under those contracts.”
Awards ($)
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We may be subject to risks related to doing business in, and having counterparties based in, foreign countries.
We may engage in operations or make substantial commitments to and investments in, and enter into agreements with, counterparties located outside the U.S., which would expose us to political, governmental, and economic instability and foreign currency exchange rate fluctuations.
Any disruption caused by these factors could harm our business, results of operations, financial condition, liquidity and prospects. Risks associated with potential operations, commitments and investments outside of the U.S. include but are not limited to risks of:
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As our reporting currency isNarrative Disclosure
Overview of Compensation for Matthew K. Schatzman, President and Chief Executive Officer
Mr. Schatzman has served as President of the U.S. dollar, any operations conducted outsideCompany since September 2017 and has served as Chief Executive Officer of the U.S.Company since February 1, 2018. The Schatzman Employment Agreement provides for a term through June 30, 2020 and will be automatically extended for additional one-year periods unless and until the Company or transactions denominatedMr. Schatzman gives to the other written notice at least one-hundred and eighty (180) days prior to the applicable renewal date of a decision not to renew for an additional year.
Effective January 1, 2019, the Schatzman Employment Agreement was amended to reflect (i) an increase in foreign currencies would face additional riskshis annual base salary to $617,000 from $550,000 and (ii) an increase in his target annual bonus to 100% from 90% of fluctuating currency valueshis base salary based upon the achievement of performance targets established by the Board from time to time. Mr. Schatzman’s annual bonus for 2017 was pro-rated to reflect his actual time of employment with the Company. The pro-rata bonus of $119,885 was paid solely in shares of Common Stock calculated by dividing such bonus amount by $8.16, the share price of the Common Stock on the date of issuance, pursuant to a restricted stock award agreement dated January 8, 2018 (the “Schatzman Award Agreement”). Mr. Schatzman’s annual bonus for 2018 of $495,000 was also paid solely in shares of Common Stock calculated by dividing such bonus amount by $3.84, the share price of Common Stock on the date of issuance. The shares of Common Stock issued to Mr. Schatzman for his 2017 and exchange rates, hard currency shortages2018 bonuses were issued under the 2017 Equity Plan.
The Schatzman Employment Agreement entitled him to a grant of incentive stock of shares of Common Stock. Pursuant to the Schatzman Award Agreement, the Company granted Mr. Schatzman: (i) 48,450 shares of fully vested shares of Common Stock and controls on currency exchange. In addition, we would be(ii) 1,052,492 shares of Common Stock, subject to the impactterms of foreign currency fluctuationsa restricted stock award agreement between the Company and exchange rate changesMr. Schatzman (the “Restricted Incentive Stock”).
The Schatzman Employment Agreement also provides that if the Company at any time terminates Mr. Schatzman’s employment without Cause (as defined in the Schatzman Employment Agreement), or if Mr. Schatzman voluntarily terminates the agreement with Good Reason (as defined in the Schatzman Employment Agreement), Mr. Schatzman will be entitled to (i) a lump sum cash payment equal to the sum of his then current base salary for a period of 12 months, (ii) a pro-rata portion of his annual bonus for the fiscal year in which the termination occurs (based on our financial reports when translating our assets, liabilities, revenuesan amount equal to his then applicable annual bonus target percentage multiplied by his then applicable base salary) and expenses from operations or transactions outside(iii) the full vesting of his unvested shares of Restricted Incentive Stock.
If the Company elects not to renew the Schatzman Employment Agreement by providing notice of non-renewal at least 180 days before the end of the U.S. into U.S. dollars at then-applicable exchange rates. These translations could result in changesthen current term, Mr. Schatzman will be entitled to our resultsa lump sum cash payment equal to the sum of operations fromhis then current base salary for a period to period.
Our estimated costsof 12 months and a pro-rata portion of his annual bonus for the Project may notfiscal year in which the termination occurs (based on an amount equal to his then applicable annual bonus target percentage multiplied by his then applicable base salary). Mr. Schatzman’s prior grants of Restricted Incentive Stock, to the extent then vested, shall remain outstanding in accordance with their terms and any unvested Restricted Incentive Stock shall lapse and be accurateforfeited.
Additionally, upon a Change in Control (as defined in the Schatzman Employment Agreement), any unvested portion of his Restricted Incentive Stock shall immediately vest.
The Schatzman Employment Agreement also provides that Mr. Schatzman is eligible for health insurance and are subject to change due to various factors.
Our construction cost estimates are only an approximation of the actual costs of construction and are before owners’ costs, financing costs, pipeline construction costs and contingencies. Moreover, cost estimates may change due to various factors, such as economic and market conditions, government policy, claims and litigation risk, competition, the final terms of any definitive request for services with our EPC service provider, as well as change orders, delays in construction, legal and regulatory requirements, site issues, increased component and material costs, escalation of labor costs, labor disputes, increased spending to maintain our construction scheduledisability insurance and other factors. In particular, our estimated costs forcustomary employee benefits. The Schatzman Employment Agreement also contains customary non-competition and non-solicitation covenants and covenants regarding the Project are expected to be substantially affected by:treatment of confidential information.
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Cost estimates may change,Overview of Compensation for Kathleen Eisbrenner, Chairman and actual costsFormer Chief Executive Officer
Mrs. Eisbrenner serves as Chairman of construction may vary from current cost estimates, due to various factors, suchthe Board and served as the final terms of any LSTK contract into which we enter with CB&I, as well as any change orders, delays in construction, unanticipated regulatory delays, increased material or staffing costs, or other factors.
In addition to our actual willingness to take FID, and our ability to construct the Project and achieve operations, events related to such activities may cause actual costsChief Executive Officer of the ProjectCompany from July 2017 until February 2018. On May 20, 2015, NextDecade entered into an employment agreement with Mrs. Eisbrenner, which was amended pursuant to vary froma letter agreement, dated April 17, 2017, among Mrs. Eisbrenner, NextDecade and certain funds managed by YCMGA (as amended, the range, combination“Eisbrenner Agreement”). The Eisbrenner Agreement provides for a term through June 30, 2019 and timingautomatic renewals for additional one-year periods unless and until NextDecade or Mrs. Eisbrenner gives to the other party written notice at least one-hundred and eighty (180) days prior to the applicable renewal date of assumptions useda decision not to renew for an additional year. On November 30, 2018, the projected costs of the Project, such variations may be material and adverse, and an investor may lose all or a portionCompany gave Mrs. Eisbrenner notice of its investment.decision not to renew the Eisbrenner Agreement.
Under the Eisbrenner Agreement, Mrs. Eisbrenner’s annual base salary is $617,500 and Mrs. Eisbrenner is eligible for an annual bonus with a target of 100%, and a stretch of 160%, of her base salary based upon the achievement of performance targets established by the Board from time to time. The constructionEisbrenner Agreement provides for a minimum annual bonus payment of $308,750 and operationa one-time cash bonus of $1.0 million upon the achievement of a Final Investment Decision for a Qualified Project remains subject(each as defined in the Eisbrenner Agreement). Furthermore, under the Eisbrenner Agreement, Mrs. Eisbrenner was entitled to further governmental approvals,Management Incentive Units under the NextDecade Incentive Plan that represented actual (non-voting) equity interests in NextDecade.
On July 24, 2017, Mrs. Eisbrenner received (i) 8,685,633 shares of Company stock in exchange for her vested Management Incentive Units, (ii) 2,072,369 2017 Additional Shares and some approvals may be subject to further conditions, review and/or revocation.
We will be required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the Project and the export of LNG from the U.S. to foreign countries. The design, construction and operation of LNG export terminals is a highly regulated activity. The approval of the FERC under Section 3 of the Natural Gas Act, as well as several other material governmental and regulatory approvals and permits, is required in order to construct and operate an LNG terminal. An equivalent approval under Section 7 of the Natural Gas Act is required to construct and operate the Pipeline. There is no guarantee that such approvals can be obtained. Although the necessary authorizations to construct and operate the Project may be obtained, such authorizations(iii) 2,035,287 2017 Restricted Shares. 2017 Restricted Shares are subject to ongoing(i) transfer and forfeiture restrictions that are substantially similar to the transfer and forfeiture restrictions as were applicable to the exchanged Management Incentive Units and (ii) substantially the same vesting conditions imposed by regulatory agencies,that were provided in the NextDecade Incentive Plan immediately before the closing of transactions contemplated in the Merger Agreement. Mrs. Eisbrenner’s 2017 Additional Shares and additional approval2017 Restricted Shares vest upon the Company’s achievement of certain milestones.
The Eisbrenner Agreement also provides that if the Company at any time terminates Mrs. Eisbrenner’s employment without Cause (as defined in the Eisbrenner Agreement), or if Mrs. Eisbrenner voluntarily terminates the Eisbrenner Agreement with Good Reason (as defined in the Eisbrenner Agreement), then Mrs. Eisbrenner shall be entitled to receive (i) a cash payment equal to the sum of her then current base salary for a period of 18 months in a single, lump sum payment, (ii) a pro-rata portion of her annual bonus for the fiscal year in which the termination occurs and permit requirements may(iii) the full vesting of her 2017 Additional Shares and 2017 Restricted Shares. Moreover, the Eisbrenner Agreement provides that in the event that the Company appoints an individual other than Mrs. Eisbrenner to the position of Chief Executive Officer or to another officer position that reports directly to the Board and does not terminate Mrs. Eisbrenner’s employment for Cause (a “New Executive Event”), then such appointment will not be imposed.
Substantially all of our revenue will be generated from exports of LNG from the U.S. to foreign countries. Under Section 3considered a termination of the Natural Gas Act authorizationEisbrenner Agreement without Cause, subject to certain provisions. In the event of a termination in connection with a New Executive Event, (i) Mrs. Eisbrenner shall be paid (in addition to any other amounts due in accordance with the terms of the DOE is required to export LNG from the U.S. We have obtained such authorization for export to countries with which the U.S. hasEisbrenner Agreement) a Free Trade Agreement (“FTA”), but many of our target markets are not FTA countries. We have appliedspecial bonus equal to the DOEsum of her then current base salary for approvala period of 18 months in a single, lump sum payment, (ii) the NCGC Committee and the Board shall consider in good faith the acceleration of Mrs. Eisbrenner’s unvested equity to export LNGbe effective as of her termination date and (iii) to non-FTA countries. Therethe extent that any shares of Common Stock issued to Mrs. Eisbrenner are at such time subject to a lock-up agreement, the Company will release shares of Common Stock with an aggregate value of $25.0 million from any restriction on trading in the lock-up agreement that extends for more than six months. Mrs. Eisbrenner’s role as Chairman of the Board shall not be impacted by a New Executive Event during her initial employment term. As discussed above, on January 23, 2018, the Board appointed Mr. Schatzman, President of the Company, as the Chief Executive Officer of the Company, effective February 1, 2018. Mrs. Eisbrenner, Chairman of the Board, continued as the Chief Executive Officer of the Company until such date. The appointment of Mr. Schatzman as Chief Executive Officer of the Company resulted in a New Executive Event under the Eisbrenner Agreement and, as a result, the Company released shares of Common Stock with an aggregate value of $25.0 million from any restriction on trading in the lock-up agreement between the Company and Mrs. Eisbrenner.
The Eisbrenner Agreement also provides that Mrs. Eisbrenner is no assurance that we will obtain or, if obtained, maintain these governmental authorizations, approvalseligible for health insurance and permits. Failure to obtain, failure to obtain on a timely basis, or failure to maintain any of these governmental authorizations, approvals and permits could have a material adverse effect on our business, results of operations, financial condition and prospects.
For example, some of these governmental authorizations, approvals and permits require extensive environmental review. Some groups have perceived,disability insurance and other groups could perceivecustomary employee benefits. The Eisbrenner Agreement also contains customary non-competition and non-solicitation covenants and covenants regarding the proposed construction and operationtreatment of the Project as negatively impacting the environment or cultural heritage sites. Objections from such groups could cause delays, damage to reputation and difficulties in obtaining governmental authorizations, approvals or permits, or prevent the obtaining of such authorizations, approvals or permits altogether.confidential information.
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We will be dependent on third-party contractorsOverview of Compensation for Benjamin Atkins, Chief Financial Officer
Mr. Atkins currently serves as Chief Financial Officer of the Company. There is no employment agreement with Mr. Atkins and his employment is “at will.”
Mr. Atkins’s annual base salary for 2017 was $275,000. Effective April 1, 2018, Mr. Atkins’s annual base salary was increased to $308,000. Mr. Atkins is eligible for an annual bonus with a target of 50% of his annual base salary based upon the achievement of performance targets established by the Board from time to time and a minimum bonus payment of 25% of his base salary.
Mr. Atkins is eligible for health insurance and disability insurance and other customary employee benefits.
Overview of Compensation for Krysta De Lima, General Counsel and Corporate Secretary
Ms. De Lima currently serves as General Counsel and Corporate Secretary of the Company. There is no employment agreement with Ms. De Lima and her employment is “at will.”
Ms. De Lima’s annual base salary for 2017 was $275,000. Effective April 1, 2018, Ms. De Lima’s annual base salary was increased to $308,000. Ms. De Lima is eligible for an annual bonus with a target of 50% of her annual base salary based upon the achievement of performance targets established by the Board from time to time. There is no minimum threshold for any such bonus.
Ms. De Lima is eligible for health insurance and disability insurance and other customary employee benefits.
Termination and Change in Control
The employment agreements of Mr. Schatzman and Ms. Eisbrenner provide for the successful completionpayment of certain severance benefits upon termination. For additional information about the Project,payment of certain severance benefits upon termination, including in connection with a change of control, please see the overview of compensation for the Company’s named executive officers and these contractors may be unablethe footnotes to complete the Project or may build a non-conforming Project.Outstanding Equity Awards Table.
Pension/Retirement Benefits
The construction of the Project is expected to take several years, will be confined to a limited geographic area and could be subject to delays, cost overruns, labor disputes and other factors that could adversely affect financial performance or impair our ability to execute our scheduled business plan.
Timely and cost-effective completion of the Project in conformity with agreed-upon specifications will be highly dependent upon the performance of third-party contractors pursuant to their agreements. However, we have not yet entered into definitive agreements with certain of the contractors, advisors and consultants necessary for the development and construction of the Project. We may not be able to successfully enter into such construction contracts on terms or at prices that are acceptable to it.
Further, faulty construction thatCompany does not conformprovide a qualified defined benefit pension plan or any non-qualified supplemental executive retirement benefits to our designany of its executive officers or directors. However, eligible executive officers and quality standards may have an adverse effect on our business, resultsdirectors participate in a defined contribution retirement plan (the “401(k) Plan”) which allows them to contribute up to 100% of operations, financial condition and prospects. For example, improper equipment installation may lead to a shortened life of our equipment, increased operations and maintenance costs or a reduced availability or production capacity of the affected facility. The ability of our third-party contractors to perform successfully under any agreements to be entered into is dependent on a number of factors, including force majeure events and such contractors’ ability to:
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Furthermore, we may have disagreements with our third-party contractors about different elements of the construction process, which could leadtheir compensation up to the assertion of rightsmaximum permitted by the Internal Revenue Code. The Company does not make matching contributions. The 401(k) Plan is sponsored and remedies undermaintained by the related contracts, resulting in a contractor’s unwillingness to perform further work on the relevant project. We may also face difficulties in commissioning a newly constructed facility. Any of the foregoing issues or significant project delays in the development or construction of the Project could materiallyCompany.
Additional Benefit Programs
Certain officers and adversely affect our business, results of operations, financial condition and prospects. We plan to enter into a LSTK EPC contract, which could mitigate certain of these design, construction, and execution risks through performance, time and cost guarantees. We expect to execute the EPC contract in the second quarter of 2018.
Our ability to generate cash is substantially dependent upon it entering into satisfactory contracts with third parties and the performance of those third parties under those contracts.
We have not yet entered into, and may never be able to enter into, satisfactory commercial arrangements with third-party suppliers of feedstock or other required suppliesdirectors are entitled to the Project, or customers for productsfollowing benefits: parking, health insurance, life insurance and services from the Project.accidental death and dismemberment.
Our business strategy regarding how and when the Project’s export capacity or LNG produced by the Terminal is marketed may change based on market factors. Without limitation, our business strategy may change due to inability to enter into agreements with customers or based on our or market participants’ views regarding future supply and demand of LNG, prices, available worldwide natural gas liquefaction capacity or regasification capacity, or other factors. If efforts
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to market the Project’s export capacity or LNG produced by the Terminal are not successful, our business, resultsOUTSTANDING EQUITY AWARDS AT FISCAL 2018 YEAR-END
The following table provides information concerning outstanding equity awards as of operations, financial condition and prospects may be materially and adversely affected.
Rio Grande’s construction and operations activities are subject to a number of development risks, operational hazards, regulatory approvals and other risks which may not be fully covered by insurance, and which could cause cost overruns and delays that could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
Siting, development and construction of the Project will be subjectDecember 31, 2018 granted to the risks of delay or cost overruns inherent in any construction project resulting from numerous factors, including, but not limited to the following:Company’s named executive officers.
1843 |
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| Stock Awards | ||||||
Name |
| Number of shares |
| Market value of shares |
| Equity |
| Equity incentive |
Matthew K. Schatzman |
| 210,498 | (2) | 1,136,689 |
| 841,994 | (3) | 4,546,768 |
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Kathleen Eisbrenner |
| — |
| — |
| 1,843,267 | (4) | 9,953,642 |
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| 518,092 | (5) | 2,797,698 |
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Benjamin Atkins |
| — |
| — |
| 466,801 | (6) | 2,520,725 |
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| 25,473 | (7) | 137,554 |
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Krysta De Lima |
| — |
| — |
| 347,108 | (8) | 1,874,383 |
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| 18,942 | (9) | 102,284 |
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Delays beyond the estimated development periods, as well as cost overruns, could increase the cost of completion beyond the amounts that are currently estimated, which could require us to obtain additional sources of financing to fund the activities until the Project is constructed and operational (which could cause further delays). The need for more financing may also make the Project uneconomic. Any delay in completion of the Project may also cause a delay in the receipt of revenues projected from the Project or cause a loss of one or more customers. As a result, any significant construction delay, whatever the cause, could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
Our operations are subject to all of the hazards inherent in the receipt and processing of natural gas to LNG, and associated short-term storage including:
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Any of these risks could adversely affect our ability to conduct operations or result in substantial loss to us as a result of claims for:
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We may elect not to obtain insurance for any or all of these risks if we believe that the cost of available insurance is excessive relative to the risks presented. In addition, contractual liabilities and pollution and environmental risks generally are not fully insurable. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
We may experience increased labor costs, and the unavailability of skilled workers or our failure to attract and retain qualified personnel could adversely affect us. In addition, changes in our senior management or other key personnel could affect our business operations.
We are dependent upon the available labor pool of skilled employees authorized to work in the United States. We compete with other energy companies and other employers to attract and retain qualified personnel with the technical skills and experience required to construct and operate our facilities and pipelines and to provide our customers with the highest quality service. A shortage in the labor pool of skilled workers able to legally work in the United States or other general inflationary pressures or changes in applicable laws and regulations could make it more difficult for us to attract and retain qualified personnel and could require an increase in the wage and benefits packages that we offer, thereby increasing our operating costs. Any increase in our operating costs could materially and adversely affect our business, financial condition, operating results, liquidity and prospects.
We depend on our executive officers for various activities. We do not maintain key person life insurance policies on any of our personnel. Although we have arrangements relating to compensation and benefits with certain of our executive officers, we do not have any employment contracts or other agreements with key personnel binding them to provide services for any particular term. The loss of the services of any of these individuals could have a material adverse effect on our business.
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Technological innovation, competition or other factors may negatively impact our anticipated competitive advantage or our processes.2018 DIRECTOR COMPENSATION
Our success will depend on our abilityThe Board determined that non-employee members of the Board who were not appointed to create and maintain a competitive position in the natural gas liquefaction industry. We do not have any exclusive rightsBoard pursuant to any agreement or arrangement with the Company shall receive annual retention fee of $75,000, which is paid in cash and in monthly installments. The table below summarizes the compensation paid by the Company to such a member of the technologies that we will be utilizing. In addition, the technology we anticipate using in the Project may face competition due to the technological advances of other companies or solutions, including more efficient and cost-effective processes or entirely different approaches developed by one or more of our competitors or others, which could affect our business, results of operations, financial condition, liquidity and prospects.Board during fiscal year 2018.
Factors that may negatively affect potential demand for LNG from the Project are diverse and include, among others:
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Name |
| Fees Earned |
| Stock Awards ($) |
| Total($) |
L. Spencer Wells(1) |
| 115,000 |
| 196,534 | (2) | 311,534 |
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Decreases in the global demand for and price of natural gas (versus the price of imported LNG) could lead to reduced development of LNG projects worldwide.
We are subject to risks associated with the development, operation and financing of domestic LNG facilities. The development of domestic LNG facilities and projects is generally based on assumptions about the future price of natural gas and LNG and the conditions of the global natural gas and LNG markets. Natural gas and LNG prices have been, and are likely to remain in the future, volatile and subject to wide fluctuations that are difficult to predict. As a result, our activities will expose us to risks of commodity price movements, which we believe could be mitigated by entering into long-term LNG sales contracts. There can be no assurance that we will be successful in entering into long-term LNG sales contracts. Additionally, the global LNG market could shift toward the use of shorter-term LNG sales contracts.
Fluctuations in commodity prices may create a mismatch between natural gas and petroleum prices, which could have a significant impact on our future revenues. Commodity prices and volumes are volatile due to many factors over which we have no control, including competing liquefaction capacity in North America; the international supply and receiving capacity of LNG; LNG marine transportation capacity; weather conditions affecting production or transportation of LNG from the Terminal; domestic and global demand for natural gas; the effect of government regulation on the production, transportation and sale of natural gas; oil and natural gas exploration and production activities; and the development of and changes in the cost of alternative energy sources for natural gas and political and economic conditions worldwide.
Our activities are also dependent on the price and availability of materials for the construction of the Project, such as nickel, aluminum, pipe, and steel, which may be subject to import tariffs in the U.S. market and are all also subject to factors affecting commodity prices and volumes. In addition, authorities with jurisdiction over wholesale power rates in the U.S., Europe and elsewhere, as well as independent system operators overseeing some of these markets, may impose
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price limitations, bidding rules
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
On December 15, 2017, the Company’s stockholders approved the 2017 Equity Plan and the 2017 Equity Plan became effective by its terms on such date. The purpose of the 2017 Equity Plan is to further align the interests of eligible participants with those of the Company’s stockholders by providing long-term incentive compensation opportunities tied to the performance of the Company and its Common Stock. Persons eligible to receive awards under the 2017 Equity Plan include our employees, non-employee members of the Board, consultants, or other mechanisms which may adversely impactpersonal service providers of the Company or otherwise limit trading margins and leadany of its subsidiaries. The 2017 Equity Plan authorizes the issuance of up to diminished opportunities5,262,461 shares of Common Stock, subject to certain adjustments under the 2017 Equity Plan. 2,944,140 awards were granted under the 2017 Equity Plan for gain. We cannot predict the impact energy trading may have on our business, results of operations or financial condition.fiscal year 2018.
Further, the development of liquefaction facilities takes a substantial amount of time, requires significant capital investment, may be delayed by unforeseen and uncontrollable factors and is dependent on our financial viability and ability to market LNG internationally.
Competition in the LNG industry is intense, and some of our competitors have greater financial, technological and other resources.
We plan to operate in the highly competitive area of LNG production and face intense competition from independent, technology-driven companies as well as from both major and other independent oil and natural gas companies and utilities.
Many competing companies have secured access to, or are pursuing development or acquisition of, LNG facilities in North America. We may face competition from major energy companies and others in pursuing our proposed business strategy to provide liquefaction and export products and services at the Project. In addition, competitors have and are developing LNG terminals in other markets, which will compete with U.S. LNG facilities. Some of these competitors have longer operating histories, more development experience, greater name recognition, larger staffs and substantially greater financial, technical and marketing resources than we currently possess. The superior resources that some of these competitors have available for deployment could allow them to compete successfully against us, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
There may be shortages of LNG vessels worldwide, which could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.Equity Compensation Plan Information
The construction and delivery of LNG vessels requires significant capital and long construction lead times, and the availability of the vessels could be delayedfollowing provides certain aggregate information with respect to the detrimentCompany’s equity compensation plans in effect as of our business and customers due to the following:December 31, 2018.
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Plan Category |
| Number of |
| Weighted Average |
| Number of Securities |
Equity Compensation Plans Approved by Security Holders |
| — |
| — |
| 2,467,213 |
Equity Compensation Plans Not Approved by Security Holders |
| 4,477,585 | (1) | — | (2) | — |
Total |
| 4,477,585 |
| — |
| 2,467,213 |
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Terrorist attacks, including cyberterrorism, or military campaigns involving us or the Project could result in delays in, or cancellation of, construction or closure of the Project.
A terrorist or military incident involving the Project may result in delays in, or cancellation of, construction of the Project, which would increase our costs and prevent us from obtaining expected cash flows. A terrorist incident could also result in temporary or permanent closure of the Project, which could increase costs and decrease cash flows, depending on the duration of the closure. Operations at the Project could also become subject to increased governmental scrutiny that may result in additional security measures at a significant incremental cost. In addition, the threat of terrorism and the impact of military campaigns may lead to continued volatility in prices for natural gas that could adversely affect our business and customers, including the ability of our suppliers or customers to satisfy their respective obligations under our
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commercial agreements. Instability
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of our voting securities as of April 9, 2019:
(1) | each person who is known to us to be the beneficial owner of more than 5% of our voting securities; |
(2) | each of our directors; and |
(3) | each of our named executive officers and all of executive officers and directors as a group. |
Such table is based on information supplied by officers, directors, principal stockholders and the Company’s transfer agent, and information contained in Schedules 13D and 13G filed with the SEC.
Unless otherwise indicated, each person named below has an address in care of our principal executive offices and has sole power to vote and dispose of the shares of voting securities beneficially owned by them, subject to community property laws where applicable.
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| Shares of Common |
| Percentage |
| Shares of |
| Percentage |
| Shares of |
| Percentage |
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Executive Officers and Directors: |
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Matthew K. Schatzman |
| 1,192,836 | (1) | 1.1 | % | — |
| — | % | — |
| — | % |
Benjamin Atkins |
| 92,623 |
| * | % | — |
| — | % | — |
| — | % |
Krysta De Lima |
| 68,873 |
| * | % | — |
| — | % | — |
| — | % |
Kathleen Eisbrenner |
| 8,714,132 | (2) | 7.9 | % | — |
| — | % | — |
| — | % |
Avinash Kripalani |
| — |
| — | % | — |
| — | % | — |
| — | % |
William Vrattos |
| — |
| — | % | — |
| — | % | — |
| — | % |
David Magid |
| — |
| — | % | — |
| — | % | — |
| — | % |
Matthew Bonanno |
| — |
| — | % | — |
| — | % | — |
| — | % |
Brian Belke |
| — |
| — | % | — |
| — | % | — |
| — | % |
David Gallo |
| — |
| — | % | — |
| — | % | — |
| — | % |
L. Spencer Wells |
| 24,085 |
| * | % | — |
| — | % | — |
| — | % |
Eric S. Rosenfeld |
| 1,624,851 | (3) | 1.6 | % | — |
| — | % | — |
| — | % |
Koo Yung Lee |
| — |
| — | % |
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All directors and executive officers as a group (16 persons) |
| 11,717,400 |
| 10.6 | % | — |
| — | % | — |
| — | % |
Other 5% Stockholders: |
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YCMGA Entities |
| 57,873,196 | (4) | 52.6 | % | 10,944 | (5) | 20.4 | % | — |
| — | % |
Valinor Entities |
| 19,551,334 | (6) | 17.8 | % | 3,749 | (7) | 7.0 | % | — |
| — |
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Bardin Hill Entities |
| 9,557,346 | (8) | 8.7 | % | 1,809 | (9) | 3.4 | % | — |
| — |
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HGC NEXT INV LLC |
| — |
| — | % | 38,352 | (10) | 70.5 | % | — |
| — |
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BlackRock, Inc. |
| — |
| — | % | — |
| — | % | 31,455 | (11) | 100.0 | % |
* Indicates beneficial ownership of less than 1% of the total outstanding Common Stock.
** “Beneficial ownership” is a term broadly defined by the SEC in Rule 13d‑3 under the Exchange Act and includes more than typical forms of stock ownership, that is, stock held in the financial marketsperson’s name. The term also includes what is referred to as “indirect ownership,” meaning ownership of shares as to which a resultperson has or shares investment or voting power. For purposes of terrorism, including cyberterrorism, or war could also materially adversely affect our ability to raise capital. The continuationthis table, shares of these developments may subject our construction and operations to increased risks, as well as increased costs, and, depending on their ultimate magnitude, could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Changes in legislation and regulations relating to the LNG industry could have a material adverse impact on our business, results of operations, financial condition, liquidity and prospects.
Future legislation and regulations, such as those relating to the transportation and security of LNG exported from the proposed LNG facilities, could cause additional expenditures, restrictions and delays in connection with the proposed LNG facilities and their construction, the extent of which cannot be predicted, and which may require us to substantially limit, delay or cease operations in some circumstances. Revised, reinterpreted or additional laws and regulationsCommon Stock not outstanding that result in increased compliance costs or additional operating costs and restrictions could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
Our operations will beare subject to a numberoptions, warrants, rights or conversion privileges exercisable within 60 days of environmental laws and regulations that impose significant compliance costs, and existing and future environmental and similar laws and regulations could result in increased compliance costs or additional operating restrictions.
Our business will be subject to extensive federal, state and local regulations and laws, including regulations and restrictions on discharges and releases to the air, land and water and the handling, storage and disposal of hazardous materials and wastes in connection with the development, construction and operation of our liquefaction facilities. These regulations and laws will require us to maintain permits, provide governmental authorities with access to our facilities for inspection and provide reports related to our compliance. Violation of these laws and regulations could lead to substantial fines and penalties or to capital expenditures related to pollution control equipment that could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects. Federal and state laws impose liability, without regard to fault or the lawfulness of the original conduct,April 9, 2019 are deemed outstanding for the releasepurpose of certain types or quantities of hazardous substances intocalculating the environment. As the ownernumber and operator of the Project, we could be liablepercentage owned by such person, but not deemed outstanding for the costspurpose of cleaning up hazardous substances released intocalculating the environment and for damage to natural resources.
In addition, future federal, state and local legislation and regulations may impose unforeseen burdens and increased costs on our business that could have a material adverse effect on our financial results, such as regulations regarding greenhouse gas emissions andpercentage owned by each other person listed.Since the transportation of LNG. As an international shipper of LNG, our operations could also be impacted by environmental laws applicable under international treaties or foreign jurisdictions.
The operation ofSeries A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), the Project may be subject to significant operating hazards and uninsured risks, one or more of which may create significant liabilities and losses that could have a material adverse effect on our business, results of operations, financial condition, liquidity and prospects.
The plan of operations for the Project is subject to the inherent risks associated with LNG operations, including explosions, pollution, release of toxic substances, fires, hurricanes and other adverse weather conditions, and other hazards, each of which could result in significant delays in commencement or interruptions of operations and/or result in damage to or destruction of the Project and assets or damage to persons and property.
We do not, nor do we intend to, maintain insurance against all these risks and losses. We may not be able to maintain desired or required insurance in the future at rates that we consider reasonable. The occurrence of a significant event not fully insured or indemnified against could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
We are dependent on a limited number of customers for the purchase of LNG.
The number of potential customers is limited. Some potential purchasers of the LNG to be produced from the Terminal are new to the LNG business and have limited experience in the industry. We will be reliant upon the ability for these customers to enter into satisfactory downstream arrangements in their home markets for the licenses to import and re-sell re-gasified LNG. Some of these jurisdictions are heavily regulated and dominated by state entities. In certain instances, customers may require credit enhancement measures in order to satisfy project-financing requirements.
Series B Convertible Preferred Stock, par value $0.0001
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We haveper share (the “Series B Preferred Stock”), the warrants issued together with the Series A Preferred Stock (the “Series A Warrants”) and the warrants issued together with the Series B Preferred Stock (the “Series B Warrants”) are not yet concluded negotiationsconvertible into, or exercisable for, the Terminal site lease and have obtained right-of-way options for only partCommon Stock within 60 days of the Pipeline route.
Our strategy currently involves leasingApril 9, 2019, shares of Common Stock issuable upon such conversion or otherwise acquiring suitable sites for the construction of new facilities to transport gas to the Terminal and to produce large quantities of LNG for delivery under tolling arrangements or sale. For the siting of the Terminal, we have entered into a site option agreement for a 984-acre tract of landexercise are not reflected as beneficially owned by the Brownsville Navigation District which operates the Port of Brownsville along the Brownsville Ship Channel. Our option is valid until November 2019. If we are unable to timely complete the lease negotiations or extend the lease option, we may not be able to site the Terminal and our business will be materially adversely affected.
We have commenced work on securing options for rights-of-way along the approximately 137-mile Pipeline route. This involves direct negotiations with more than 125 landowners along the route, some of whom may not be familiar with oil and gas developments or negotiate terms in good faith. It is possible that as we progress these negotiations, we may encounter recalcitrant land-owners or competitive projects offering more attractive terms which could result in additional time and cost in order to secure the Pipeline route. Although the Pipeline is being permitted under Section 7 of the Natural Gas Act, which provides permit holders rights of eminent domain, any recourse to eminent domain proceedings will increase the time and cost at which these rights-of-way will be secured. If the time or cost required to obtain these rights-of-way increases substantially or we are unable to obtain the rights-of-way, our business could be materially adversely affected.
Our U.S. competitors have acquired significant property tax incentives, and we may not be able to acquire or may not have acquired similar incentives from applicable taxing entities.
Due to the size of the Project’s capital investment, property taxes represent large operating costs for the Project. Therespective principal taxing entities are the Point Isabel Independent School District (“PIISD”) and Cameron County (the “County”). Due to local opposition supported by national environmental interest groups, PIISD did not initially accept Rio Grande’s application for a value limitation agreement pursuant to the State of Texas tax code provisions for economic development. We intend to resubmit Rio Grande’s application for consideration, but there is no guaranty that it will be accepted and approved. Approval of these tax incentives is an important component of the Project’s competitiveness. Failure to gain approval of tax incentives by PIISD on comparable terms with competitors could materially impact the Project’s competitiveness.
On October 3, 2017, Rio Grande executed four tax abatement agreements with the County; however, there is no assurance that the terms of such tax abatement agreements are competitive with other Gulf Coast liquefaction projects.
Objections from local communities can delay the Project.
Some local communities could perceive the proposed construction and operation of the Project as negatively impacting the environment, wildlife, cultural heritage sites or the public health of residents. Objections from local communities could cause delays, damage to reputation and difficulties in obtaining or renewing permits.
The Project will be dependent on the availability of gas supply at the Agua Dulce Hub.
The Pipeline will collect and transport natural gas to the Terminal. The Pipeline route passes through Jim Wells, Kleberg, Kenedy, Willacy, and Cameron Counties in Texas. The header system at the upstream end of the Pipeline is intended to have multiple interconnects to the existing natural gas pipeline grid locatedstockholders in the Agua Dulce market area (the “Agua Dulce Hub”). The Agua Dulce Hub is located in Nueces County, Texas, and includes deliveries from (but not limited to) ConocoPhillip’s 1,100-mile South Texas intrastate and gas gathering pipeline system and ExxonMobil’s 925 MMcf/d King Ranch processing facility. As the Pipeline system interconnects are expected to be relatively close to the Agua Dulce Hub, it is expected that gas will be available for purchase in large volumes at commercially acceptable prices. Nonetheless, disruptions in upstream supply sources or increased market demand could impact the availability of gas supply to the Pipeline header system, which would result in curtailments at the Terminal.table above.
(1) | Includes 210,498 shares of restricted stock subject to time-based vesting requirements and 841,994 shares of restricted stock subject to performance-based vesting requirements, in each case issued under the 2017 Equity Plan. |
(2) | Includes 28,499 shares of Common Stock beneficially owned by Mrs. Eisbrenner’s husband. |
(3) | Includes 90,744 shares of Common Stock held by the Rosenfeld Children’s Successor Trust of which Mr. Rosenfeld is trustee. Also includes 96,232 shares of Common Stock issuable upon exercise of warrants. |
(4) | Consists of 12,628,348 shares of Common Stock held by York Credit Opportunities Investments Master Fund, L.P.; 2,522,723 shares of Common Stock held by York European Distressed Credit Fund II, L.P.; 13,567,803 shares of Common Stock held by York Multi-Strategy Master Fund, L.P.; 11,751,923 shares of Common Stock held by York Credit Opportunities Fund, L.P.; 9,240,977 shares of Common Stock held by York Capital Management, L.P.; and 8,161,422 shares of Common Stock held by York Select Strategy Master Fund L.P. (collectively, the “YCMGA Entities”). YCMGA is the senior managing member of the general partner of each of the YCMGA Entities. James G. Dinan is the chairman of, and controls, YCMGA. Each of YCMGA and James G. Dinan has voting and investment power with respect to the securities owned by each of the YCMGA Entities and may be deemed to be beneficial owners thereof. Each of YCMGA and James G. Dinan disclaims beneficial ownership of the reported securities except to the extent of their pecuniary interests therein. The business address of the YCMGA Entities is 767 Fifth Avenue, 17th Floor, New York, NY 10153. |
(5) | Consists of 2,781 shares of Series A Preferred Stock held by York Credit Opportunities Investments Master Fund, L.P.; 556 shares of Series A Preferred Stock held by York European Distressed Credit Fund II, L.P.; 2,987 shares of Series A Preferred Stock held by York Multi-Strategy Master Fund, L.P.; 2,586 shares of Series A Preferred Stock held by York Credit Opportunities Fund, L.P.; and 2,034 shares of Series A Preferred Stock held by York Capital Management, L.P. None of such shares are convertible into shares of Common Stock within 60 days of April 9, 2019. |
(6) | Consists of 10,904,733 shares of Common Stock held by Valinor Capital Partners Offshore Master Fund, L.P.; 4,813,971 shares of Common Stock held by VND Partners, L.P.; and 3,832,630 shares of Common Stock held by Valinor Capital Partners, L.P. (collectively, the “Valinor Entities”). Valinor serves as investment manager to each of the Valinor Entities. David Gallo is the Founder, Managing Partner, and Portfolio Manager of Valinor and is the managing member of Valinor Associates, LLC (“Valinor Associates”), which serves as general partner to Valinor Capital Partners, L.P., Valinor Capital Partners Offshore Master Fund, L.P. and VND Partners, L.P. Each of Valinor Management, Valinor Associates and David Gallo may be deemed to beneficially own the securities held by such fund and each of Valinor Management, Valinor Associates and David Gallo disclaims beneficial ownership of the reported securities, except to the extent of its or his pecuniary interest. The business address of the Valinor Entities is 510 Madison Avenue, 25th Floor, New York, NY 10022. |
(7) | Consists of 2,774 shares of Series A Preferred Stock held by Valinor Capital Partners Offshore Master Fund, L.P. and 975 shares of Series A Preferred Stock held by Valinor Capital Partners, L.P. None of such shares are convertible into shares of Common Stock within 60 days of April 9, 2019. |
(8) | Consists of 329,411 shares of Common Stock held by Bardin Hill Event-Driven Master Fund LP; 4,090,195 shares of Common Stock held by HCN L.P.; 2,641,178 shares of Common Stock held by Halcyon Mount Bonnell Fund LP; 1,741,349 shares of Common Stock held by Halcyon Energy, Power, and Infrastructure Capital Holdings LLC; and 647,713 shares of Common Stock held by First Series of HDML Fund I LLC (collectively, the “Bardin Hill Entities”). Beneficial ownership includes 107,500 shares of Common Stock issuable upon exercise of warrants held by Bardin Hill Event-Driven Master Fund LP. Bardin Hill serves as the investment manager to each of the Bardin Hill Entities. Investment decisions of Bardin Hill are made by one or more of its portfolio managers, including Jason Dillow, Kevah Konner, John Greene and Pratik Desai, each of whom has individual decision-making authority. Jason Dillow is the Chief Executive Officer and Chief Investment Officer of Bardin Hill. Each of Bardin Hill, HCN GP LLC (in the case of HCN LP), Bardin Hill Fund GP LLC (in the case of Bardin Hill Event-Driven Master Fund LP, First Series of HDML Fund I LLC and Halcyon Mount Bonnell Fund LP), Jason Dillow, Kevah Konner, John Greene and Pratik Desai may be deemed to beneficially own the securities held by such Bardin Hill Entity and each of Bardin Hill, HCN GP LLC, Bardin Hill Fund GP LLC, Jason Dillow, Kevah Konner, John Greene and Pratik Desai disclaims beneficial ownership of the reported securities, except to the extent of its or his pecuniary interest. The business address of the Bardin Hill Entities is 477 Madison Avenue, 8th Floor, New York, NY 10022. |
Each liquefaction train for the Terminal is expected to involve the transportation and liquefaction of approximately 0.75 Bcf/day of natural gas (for a total of 4.5 Bcf/day for six liquefaction trains at full build-out). Gas sales agreements for the supply of these volumes could entail negotiations with multiple parties for firm and interruptible gas supply and transportation services to the Pipeline header system, as well as pipeline interconnects and ancillary operational
18
agreements in time for operational start-up as early as 2023. Delays caused by third parties in the course of negotiating agreements and constructing the required interconnects could delay the start of commercial operations for the Project.
Unethical conduct and non-compliance with applicable laws could have a significant adverse effect on our business.
Incidents of unethical behavior, fraudulent activity, corruption or non-compliance with applicable laws and regulations could be damaging to our operations and reputation and may subject us to criminal and civil penalties or loss of operating licenses. We have implemented an anti-corruption policy which applies to all employees and contractors without exception and we are a member of TRACE International, an internationally recognized anti-bribery compliance provider. Our legal team screens potential partners, agents and advisors in multiple data-bases to which it has access and regularly conducts due diligence interviews with potential counterparties. Due to the global nature of the LNG business and the diversity of jurisdictions in which our customers operate, it is possible that a prospective counterparty could be accused of behavior that falls short of our expectations in this regard, leading to reputational damage and potential legal liabilities, notwithstanding our best efforts to prevent such behaviors.
Our common stock could be delisted from Nasdaq.
Our common stock is currently listed on Nasdaq. However, we cannot assure you that we will be able to comply with the continued listing standards of Nasdaq. If we fail to comply with the continued listing standards of Nasdaq, our common stock may become subject to delisting. If Nasdaq delists our common stock from trading on its exchange for failure to meet the continued listing standards, we and our stockholders could face significant material adverse consequences including:
(9) | Consists of 517 shares of Series A Preferred Stock held by First Series of HDML Fund I LLC; 167 shares of Series A Preferred Stock held by Bardin Hill Event-Driven Master Fund LP; and 1,125 shares of Series A Preferred Stock held by HCN L.P. None of such shares are convertible into shares of Common Stock within 60 days of April 9, 2019. |
(10) |
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The market price of our common stock has fluctuated in the past and is likely to fluctuate in the future. Holders of common stock could lose all or part of their investment.
The securities markets in general and our common stock has experienced significant price and volume volatility. The market price and trading volume of our common stock may continue to experience significant fluctuations due not only to general stock market conditions but also to a change in sentiment in the market regarding our operations or business prospects or those of companies in our industry. In addition to the other risk factors discussed above, the price and volume volatility of our common stock may be affected by:
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Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Person Transactions
The stock pricesBoard adopted a written Related Person Transaction Policy on October 10, 2017, which addresses the reporting, review and approval or ratification of companiestransactions with related persons. Although related person transactions can involve potential or actual conflicts of interest, the Company recognizes that such transactions may occur in the LNG industry have experienced wide fluctuationsnormal course of business or provide an opportunity that have often been unrelatedis in the best interests of the Company. The Related Person Transaction Policy is not designed to prohibit related person transactions; rather, it is to provide for timely internal review of prospective transactions, approval or ratification of transactions and appropriate oversight and public disclosure of transactions.
Pursuant to the operating performanceRelated Person Transaction Policy, any transaction or arrangement or series of these companies. Following periodstransactions or arrangements between the Company, any subsidiary of volatilitythe Company or any other company controlled by the Company participates, whether or not the Company is a party, and a “related person” in which such person will have a material direct or indirect interest must be submitted to the market priceindependent directors of the Board for review, approval or ratification. A “related person” means any director, director nominee or executive officer of the Company, any holder of more than 5% of the outstanding voting securities of the Company, or any immediate family member of the foregoing persons.
The independent directors of the Board will consider all relevant factors when determining whether to approve or ratify a company’s securities, securities class action litigation often has been initiated againstrelated person transaction, including whether such transaction is in, or not inconsistent with, the best interests of the Company, and whether such transaction is comparable to a company. If any class action litigationtransaction that could be available on an arms-length basis or is initiated against us, we may incur substantial costson terms that the Company offers generally to persons who are not related persons and our management’s attention maywhether such transaction. Specific types of transactions are excluded from the Related Person Transaction Policy, such as, for example, transactions in which the related person’s interest arises solely from his or her service as a director of, or direct or indirect ownership of less than a ten percent (10%) equity interest in, another entity that is a party to the transaction.
In addition to the Related Person Transaction Policy, the Code of Conduct requires that conflicts of interests involving persons other than directors, director nominees and executive officers must be diverted from our operations,approved by the Operations Committee.
The following is a discussion of transactions between the Company and its executive officers, directors and stockholders owning 5% or more of the Company’s common stock.
Series A Convertible Preferred Stock Purchase Agreements
On August 3, 2018, the Company entered into a Series A Convertible Preferred Stock Purchase Agreement (the “Series A Preferred Stock Purchase Agreements”) with each of (i) YCMGA, severally on behalf of certain funds or accounts managed by it or its affiliates (the “YCMGA Purchasers”), (ii) Valinor, severally on behalf of certain funds or accounts for which could materially adversely affect our businessit is investment manager (the “Valinor Purchasers”), and financial condition.
Raising additional capital may cause dilution to existing stockholders, restrict our operations(iii) Bardin Hill, severally on behalf of certain funds or require us to relinquish rights. Additionally, sales of a substantial number of shares of our common stockaccounts managed by it or other securities inits affiliates (the “Barding Hill Purchasers” and together with the public market could cause our stock price to fall.
We may seek the additional capital necessary to fund our operations through public or private equity offerings and debt financings. To the extent that we raise additional capital through the sale of equity or convertible debt securities, existing stockholders’ ownership interests will be diluted,YCMGA Purchasers and the terms may include liquidation or other preferences that adversely affect their rights as a stockholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our abilityValinor Purchasers, the “Fund Purchasers”) pursuant to take specific actions such as incurring additional debt, making capital expenditures or declaring dividends. In addition, sales of a substantial number of shares of our common stock or other securities inwhich the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.
Warrants are exercisable for our common stock, which, if exercised, would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As of December 31, 2017, outstanding warrants to purchaseCompany sold an aggregate of 12,081,89515,000 shares of our common stock became exercisableSeries A Preferred Stock at $1,000.00 per share for an aggregate purchase price of $15 million, issued the Series A Warrants and issued an additional 300 shares of Series A Preferred Stock in accordanceaggregate as origination fees to the Fund Purchasers (the “Fund Purchaser Offering”).
In connection with the termsissuance of Series A Preferred Stock and pursuant to backstop commitment agreements with the Fund Purchasers dated April 11, 2018, as subsequently amended on August 3, 2018 (as amended, the “Backstop Agreements”), we also issued a total of 413,658 shares of Common Stock as fees to the Fund Purchasers. Each Fund Purchaser is a Company stockholder and, pursuant to the Merger Agreement by and among the Company, each Fund Purchaser and/or one or more of its affiliates, and the other parties named therein, three individuals, two individuals, and one individual from YCMGA, Valinor and Bardin Hill, respectively, were appointed to the Board.
Warrant Agreements
On August 9, 2018, the closing date of the Fund Purchaser Offering (the “Fund Purchaser Offering Closing Date”), the Company delivered a warrant agreement governing those securities. These warrants will expire at 5:00 p.m., New York time, on July 24, 2022 or earlier upon redemption or liquidation. The exercise price of these warrants is $11.50 per one full share, subject to certain adjustments. To the extent such warrants are exercised, additional shares of our common stock will be issued, which will result in dilution to the holders of our common stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our common stock.
Our Second Amended and Restated Certificate of Incorporation grants our board of directors the power to designate and issue additional shares of common and/or preferred stock.
Our authorized capital consists of 480,000,000 shares of common stock and 1,000,000 shares of preferred stock. Our preferred stock may be designated into series pursuant to authority granted by our Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), and on approval from our board of directors. The board of directors, without any action by our stockholders, may designate and issue shares in such classes or series as it deems appropriate and establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of other classes or series of stock that may be issued could be superior to the rights of holders of our common stock. The designation and issuance of shares of capital stock having preferential rights could adversely affect other rights appurtenant to shares of our common stock.
Provisions of our charter documents or Delaware law could delay or prevent an acquisition of NextDecade even if the acquisition would be beneficial to our stockholders and could make it more difficult to change management.
Provisionseach of the Certificate of Incorporation and our Amended and Restated Bylaws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders might otherwise consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions mayFund Purchasers governing the Series A Warrants
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frustrateissued to such Fund Purchaser. Under such warrant agreements, the Series A Warrants issued to the Fund Purchasers represent the right to acquire approximately 21 basis points (0.21%) in the aggregate of the fully diluted shares of all outstanding shares of Common Stock on the exercise date with a strike price of $0.01 per share. The Series A Warrants have a fixed three-year term commencing on the respective closings of the issuances of the Series A Preferred Stock. The Series A Warrants may only be exercised by holders at the expiration of such three-year term; however, the Company can force exercise of the Series A Warrants prior to expiration of such term if the volume weighted average trading price of shares of Common Stock for each trading day during any 60 of the prior 90 trading days is equal to or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our boardgreater than 175% of directors. These provisions include:the $7.50.
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U.S. federal income tax reform could adversely affect us.Registration Rights Agreements
On the Fund Purchaser Offering Closing Date, the Company and the Fund Purchasers entered into registration rights agreements, as subsequently amended on December 22, 2017,7, 2018 (as amended, the Tax Cuts and Jobs Act (the “2017 Tax Act”“Registration Rights Agreements”) was signed into law, significantly reforming. Pursuant to the IRC. The 2017 Tax Act,Registration Rights Agreements, the Company agreed to, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on(i) file as soon as practicable after the deductibility of interest, allows fordate that is one hundred twenty (120) days after the expensing of capital expenditures, reduces or eliminates certain domestic deductions and imposes limitations on the use of net operating losses arising in taxable years beginning after December 31, 2017. The reductionconsummation of the U.S. corporate tax rate resultsFund Purchaser Offering Closing Date, but in any event within thirty (30) days after the date that is one hundred twenty (120) from the consummation of the Fund Purchaser Offering Closing Date, with the SEC a decreased valuationshelf registration statement to permit the public resale of shares of Common Stock underlying (i) the Series A Preferred Stock (including any Common Stock underlying the Series A Preferred Stock issued as payment-in-kind dividends) issued pursuant to the Series A Preferred Stock Purchase Agreements and the Backstop Agreements, as applicable, and (ii) the Series A Warrants (the securities described in clauses (i) and (ii), the “Registrable Securities”). Further, the Company agreed to keep such shelf registration statement effective until the earliest of (i) the date all such Registrable Securities ceased to be Registrable Securities and (ii) the date all such Registrable Securities covered by such shelf registration statement can be sold publicly without restriction or limitation under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), and without the requirement to be in compliance with Rule 144(c)(1) under the Securities Act. The Company filed such shelf registration statement with the SEC on December 20, 2018 and such registration statement became effective on December 26, 2018.
Director Independence
The Company adheres to the Nasdaq listing rules in determining whether a director is independent. The Board consults with its counsel to ensure that the Board’s determinations are consistent with such rules and all relevant securities and other laws and regulations regarding the independence of directors. The Nasdaq listing rules define an “independent director” as a person, other than an executive officer of a company or any other individual having a relationship which, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
The Board undertook a review of the independence of our deferred tax assetdirectors and liabilities. We continueconsidered whether any director has a material relationship with us that could compromise his or her ability to examineexercise independent judgment in carrying out his or her responsibilities. The Board considered the impactrelationships that each director has with us and all other facts and circumstances the 2017 Tax Act may have onBoard deemed relevant in determining his or her independence, including the beneficial ownership of our business. The estimated impactCommon Stock owned by each director. Based upon information requested from and provided by each director concerning his background, employment, affiliations and common stock ownership, the Board has determined that each of Messrs. Belke, Bonanno, Gallo, Kripalani, Lee, Magid, Rosenfeld, Vrattos and Wells are independent under the Nasdaq listing rules. Additionally, the Board determined that David Sgro, a former member of the 2017 Tax ActBoard who served until the 2018 Annual Meeting of Stockholders, was independent under the Nasdaq listing rules.
The Board determined that Mr. Schatzman is based on our management’s current knowledgenot an independent director under the Nasdaq listing rules because he currently serves as the President and assumptionsChief Executive Officer of the Company and recognized impacts could be materially different from current estimates based on our actual resultsMrs. Eisbrenner is not an independent director under the Nasdaq listing rules because she served as the Chief Executive Officer of the Company until February 2018. René van Vliet, a former member of the Board,.was not an independent director under the Nasdaq listing rules because he served as executive officer of the Company until October 2018.
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Item 1B. Unresolved Staff Comments14. Principal Accounting Fees and Services
None.Dismissal of Marcum LLP
We currently lease approximately 8,300 square feet of office space for general and administrative purposesAs previously disclosed in The Woodlands, Texas under an amended lease agreement that expiresthe Company’s Current Report on September 30, 2018.
In January 2017, NextDecade LLC executed surface lease agreementsForm 8-K filed with the CitySEC on August 30, 2018 (the “Auditor Form 8-K”), Marcum LLP (“Marcum”), an independent registered public accounting firm, served as the Company’s independent auditors until August 24, 2018 when the Audit Committee dismissed Marcum in connection with the appointment of Texas CityGrant Thornton LLP (“Grant Thornton”) on August 24, 2018.
Marcum’s audit report on the consolidated financial statements of the Company as of and for the year ended December 31, 2017 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principle.
During the years ended December 31, 2017 and 2016 and the Statesubsequent interim period through August 24, 2018, there were no (i) disagreements (as defined in Item 304(a)(1)(iv) of Texas forRegulation S-K) with Marcum on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Marcum, would have caused Marcum to make reference to the subject matter of the disagreements in their reports on the Company’s financial statements nor (ii) any reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
The Company provided Marcum with a 994‑acre sitecopy of the disclosures contained in the Auditor Form 8-K and requested in writing that Marcum furnish the Company with a letter addressed to the SEC stating whether it agreed with the statements made therein. Marcum provided a letter, dated August 29, 2018, which letter is attached to the Auditor Form 8-K as Exhibit 16.1.
Independent Auditors and Fees
Grant Thornton LLP (“Grant Thornton”) was the Company’s independent registered public accounting firm for the Galveston Bay Terminal (collectively,year ended December 31, 2018 and Marcum was the “Galveston Bay Leases”). Company’s independent registered public accounting firm for the year ended December 31, 2017.
The termfollowing table presents (i) fees for professional audit services rendered by (a) Grant Thornton for the audit of the Galveston Bay Leases is 36 months with an option to extend for an additional 12 months.
In March 2017, NextDecade LLC executed a lease agreement with the Brownsville Navigation District for a ten‑acre tract subsumed within the siteCompany’s annual financial statements for the Terminal (the “Brownsville Lease”). year ended December 31, 2018 and (b) Marcum for the audit of the Company’s annual financial statements for the year ended December 31, 2017 and (ii) fees billed for other services rendered by Grant Thornton and Marcum:
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| Year Ended December 31, | ||||
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| 2018 |
| 2017 | ||
Audit fees(1) |
| $ | 175,037 |
| $ | 201,851 |
Tax fees(2) |
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| — |
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| 7,168 |
Total |
| $ | 175,037 |
| $ | 209,019 |
(1) | Audit fees: Consist of fees billed for professional services rendered for audits of the Company’s consolidated financial statements, for the review of the interim condensed consolidated financial statements included in quarterly reports, services that are normally provided in connection with statutory and regulatory filings or engagements and attest services, except those not required by statute or regulation. |
(2) | Tax fees: Consist of fees billed for professional services rendered for tax preparation, tax compliance, tax advice or tax planning. |
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Brownsville Lease has an eight‑month primary term withAudit Committee is responsible for the optionappointment, retention, termination, compensation and oversight of the independent auditors. The Audit Committee’s policy is to renewpre-approve all audit and permissible non-audit services provided by the independent auditors. Requests for approval are generally submitted at a meeting of the Audit Committee. The Audit Committee may delegate pre-approval authority to a committee member, provided that any decisions made by such lease for six additional six-month terms. On October 10, 2017, NextDecade LLC exercisedmember shall be presented to the full committee at its option to renew the Brownsville Lease for an additional six-month term, which expires May 5, 2018.
We do not own or lease any other real property that is materially important to our business. We believe that our current properties are adequate for our current needs and that additional space will be available when and as needed.
None.
Item 4.Mine Safety Disclosures
Not applicable.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information, Holders and Dividends
Our common stock trades on Nasdaq under the symbol “NEXT.” Our warrants traded on Nasdaq under the symbol “NEXTW” until February 22, 2018, the date on which our warrants were delisted from Nasdaq as a result of our failure to satisfy the initial listing requirements of Nasdaq. Since February 22, 2018, our warrants have been trading on the OTC Pink Market under the symbol “NEXTW.” The table below presents the high and low sales prices of our common stock and warrants, as reported by the Nasdaq, for each quarter during 2017 and 2016.
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| Common Stock |
| Warrants | ||||||||
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| High |
| Low |
| High |
| Low | ||||
2017 |
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First Quarter |
| $ | 10.26 |
| $ | 10.12 |
| $ | 1.00 |
| $ | 0.23 |
Second Quarter |
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| 10.34 |
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| 10.16 |
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| 1.00 |
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| 0.17 |
Third Quarter |
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| 20.00 |
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| 6.55 |
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| 1.19 |
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| 0.26 |
Fourth Quarter |
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| 10.80 |
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| 5.54 |
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| 0.94 |
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| 0.42 |
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First Quarter |
| $ | 10.00 |
| $ | 9.82 |
| $ | 0.40 |
| $ | 0.20 |
Second Quarter |
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| 10.50 |
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| 9.83 |
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| 0.34 |
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| 0.17 |
Third Quarter |
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| 10.21 |
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| 9.98 |
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| 0.45 |
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| 0.19 |
Fourth Quarter |
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| 10.30 |
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| 9.98 |
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| 0.50 |
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| 0.25 |
As of March 1, 2018, we had 106.4 million shares of common stock outstanding held by approximately 81 record owners. All shares of common stock held in street name are recorded in our stock register as being held by one stockholder.
We currently intend to retain earnings to finance the growth and development of our business and do not anticipate paying any cash dividends on the common stock in the foreseeable future. Any future change in our dividend policy will be made at the discretion of our board of directors in light of our financial condition, capital requirements, earnings, prospects and any restrictions under any financing agreements, as well as other factors it deems relevant.
Item 6. Selected Financial Data
Selected financial data set forth below (in thousands, except per share data) are derived from our audited Consolidated Financial Statements for the periods indicated. The financial data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and our Consolidated Financial Statements and the accompanying notes thereto included elsewhere in this report.
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| December 31, | ||||||||||
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| 2017 |
| 2016 |
| 2015 |
| 2014 | ||||
Property, plant and equipment, net |
| $ | 73,226 |
| $ | 56,233 |
| $ | 36,879 |
| $ | 1,369 |
Total assets |
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| 116,091 |
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| 75,777 |
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| 82,596 |
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| 2,165 |
Total liabilities |
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| 12,999 |
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| 7,679 |
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| 6,032 |
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| 1,051 |
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| Year Ended December 31, | ||||||||||
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| 2017 |
| 2016 |
| 2015 |
| 2014 | ||||
Revenues |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Total operating loss |
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| (35,638) |
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| (8,502) |
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Net loss |
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| (35,326) |
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| (8,439) |
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| (2,888) |
Net loss per common share - basic and diluted |
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| (0.35) |
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| (0.09) |
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| (0.14) |
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Weighted average shares outstanding - basic and diluted |
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| 100,926 |
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| 95,680 |
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| 55,226 |
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| 6,191 |
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis presents management’s view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes in “Financial Statements and Supplementary Data.” This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis include the following subjects:
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We are 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. PWe believe we maintain key competitive advantages involving engineering, commercial, regulatory, and gas supply considerations. 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 will commence commercial operations as early as 2023.
Overview of Significant Events
Our Merger with NextDecade LLC
On July 24, 2017, one of our subsidiaries merged with and into NextDecade LLC, a liquefied natural gas (“LNG”) development company founded in 2010 to develop LNG export projects and associated pipelines in the State of Texas. Prior to the merger with NextDecade LLC, we had no operations and our assets consisted of cash proceeds received in connection with our initial public offering.
Completion of Front End Engineering and Design Update Package
In early 2018, we completed the FEED update package with CB&I for the Terminal. The update incorporates identified cost reduction and value improvement initiatives and reconfirms market-leading EPC cost estimates for three trains of $490 per ton with a target of $450 per ton. For two trains the EPC cost estimate improves to $535 per ton with a target of $500 per ton. NextDecade and CB&I are finalizing an Open Book Estimate to incorporate the FEED update improvements and plan to execute a binding Lump-Sum Turnkey EPC agreement in the second quarter of 2018.
24
Liquidity and Capital Resources
In March 2015, we completed our initial public offering raising approximately $115 million in cash proceeds. 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 consist of approximately $35.7 million of cash and $5.1 million of available-for-sale investment securities as of December 31, 2017.
The following table summarizes the sources and uses of our cash for the periods presented (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Operating cash flows |
| $ | (12,830) |
| $ | (7,190) |
| $ | (6,227) |
Investing cash flows |
|
| 11,862 |
|
| (24,416) |
|
| (33,213) |
Financing cash flows |
|
| 24,147 |
|
| — |
|
| 83,214 |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| 23,179 |
|
| (31,606) |
|
| 43,774 |
Cash, cash equivalents and restricted cash – beginning of year |
|
| 12,524 |
|
| 44,130 |
|
| 356 |
Cash, cash equivalents and restricted cash – end of year |
| $ | 35,703 |
| $ | 12,524 |
| $ | 44,130 |
Operating Cash Flows
Operating cash outflows during the years ended December 31, 2017, 2016 and 2015 were $12.8 million, $7.2 million and $6.2 million, respectively. The increase in operating cash outflows in 2017 compared to 2016 was primarily related to increased cash used as a result of additional employees and increased professional fees.
The increase in operating cash outflows in 2016 compared to 2015 was primarily related to increased cash used as a result of additional employees.
Investing Cash Flows
Investing cash inflows (outflows) during the years ended December 31, 2017, 2016 and 2015 were $11.9 million, $(24.4) million and $(33.2) million, respectively. The increase in investing cash inflows in 2017 compared to 2016 was primarily the result of cash acquired in the Merger of $26.8 million, a reduction in cash outflows in the development of the Project of $4.6 million and a reduction in cash outflows for the purchase of available-for-sale investment securities of $4.9 million.
The decrease in investing cash outflows in 2016 compared to 2015 was primarily due to a reduction in cash outflows in the development of the Project of $13.8 million offset by an increase in cash outflows for the purchase of available-for-sale investment securities of $5.0 million.
Financing Cash Flows
Financing cash inflows during the years ended December 31, 2017, 2016 and 2015 were $24.1 million, zero, and $83.2 million, respectively. Financing cash inflows in 2017 was the result of $30.1 million of equity issued offset by $6.0 million of equity issuance costs in 2017 and no financing cash flows in 2016.
Financing cash inflows in 2015 was the result of $87.0 million of equity issued offset by $2.7 million of equity issuance costs and $1.0 million dividend paid.
25
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 significant cash flows until at least several years from now, which management currently estimates being as early as 2023. Construction of the Terminal and Pipeline would not begin until 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 the costs of staffing, operating and expanding our company 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. Additionally, we have negotiated a non-binding term sheet with GE Oil & Gas, Inc. for $150 million of pre-FID “bridge loan financing” which, subject to the achievement of certain development milestones, may be utilized to fund certain pre-FID development 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. 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
We are committed to make cash payments in the future pursuant to certain of our contracts. The following table summarizes certain contractual obligations (in thousands) in place as of December 31, 2017:
Operating lease obligations primarily relate to our land site for our Galveston Bay Terminal and office space in The Woodlands, Texas. A discussion of these obligations can be found at Note 12 – Commitments and Contingencies of our Notes to Consolidated Financial Statements.
Results of Operations
The following table summarizes costs, expenses and other income for the year ended December 31, 2017 and 2016 (in thousands):
|
|
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|
|
|
|
|
| For the Year Ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| Change | |||
Revenues |
| $ | — |
| $ | — |
| $ | — |
General and administrative expenses |
|
| 34,551 |
|
| 7,300 |
|
| 27,251 |
Land option and lease expenses |
|
| 981 |
|
| 596 |
|
| 385 |
Depreciation expense |
|
| 106 |
|
| 100 |
|
| 6 |
Impairment loss on capital projects |
|
| — |
|
| 506 |
|
| (506) |
Operating loss |
|
| (35,638) |
|
| (8,502) |
|
| (27,136) |
Interest income, net |
|
| 343 |
|
| 82 |
|
| 261 |
Other expense |
|
| (31) |
|
| (19) |
|
| (12) |
Net loss |
| $ | (35,326) |
| $ | (8,439) |
| $ | (26,887) |
26
Our consolidated net loss was $35.3 million, or $0.35 per share (basic and diluted), for the year ended December 31, 2017, compared to a net loss of $8.4 million, or $0.09 per share (basic and diluted), for the year ended December 31, 2016. This $26.9 million increase in net loss was primarily a result of increased general and administrative expenses discussed separately below.
General and administrative expenses during the year ended December 31, 2017 increased $27.3 million compared to the year ended December 31, 2016 due primarily to (i) share-based compensation expense of $22.7 million, which was not incurred in 2016, and (ii) an increase in the number of employees and amount of professional fees increasing from $5.6 million in the year ended December 31, 2016 to $9.5 million in the year ended December 31, 2017.
Land option and lease expenses during the year ended December 31, 2017, increased $0.4 million compared to the year ended December 31, 2016 primarily due to lease expense associated with a 994-acre site with the City of Texas City and the State of Texas of $0.3 million, which was not incurred in 2016.
Impairment loss on capital projects decreased in the year ended December 31, 2017 compared to the year ended December 31, 2016 due to an approximate $0.5 million impairment charge recognized in May 2016, when we decided to abandon several early-stage, non-core projects to focus on development of the Project.
Interest income, net during the year ended December 31, 2017 increased $0.3 million compared to the year ended December 31, 2016 due to increased yield and higher average balances maintained in our cash accounts and investments.
The following table summarizes costs, expenses and other income for the year ended December 31, 2016 and 2015 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| For the Year Ended | |||||||
|
| December 31, | |||||||
|
| 2016 |
| 2015 |
| Change | |||
Revenues |
| $ | — |
| $ | — |
| $ | — |
General and administrative expenses |
|
| 7,300 |
|
| 7,109 |
|
| 191 |
Land option and lease expenses |
|
| 596 |
|
| 584 |
|
| 12 |
Depreciation expense |
|
| 100 |
|
| 80 |
|
| 20 |
Impairment loss on capital projects |
|
| 506 |
|
| — |
|
| 506 |
Operating loss |
|
| (8,502) |
|
| (7,773) |
|
| (729) |
Interest income, net |
|
| 82 |
|
| 24 |
|
| 58 |
Other expense |
|
| (19) |
|
| (15) |
|
| (4) |
Net loss |
| $ | (8,439) |
| $ | (7,764) |
| $ | (675) |
Our consolidated net loss was $8.4 million, or $0.09 per share (basic and diluted), for the year ended December 31, 2016, compared to a net loss of $7.8 million, or $0.14 per share (basic and diluted), for the year ended December 31, 2016. This $0.7 million increase in net loss was primarily a result of increased general and administrative expenses and impairment loss on capital projects discussed separately below.
General and administrative expenses during the year ended December 31, 2016 increased $0.2 million compared to the year ended December 31, 2015 due primarily to increased professional fees for legal, financial advisors, and market consultants of $1.2 million compared to $1.0 million during the year ended December 31, 2015.
Impairment loss on capital projects during the year ended December 31, 2016 increased compared to the year ended December 31, 2015 due to an approximate $0.5 million impairment charge recognized in May 2016, when we decided to abandon several early-stage, non-core projects to focus on development of the Project.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2017.
27
Summary of Critical Accounting Estimates
The preparation of our Condensed 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. Management evaluates its estimates and related assumptions regularly, including those related to the value of properties, plant, and equipment, share-based compensation and income taxes. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Management considers the following to be its most critical accounting estimates that involve significant judgment.
Impairment of Long-Lived Assets
A long-lived asset, including an intangible asset, is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability generally is determined by comparing the carrying value of the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value. We use a variety of fair value measurement techniques when market information for the same or similar assets does not exist. Projections of future operating results and cash flows may vary significantly from results. Management reviews its estimates of cash flows on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.
Share-based Compensation
The assumptions used in calculating the fair value of share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future.
For additional information regarding our share-based compensation, see Note 10 – Share-based Compensation of our Notes to Consolidated Financial Statements.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements. Deferred tax assets and liabilities are included in the Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the current period’s provision for income taxes. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. This assessment requires significant judgment and is based upon our assessment of our ability to generate future taxable income among other factors.
For descriptions of recently issued accounting standards, see Note 13 – Recent Accounting Pronouncements of our Notes to Consolidated Financial Statements.
28
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk in the form of equity price risk related to investments in marketable securities and capital market risk related to future debt and equity offerings.
At December 31, 2017, the fair value of our investments in securities available-for-sale was $5.1 million. We determined the fair value of our investment based on the closing market price where these securities were listed on December 29, 2017. In order to test the sensitivity of the fair value of the available-for-sale securities to changes in equity prices, management modeled a 10% change in the closing market price. This 10% change in closing market price would have resulted in a $0.5 million change in the fair value of available-for-sale securities as of December 31, 2017 and December 31, 2016.
Capital Market Risk
We currently have no revenues and depend on funds raised through other sources. Two sources of funding are through future debt or equity offerings. Our ability to raise funds in this manner depends upon capital market forces affecting the share price of our common stock.
29
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
NextDecade Corporation and Subsidiaries
30
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
NextDecade Corporation and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of NextDecade Corporation and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for years ended December 31, 2017, 2016 and 2015 and the related notes(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and December 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum llp
Marcum llp
We have served as the Company’s auditor since 2017.
New York, NY
March 8, 2018
31
NextDecade Corporation and Subsidiaries
(in thousands, except share data)
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2017 |
| 2016 | ||
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 35,703 |
| $ | 12,524 |
Deferred equity issuance costs |
|
| — |
|
| 578 |
Investments |
|
| 5,063 |
|
| 4,997 |
Prepaid expenses and other current assets |
|
| 2,099 |
|
| 1,096 |
Total current assets |
|
| 42,865 |
|
| 19,195 |
Property, plant and equipment, net |
|
| 73,226 |
|
| 56,233 |
Other assets |
|
| — |
|
| 349 |
Total assets |
| $ | 116,091 |
| $ | 75,777 |
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
| $ | 726 |
| $ | 1,167 |
Share-based compensation liability |
|
| 1,815 |
|
| — |
Accrued liabilities and other current liabilities |
|
| 5,856 |
|
| 3,767 |
Total current liabilities |
|
| 8,397 |
|
| 4,934 |
Non-current compensation liabilities |
|
| 2,015 |
|
| 2,745 |
Non-current share-based compensation liability |
|
| 2,587 |
|
| — |
Total liabilities |
|
| 12,999 |
|
| 7,679 |
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Preferred stock, $0.0001 par value, 1.0 million shares authorized, none issued |
|
| — |
|
| — |
Common stock, $0.0001 par value |
|
| 11 |
|
| 10 |
Additional paid-in-capital |
|
| 158,738 |
|
| 88,406 |
Accumulated deficit |
|
| (55,617) |
|
| (20,291) |
Accumulated other comprehensive loss |
|
| (40) |
|
| (27) |
Total stockholders’ equity |
|
| 103,092 |
|
| 68,098 |
Total liabilities and stockholders’ equity |
| $ | 116,091 |
| $ | 75,777 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
32
NextDecade Corporation and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
| Year Ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Operations |
|
|
|
|
|
|
|
|
|
Revenues |
| $ | — |
| $ | — |
| $ | — |
Operating Expenses |
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
| 34,551 |
|
| 7,300 |
|
| 7,109 |
Land option and lease expenses |
|
| 981 |
|
| 596 |
|
| 584 |
Depreciation expense |
|
| 106 |
|
| 100 |
|
| 80 |
Impairment loss on capital projects |
|
| — |
|
| 506 |
|
| — |
Total operating expenses |
|
| 35,638 |
|
| 8,502 |
|
| 7,773 |
Total operating loss |
|
| (35,638) |
|
| (8,502) |
|
| (7,773) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
Interest income, net |
|
| 343 |
|
| 82 |
|
| 24 |
Other expense |
|
| (31) |
|
| (19) |
|
| (15) |
Total other income |
|
| 312 |
|
| 63 |
|
| 9 |
Net loss |
| $ | (35,326) |
| $ | (8,439) |
| $ | (7,764) |
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
| $ | (0.35) |
| $ | (0.09) |
| $ | (0.14) |
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
| 100,926 |
|
| 95,680 |
|
| 55,226 |
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (35,326) |
| $ | (8,439) |
| $ | (7,764) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
Change in fair value of investments |
|
| (13) |
|
| (27) |
|
| — |
Comprehensive loss |
| $ | (35,339) |
| $ | (8,466) |
| $ | (7,764) |
The accompanying notes are an integral part of these Consolidated Financial Statements.
33
NextDecade Corporation and Subsidiaries
Consolidated Statements of Stockholders’ Equity
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
|
|
|
|
|
|
| Accumulated |
|
|
| ||||
|
|
|
| Par |
| Additional |
|
|
|
| Other |
| Total | ||||
|
|
|
| Value |
| Paid-in |
| Accumulated |
| Comprehensive |
| Stockholders’ | |||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity | |||||
Balance at December 31, 2014 |
| 6,191 |
| $ | 1 |
| $ | 5,201 |
| $ | (4,088) |
| $ | — |
| $ | 1,114 |
Pre-merger equity issuance |
| 89,489 |
|
| 9 |
|
| 86,991 |
|
| — |
|
| — |
|
| 87,000 |
Equity issuance costs |
| — |
|
| — |
|
| (2,746) |
|
| — |
|
| — |
|
| (2,746) |
Dividend |
| — |
|
| — |
|
| (1,040) |
|
| — |
|
| — |
|
| (1,040) |
Net loss |
| — |
|
| — |
|
| — |
|
| (7,764) |
|
| — |
|
| (7,764) |
Balance at December 31, 2015 |
| 95,680 |
|
| 10 |
|
| 88,406 |
|
| (11,852) |
|
| — |
|
| 76,564 |
Other comprehensive loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (27) |
|
| (27) |
Net loss |
| — |
|
| — |
|
| — |
|
| (8,439) |
|
| — |
|
| (8,439) |
Balance at December 31, 2016 |
| 95,680 |
| $ | 10 |
| $ | 88,406 |
| $ | (20,291) |
| $ | (27) |
| $ | 68,098 |
Pre-merger equity issuance |
| 2,810 |
|
| — |
|
| 20,100 |
|
| — |
|
| — |
|
| 20,100 |
Reverse recapitalization |
| 6,759 |
|
| 1 |
|
| 26,773 |
|
| — |
|
| — |
|
| 26,774 |
Issuance of common stock |
| 1,026 |
|
| — |
|
| 10,000 |
|
| — |
|
| — |
|
| 10,000 |
Equity issuance costs |
| — |
|
| — |
|
| (6,295) |
|
| — |
|
| — |
|
| (6,295) |
Share-based compensation |
| — |
|
| — |
|
| 19,754 |
|
| — |
|
| — |
|
| 19,754 |
Other comprehensive loss |
| — |
|
| — |
|
| — |
|
| — |
|
| (13) |
|
| (13) |
Net loss |
| — |
|
| — |
|
| — |
|
| (35,326) |
|
| — |
|
| (35,326) |
Balance at December 31, 2017 |
| 106,275 |
| $ | 11 |
| $ | 158,738 |
| $ | (55,617) |
| $ | (40) |
| $ | 103,092 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
34
NextDecade Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
| Year Ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
| $ | (35,326) |
| $ | (8,439) |
| $ | (7,764) |
Adjustment to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
Depreciation |
|
| 106 |
|
| 100 |
|
| 80 |
Share-based compensation expense |
|
| 22,693 |
|
| — |
|
| — |
Impairment loss on capital projects |
|
| — |
|
| 506 |
|
| — |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other currents assets |
|
| (1,003) |
|
| (785) |
|
| (475) |
Other assets |
|
| 349 |
|
| 350 |
|
| (672) |
Accounts payable |
|
| (137) |
|
| 272 |
|
| 39 |
Accrued expenses and other liabilities |
|
| 488 |
|
| 806 |
|
| 2,565 |
Net cash used in operating activities |
|
| (12,830) |
|
| (7,190) |
|
| (6,227) |
Investing activities: |
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment |
|
| (14,833) |
|
| (19,392) |
|
| (33,213) |
Issuance of note receivable |
|
| (115) |
|
| — |
|
| — |
Repayment of note receivable |
|
| 115 |
|
| — |
|
| — |
Cash received in reverse recapitalization |
|
| 26,774 |
|
| — |
|
| — |
Investments |
|
| (79) |
|
| (5,024) |
|
| — |
Net cash provided by (used in) investing activities |
|
| 11,862 |
|
| (24,416) |
|
| (33,213) |
Financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from equity issuances |
|
| 30,100 |
|
| — |
|
| 87,000 |
Equity issuance costs |
|
| (5,953) |
|
| — |
|
| (2,746) |
Dividends paid |
|
| — |
|
| — |
|
| (1,040) |
Net cash provided by financing activities |
|
| 24,147 |
|
| — |
|
| 83,214 |
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
| 23,179 |
|
| (31,606) |
|
| 43,774 |
Cash, cash equivalents and restricted cash – beginning of year |
|
| 12,524 |
|
| 44,130 |
|
| 356 |
Cash, cash equivalents and restricted cash – end of year |
| $ | 35,703 |
| $ | 12,524 |
| $ | 44,130 |
|
|
|
|
|
|
|
|
|
|
Non-cash investing activities: |
|
|
|
|
|
|
|
|
|
Accounts payable for acquisition of property, plant and equipment |
| $ | 498 |
| $ | 802 |
| $ | 1,200 |
Accrued liabilities for acquisition of property, plant and equipment |
|
| 3,317 |
|
| 1,810 |
|
| 1,989 |
|
|
|
|
|
|
|
|
|
|
Balances per Consolidated Balance Sheets: |
|
|
|
|
|
|
|
|
|
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Cash and cash equivalents |
| $ | 35,703 |
| $ | 12,524 |
| $ | 27,127 |
Restricted cash |
|
| — |
|
| — |
|
| 17,003 |
Total cash, cash equivalents and restricted cash |
| $ | 35,703 |
| $ | 12,524 |
| $ | 44,130 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
35
NextDecade Corporation and Subsidiaries
Notes to Consolidated Financial Statements
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” together with the Terminal, the “Project”). We have also secured, through December 2019, a 994-acre site near Texas City, Texas for another potential LNG terminal (the “Galveston Bay Terminal”).
We were incorporated in Delaware on May 21, 2014 and were formed for the purpose of acquiring, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities. On July 24, 2017 (the “Merger Date”), one of our subsidiaries merged with and into NextDecade LLC (the “Merger”), a LNG development company founded in 2010 to develop LNG export projects and associated pipelines in the State of Texas. Prior to the merger with NextDecade LLC, we had no operations and our assets consisted of cash proceeds received in connection with our initial public offering.
The Merger was accounted for as a reverse acquisition and recapitalization, with NextDecade LLC being treated as the accounting acquirer. As such, the historical Consolidated Financial Statements as of and for the years ended December 31, 2016 and 2015, contained in this report, relate to NextDecade LLC and its subsidiaries. Subsequent to the Merger Date, the information relates to the consolidated entities of NextDecade. We continue to operate in a single operating segment for financial reporting purposes.
In connection with the Merger, the issued and outstanding membership interests in NextDecade LLC were exchanged for 98,490,409 shares of our common stock. All share and per share amounts in the Consolidated Financial Statements and related notes have been retroactively adjusted for all periods presented to give effect to this exchange.
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All intercompany accounts and transactions have been eliminated in consolidation.
Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications had no effect on our overall consolidated financial position, operating results or cash flows.
Note 2 — Summary of Significant Accounting Policies
Use of Estimates
The preparation of Consolidated Financial Statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. Management evaluates its estimates and related assumptions regularly, including those related to the value of property, plant and equipment, income taxes including valuation allowances for net deferred tax assets, share-based compensation and fair value measurements. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist principally of cash and cash equivalents. We maintain cash balances with a single financial institution, which may at times be in excess of federally insured levels. We have not incurred losses related to these cash and cash equivalent balances to date.
36
Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash consist of funds that are contractually restricted as to usage or withdrawal and are presented separately from cash and cash equivalents on our Consolidated Balance Sheets.
Investment Securities
We define investment securities as securities that can be readily converted to cash. As of December 31, 2017, and 2016, our investment securities are classified as available-for-sale. Available-for-sale investment securities are initially recorded at cost and periodically remeasured to fair value, with changes presented in comprehensive income. We determine the appropriate classification of investment securities at the time of purchase and reevaluate such classification at each balance sheet date. Realized gains and losses and other than temporary declines in fair value are included in earnings.
Property, Plant and Equipment
Generally, we begin to capitalize the costs of our development projects once construction of the individual project is probable. This assessment includes the following criteria:
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|
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|
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|
|
Prior to meeting the criteria above, costs associated with a project are expensed as incurred. Expenditures for normal repairs and maintenance are expensed as incurred.
When assets are retired or disposed, the cost and accumulated depreciation are eliminated from the accounts and any gain or loss is reflected in our Consolidated Statements of Operations.
Property, plant and equipment is carried at historical cost and depreciated using the straight-line method over their estimated useful lives.
Leasehold improvements are depreciated over the lesser of the economic life of the leasehold improvement or the term of the lease, without regard to extension/renewal rights.
Management tests property, plant and equipment for impairment whenever events or changes in circumstances have indicated that the carrying amount of property, plant and equipment might not be recoverable. Assets are grouped at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets for purposes of assessing recoverability. Recoverability generally is determined by comparing the carrying value of the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable,
37
the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value.
Fair Value of Financial Instruments
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Hierarchy Levels 1, 2 and 3 are terms for the priority of inputs to valuation techniques used to measure fair value. Hierarchy Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Hierarchy Level 2 inputs are inputs other than quoted prices included within Level 1 that are directly or indirectly observable for the asset or liability. Hierarchy Level 3 inputs are inputs that are not observable in the market. In determining fair value, we use observable market data when available, or models that incorporate observable market data. In addition to market information, we incorporate transaction-specific details that, in management’s judgment, market participants would take into account in measuring fair value. We maximize the use of observable inputs and minimize our use of unobservable inputs in arriving at fair value estimates. Recurring fair-value measurements are performed for available-for-sale securities as disclosed in Note 5 – Investment Securities. The carrying amount of cash and cash equivalents and accounts payable reported on the Consolidated Balance Sheets approximates fair value due to their short-term maturities.
Net Loss Per Share
Net loss per share (“EPS”) is computed in accordance with GAAP. Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS reflects potential dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued and were dilutive. The dilutive effect of unvested stock and warrants is calculated using the treasury-stock method. Basic and diluted EPS for all periods presented are the same since the effect of our outstanding warrants and unvested stock is anti-dilutive to our net loss per share, as disclosed in Note 9 – Net Loss Per Share.
Share-based Compensation
We recognize share-based compensation at fair value on the date of grant. The fair value is recognized as expense (net of any capitalization) over the requisite service period. For equity-classified share-based compensation awards (which include grants of stock and restricted stock to employees), compensation cost is recognized based on the grant-date fair value using the quoted market price of our common stock and not subsequently remeasured. The fair value is recognized as expense (net of any capitalization) using the straight-line basis for awards that vest based on service conditions and using the graded-vesting attribution method for awards that vest based on performance conditions. We estimate the service periods for performance awards utilizing a probability assessment based on when we expect to achieve the performance conditions. For liability classified share-based compensation awards (which include grants of stock and restricted stock to non-employees), compensation cost is initially recognized on the grant date using estimated payout levels. Compensation cost is subsequently adjusted quarterly to reflect the updated estimated payout levels based on the changes in our stock price.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements. Deferred tax assets and liabilities are included in the Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the current period’s provision for income taxes. A valuation allowance is recorded to reduce the carrying value of our deferred tax assets when it is more likely than not that a portion or all of the deferred tax assets will expire before realization of the benefit or future deductibility is not probable. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the tax position.
38
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). An “emerging growth company” may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised, and it has different application dates for public and private companies. Accordingly, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards adopted.
As discussed in Note 1 – Background and Basis of Presentation, one of our subsidiaries merged with and into NextDecade LLC on July 24, 2017. Immediately following the Merger, the pre-Merger members and management of NextDecade LLC held approximately 94%, or 98,490,409 shares, of our outstanding common stock. The pre-Merger members, management and consultants of NextDecade LLC also have the right to receive an additional 2,176,542 shares, 2,429,396 shares and 287,388 shares, respectively, (up to 19,573,304 shares in aggregate) of the Company’s common stock (“Additional Shares”) upon the achievement by us of each of the following milestones (the “Additional Share Milestones”):
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|
|
|
|
|
|
|
The Merger has been accounted for as a reverse acquisition and recapitalization, with NextDecade LLC being treated as the accounting acquirer. In connection with the completion of the Merger, approximately $26.8 million was released from our trust account to NextDecade LLC to be used for development activities.
39
Note 4 — Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2017 |
| 2016 | ||
Rio Grande LNG site option |
| $ | 1,080 |
| $ | 495 |
Short-term security deposits |
|
| 364 |
|
| 349 |
Galveston Bay Leases |
|
| 100 |
|
| — |
Rio Bravo Pipeline options |
|
| 111 |
|
| 86 |
Prepaid insurance |
|
| 208 |
|
| 21 |
Other |
|
| 236 |
|
| 145 |
Total prepaid expenses and other current assets |
| $ | 2,099 |
| $ | 1,096 |
During each of the years ended December 31, 2017, 2016 and 2015, we recognized $584 thousand of lease option expense related to the Rio Grande LNG site option, which expires November 5, 2019.
Note 5 — Investment Securities
We maintain cash reserves in the Ultra-Short-Term Bond Fund and the Short-Term Bond Index Fund, which are managed by The Vanguard Group, Inc. The target investment allocation between the Ultra-Short-Term Bond Fund and the Short-Term Bond Index Fund are 75% and 25%, respectively. The Ultra-Short-Term Bond Fund has an average maturity of approximately one year, and approximately 42% of such fund’s holdings are AAA-rated, with 2% non-investment grade rated. The Short-Term Bond Index Fund has an average maturity of approximately three years, and approximately 70% of such fund’s holdings are AAA-rated, with 0% non-investment grade rated. Investment securities are classified as available-for-sale, recorded at fair value based on Level I inputs and consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||||||||
|
| 2017 |
| 2016 | ||||||||
|
| Fair value |
| Cost |
| Fair value |
| Cost | ||||
Ultra-Short-Term Bond Fund |
| $ | 3,811 |
| $ | 3,825 |
| $ | 3,760 |
| $ | 3,767 |
Short-Term Bond Index Fund |
|
| 1,252 |
|
| 1,278 |
|
| 1,237 |
|
| 1,257 |
Total investments |
| $ | 5,063 |
| $ | 5,103 |
| $ | 4,997 |
| $ | 5,024 |
Note 6 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2017 |
| 2016 | ||
Fixed Assets |
|
|
|
|
|
|
Computers |
| $ | 69 |
| $ | 42 |
Furniture, fixtures, and equipment |
|
| 246 |
|
| 232 |
Leasehold improvements |
|
| 264 |
|
| 264 |
Total fixed assets |
|
| 579 |
|
| 538 |
Less: accumulated depreciation |
|
| (371) |
|
| (265) |
Total fixed assets, net |
|
| 208 |
|
| 273 |
Project Assets (not placed in service) |
|
|
|
|
|
|
Rio Grande |
|
| 62,866 |
|
| 48,087 |
Rio Bravo |
|
| 10,152 |
|
| 7,873 |
Total project assets |
|
| 73,018 |
|
| 55,960 |
Total property, plant and equipment, net |
| $ | 73,226 |
| $ | 56,233 |
Depreciation expense for the years ended December 31, 2017, 2016, and 2015 was $106 thousand, $100 thousand, and $80 thousand, respectively.
40
In 2016, we abandoned certain development projects due to less favorable site characteristics relative to the Project. As a result, we recognized impairment charges of $506 thousand associated with development activities related to the original Pelican Island site of $360 thousand and other noncore projects of $146 thousand.
Note 7 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2017 |
| 2016 | ||
Employee compensation expense |
| $ | 1,851 |
| $ | 1,535 |
Project asset costs |
|
| 3,317 |
|
| 1,810 |
Accrued legal services |
|
| 141 |
|
| 91 |
Other accrued liabilities |
|
| 547 |
|
| 331 |
Total accrued liabilities and other current liabilities |
| $ | 5,856 |
| $ | 3,767 |
Certain employee contracts provide for cash bonuses upon a positive FID in the Project, subject to approval by our board of directors. At December 31, 2017 and 2016, non-current compensation liabilities related to engineering staff were $0.7 million and $1.1 million, respectively, which were recognized as an addition to project assets. In addition, non-current compensation liabilities related to certain executive staff were $1.3 million and $1.6 million as of December 31, 2017, and December 31, 2016, respectively.
Note 8 — Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 1.0 million shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At December 31, 2017, there were no shares of preferred stock issued or outstanding.
Common Stock
The Company is authorized to issue 480.0 million shares of common stock with a par value of $0.0001 per share. At December 31, 2017, 106.3 million shares of common stock were issued and outstanding.
Redeemable Warrants
At December 31, 2017, the Company had 12.1 million common stock warrants (“Warrants”) issued and outstanding. The Warrants are exercisable at a price of $11.50 per share and expire July 24, 2022. The Company may redeem the Warrants at a price of $0.01 per 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 ending on the third day prior to the date on which notice of redemption is given. If the Company redeems the Warrants as described above, the Company will have the option to do so on a cashless basis. As of December 31, 2017, no warrants have been exercised.
41
The following table (in thousands, except for loss per share) reconciles basic and diluted weighted average common shares outstanding for the years ended December 31, 2017, 2016 and 2015:
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|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
| 100,926 |
|
| 95,680 |
|
| 55,226 |
Dilutive unvested common stock and common stock warrants |
|
| — |
|
| — |
|
| — |
Diluted |
|
| 100,926 |
|
| 95,680 |
|
| 55,226 |
|
|
|
|
|
| — |
|
| — |
Basic and diluted net loss per share |
| $ | (0.35) |
| $ | (0.09) |
| $ | (0.14) |
Potentially dilutive securities that were not included in the diluted net loss per share computations because their effect would have been anti-dilutive were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Unvested stock (1) |
|
| 258 |
|
| — |
|
| — |
Common Stock Warrants |
|
| 12,082 |
|
| 12,059 |
|
| 12,059 |
Total dilutive common shares |
|
| 12,340 |
|
| 12,059 |
|
| 12,059 |
|
|
Note 10 — Share-based Compensation
As discussed in Note 3 – Merger, the stockholders of the Company approved the issuance of Additional Shares upon the achievement of the Additional Share Milestones. In aggregate, 2,429,396 shares and 287,388 Additional Shares will be awarded to management and consultants, respectively, upon the achievement of the Additional Share Milestones.
In addition, in connection with the Merger, the stockholders of the Company also approved the issuance of restricted shares of our common stock to certain employees and consultants (“Restricted Shares”) in an amount based on the number of shares of common stock outstanding at the time of achieving each of the following milestones. In aggregate, we estimate that total Restricted Shares to be issued and to vest upon achievement of the milestones below to employees and consultants are 3,832,682 shares and 1,453,776 shares, respectively, with vesting percentage by milestone as follows:
|
|
|
|
|
|
On December 15, 2017, the Company’s stockholders approved the 2017 Omnibus Incentive Plan (the “2017 Plan”) and the 2017 Plan became effective by its terms on such date. A total of 5,262,461 shares are reserved for issuance under the 2017 Plan.
42
Total share-based compensation consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| Year ended | |||||||
|
| December 31, | |||||||
|
| 2017 |
| 2016 |
| 2015 | |||
Share-based compensation: |
|
|
|
|
|
|
|
|
|
Equity awards |
| $ | 19,754 |
| $ | — |
| $ | — |
Liability awards |
|
| 4,402 |
|
| — |
|
| — |
Total share-based compensation |
|
| 24,156 |
|
| — |
|
| — |
Capitalized share-based compensation |
|
| (1,463) |
|
| — |
|
| — |
Total share-based compensation expense |
| $ | 22,693 |
| $ | — |
| $ | — |
The total unrecognized compensation costs at December 31, 2017 relating to equity-classified awards and liability-classified awards were $48.5 million and $9.6 million, respectively, which are expected to be recognized over a weighted average period of 1.2 years.
The Additional Shares, Restricted Shares, and shares granted under the 2017 Plan represent restricted stock awards. Restricted stock awards are awards of common stock that are subject to restrictions on transfer and to a risk of forfeiture if the recipient terminates employment with the Company prior to the lapse of the restrictions. Restricted stock awards vest based on service conditions and/or performance conditions. The amortization of the value of restricted stock grants is accounted for as a charge to compensation expense, or capitalized, depending on the nature of the services provided by the employee, with a corresponding increase to additional-paid-in-capital over the requisite service period.
Grants of restricted stock to employees and non-employee directors that vest based on service and/or performance conditions are measured at the closing quoted market price of our common stock on the grant date. For restricted stock awards granted to non-employees that vest based on service and/or performance conditions, we record compensation cost equal to the fair value of the award at the measurement date, which is determined to be the earlier of the performance commitment date or the service completion date. In addition, compensation cost for unvested restricted stock awards to non-employees is adjusted quarterly for any changes in our stock price.
The table below provides a summary of our restricted stock outstanding as of December 31, 2017 and changes during the year ended December 31, 2017 (in thousands, except for per share information):
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|
|
|
|
|
|
|
| Shares |
| Weighted Average Grant Date Fair Value Per Share | ||
Non-vested at January 1, 2017 |
|
| — |
| $ | — |
Granted |
|
| 9,104 |
|
| 10.15 |
Vested |
|
| — |
|
| — |
Forfeited |
|
| — |
|
| — |
Non-vested at December 31, 2017 |
|
| 9,104 |
| $ | 10.15 |
Note 11 — Income Taxes
As discussed in Note – 1 Background and Basis of Presentation, the Merger was accounted for as a reverse acquisition and recapitalization, with NextDecade LLC being treated as the accounting acquirer. As such, the historical Consolidated Financial Statements as of December 31, 2016 and 2015, relate to NextDecade LLC and its subsidiaries.
We are a C-Corporation and subject to income taxes in the U.S. NextDecade LLC is a limited liability company that was not subject to income taxes during the years ended December 31, 2017, 2016 and 2015, since it was a pass-through entity for tax purposes. As such, the income tax provision for the year ended December 31, 2017 represents the period from July 25, 2017 through December 31, 2017.
Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at December 31, 2017. Due to NextDecade LLC’s previous pass-through status and our full valuation allowance, we have not recorded a provision for federal or state income taxes during the years ended December 31, 2017, 2016 or 2015.
43
The reconciliation of the federal statutory income tax rate to our effective income tax rate for the year ended December 31, 2017 is as follows:
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|
| |
|
| ||
|
| ||
|
| ||
|
| ||
|
|
|
Significant components of our deferred tax assets and liabilities at December 31, 2017 are as follows (in thousands):
|
|
|
|
Deferred tax assets |
|
|
|
Net operating loss carryforwards and credits |
| $ | 1,694 |
Share-based compensation expense |
|
| 2,203 |
Other |
|
| 14 |
Less: valuation allowance |
|
| (3,911) |
Total deferred tax assets |
|
| — |
|
|
|
|
Deferred tax liabilities |
|
|
|
Total deferred tax liabilities |
|
| — |
|
|
|
|
Net deferred tax assets (liabilities) |
| $ | — |
The federal deferred tax assets presented above do not include the state tax benefits as our net deferred state tax assets are offset with a full valuation allowance.
At December 31, 2017, we had federal net operating loss (“NOL”) carryforwards of approximately $8.1 million. These NOL carryforwards will expire between 2034 and 2037.
Due to our history of NOLs, current year NOLs and significant risk factors related to our ability to generate taxable income, we have established a valuation allowance to offset our deferred tax assets as of December 31, 2017 and 2016. We will continue to evaluate our ability to release the valuation allowance in the future. The increase in the valuation allowance was $3.6 million for the year ended December 31, 2017. Deferred tax assets and deferred tax liabilities are classified as non-current in our Consolidated Balance Sheets.
The Tax Reform Act of 1986 (as amended) contains provisions that limit the utilization of NOL and tax credit carry forwards if there has been a change in ownership as described in Section 382 of the Internal Revenue Code (“Section 382”). Due to the Company’s initial public offering in 2015 and the Merger in 2017, substantial changes in the Company's ownership have occurred that may limit or reduce the amount of NOL carry forwards that the Company could utilize in the future to offset taxable income. The Company has not completed a detailed Section 382 study at this time to determine what impact, if any, that ownership changes may have had on its NOL carry forwards. In each period since its inception, the Company has recorded a valuation allowance for the full amount of its deferred tax assets, as the realization of the deferred tax asset is uncertain. As a result, the Company has not recognized any federal or state income tax benefit in its Consolidated Statement of Operations and Comprehensive Loss.
We remain subject to periodic audits and reviews by taxing authorities; however, we do not expect these audits will have a material effect on our tax provision. The federal tax returns for the years beginning 2014 remain open for examination.
The Tax Cuts and Jobs Act (“2017 Tax Act”), which was signed into law on December 22, 2017, has resulted in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation for domestic companies. These changes are effective beginning in 2018.
44
Changes in tax rates and tax laws are accounted for in the period of enactment. Our deferred tax assets and liabilities are measured at the enacted tax rate expected to apply when these temporary differences are expected to be realized or settled. As a result of the 2017 Tax Act, we remeasured our December 31, 2017 deferred tax assets and liabilities. The result of the remeasurement was a $2.6 million reduction to our net deferred tax assets offset completely by a reduction in our valuation allowance.
Note 12 — Commitments and Contingencies
Operating Leases
During the years ended December 31, 2017, 2016 and 2015, we recognized expense for all operating leases of $728 thousand, $245 thousand and $234 thousand, respectively, related primarily to office space and site leases.
NextDecade currently leases approximately 8,300 square feet of office space for general and administrative purposes in The Woodlands, Texas under an amended lease agreement that expires on September 30, 2018.
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. NextDecade LLC has the right to terminate the Galveston Bay Leases with a $50 thousand termination payment to each lessor.
In March 2017, NextDecade LLC executed a lease agreement with the Brownsville Navigation District for a ten -acre tract subsumed within the site for the Terminal (the “Brownsville Lease”). The Brownsville Lease has an eight-month primary term with the option to renew such lease for six additional six-month terms. On October 10, 2017, NextDecade LLC exercised its option to renew the Brownsville Lease for an additional six-month term, which expires May 5, 2018. NextDecade LLC has the right to terminate the Brownsville Lease at the end of any six-month term at no additional cost.
Future annual minimum lease payments, for all operating leases are as follows (in thousands):
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Years ending December 31, |
| Operating Leases (1) | |
2018 |
| $ | 661 |
2019 |
|
| 561 |
2020 |
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| 630 |
2021 |
|
| — |
2022 |
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| — |
Thereafter |
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| — |
Total |
| $ | 1,852 |
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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. We regularly analyze current information and, as necessary, provide accruals for liabilities we deem probable and estimable. We are not currently a party to any proceeding, the adverse outcome of which would have a material adverse effect on our financial position or results of operations.
45
Note 13 — Recent Accounting Pronouncements
The following table provides a brief description of recent accounting standards that have not been adopted by the Company as of December 31, 2017:
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Additionally, the following table provides a brief description of recent accounting standards that were adopted by the Company during the reporting period:
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Note 14 — Subsequent Events
Issuance of Equity Awards under the 2017 Plan
In January 2018, an aggregate of 0.1 million fully-vested common stock awards and 2.1 million restricted common stock awards were issued to employees, consultants and a non-employee director of the Company under the 2017 Plan.
48
NextDecade Corporation and Subsidiaries
Supplemental Information to Consolidated Financial Statements
Summarized Quarterly Financial Data
(unaudited)
Summarized Quarterly Financial Data – (in thousands, except per share amounts)
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| First |
| Second |
| Third |
| Fourth | ||||
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| Quarter |
| Quarter |
| Quarter | ||||
Year ended December 31, 2017: |
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Revenues |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Total operating loss |
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| (2,417) |
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| (2,496) |
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| (14,290) |
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| (16,435) |
Net loss |
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| (2,388) |
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| (2,453) |
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| (14,157) |
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| (16,328) |
Basic and diluted loss per share (1) |
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| (0.02) |
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| (0.03) |
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| (0.14) |
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| (0.15) |
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Year ended December 31, 2016: |
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Revenues |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Total operating loss |
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| (2,305) |
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| (1,858) |
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| (2,061) |
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| (2,278) |
Net loss |
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| (2,303) |
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| (1,857) |
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| (2,049) |
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| (2,230) |
Basic and diluted loss per share (1) |
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| (0.02) |
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| (0.02) |
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| (0.02) |
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| (0.02) |
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49
Item 9. Changes in and Disagreements with Accountants
None.
Item 9A. 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 year ended December 31, 2017. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of December 31, 2017, our disclosure controls and procedures were effective.
Management’s Report on Internal Controls Over Financial Reporting
As management, we are responsible for establishing and maintaining adequate internal control over financial reporting for NextDecade Corporation and its subsidiaries (“NextDecade”). In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, we have conducted an assessment, including testing using the criteria in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). NextDecade’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation.
Based on our assessment, we have concluded that NextDecade maintained effective internal control over financial reporting as of December 31, 2017, based on criteria in Internal Control—Integrated Framework (2013) issued by the COSO.
The JOBS Act permits an emerging growth company such as us to take advantage of specified reduced reporting and other requirements that are otherwise generally applicable to public companies. Among these provisions is an exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting. We have elected to rely on this exemption and are not providing such an attestation from our auditors.
Changes in Internal Control over Financial Reporting
Following the completion of the Merger, we have undertaken a variety of efforts to adapt our internal control over financial reporting to the nature and scope of our Company following the Merger, including through the hiring of additional personnel with control responsibilities and expertise and the implementation of new controls. Other than these activities, there have been no material changes in internal control over financial reporting.
None.
50
Pursuant to paragraph 3 of General Instruction G to Form 10-K, the information required by Items 10 through 14 of Part III of this Report is incorporated by reference from NextDecade’s definitive proxy statement, which is to be filed pursuant to Regulation 14A within 120 days after the end of NextDecade’s fiscal year ended December 31, 2017.
51
Item 15.Exhibits and Financial Statement Schedules
(a) | Financial Statements, Schedules and Exhibits |
(1) | Financial Statements – |
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(2) | Financial Statement Schedules: |
NoneAll schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes thereto.
(3) | Exhibits: |
Exhibit No. |
| Description |
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| Amended and Restated Bylaws of NextDecade Corporation, dated July 24, 2017 |
| Certificate of Designations of Series A Convertible Preferred Stock, dated August 9, 2018 | |
3.4(5) | Certificate of Designations of Series B Convertible Preferred Stock, dated September 28, 2018 | |
4.1(6) |
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4.6(11) | ||
10.1(12) |
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| Promissory Note issued to Eric Rosenfeld on November 21, 2016 |
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| Employment Agreement of Kathleen Eisbrenner, dated May 20, 2015 |
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| Letter Agreement with Kathleen Eisbrenner, dated April 17, 2017 |
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| Letter Agreement with Kathleen Eisbrenner, dated November 13, 2015 |
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| Form of Restricted Stock Award Agreement for Non-Executive Employees and Contractors |
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10.14(25) | ||
10.15(26) |
23
10.16(27) | ||
10.17(28) | ||
10.18(29) | ||
10.19(30) | ||
10.20(31) | ||
10.21(32) | Purchaser Rights Agreement by and between NextDecade Corporation and HGC NEXT INV LLC | |
10.22(33) | ||
10.23(34) | ||
10.24(35) | ||
10.25(36) | ||
10.26(37) | ||
10.27(38) | ||
10.28** | ||
10.29** | ||
10.30** | ||
10.31** | ||
10.32(39)† | ||
21.1** |
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23.2** |
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31.1* |
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31.2* |
| Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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| Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
52
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| Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| XBRL Instance Document. |
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| XBRL Taxonomy Extension Schema Document. |
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| XBRL Taxonomy Extension Calculation Linkbase Document. |
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| XBRL Taxonomy Extension Label Linkbase Document |
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| XBRL Taxonomy Extension Presentation Linkbase Document. |
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| XBRL Taxonomy Extension Definition Linkbase Document. |
(1) | Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, filed April 18, 2017. |
(2) | Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K, filed July 28, 2017. |
(3) | Incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K, filed July 28, 2017. |
(4) | Incorporated by reference to Exhibit 4.3 of the Registrant’s Registration Statement on Form S-3, filed December 20, 2018. |
(5) | Incorporated by reference to Exhibit 3.4 of the Registrant’s Quarterly Report on Form 10-Q, filed November 9, 2018. |
24
(6) | Incorporated by reference to Exhibit 4.2 of the Amendment No. 2 to the Registrant’s Registration Statement on Form S-1, filed October 10, 2014. |
| Incorporated by reference to Exhibit 4.1 of the Amendment No. 7 to the Registrant’s Registration Statement on Form S-1, filed March 13, 2015. |
| Incorporated by reference to Exhibit 4.3 of the Amendment No. 7 to the Registrant’s Registration Statement on Form S-1, filed March 13, 2015. |
| Incorporated by reference to Exhibit 4.4 of the Amendment No. 7 to the Registrant’s Registration Statement on Form S-1, filed March 13, 2015. |
| Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, filed August 7, 2018. |
(11) | Incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K, filed August 24, 2018 |
(12) | Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, filed January 9, 2017. |
| Incorporated by reference to Exhibit 10.13 of the Registrant’s Annual Report on Form 10-K, filed March 10, 2017. |
| Incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K, filed April 18, 2017. |
| Incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K, filed April 18, 2017. |
| Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed July 28, 2017. |
| Incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K, filed July 28, 2017. |
| Incorporated by reference to Exhibit 10.3 of the Company’s Form 8‑K, filed July 28, 2017. |
| Incorporated by reference to Exhibit 10.4 of the Company’s Form 8‑K, filed July 28, 2017. |
| Incorporated by reference to Exhibit 10.5 of the Company’s Form 8‑K, filed July 28, 2017. |
| Incorporated by reference to Exhibit 10.6 of the Company’s Form 8‑K, filed July 28, 2017. |
| Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed September 11, 2017. |
| Incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K, filed December 20, 2017. |
(24) | Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed April 12, 2018. |
(25) | Incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K, filed April 12, 2018. |
(26) | Incorporated by reference to Exhibit 10.3 of the Company’s Form 8‑K, filed April 12, 2018. |
(27) | Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed August 7, 2018. |
(28) | Incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K, filed August 7, 2018. |
(29) | Incorporated by reference to Exhibit 10.3 of the Company’s Form 8‑K, filed August 7, 2018. |
(30) | Incorporated by reference to Exhibit 10.4 of the Company’s Form 8‑K, filed August 7, 2018. |
(31) | Incorporated by reference to Exhibit 10.5 of the Company’s Form 8‑K, filed August 7, 2018. |
(32) | Incorporated by reference to Exhibit 10.6 of the Company’s Form 8‑K, filed August 7, 2018. |
(33) | Incorporated by reference to Exhibit 10.7 of the Company’s Form 8‑K, filed August 7, 2018. |
(34) | Incorporated by reference to Exhibit 10.8 of the Company’s Form 8‑K, filed August 7, 2018. |
(35) | Incorporated by reference to Exhibit 10.9 of the Company’s Form 8‑K, filed August 7, 2018. |
(36) | Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed August 24, 2018. |
(37) | Incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K, filed August 24, 2018. |
(38) | Incorporated by reference to Exhibit 10.3 of the Company’s Form 8‑K, filed August 24, 2018. |
(39) | Incorporated by reference to Exhibit 10.1 of the Company’s Form S-8 filed December 15, 2017. |
* Filed herewith.
** Filed as an exhibit to NextDecade Corporation’s Annual Report on Form 10-K filed on March 6, 2019.
† Indicates management contract or compensatory plan.
* Filed herewith.
** Furnished herewith.
None.
5325
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| NextDecade Corporation | |
| (Registrant) | |
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| By: | /s/ Matthew K. Schatzman |
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| Matthew K. Schatzman |
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| President and Chief Executive Officer |
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| Date: |
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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5426