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, 2018
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001‑36842
NEXTDECADE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware |
| 46-5723951 |
(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
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1000 Louisiana Street, Suite 3900 |
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Houston, Texas |
| 77002 |
(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 |
(Title of Class) |
| (Name of each exchange on which registered) |
Securities registered pursuant to Section 12(g) of the Act:
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, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark 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 $137.1 million as of June 29, 2018.
109,850,774110,035,774 shares of the registrant’s Common Stock, $0.0001 par value, were outstanding as of March 1,April 9, 2019.
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.
TABLE OF CONTENTS
TABLE OF CONTENTS
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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, 2018 (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,” “would,” “could,” “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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Should one or moreThe 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.
William Vrattos, 49, has served as a Company director since July 2017. Mr. Vrattos served as a member of the foregoing risksboard 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 uncertainties materializeadvisory 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, he 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 senior executive leadership roles with his respective firms’ investments in a waywide 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 negatively impacts us, or shouldcertain Purchaser Rights Agreement, dated as of August 23, 2018, by and between the underlying assumptions prove incorrect, our actual results may vary materiallyCompany 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 those anticipatedOctober 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 our forward-looking statementsPolitical Science from Yonsei University in Seoul, South Korea.
The Board believes Mr. Lee’s management experience, leadership capabilities, financial knowledge and our business financial conditionacumen as well as his broad understanding of business globally provide Mr. Lee with the qualifications and results of operations could be materially and adversely affected.skills to serve as a Company director.
Class B Directors
You should not rely upon forward-looking statementsKathleen Eisbrenner, 58, has served as predictionsthe Chairman of future events. In addition, neither we nor any other person assumes responsibilitythe 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 merged with and into NextDecade LLC, a LNG development company founded in 2010 to develop LNG export projects and associated pipelines.York. Prior to the mergerjoining 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 NextDecade LLC, we had no operationshis respective firms’ investments in a wide range of industries and our assets consisted of cash proceeds received in connection with our initial public offering.
Our common stock trades on the Nasdaq Capital Market (“Nasdaq”) under the symbol “NEXT.”
Our warrants issued in connection with our initial public offering in 2015 (the “IPO Warrants”) trade on the OTC Pink Market under the symbol “NEXTW.”
Company Overview
Our management is comprised of a team of industry leaders with extensivehis valuable and relevant experience in LNG marketingprivate financing, strategic investing and project development. We have focusedrestructuring provide him with the qualifications and continueskills to focus our development activities on the Projectserve as a Company director.
David Gallo,45, has served as a Company director since July 2017 and have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Project that we expect will result in demand for LNG supply at the Terminal, which would allow us to seek construction financing to develop the Project. We believe the Project possesses competitive advantages in several important areas, including engineering, design, commercial, regulatory and gas supply. We submitted a pre-filing request for the Projectwas appointed to the Federal Energy Regulatory Commission (the “FERC”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 (“Valinor”), 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 March 2015Economics, summa cum laude, from the Wharton School of the University of Pennsylvania and filedhis Master of Business Administration from Harvard Business School where he graduated as a formal applicationBaker 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 LNG sector provide him with the FERC in May 2016. We also believe we have robust commercial offtakequalifications and gas supply strategies and we estimate that the Project will commence commercial operationsskills to serve as early as 2023.a Company director.
We believe that the Terminal, to be 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 United States (“U.S.”) LNG projects. The Terminal is engineered to have liquefaction capacity of 27 million metric tons of LNG per annum (“mtpa”). It is located to take advantage of natural gas resources in Texas, including the Permian Basin and Eagle Ford Shale. We plan to construct, develop, own 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 is expected to be permitted for up to six liquefaction trains (each with a nominal capacity of at least 4.5 mtpa), 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 billion cubic feet per day (“Bcf/d”). We are exploring design enhancements to increase throughput capacity for the Project.
We have also leased a 994-acre site on the Houston Ship Channel in Texas City, Texas for our second U.S. LNG project, which is expected to be permitted for up to three trains (each with a nominal capacity of 5.5 mtpa), a minimum of two LNG storage tanks (each with a capacity of 200,000 cubic meters), two marine jetties for ocean-going LNG vessels and one turning basin (the “Galveston Bay Terminal”). We intend to use similar design and engineering as the Terminal.
Engineering, Procurement, and Construction
During the third quarter of 2018, we initiated a competitive engineering, procurement and construction (“EPC”) bid process. We received expressions of interest (the “EOIs”) from multiple EPC contractors to participate in the EPC process. We reviewed the EOIs against a series of selection criteria and issued formal invitations to bid to Bechtel Oil, Gas and Chemicals, Inc., Fluor Enterprises, Inc. and McDermott International, Inc. In December 2018, each of the EPC
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bidders provided us with an endorsement
Brian Belke, 35, has served as a Company director since July 2017 and was appointed to the Board pursuant to the Merger Agreement. Mr. Belke served as member of the Terminal’s front-end engineeringboard 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 design (“FEED”), which indicatesis a member of the bidders’ confirmation thatCFA Institute and the Terminal is technically feasibleNew York Society of Securities Analysts. Mr. Belke earned a Bachelor of Science in Management with concentrations in Finance and can be further designed, engineered, permitted, constructed, commissionedAccounting, summa cum laude, from Boston College, and safely placed into operations. a Master of Business Administration from Harvard Business School, where he graduated with High Distinction as a Baker Scholar.
The EPC bid process is scheduled to culminate on April 22, 2019Board believes Mr. Belke’s experience as a partner of an investment firm and in other senior executive leadership roles as well as his extensive industry experience and experience overseeing investments in the LNG sector provide him with the submissionqualifications 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 a Partner of the firm and its Co-Head of North American Credit. Mr. Bonanno is a Co-Portfolio Manager of the 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 Blackstone 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 served as a member of the boards of directors of (i) Rever Offshore AS, (ii) all entities incorporated pursuant to YCMGA’s partnership with Costamare 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 board of the Children’s Scholarship Fund.
Mr. Bonanno received a Bachelor of Arts in History from Georgetown University and a Master of Business Administration in Finance from The Wharton School of the University of Pennsylvania.
The Board believes Mr. Bonanno’s experience as a private equity partner and in other senior executive leadership roles and relevant experience in corporate finance, mergers and acquisitions, and reorganizations, as well as his 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 serves 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 EPC contractor 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 lump-sum turnkey EPC price. We expect to executeBachelor of Arts in Psychology from Wesleyan University and a final EPC contractMaster 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 third quarter of 2019.LNG sector provides him with the qualifications and skills to serve as a Company director.
Commercial
We are continuing commercial discussions with a variety of parties ranging from large utilities and state-sponsored enterprises to portfolio and multinational commodity interests. Leveraging the global relationships and extensive experience of our management team, we expect to sign long-term binding offtake commitments for substantially all of the Terminal’s capacity prior to a final investment decision (“FID”).
We believe the Project’s location will provide customers with access to low-cost natural gas from the Permian Basin and Eagle Ford Shale. We are focused on selling LNG to customers through a “free on board” model whereby a marketing affiliate would acquire feed gas, the Terminal would produce the LNG and the title transfer would occur at the interface between the Terminal and the customer’s ship.
In 2018, we complemented our Henry Hub-based offering with LNG pricing indexed to the Agua Dulce area, Waha and Brent crude oil prices. As discussed below, we believe this Brent indexed product is a competitive advantage related to our access to associated gas from the Permian basin as it allows us to access new customer segments that desire an alternative to Henry Hub priced LNG. This builds on natural advantages of U.S. LNG export projects such as the country’s abundant gas supply, existing pipeline infrastructure, political stability, and a competitive project execution environment.
Governmental Permits, Approvals and Authorizations
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 regulated activity and is subject to Section 3 of the federal Natural Gas Act (the “NGA”). Federal law has bifurcated regulatory jurisdiction of LNG export and import activities. The FERC has jurisdiction over the siting, construction and permitting of LNG import and export facilities. The U.S. Department of Energy (the “DOE”) has jurisdiction over the import and export of the natural gas commodity, including natural gas in the form of LNG. The FERC also has jurisdiction over the siting, construction and operation of interstate natural gas pipelines under Section 7 of the NGA and regulates interstate pipelines’ terms and conditions of service under Sections 4 and 5 of the NGA. In 2002, the FERC established a policy of not regulating the terms and conditions of service for LNG import or export facilities or requiring that LNG import or export facilities operate as “open access” facilities for all customers. The Energy Policy Act of 2005, which amended the NGA, codified this policy until January 1, 2015, and the FERC has not indicated that it intends to depart from its policy of not regulating the terms or conditions of service or requiring that LNG terminals operate on an open access basis.
Although the FERC is the primary agency with jurisdiction over LNG import and export facilities, the FERC works closely with other federal and state agencies to evaluate applications for LNG export facilities. These agencies include the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (the “PHMSA”), the U.S. Coast Guard (the “Coast Guard”), the U.S. Army Corps of Engineers, the U.S. Environmental Protection Agency, the International Boundary and Water Commission and other federal agencies with jurisdiction over potential environmental impacts of LNG terminal construction and operation. Certain federal laws, such as the Clean Water Act, the Clean Air Act and the Coastal Zone Management Act, delegate authority over certain actions to state agencies. In reviewing an application for an LNG import or export terminal or an interstate natural gas pipeline, the FERC also works with these state agencies that have jurisdiction over certain aspects of LNG terminal or interstate natural gas pipeline construction or operation.
In particular, the PHMSA has established safety standards for interstate natural gas pipelines and LNG facilities. Similarly, the Coast Guard has established safety regulations for marine operations at LNG facilities and the operation of LNG carriers. The FERC, the PHMSA and the Coast Guard entered into a Memorandum of Understanding in 2004 that
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establishes
Identification of Executive Officers
The 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 the FERC’s primary roleCompany’s President and Chief Executive Officer. Mr. Schatzman was appointed President in evaluatingSeptember 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 section titled “Identification of Directors” for additional information with respect to Mr. Schatzman’s background and experience.
Benjamin Atkins, CFA, CPA, is the Company’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 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 terminal applicationstrains 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 definesa DESS in European Law and Maîtrise in French Law from the process for coordinatingUniversité 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 an LNG import or export terminal applicationthe Forms 3 and 4 and any amendments thereto and certain written representations from certain reporting persons that no other reports 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 them on a timely basis during the PHMSAfiscal year ended December 31, 2018.
Availability of Committee Charters and Codes of Ethics
The charters for the Audit and Risk Committee (the “Audit Committee”), the Nominating, Corporate Governance and Compensation Committee (the “NCGC Committee”) and the Coast Guard. In 2018,Operations Committee, as well as the FERCCompany’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 PHMSA entered into a separate MemorandumCorporate Governance page under the “Investors” section of Understanding that establishes the processCompany’s website, www.next-decade.com. The Code of Conduct is applicable to all directors, officers and timeline by which the PHMSA should determine whether an LNG terminal project will meet the PHMSA’s LNG safety siting standards.
We filed our formal application for the Project with the FERC on May 5, 2016 and received a Draft Environmental Impact Statementemployees. The Company intends to disclose any changes to, or waivers from, the FERC on October 12, 2018. The FERC’s approvalprovisions of the Terminal under Section 3Code of the NGA and of the Pipeline under Section 7 of the NGA is expected in late July 2019. Separately, we submitted a pre-filing request to the FERC for the Galveston Bay Terminal on August 31, 2018, and the FERC initiated its pre-filing process forConduct that application on October 10, 2018.
Section 3 of the NGA requires prior authorization by the DOE for the import or export of natural gas, including LNG, from the U.S. The DOE’s practice has been to include certain reporting requirements in its LNG export authorizations, including mandating the reporting of the foreign destination of U.S.-sourced LNG. In December 2018, the DOE clarified its reporting requirements, directing LNG export authorization holders and their downstream counterparties to report the destination to which the U.S.-sourced LNG was “actually delivered,” in contrast to the agency’s prior policy requiring the reporting of where the LNG was “delivered for end use.” This revised policy recognizes the increasing flexibility and liquidity in the global LNG market.
On September 7, 2016, Rio Grande obtained an authorization for export of LNG to countries with which the U.S. has a Free Trade Agreement (“FTA”) on our own behalf and as an agent for others for a term of 30 years. On June 13, 2018, Galveston Bay obtained a similar authorization for export of LNG to FTA countries on our own behalf and as an agent for others for a term of 20 years. The DOE’s December 2018 order adjusting the reporting requirements applies to both of the authorizations for LNG to FTA countries. However, many of our target markets are not FTA countries. We have applied to the DOE for approval to export LNG to non-FTA countries. Non-FTA authorizations are expected shortly after completion of the FERC’s environmental review processes.
Gas Supply
The proposed Terminal site will be located in Brownsville, Texas, benefiting from close access 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. 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. demand for natural gas has generally increased modestly year-over-year the past few decades, the level of new discoveries and production has been significant. According to the U.S. Energy Information Administration (the “EIA”), domestic demand for natural gas has increased from approximately 20 trillion cubic feet (“Tcf”) per year in 1980 to approximately 27.1 Tcf in 2017, 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 Permian Basin has exceeded expectations and produced 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 is required to transport this associated gas to Gulf Coast markets economically. Two new high-pressure Permian pipeline gas takeaway projects are being constructed. The first is the Gulf Coast Express (“GCX”) project. With an estimated in-service date of October 2019, the GCX project will move an estimated 1.9 Bcf/d of gas from the Waha area in the Permian Basin to Agua Dulce, Texas, where the Terminal expects to receive gas supply. The second project is the Permian Highway Pipeline, capable of bringing 2.0 Bcf/day of gas supply to the Katy Hub, located just outside of Houston, Texas with a portion of that capacity able to be delivered to markets from Freeport, Texas to the Agua Dulce area of Texas. These new pipelines will provide a much-needed exit strategy for incremental Permian gas supplies.
would
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The Permian Basin is approaching its 100th year of oil production. At present, production has reached a record 3.8 million barrels per day (MBPD) and is estimated to grow to 6.4 MBPD by 2022, making it the world’s second-most-prolific field, behind Ghawar in Saudi Arabia.
In December 2018, the EIA estimated natural gas production in the Permian Basinotherwise be required to be 12.4 Bcf/d, up from 6.9 Bcf/d in May 2016. This significant increase in gas production relative to anticipated takeaway capacity constraints (despite expected capacity growth), has led to a negative basis at the Waha Hub relative to the Henry Hub.
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 9 to 18 months among key pipeline sponsors. 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 production and infrastructure investment over the last 12 to 18 months, as well as our existing contacts and discussions with some of the largest regional operators, represent key elementsdisclosed under Item 5.05 of a compelling feed gas strategy for partners and customers alike. We are continuing to advance substantive negotiations in these areas.
Competition
We are subject to a high degree of competition in all aspects of our business. See “Item 1.A — Risk Factors —Competition inForm 8-K on the energy industry is intense, and some of our competitors have greater financial, technological and other resources.”
Company’s website. The ProjectCompany will compete with liquefaction facilities worldwide to supply low-cost liquefaction to the market. There are liquefaction facilities worldwide that we will compete with for customers. In addition, we will compete with a variety of companies in the global LNG market, such as independent, technology-driven companies, major and other independent oil and natural gas companies and utilities. Manyalso provide printed copies of these competitors have longer operating histories, more development experience, greater name recognition, greater accessmaterials to the LNG market, more employeesany stockholder or other interested person upon request to NextDecade Corporation, Attention: Krysta De Lima, General Counsel and substantially greater financial, technical and marketing resources than we currently possess.
Employees
As of December 31, 2018, we had 36 full-time employees and 11 independent contractors. We hire independent contractors on an as needed basis and have no collective bargaining agreements with our employees.
Offices
Our principal executive offices are located atCorporate Secretary, 1000 Louisiana St.,Street, Suite 3900, Houston, Texas 77002, and our telephone number is (713) 574-1880.
Available Information
Our internet website address is www.next-decade.com. We intend to use our website as a means of disclosing material non-public77002. The information and for complying with disclosure obligations under Regulation FD. Such disclosures will be included on our website under the heading “Investors.” Accordingly, investors should monitor such portion of our website, in addition to following our press releases and SEC filings. Within our website under the heading “Investors,” 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 to 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 such materials to the SEC. Information on ourCompany’s website is not, incorporated by reference into this Annual Report on Form 10-K and shouldshall not be considereddeemed to be, a part of this document. In addition, we intendreport or incorporated into any other filings the Company makes with the SEC.
Stockholder Nominees for Director
There have been no material changes to disclose on our website any amendmentsthe procedures by which stockholders may recommend nominees to or waivers from, our Codethe Board.
Audit Committee
The Audit Committee has been structured to comply with the requirements of Conduct and Ethics that are required to be publicly disclosed pursuant to rulesSection 3(a)(58)(A) of the SEC.Exchange Act. The Audit Committee is currently comprised of Messrs. Rosenfeld, Kripalani and Wells with Mr. Wells as Chairman of the Audit Committee. The Board has also determined that each of Messrs. Rosenfeld and Wells qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K of the Exchange Act and possesses the requisite accounting or related financial management expertise as required under the listing standards of the Nasdaq Stock Market (“Nasdaq”).
The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov.
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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.
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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 |
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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 |
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Benjamin Atkins |
| 2018 |
| 299,750 |
| 154,000 |
| — |
| 453,750 |
Chief Financial Officer |
| 2017 |
| 275,000 |
| 116,875 |
| 6,333,713 | (6) | 6,725,588 |
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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 |
(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. |
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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 atthen current term, Mr. Schatzman will be entitled to a lump sum cash payment equal to the then-applicable exchange rates. These translations could result in changes to our resultssum of operations fromhis then current base salary for a period to period.
Costsof 12 months and a pro-rata portion of his annual bonus for the Project are subjectfiscal year in which the termination occurs (based on an amount equal to various factors.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 forfeited.
Construction costsAdditionally, 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 the Project will be subject to various factors such as economichealth insurance and market conditions, government policy, claims and litigation risk, competition, the final terms of any definitive agreement for services with our EPC service provider, change orders, delays in construction, legal and regulatory requirements, unanticipated regulatory delays, 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, 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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Overview of Compensation for Kathleen Eisbrenner, Chairman and Former Chief Executive Officer
Mrs. Eisbrenner serves as Chairman of the Board and served as the Chief Executive Officer of the Company from July 2017 until February 2018. On May 20, 2015, NextDecade entered into an employment agreement with Mrs. Eisbrenner, which was amended pursuant to a letter agreement, dated April 17, 2017, among Mrs. Eisbrenner, NextDecade and certain funds managed by YCMGA (as amended, the “Eisbrenner Agreement”). The Eisbrenner Agreement provides for a term through June 30, 2019 and automatic 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 a decision not to renew for an additional year. On November 30, 2018, the Company gave Mrs. Eisbrenner notice of its 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 Eisbrenner Agreement provides for a minimum annual bonus payment of $308,750 and a one-time cash bonus of $1.0 million upon the achievement of a Final Investment Decision for a Qualified Project (each as defined in the Eisbrenner Agreement). Furthermore, under the Eisbrenner Agreement, Mrs. Eisbrenner was entitled to 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 (iii) 2,035,287 2017 Restricted Shares. 2017 Restricted Shares are subject to (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 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 2017 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 (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 considered a termination of the Eisbrenner 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 our willingness to make a FID and our ability to constructany other amounts due in accordance with the Project and achieve operations, events related to such activities may cause actual coststerms of the ProjectEisbrenner Agreement) a special bonus equal to vary from the range, combination and timingsum of assumptions usedher then current base salary for projected costsa period of 18 months in a single, lump sum payment, (ii) the Project. Such variations may be material and adverse, and an investor may lose all or a portion of its investment.
The construction and operation of the Project remains subject to further governmental approvals, and some approvals may be subject to further conditions, review and/or revocation.
We are required to obtain governmental approvals and authorizations to implement our proposed business strategy, which includes the design, construction and operation of the ProjectNCGC Committee and the exportBoard shall consider in good faith the acceleration of LNG fromMrs. Eisbrenner’s unvested equity to be effective as of her termination date and (iii) to the U.S.extent that any shares of Common Stock issued to foreign countries. As described above under “Business− Governmental Permits, Approvals and Authorizations,” the design, construction and operation of LNG export terminals is a highly regulated activity in the U.S.,Mrs. Eisbrenner are at such time subject to a numberlock-up agreement, the Company will release shares of permitting requirements, regulatory approvals and ongoing safety and operational compliance programs. There is no guaranteeCommon Stock with an aggregate value of $25.0 million from any restriction on trading in the lock-up agreement that we will obtain or, if obtained, maintain these governmental authorizations, approvals and permits. Failure to obtain, failure to obtainextends 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 a timely basis, or failure to maintain anyJanuary 23, 2018, the Board appointed Mr. Schatzman, President of these governmental authorizations, approvals and permits could have a material adverse effect on our business, results of operations, financial condition and prospects.
Future legislation and regulations, such as those relating to the transportation and security of LNG exported from the proposed LNG facilities, and ongoing reviews relating to certain permits and approvals 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.
We consider recent policy and regulatory developments that (i) streamline LNG terminal permitting,suchCompany, as the FERC’s continuationChief Executive Officer of its policythe Company, effective February 1, 2018. Mrs. Eisbrenner, Chairman of not regulating the terms and conditions of service for LNG import or export facilities and the 2018 FERC-PHMSA Memorandum of Understanding, and (ii) clarify LNG export reporting requirements, suchBoard, continued as the DOE’s 2018 policy statementChief 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 downstream LNG delivery reporting, to be beneficial to ustrading in the lock-up agreement between the Company and the broader U.S. LNG industry. However, revised, reinterpreted or additional lawsMrs. Eisbrenner.
The Eisbrenner Agreement also provides that Mrs. Eisbrenner is eligible for health insurance and regulations 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.
In addition, some of these governmental authorizations, approvals and permits require extensive environmental review. Some groups have perceived,disability insurance and other groups could perceive, thatcustomary 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 or the Galveston Bay Terminal could negatively impact 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. Although the necessary authorizations, approvals and permits to construct and operate the Project and the Galveston Bay Terminal may beconfidential information.
11
obtained,
Overview 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 authorizations, approvalsbonus.
Ms. De Lima is eligible for health insurance and permits may be subject to ongoing conditions imposed by regulatory agencies or may be subject to legal proceedings not involving us, which isdisability insurance and other customary for U.S. LNG projects.employee benefits.
Termination and Change in Control
The Projectemployment agreements of Mr. Schatzman and Ms. Eisbrenner provide for the Galveston Bay Terminal will be subject to a numberpayment 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, liabilities orcertain severance benefits upon termination. For additional operating restrictions.
Our business will be subject to extensive federal, state and local regulations and laws,information about the payment of certain severance benefits upon termination, 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 a change of control, please see the development, constructionoverview of compensation for the Company’s named executive officers and operationthe footnotes to the Outstanding Equity Awards Table.
Pension/Retirement Benefits
The Company does not provide a qualified defined benefit pension plan or any non-qualified supplemental executive retirement benefits to any of its liquefaction facilities. These regulationsexecutive officers or directors. However, eligible executive officers and laws will require usdirectors participate in a defined contribution retirement plan (the “401(k) Plan”) which allows them to maintain permits, provide governmental authorities with accesscontribute up to its facilities for inspection and provide reports related100% of their compensation up to its compliance. Violation of these laws and regulations could lead to substantial fines and penalties or to capital expenditures related to pollution control or remediation 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 ofmaximum permitted by the original conduct, for the release of certain types or quantities of hazardous substances into the environment. As the owner and operator of the Project and the Galveston Bay Terminal, we could be liable for the costs of cleaning up hazardous substances released into the environment and for damage to natural resources.
We will be dependent on third-party contractors for the successful completion of the Project, and these contractors may be unable to complete the Project or may build a non-conforming Project.
Internal Revenue Code. 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 us.
Further, faulty construction thatCompany does not conformmake matching contributions. The 401(k) Plan is sponsored and maintained by the Company.
Additional Benefit Programs
Certain officers and directors are entitled to our designthe following benefits: parking, health insurance, life insurance and quality standards may have an adverse effect on our business, results of operations, financial conditionaccidental death 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:dismemberment.
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OUTSTANDING EQUITY AWARDS AT FISCAL 2018 YEAR-END
Furthermore, we may have disagreements with our third-party contractors about different elementsThe following table provides information concerning outstanding equity awards as of the construction process, which could leadDecember 31, 2018 granted to the assertion of rights and remedies under 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 materially and adversely affect our business, results of operations, financial condition and prospects. We plan to enter into a lump-sum turnkey EPC contract, which could mitigate certain of these design, construction and execution risks through performance, time and cost guarantees. We expect to execute an EPC contract in the third quarter of 2019.
Our ability to generate cash is substantially dependent upon us 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 supplies to the Project, or customers for products and services from the Project.Company’s named executive officers.
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 to market the Project’s export capacity or LNG produced by the Terminal are not successful, our business, results of operations, financial condition and prospects may be materially and adversely affected.
Our construction and operations activities will be 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 subject to the risks of delay or cost overruns inherent in any construction project resulting from numerous factors, including, but not limited to, the following:
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 additional 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 will be 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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Due to the scale of the Project, we may encounter capacity limits in insurance markets, thereby limiting our ability to economically obtain insurance with our desired level of coverage limits and terms. We may elect not to obtain insurance
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for any or all
2018 DIRECTOR COMPENSATION
The Board determined that non-employee members of these risks if we believe that the cost of available insurance is excessive relativeBoard who were not appointed 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 workersBoard pursuant to any agreement 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 U.S. We compete with other energy companies and other employers to attract and retain qualified personnelarrangement with the technical skillsCompany shall receive annual retention fee of $75,000, which is paid in cash and experience requiredin monthly installments. The table below summarizes the compensation paid by the Company 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 U.S. 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 losssuch a member of the services of any of these individuals could have a material adverse effect on our business.Board during fiscal year 2018.
Technological innovation, competition or other factors may negatively impact our anticipated competitive advantage or our processes.
Our success will depend on our ability to create and maintain a competitive position in the natural gas liquefaction industry. We do not have any exclusive rights to any 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.
Failure of exported LNG to be a competitive source of energy for international markets could adversely affect our customers and could materially and adversely affect our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Operations of the Project will be dependent upon our ability to deliver LNG supplies from the U.S., which is primarily dependent upon LNG being a competitive source of energy internationally. The success of our business plan is dependent, in part, on the extent to which LNG can, for significant periods and in significant volumes, be supplied from North America and delivered to international markets at a lower cost than the cost of alternative energy sources. Through the use of improved exploration technologies, additional sources of natural gas may be discovered outside the U.S., which could increase the available supply of natural gas outside the U.S. and could result in natural gas in those markets being available at a lower cost than that of LNG exported to those markets.
Additionally, our liquefaction projects will be subject to the risk of LNG price competition at times when we need to replace any existing LNG sale and purchase contract, whether due to natural expiration, default or otherwise, or enter into new LNG sale and purchase contracts. Factors relating to competition may prevent us from entering into a new or replacement LNG sale and purchase contract on economically comparable terms as prior LNG sale and purchase contracts, or at all. Factors which may negatively affect potential demand for LNG from our liquefaction projects 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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(2) | Mr. Wells was granted 24,085 shares of Common Stock on January 8, 2018 in connection with his appointment to the Board. The amount noted reflects the grant date fair value, based on the closing price of Common Stock on the date of grant of $8.16 per share. |
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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 personal service providers of the Company or any of its subsidiaries. The 2017 Equity Plan authorizes the issuance of up to 5,262,461 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 fiscal year 2018.
Equity Compensation Plan Information
The following provides certain aggregate information with respect to the Company’s equity compensation plans in effect as of 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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Political instability in foreign countries that import natural gas, or strained relations between such countries and the U.S. may also impede the willingness or ability of LNG suppliers, purchasers and merchants in such countries to import LNG from the U.S. Furthermore, some foreign purchasers of LNG may have economic or other reasons to obtain their LNG from non-U.S. markets or our competitors’ liquefaction facilities in the U.S.
As a result of these and other factors, LNG may not be a competitive source of energy internationally. The failure of LNG to be a competitive supply alternative to local natural gas, oil and other alternative energy sources in markets accessible to our customers could adversely affect the ability of our customers to deliver LNG from the U.S. on a commercial basis. Any significant impediment to the ability to deliver LNG from the U.S. generally or from the Project specifically could have a material adverse effect on our customers and our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
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 price limitations, bidding rules and other mechanisms which may adversely impact or otherwise limit trading margins and
16
lead to diminished opportunities for gain. We cannot predict
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the impact energy trading may have on our business, results of operations or financial condition.
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 somebeneficial ownership of our competitors have greater financial, technological and other resources.
We plan to operate in the highly competitive areavoting securities as 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, superior tax incentives, more employees 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.
April 9There 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.,
The construction and delivery of LNG vessels requires significant capital and long construction lead times, and the availability of the vessels could be delayed to the detriment of our business and customers due to the following: 2019:
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We will relySuch table is based on third-party engineersinformation 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 estimate the future capacity ratingsvote and performance capabilitiesdispose of the Project,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 these estimates may proveincludes more than typical forms of stock ownership, that is, stock held in the person’s name. The term also includes what is referred to be inaccurate.
We will rely on third partiesas “indirect ownership,” meaning ownership of shares as to which a person has or shares investment or voting power. For purposes of this table, shares of Common Stock not outstanding that are subject to options, warrants, rights or conversion privileges exercisable within 60 days of April 9, 2019 are deemed outstanding for the designpurpose of calculating the number and engineering services underlying our estimatespercentage owned by such person, but not deemed outstanding for the purpose of calculating the future capacity ratings and performance capabilities ofpercentage owned by each other person listed.Since the Project. Any of our LNG facilities, when constructed, may not haveSeries A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), the capacity ratings and performance capabilities that we intend or estimate. Failure of any of our facilities to achieve our intended capacity ratings and performance capabilities could prevent us from achieving the commercial start dates under our future LNG sale and purchase agreements and could have a material adverse effect on our business, contracts, financial condition, operating results, cash flow, liquidity and prospects.
Series B Convertible Preferred Stock, par value $0.0001
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Terrorist attacks, including cyberterrorism, or military campaigns involving us orper share (the “Series B Preferred Stock”), the Project could result in delays in, or cancellation of, construction or closure ofwarrants issued together with the Project.
Series 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.Preferred Stock (the “Series 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 terrorismWarrants”) and the impactwarrants issued together with the Series B Preferred Stock (the “Series B Warrants”) are not convertible into, or exercisable for, Common Stock within 60 days of military campaigns may lead to continued volatility in prices for natural gas that could adversely affect our business and customers, includingApril 9, 2019, shares of Common Stock issuable upon such conversion or exercise are not reflected as beneficially owned by the ability of our suppliers or customers to satisfy their respective obligations under our commercial agreements. Instabilityprincipal stockholders in the financial markets as a result of terrorism, including cyberterrorism, or war could also materially adversely affect our ability to raise capital. The continuation 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.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. |
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(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) | HGC is a Delaware limited liability company. Haeyoung Lee is the sole Manager and the President of HGC and may be deemed to have voting and investment power over the shares held by HGC. HGC’s address is 300 Frank W. Burr Blvd., Suite 52, Teaneck, New Jersey 07666. |
(11) | The registered holders of the referenced shares to be registered are the following funds and accounts under management by investment adviser subsidiaries of BlackRock, Inc.: ABR PE Investments II, LP, BOPA1, L.P., Coastline Fund, L.P., Fair Lane Investment Partners, L.P., Multi-Alternative Opportunities Fund (A), L.P., Multi-Alternative Opportunities Fund (B), L.P., Investment Partners V (A), LLC and SUNROCK DISCRETIONARY CO-INVESTMENT FUND II, LLC. BlackRock, Inc. is the ultimate parent holding company of such investment adviser entities. On behalf of such investment adviser entities, the applicable portfolio managers, as managing directors (or in other capacities) of such entities, and/or the applicable investment committee members of such funds and accounts, have voting and investment power over the shares held by the funds and accounts which are the registered holders of the reported securities. Such portfolio managers and/or investment committee members expressly disclaim beneficial ownership of the reported securities held by such funds and accounts. The address of such funds and accounts, such investment adviser subsidiaries and such portfolio managers and/or investment committee members is 55 East 52nd Street, New York, New York 10055. Shares listed in the table as beneficially owned may not incorporate all shares deemed to be beneficially held by BlackRock, Inc. |
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 of these customers to enter into satisfactory downstream arrangements in their home markets for the licenses to import and 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.
We have not yet concluded negotiations for the Terminal site lease and have obtained right-of-way options for only part of the Pipeline route.
Our strategy currently involves leasing 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 land 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 a Section 7 certificate holder with the right 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. The 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 our application for a value limitation agreement pursuant to the State of Texas tax code provisions for economic development. We intend to resubmit the 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 and other applicable tax authorities on comparable terms with competitors could materially impact the Project’s competitiveness.
On October 3, 2017, we 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, limit access to or increase the cost of construction capital, cause reputational damage and impede us in obtaining or renewing permits.
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The Project will be dependent on the availability of gas supply at the Agua Dulce Hub. Item 13. Certain Relationships and Related Transactions, and Director Independence
Certain Relationships and Related Person Transactions
The Pipeline will collectBoard adopted a written Related Person Transaction Policy on October 10, 2017, which addresses the reporting, review and transport natural gasapproval or ratification of transactions 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 normal course of business or provide an opportunity that is 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 Terminal. The Pipeline route passes through Jim Wells, Kleberg, Kenedy, Willacy, and Cameron Counties in Texas. The header system atRelated Person Transaction Policy, any transaction or arrangement or series of transactions or arrangements between the upstream endCompany, any subsidiary of the PipelineCompany or any other company controlled by the Company participates, whether or not the Company is intended toa party, and a “related person” in which such person will have multiple interconnectsa material direct or indirect interest must be submitted to the existing natural gas pipeline grid locatedindependent 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 related person transaction, including whether such transaction is in, or not inconsistent with, the Agua Dulce market area (thebest interests of the Company, and whether “such transaction is Agua Dulce Hubcomparable to a transaction that could be available on an arms-length basis or is on terms that the Company offers generally to persons who are not related persons and whether 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%). The Agua Dulce Hub 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 equity interest in, another entity that is a party 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.transaction.
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 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 organization. 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:
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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 our common stock could lose all or part of their investment.
The securities markets in general and our common stock have 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, business prospects or those of companies in our industry. In addition to the Related Person Transaction Policy, the Code of Conduct requires that conflicts of interests involving persons other risk factors discussed above, the pricethan directors, director nominees and volume volatility of our common stock mayexecutive officers must be affected by:
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The stock prices of companies in the LNG industry have experienced wide fluctuations that have often been unrelated to the operating performance of these companies. Following periods of volatility in the market price of a company’s securities, securities class action litigation often has been initiated against a company. If any class action litigation is initiated against us, we may incur substantial costs and our management’s attention may be diverted from our operations, which could materially adversely affect our business and financial condition.
Raising additional capital may cause dilution to existing stockholders, restrict our operations or require us to relinquish rights. Additionally, sales of a substantial number of shares of our common stock or other securities in 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, 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 ability 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 in 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.
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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. In the third quarter of 2018, our board of directors designated 50,000 shares of preferred stock as Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and 50,000 shares of preferred stock as Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Convertible Preferred Stock”), in each case such designated number of shares subject to adjustment pursuant to the provisions of the certificate of designations governing such shares. The board of directors, without any action by our stockholders, may designate and issue additional shares of preferred stock 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.
The dividend, liquidation, and redemption rights of the holders of the Convertible Preferred Stock may adversely affect our financial position and the rights of the holders of our common stock.
At December 31, 2018, we had 51,720 shares of Series A Preferred Stock and 29,636 shares of Series B Preferred Stock outstanding. The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value. Such dividends are payable quarterly and may be paid in cash or in-kind. No dividends may be paid to holders of our common stock while accumulated dividends remain unpaid on the Convertible Preferred Stock.
Further, we are required, on the earlier of (i) ten (10) business days following a FID Event (as defined in the certificates of designations of the Convertible Preferred Stock) and (ii) the date that is the tenth (10th) anniversary of the closings of the issuances of the Convertible Preferred Stock, as applicable, to convert all of the Convertible Preferred Stock into shares of Company common stock at a strike price of $7.50 per share of Company common stock. The conversion of the Convertible Preferred Stock would directly dilute the holders of our common stock. In the event we are liquidated while shares of Convertible Preferred Stock are outstanding, holders of Convertible Preferred Stock will be entitled to receive a preferred liquidation distribution, plus any accumulated and unpaid dividends, before holders of our common stock receive any distributions.
Holders of the Convertible Preferred Stock have certain voting and other rights that may adversely affect holders of our common stock, and the holders of Convertible Preferred Stock may have different interests from and vote their shares in a manner deemed adverse to, holders of our common stock.
The holders of Convertible Preferred Stock vote on an “as-converted” basis with the holders of our common stock on all matters brought before the holders of our common stock. In addition, prior to the conversion of the Convertible Preferred Stock, the consent of the holders of at least a majority of each of the Series A Preferred Stock and the Series B Preferred Stock then outstanding, in each case voting together as a single class, will be required for the Company to take certain actions, including, among others, (i) authorizing, creating or approving the issuance of any shares, or of any security convertible into, or convertible or exchangeable for shares of, senior to the Convertible Preferred Stock; (ii) authorizing, creating or approving the issuance of any shares of, or of any security convertible into, or convertible or exchangeable for shares of, Parity Stock (as defined in the certificates of designations of the Convertible Preferred Stock), subject to certain exceptions; (iii) adversely affecting the rights, preferences or privileges of the Convertible Preferred Stock, as applicable, subject to certain exceptions; (iv) amending, altering or repealing any of the provisions of the Certificate of Incorporation in a manner that would adversely affect the powers, designations, preferences or rights of the Convertible Preferred Stock, as applicable; or (v) amending, altering or repealing any of the provisions of the certificates of designations of the Convertible Preferred Stock, as applicable.
The holders of Convertible Preferred Stock may have different interests from the holders of our common stock and could vote their shares in a manner deemed adverse to the holders of our common stock.
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Exercise of warrants may have a dilutive effect on our common stock.
As of December 31, 2018, outstanding IPO Warrants to purchase an aggregate of 12,081,895 shares of our common stock were exercisable in accordance with the terms of the warrant agreement governing such warrants. 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 of our common stock, subject to certain adjustments.
In addition, we issued warrants together with the Series A Preferred Stock and the Series B Preferred Stock. The warrants issued together with the Series A Preferred Stock represent the right to acquire in the aggregate approximately 71 basis points (0.71%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share. The warrants issued together with the Series B Preferred Stock represent the right to acquire in the aggregate 42 basis points (0.42%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share. The warrants issued together with the Convertible Preferred Stock have a fixed three-year term commencing on the closings of the issuances of the associated Convertible Preferred Stock and may only be exercisedapproved by the holders thereof at the expiration of such three-year term; however, we can force exercise of such warrants prior to expiration of such term if the volume weighted average trading price of shares of Company common stock for each trading day during any 60 of the prior 90 trading days is equal to or greater than 175% of the $7.50 per share of Company common stock and, in the case of the warrants issued together with the Series B Preferred Stock, also if we simultaneously elect to force a mandatory exercise of all other warrants then-outstanding and unexercised and held by any holder of Parity Stock.
To the extent the IPO Warrants are exercised or the warrants issued together with the Convertible Preferred Stock 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.
Provisions of our charter documents or Delaware law could discourage, delay or prevent us from being acquired even if being acquired would be beneficial to our stockholders and could make it more difficult to change management.
Provisions of the Certificate of Incorporation and our Amended and Restated Bylaws (the “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 may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. Among other things, these provisions include:
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In addition, the Certificate of Incorporation provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for any claims, including (i) any derivative actions or proceedings brought on our behalf, (ii) any action asserting a claim of a breach of a fiduciary
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duty owed by, or any wrongdoing by, a director, officer or employee or (iii) any action asserting a claim pursuant to any provision of the Delaware General Corporation Law, the Certificate of Incorporation or the Bylaws, (iv) any action to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws or (v) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders which may discourage lawsuits with respect to such claims. Alternatively, if a court were to find the choice of forum provision that is contained in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business, operating results and financial condition.
Item 1B. Unresolved Staff Comments
None.
We currently lease approximately 25,600 square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on September 30, 2020.
In January 2017, NextDecade LLC executed surface lease agreements with the City of Texas City and the State of Texas for a 994‑acre site for the Galveston Bay Terminal (collectively, the “Galveston Bay Leases”). The term of the Galveston Bay Leases is 36 months with an option to extend for an additional 12 months.
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. In October 2018, NextDecade LLC exercised its option to renew the Brownsville Lease for an additional six-month term, which expires May 6, 2019.
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.” The IPO Warrants traded on Nasdaq under the symbol “NEXTW” until February 22, 2018. Since February 22, 2018, the IPO Warrants have traded on the OTC Pink Market under the symbol “NEXTW.”
As of March 1, 2019, we had 109.9 million shares of Company common stock outstanding held by approximately 90 record owners. All shares of Company 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 Company 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.
Purchase of Equity Securities by the IssuerOperations Committee.
The following table summarizes stock repurchases for the three months ended December 31, 2018:
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Period |
| Total Number of Shares Purchased (1) |
| Average Price Paid Per Share (2) |
| Total Number of Shares Purchased as a Part of Publicly Announced Plans |
| Maximum Number of Units That May Yet Be Purchased Under the Plans |
October 2018 |
| — |
| — |
| — |
| — |
November 2018 |
| — |
| — |
| — |
| — |
December 2018 |
| 3,223 |
| $ 5.03 |
| — |
| — |
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Recent Issuancesis a discussion of Unregistered Securities
On December 31, 2018,transactions between the Company issued 25,000 shares of Company common stock to a consultant under the terms of a consulting services agreement. Such shares were fully vested on the date of issuance and were issued in a transaction exempt from the registration requirementsits executive officers, directors and stockholders owning 5% or more of the Securities Act pursuant to Section 4(a)(2) thereof as a transaction by an issuer not involving any public offering. The Company relied on the representations made by such consultant. No commissions were paid, and no underwriter or placement agent was involved in such transaction.
Item 6. Selected Financial Data
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
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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 and have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Project that we expect will result in demand for contracted capacity at the Terminal, which would allow us to seek construction financing to develop the Project. We believe the Project possesses competitive advantages in several important areas, including, engineering, commercial, regulatory, and gas supply. We submitted a pre-filing request for the Project to the FERC in March 2015 and filed a formal application with the FERC in May 2016. We also believe we have robust commercial offtake and gas supply strategies in place and we estimate that the Project could commence commercial operations as early as 2023.
Overview of Significant Events
Receipt of FERC Scheduling Notice and Draft Environmental Impact Statement
On August 31, 2018, the FERC issued a notice of schedule for environmental review of the Project. According to the notice, the FERC will issue its final Environmental Impact Statement (“EIS”) on April 26, 2019, based on issuance of the draft EIS in October 2018. The FERC subsequently issued the draft EIS on October 12, 2018. The FERC has established a Federal Authorization Decision Deadline of July 25, 2019, the date by which all other agencies responsible for issuing required Project-related permits pursuant to federal law must act. This deadline does not apply to the FERC.
Engineering, Procurement, and Construction Contract
During the third quarter of 2018 we initiated a competitive engineering, procurement and construction (“EPC”) bid process. We received expressions of interest (the “EOIs”) from multiple EPC contractors to participate in the EPC process. We reviewed the EOIs against a series of selection criteria and issued formal invitations to bid to Bechtel Oil, Gas and Chemicals, Inc., Fluor Enterprises, Inc. and McDermott International, Inc. See additional information relating to the invitations to bid in Note 12 – Commitments and Contingencies of our Notes to Consolidated Financial Statements. We expect to execute a final EPC contract in the third quarter of 2019.
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Preferred Equity OfferingsCompany’s common stock.
Series A Convertible Preferred Stock OfferingPurchase Agreements
InOn August 3, 2018, wethe 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 it is investment manager (the “Valinor Purchasers”), and (iii) Bardin Hill, severally on behalf of certain funds or accounts managed by it or its affiliates (the “Barding Hill Purchasers” and together with the YCMGA Purchasers and the Valinor Purchasers, the “Fund Purchasers”) pursuant to which the Company sold an aggregate of 50,00015,000 shares of Series A Preferred Stock at $1,000.00 per share for an aggregate purchase price of $50$15 million, issued the Series A Warrants and we issued an additional 1,000300 shares of Series A Preferred Stock in aggregate as origination fees to (i) York Capital Management Global Advisors, LLC, severally on behalf of certain funds or accounts managed by it or its affiliates (“York”), (ii) Valinor Management, L.P., severally on behalf of certain funds or accounts for which it is investment manager (“Valinor”), (iii) Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP), severally on behalf of certain funds or accounts managed by it or its affiliates (“Bardin Hill,” and together with York and Valinor, the “Fund Purchasers”) and (iv) HGC NEXT INV LLC (“HGC” and, together with the Fund Purchasers the “Series A Preferred Stock Purchasers”(the “Fund Purchaser Offering”). Warrants were issued together with the shares of Series A Preferred Stock (the “Series A Warrants”).
In connection with the issuance 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“Backstop Agreements”), we also issued a total of 413,658 shares of Company common stockCommon Stock as fees to the Fund Purchasers. Each Fund Purchaser is a Company stockholder and, pursuant to that certainthe Merger Agreement and Plan of Merger, dated as of April 17, 2017, 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 York,YCMGA, Valinor and Bardin Hill, respectively, were appointed to the Company’s board of directors. For further descriptions of the Series A Preferred Stock and the Series A Warrants, see Board.
Warrant Agreements
Note 8 – Preferred Stock and Common Stock Warrants, and for additional details on the Series A Preferred Stock offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the SEC onOn August 7, 2018.
Series B Convertible Preferred Stock Offering
In September9, 2018, we sold an aggregate of 29,055 shares of Series B Preferred Stock at $1,000.00 per share for an aggregate purchase price of $29.055 million and issued an additional 581 shares of Series B Preferred Stock in aggregate as origination fees to certain funds managed by BlackRock (collectively, the “Series B Preferred Stock Purchasers”). Warrants were issued together with the shares of Series B Preferred Stock (the “Series B Warrants” and, together with the Series A Warrants, the “Common Stock Warrants”). For further descriptions of the Series B Preferred Stock and the Series B Warrants, see Note 8 – Preferred Stock and Common Stock Warrants, and for additional details on the Series B Preferred Equity Offering and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the SEC on August 24, 2018.
Air Permits
On December 12, 2018, the Texas Commission on Environmental Quality (“TCEQ”) Commissioners voted to issue a series of air permits for the Project, which include Air Quality Permit No. 104792, PSD Air Quality Permit No. PSDTX1498, and GHPSD Air Quality Permit No. GHGPSDTX158. In addition, all requests for hearing and a motion for reconsideration were denied.
Liquidity and Capital Resources
We have funded and continue to fund the development of the Project and general working capital needs through our cash on hand and proceeds from the issuances of equity. As discussed above in “Overview of Significant Events – Preferred Equity Offerings,” in August 2018, we sold an aggregate of 50,000 shares of Series A Preferred Stock at $1,000.00 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate to Series A Preferred Stock Purchasers, together with the Series A Warrants. In September 2018, we sold an aggregate of 29,055 shares of Series B Preferred Stock at $1,000.00 per share for an aggregate purchase price of $29.055 million and we issued an additional 581 shares of Series B Preferred Stock in aggregate to the Series B Preferred Stock Purchasers, together with the Series B Warrants. Our capital resources consisted of approximately $3.2 million of cash and cash equivalents and $72.5 million of investment securities as of December 31, 2018.
27
The following table summarizes the sources and uses of our cash for the periods presented (in thousands):
|
|
|
|
|
|
|
|
| Year Ended | ||||
|
| December 31, | ||||
|
| 2018 |
| 2017 | ||
Operating cash flows |
| $ | (23,285) |
| $ | (12,830) |
Investing cash flows |
|
| (86,161) |
|
| 11,862 |
Financing cash flows |
|
| 76,912 |
|
| 24,147 |
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
| (32,534) |
|
| 23,179 |
Cash and cash equivalents – beginning of period |
|
| 35,703 |
|
| 12,524 |
Cash and cash equivalents – end of period |
| $ | 3,169 |
| $ | 35,703 |
Operating Cash Flows
Operating cash outflows during the years ended December 31, 2018 and 2017 were $23.3 million and $12.8 million, respectively. The increase in operating cash outflows in 2018 compared to 2017 was primarily related to additional employees and travel costs, Invitation to Bid Contract Costs, increased professional fees and increased marketing and conference sponsorship costs.
Investing Cash Flows
Investing cash (outflows) inflows during the years ended December 31, 2018 and 2017 were $(86.2) million and $11.9 million, respectively. The investing cash outflows in 2018 were the result of cash used in the development of the Project of $18.7 million and a net investment of $67.5 million in investment securities. The investing cash inflows in 2017 were primarily the result of cash received in the reverse recapitalization of $26.8 million partially offset by cash used in the development of the Project of $14.8 million.
Financing Cash Flows
Financing cash inflows during the years ended December 31, 2018 and 2017 were $76.9 million and $24.1 million, respectively. Financing cash inflows in 2018 was the result of $79.1 million of proceeds from the issuance of preferred equity offset by $2.1 million of equity issuance costs. Financing cash inflows in 2017 was the result of $30.1 million of proceeds from the issuance of Company common stock and membership interests in NextDecade LLC offset by $6.0 million of equity issuance costs.
Capital Development Activities
We are primarily engaged in developing the Project, which will likely require additional capital to support further project development, engineering, regulatory approvals and compliance, and commercial activities in advance of a final investment decision (“FID”) made to finance and construct the Project. Even if successfully completed, the Project will not begin to operate and generate significant cash flows until at least several years from now, which management currently estimates being as early as 2023. Construction of the Project would not begin until, among other requirements for project financing, the FERC issues an order granting the necessary authorizations under the Natural Gas Act and once all required federal, state and local permits have been obtained. We estimate that we will receive all regulatory approvals and begin construction to support the commencement of commercial operations as early as 2023. Additionally, approval of tax incentives is an important component of the Project’s competitiveness. Failure to gain approval of tax incentives on comparable terms with competitors could materially impact the Project’s competitiveness. As a result, our business success will depend, to a significant extent, upon our ability to obtain the funding necessary to construct the Project, to bring it into operation on a commercially viable basis and to finance our staffing, operating and expansion costs during that process.
We have engaged SG Americas Securities, LLC (a business unit of Société Générale) and Macquarie Capital (USA) Inc. to advise and assist us in raising capital for post-FID construction activities.
28
We currently expect that the long-term capital requirements for the Project will be financed predominately through project financing and proceeds from future debt and equity offerings by us. There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to complete the Project or, if successful, that the capital we raise will not be expensive or dilutive to stockholders. Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all.
Contractual Obligations
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, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
|
| Total |
| 2019 |
| 2020- 2021 |
| 2022 - 2023 |
| Thereafter | ||||||||||||||||||
Operating lease obligations |
| $ | 1,829 |
| $ | 1,299 |
| $ | 530 |
| $ | — |
| $ | — | |||||||||||||
Invitation to Bid Contract Costs (1) |
|
| 14,900 |
|
| 14,900 |
|
| — |
|
| — |
|
| — | |||||||||||||
Total |
| $ | 16,729 |
| $ | 16,199 |
| $ | 530 |
| $ | — |
| $ | — |
|
|
Operating lease obligations primarily relate to our land site for our Galveston Bay Terminal and office space in Houston, Texas.
During the third quarter of 2018, we initiated a competitive EPC bid process. In connection with the EPC bid process, we entered into agreements with potential EPC contractors that provide for payments to be made by us to the EPC contractors as bid milestones are achieved (“Invitation to Bid Contract Costs”). Future potential payments for Invitation to Bid Contract Costs are up to $14.9 million in 2019.
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, 2018 and 2017 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
| Year Ended | |||||||
|
| December 31, | |||||||
|
| 2018 |
| 2017 |
| Change | |||
Revenues |
| $ | — |
| $ | — |
| $ | — |
General and administrative expenses |
|
| 35,182 |
|
| 34,551 |
|
| 631 |
Invitation to Bid Contract Costs |
|
| 6,563 |
|
| — |
|
| 6,563 |
Land option and lease expenses |
|
| 1,099 |
|
| 981 |
|
| 118 |
Depreciation expense |
|
| 171 |
|
| 106 |
|
| 65 |
Operating loss |
|
| (43,015) |
|
| (35,638) |
|
| (7,377) |
Gain on Common Stock Warrant Liabilities |
|
| 164 |
|
| — |
|
| 164 |
Interest income, net |
|
| 1,019 |
|
| 343 |
|
| 676 |
Other |
|
| (128) |
|
| (31) |
|
| (97) |
Net loss attributable to NextDecade Corporation |
|
| (41,960) |
|
| (35,326) |
|
| (6,634) |
Preferred stock dividends |
|
| (724) |
|
| — |
|
| (724) |
Deemed dividends on Series A Convertible Preferred Stock |
|
| (822) |
|
| — |
|
| (822) |
Net loss attributable to common stockholders |
| $ | (43,506) |
| $ | (35,326) |
| $ | (8,180) |
29
Our consolidated net loss was $42.0 million, or $0.41 per common share (basic and diluted), for the year ended December 31, 2018, compared to a net loss of $35.3 million, or $0.35 per common share (basic and diluted), for the year ended December 31, 2017. This $6.7 million increase in net loss was primarily a result of increased general and administrative expenses and Invitation to Bid Contract Costs partially offset by interest income discussed separately below.
General and administrative expenses during the year ended December 31, 2018 increased $0.6 million compared to the year ended December 31, 2017, due primarily to, (i) an increase in the number of employees which resulted in increased salaries and employee benefits, office expenses, travel, and professional fees of $5.6 million and (ii) increased marketing and promotion costs, insurance, taxes and license fees of $0.9 million, partially offset by a decrease in share-based compensation expense of $5.9 million as a result of forfeitures of restricted stock awards during the period and changes in the probability and expected timing of achievement of performance conditions.
As of December 31, 2018, we incurred approximately $6.6 million of Invitation to Bid Contract Costs. There were no Invitation to Bid Contract Costs incurred during 2017.
Interest income, net during the year ended December 31, 2018 increased $0.7 million compared to the year ended December 31, 2017 due to increased yield and higher average balances maintained in our cash accounts and investment securities.
Preferred stock dividends of $0.7 million in 2018 were paid-in-kind with the issuance of an additional 720 shares of Series A Preferred Stock. The Series A Preferred Stock was not issued or outstanding during 2017.
Deemed dividends on the Series A Preferred Stock for the year ended December 31, 2018 represents the accretion of the beneficial conversion feature associated with the Series A Preferred Stock issued in 2018. Due to the price of our common stock as of the closing date of the Series B Preferred Stock,Fund Purchaser Offering (the “Fund Purchaser Offering Closing Date”), the Company delivered a warrant agreement to each of the Fund Purchasers governing the Series B Preferred Stock does not have a beneficial conversion feature.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2018.
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, Common Stock Warrant liabilities, 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 factorsWarrants
30
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.
Valuation of Common Stock Warrant Liabilities
The fair value of Common Stock Warrant liabilities is determined using a Monte Carlo valuation model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrant requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The estimated volatility of our common stock at the date of issuance, and at each subsequent reporting period, is based on our historical volatility. The risk-free interest rate is based on rates published by the government for bonds with maturity similar to the expected remaining life of the Common Stock Warrants at the valuation date. The expected life of the Common Stock Warrants is assumed to be equivalent to their remaining contractual term.
The Common Stock Warrants are not traded in an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from those recorded in the consolidated financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the consolidated statement of operations and comprehensive loss each reporting period.
For additional information regarding the valuation of Common Stock Warrant liabilities, see Note 8 – Preferred Stock and Common Stock Warrants 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
31
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
NextDecade Corporation and Subsidiaries
32
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
NextDecade Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheet of NextDecade Corporation and subsidiaries (the “Company”) as of December 31, 2018, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, series A and series B convertible preferred stock, and cash flows for the year ended December 31, 2018 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 Companyas of December 31, 2018 and the results of itsoperations and itscash flows for the year ended December 31, 2018, 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit 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 audit 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 supporting the amounts and disclosures in the financial statements. Our audit 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 audit provides a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2018.
Houston, TX
March 6, 2019
33
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 sheet of NextDecade Corporation and Subsidiaries (the “Company”) as of December 31, 2017, the related consolidatedstatements of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2017, 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 the results of its operations and its cash flows for the year 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 audit. 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit 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 audit 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
/s/ Marcum LLP
We have served as the Company’s auditor since 2017.
New York, NY
March 8, 2018
34
NextDecade Corporation and Subsidiaries
(in thousands, except share data)
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
Assets |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 3,169 |
| $ | 35,703 |
Investment securities |
|
| 72,453 |
|
| 5,063 |
Prepaid expenses and other current assets |
|
| 1,310 |
|
| 2,099 |
Total current assets |
|
| 76,932 |
|
| 42,865 |
Property, plant and equipment, net |
|
| 92,070 |
|
| 73,226 |
Total assets |
| $ | 169,002 |
| $ | 116,091 |
|
|
|
|
|
|
|
Liabilities, Series A and Series B Convertible Preferred Stock and Stockholders’ Equity |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Accounts payable |
| $ | 719 |
| $ | 726 |
Share-based compensation liability |
|
| 3,018 |
|
| 1,815 |
Accrued liabilities and other current liabilities |
|
| 8,353 |
|
| 5,856 |
Total current liabilities |
|
| 12,090 |
|
| 8,397 |
Non-current Common Stock Warrant liabilities |
|
| 7,441 |
|
| — |
Non-current compensation liabilities |
|
| — |
|
| 2,015 |
Non-current share-based compensation liability |
|
| — |
|
| 2,587 |
Total liabilities |
|
| 19,531 |
|
| 12,999 |
|
|
|
|
|
|
|
Commitments and contingencies (Note 12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A Convertible Preferred Stock, $1,000 per share liquidation preference |
|
| 40,091 |
|
| — |
Series B Convertible Preferred Stock, $1,000 per share liquidation preference |
|
| 26,159 |
|
| — |
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
Common stock, $0.0001 par value Authorized: 480.0 million shares at December 31, 2018 and December 31, 2017 Issued and outstanding: 106.9 million shares and 106.3 million shares at December 31, 2018 and December 31, 2017, respectively |
|
| 11 |
|
| 11 |
Treasury stock: 6,425 shares and zero shares at December 31, 2018 and December 31, 2017, respectively, at cost |
|
| (35) |
|
| — |
Preferred stock, $0.0001 par value |
|
| — |
|
| — |
Additional paid-in-capital |
|
| 180,862 |
|
| 158,738 |
Accumulated deficit |
|
| (97,617) |
|
| (55,617) |
Accumulated other comprehensive loss |
|
| — |
|
| (40) |
Total stockholders’ equity |
|
| 83,221 |
|
| 103,092 |
Total liabilities, Series A and Series B Convertible Preferred Stock and stockholders’ equity |
| $ | 169,002 |
| $ | 116,091 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
35
NextDecade Corporation and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
| Year Ended | |||||
|
| December 31, | |||||
|
| 2018 |
| 2017 |
| ||
Operations |
|
|
|
|
|
|
|
Revenues |
| $ | — |
| $ | — |
|
Operating Expenses |
|
|
|
|
|
|
|
General and administrative expenses |
|
| 35,182 |
|
| 34,551 |
|
Invitation to Bid Contract Costs |
|
| 6,563 |
|
| — |
|
Land option and lease expenses |
|
| 1,099 |
|
| 981 |
|
Depreciation expense |
|
| 171 |
|
| 106 |
|
Total operating expenses |
|
| 43,015 |
|
| 35,638 |
|
Total operating loss |
|
| (43,015) |
|
| (35,638) |
|
Other income (expense) |
|
|
|
|
|
|
|
Gain on Common Stock Warrant liabilities |
|
| 164 |
|
| — |
|
Interest income, net |
|
| 1,019 |
|
| 343 |
|
Other |
|
| (128) |
|
| (31) |
|
Total other income |
|
| 1,055 |
|
| 312 |
|
Net loss attributable to NextDecade Corporation |
|
| (41,960) |
|
| (35,326) |
|
Preferred stock dividends |
|
| (724) |
|
| — |
|
Deemed dividends on Series A Convertible Preferred Stock |
|
| (822) |
|
| — |
|
Net loss attributable to common stockholders |
| $ | (43,506) |
| $ | (35,326) |
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
| $ | (0.41) |
| $ | (0.35) |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding - basic and diluted |
|
| 106,564 |
|
| 100,926 |
|
|
|
|
|
|
|
|
|
Comprehensive Loss |
|
|
|
|
|
|
|
Net loss attributable to NextDecade Corporation |
| $ | (41,960) |
| $ | (35,326) |
|
Other comprehensive loss: |
|
|
|
|
|
|
|
Change in fair value of investments |
|
| — |
|
| (13) |
|
Comprehensive loss |
| $ | (41,960) |
| $ | (35,339) |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
36
NextDecade Corporation and Subsidiaries
Consolidated Statements of Stockholders’ Equity, Series A and Series B Convertible Preferred Stock
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stock |
| Treasury Stock |
|
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
|
|
| |||||||
|
|
|
| Par |
|
|
|
|
| Additional |
|
|
|
| Other |
| Total |
| Series A |
| Series B | |||||||
|
|
|
| Value |
|
|
|
|
| Paid-in |
| Accumulated |
| Comprehensive |
| Stockholders’ |
| Convertible |
| Convertible | ||||||||
|
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity |
| Preferred Stock |
| Preferred Stock | ||||||||
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 |
| $ | — |
| $ | — |
Adoption of ASU 2016-01 |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (40) |
|
| 40 |
|
| — |
|
| — |
|
| — |
Share-based compensation |
| — |
|
| — |
| — |
|
| — |
|
| 19,032 |
|
| — |
|
| — |
|
| 19,032 |
|
| — |
|
| — |
Restricted stock vesting |
| 173 |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
Shares repurchased related to share-based compensation |
| (6) |
|
| — |
| 6 |
|
| (35) |
|
| — |
|
| — |
|
| — |
|
| (35) |
|
| — |
|
| — |
Issuance of Series A preferred stock |
| 414 |
|
| — |
| — |
|
| — |
|
| 4,638 |
|
| — |
|
| — |
|
| 4,638 |
|
| 38,549 |
|
| — |
Issuance of Series B preferred stock |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 26,159 |
Preferred stock dividends |
| — |
|
| — |
| — |
|
| — |
|
| (724) |
|
| — |
|
| — |
|
| (724) |
|
| 720 |
|
| — |
Deemed dividends - accretion of beneficial conversion feature |
| — |
|
| — |
| — |
|
| — |
|
| (822) |
|
| — |
|
| — |
|
| (822) |
|
| 822 |
|
| — |
Net loss |
| — |
|
| — |
| — |
|
| — |
|
| — |
|
| (41,960) |
|
| — |
|
| (41,960) |
|
| — |
|
| — |
Balance at December 31, 2018 |
| 106,856 |
| $ | 11 |
| 6 |
| $ | (35) |
| $ | 180,862 |
| $ | (97,617) |
| $ | — |
| $ | 83,221 |
| $ | 40,091 |
| $ | 26,159 |
The accompanying notes are an integral part of these Consolidated Financial Statements.
37
NextDecade Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
|
|
|
|
|
|
|
|
| Year Ended | ||||
|
| December 31, | ||||
|
| 2018 |
| 2017 | ||
Operating activities: |
|
|
|
|
|
|
Net loss attributable to NextDecade Corporation |
| $ | (41,960) |
| $ | (35,326) |
Adjustment to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
Depreciation |
|
| 171 |
|
| 106 |
Share-based compensation expense |
|
| 16,840 |
|
| 22,693 |
Gain on Common Stock Warrant liabilities |
|
| (164) |
|
| — |
Loss on investment securities |
|
| 114 |
|
| — |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Prepaid expenses |
|
| 440 |
|
| (1,003) |
Other current assets |
|
| 349 |
|
| 349 |
Accounts payable |
|
| 124 |
|
| (137) |
Accrued expenses and other liabilities |
|
| 801 |
|
| 488 |
Net cash used in operating activities |
|
| (23,285) |
|
| (12,830) |
Investing activities: |
|
|
|
|
|
|
Acquisition of property, plant and equipment |
|
| (18,658) |
|
| (14,833) |
Issuance of note receivable |
|
| — |
|
| (115) |
Repayment of note receivable |
|
| — |
|
| 115 |
Cash received in reverse recapitalization |
|
| — |
|
| 26,774 |
Proceeds from sale of investment securities |
|
| 17,113 |
|
| — |
Purchase of investment securities |
|
| (84,616) |
|
| (79) |
Net cash (used in) provided by investing activities |
|
| (86,161) |
|
| 11,862 |
Financing activities: |
|
|
|
|
|
|
Proceeds from equity issuance |
|
| 79,055 |
|
| 30,100 |
Equity issuance costs |
|
| (2,104) |
|
| (5,953) |
Shares repurchased related to share-based compensation |
|
| (35) |
|
| — |
Payment of convertible preferred stock cash dividends |
|
| (4) |
|
| — |
Net cash provided by financing activities |
|
| 76,912 |
|
| 24,147 |
Net (decrease) increase in cash and cash equivalents |
|
| (32,534) |
|
| 23,179 |
Cash and cash equivalents – beginning of period |
|
| 35,703 |
|
| 12,524 |
Cash and cash equivalents – end of period |
| $ | 3,169 |
| $ | 35,703 |
|
|
|
|
|
|
|
Non-cash investing activities: |
|
|
|
|
|
|
Accounts payable for acquisition of property, plant and equipment |
| $ | 367 |
| $ | 498 |
Accrued liabilities for acquisition of property, plant and equipment |
|
| 4,014 |
|
| 3,317 |
Non-cash financing activities: |
|
|
|
|
|
|
Paid-in-kind dividends on Series A Convertible Preferred Stock |
|
| 720 |
|
| — |
Accretion of deemed dividends on Series A Convertible Preferred Stock |
|
| 822 |
|
| — |
The accompanying notes are an integral part of these Consolidated Financial Statements.
38
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”). In January of 2017, we also secured a 36-month lease of a 994-acre site near Texas City, Texas for another potential LNG terminal (the “Galveston Bay Terminal”) with the option to extend the lease for an additional 12 months.
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. 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 results of operations and cash flows prior to the Merger Date, 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.
39
Cash Equivalents
We consider all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Investment Securities
We define investment securities as investments in marketable securities that can be readily converted to cash. We determine the appropriate classification of investment securities at the time of purchase and reevaluate such classification at each balance sheet date. Investment securities are initially recorded at cost and remeasured to fair value, with changes presented in other income in our Consolidated Statements of Operations and Comprehensive Loss.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value.
Warrants
The Company determines the accounting classification of warrants that are issued, as either liability or equity, by first assessing whether the warrants meet liability classification in accordance with Accounting Standards Codification
4020
(“ASC”) 480issued to such Fund Purchaser. Under such warrant agreements, the Distinguishing Liabilities from Equity (“ASC 480”), and then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815-40”). Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate the issuer to settle the warrants or the underlying shares by paying cash or other assets, or warrants that must or may require settlement by issuing a variable number of shares.
If warrants do not meet liability classification under ASC 480, the Company assesses the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash or a variable number of shares are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature. If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, the Company assesses whether the warrants are indexed to our common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP. After all relevant assessments are made, the Company concludes whether the warrants are classified as liability or equity. Liability classified warrants are required to be accounted for at fair value both on the date of issuance and on subsequent accounting period ending dates, with all changes in fair value after the issuance date recorded in the statements of operations as a gain or loss. Equity classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.
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 investment securities as disclosed in Note 5 – Investment Securities and for Common Stock Warrant liabilities as disclosed in Note 8– Preferred Stock and Common Stock Warrants. 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.
Treasury stock is recorded at cost. Issuance of treasury stock is accounted for on a weighted average cost basis. Differences between the cost of treasury stock and the re-issuance proceeds are charged to additional paid-in capital.
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 and the dilutive effect of convertible securities is calculated using the if-converted method. Basic and diluted EPS for all periods presented are the same since the effect of our potentially dilutive securities are anti-dilutive to our net loss per share, as disclosed in Note 9 – Net Loss Per Share Attributable to Common Stockholders.
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
41
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. We account for forfeitures as they occur.
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 net 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.
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. We may take advantage of these reporting exemptions until we are no longer an emerging growth company.
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 such time as those standards apply to private companies. The Company has elected to “opt-out” of this exemption and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
Additionally, under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company qualifies as a “smaller reporting company” because the value of its common stock held by non-affiliates as of the end of its most recently completed second fiscal quarter was less than $250 million. For as long as the Company remains a smaller reporting company, it may take advantage of certain exemptions from the SEC’s reporting requirements that are otherwise applicable to public companies that are not smaller reporting companies.
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 4,214,130 shares, 607,349 shares and 71,847 shares, respectively, of our common stock (“Additional Shares”) upon the achievement by us of each of the following milestones (the “Additional Share Milestones”):
|
|
42
|
|
|
|
|
|
Additional Share Milestones 1, 2, and 3 were not achieved by the respective dates. As such, the right to receive Additional Shares by pre-Merger members, management and consultants of NextDecade LLC for these milestones were forfeited.
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.
Note 4 — Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
Rio Grande LNG site option |
| $ | 508 |
| $ | 1,080 |
Short-term security deposits |
|
| 18 |
|
| 364 |
Galveston Bay leases |
|
| — |
|
| 100 |
Rio Bravo Pipeline options |
|
| 54 |
|
| 111 |
Prepaid insurance |
|
| 233 |
|
| 208 |
Prepaid marketing and sponsorships |
|
| 242 |
|
| 55 |
Other |
|
| 255 |
|
| 181 |
Total prepaid expenses and other current assets |
| $ | 1,310 |
| $ | 2,099 |
During the years ended December 31, 2018 and 2017, we recognized $572 thousand and $584 thousand, respectively, of lease option expense related to the Rio Grande LNG site option which expires November 5, 2019.
Note 5 — Investment Securities
In 2018, we invested in Class L shares of the JPMorgan Managed Income Fund. The JPMorgan Managed Income Fund has an average maturity of approximately one year, duration of approximately six months, and approximately 7% of such fund’s holdings are AAA-rated with 0% non-investment grade rated. Prior to our investment in the JPMorgan Managed Income Fund, we also maintained cash reserves in the Ultra-Short-Term Bond Fund and the Short-Term Bond Index Fund, which were managed by The Vanguard Group, Inc.
Investment securities are included in Level 1 of the fair value hierarchy and consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||||||||
|
| 2018 |
| 2017 | ||||||||
|
| Fair value |
| Cost |
| Fair value |
| Cost | ||||
JPMorgan Managed Income Fund |
| $ | 72,453 |
| $ | 72,567 |
| $ | — |
| $ | — |
Ultra-Short-Term Bond Fund |
|
| — |
|
| — |
|
| 3,811 |
|
| 3,825 |
Short-Term Bond Index Fund |
|
| — |
|
| — |
|
| 1,252 |
|
| 1,278 |
Total investment securities |
| $ | 72,453 |
| $ | 72,567 |
| $ | 5,063 |
| $ | 5,103 |
43
Note 6 — Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
Fixed Assets |
|
|
|
|
|
|
Computers |
| $ | 164 |
| $ | 69 |
Furniture, fixtures, and equipment |
|
| 316 |
|
| 246 |
Leasehold improvements |
|
| 420 |
|
| 264 |
Total fixed assets |
|
| 900 |
|
| 579 |
Less: accumulated depreciation |
|
| (542) |
|
| (371) |
Total fixed assets, net |
|
| 358 |
|
| 208 |
Project Assets (not placed in service) |
|
|
|
|
|
|
Rio Grande |
|
| 80,407 |
|
| 62,866 |
Rio Bravo |
|
| 11,305 |
|
| 10,152 |
Total project assets |
|
| 91,712 |
|
| 73,018 |
Total property, plant and equipment, net |
| $ | 92,070 |
| $ | 73,226 |
Depreciation expense for the years ended December 31, 2018 and 2017 was $171 thousand and $106 thousand, respectively.
Note 7 — Accrued Liabilities and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| December 31, |
| December 31, | ||
|
| 2018 |
| 2017 | ||
Employee compensation expense |
| $ | 3,130 |
| $ | 1,851 |
Project asset costs |
|
| 2,014 |
|
| 3,317 |
Valve installation incentive(1) |
|
| 2,000 |
|
| — |
Accrued legal services |
|
| 313 |
|
| 141 |
Other accrued liabilities |
|
| 896 |
|
| 547 |
Total accrued liabilities and other current liabilities |
| $ | 8,353 |
| $ | 5,856 |
|
|
Note 8 — Preferred Stock and Common Stock Warrants
Preferred Stock
In August 2018, we sold an aggregate of 50,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock), at $1,000.00 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate as origination fees to (i) York Capital Management Global Advisors, LLC, severally on behalf of certain funds or accounts managed by it or its affiliates (“York”), (ii) Valinor Management, L.P., severally on behalf of certain funds or accounts for which it is investment manager (“Valinor”), (iii) Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP), severally on behalf of certain funds or accounts managed by it or its affiliates (“Bardin Hill,” and together with York and Valinor, the “Fund Purchasers”) and (iv) HGC NEXT INV LLC (“HGC” and, together with the Fund Purchasers, the “Series A Preferred Stock Purchasers”). Warrants were issued together with the shares of Series A Preferred Stock (the “Series A Warrants”).
44
In connection with the issuance 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 Company common stock as fees to the Fund Purchasers. Each Fund Purchaser is a Company stockholder and, pursuant to that certain Agreement and Plan of Merger, dated as of April 17, 2017, by and 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 York, Valinor, and Bardin Hill, respectively, were appointed to the Company’s board of directors.
In September 2018, we sold an aggregate of 29,055 shares of Series B Convertible Preferred Stock, par value $0.0001 per share (the “Series B Preferred Stock” and, together with the Series A Preferred Stock, the “Convertible Preferred Stock”), at $1,000.00 per share for an aggregate purchase price of $29.055 million and we issued an additional 581 shares of Series B Preferred Stock in aggregate as origination fees to certain funds managed by BlackRock (collectively, the “Series B Preferred Stock Purchasers”). Warrants were issued together with the shares of Series B Preferred Stock (the “Series B Warrants” and, together with the Series A Warrants, the “Common Stock Warrants”).
The Company has the option to convert all, but not less than all, of the Preferred Stock into shares of Company common stock at a strike price of $7.50 per share of Company common stock (the “Conversion Price”) on any date on which the volume weighted average trading price of shares of Company common stock for each trading day during any 60 of the prior 90 trading days is equal to or greater than 175% of the Conversion Price, in each case subject to certain terms and conditions. Furthermore, the Company must convert all of the Preferred Stock into shares of Company common stock at the Conversion Price on the earlier of (i) ten (10) business days following a FID Event (as defined in the certificates of designations of the Preferred Stock) and (ii) the date that is the tenth (10th) anniversary of the closings of the issuances of the Preferred Stock, as applicable.
The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value. Such dividends are payable quarterly and may be paid in cash or in-kind. During 2018, the Company paid-in-kind $0.7 million of dividends to holders of the Series A Preferred Stock. On January 9, 2019, the Company declared dividends to holders of the Convertible Preferred Stock as of the close of business on December 15, 2018. On January 15, 2019, the Company paid-in-kind $2.5 million of dividends to holders of the Convertible Preferred Stock.
The holders of Convertible Preferred Stock vote on an “as-converted” basis with the holders of the Company common stock on all matters brought before the holders of Company common stock. In addition, the holders of Convertible Preferred Stock have separate class voting rights with respect to certain matters affecting their rights.
The Convertible Preferred Stock do not qualify as liability instruments under ASC 480, because they are not mandatorily redeemable. However, as SEC Regulation S-X, Rule 5-02-27 does not permit a probability assessment for a change of control provision, the Convertible Preferred Stock must be presented as mezzanine equity between liabilities and stockholders’ equity in our Consolidated Balance Sheets because a change of control event, although not considered probable, could force the Company to redeem the Convertible Preferred Stock for cash or assets of the Company. At each balance sheet date, we must re-evaluate whether the Convertible Preferred Stock continue to qualify for equity classification.
Common Stock Warrants
The Series A Warrants issued to HGC represent the right to acquire in the aggregate 50 basis points (0.50%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share. The Series A Warrants issued to each of the Fund Purchasers represent the right to acquire approximately 21 basis points (0.21%) in the aggregate of the fully diluted shares of all outstanding shares of Company common stockCommon Stock on the exercise date with a strike price of $0.01 per share. The Series B Warrants issued to the Series B Preferred Stock Purchasers represent the right to acquire in the aggregate 42 basis points (0.42%) of the fully diluted shares of all outstanding shares of Company common stock on the exercise date with a strike price of $0.01 per share.
The Common StockA Warrants have a fixed three-year term commencing on the respective closings of the issuances of the associated ConvertibleSeries A Preferred Stock. The Common StockSeries A Warrants may only be exercised by the holders thereof at the expiration of such three-year term; however, the Company can force exercise of the Common StockSeries A Warrants prior to
45
expiration of such term if the volume weighted average trading price of shares of Company common stockCommon Stock for each trading day during any 60 of the prior 90 trading days is equal to or greater than 175% of the Conversion Price$7.50.
Registration Rights Agreements
On the Fund Purchaser Offering Closing Date, the Company and in the caseFund Purchasers entered into registration rights agreements, as subsequently amended on December 7, 2018 (as amended, the “Registration Rights Agreements”). Pursuant to the Registration Rights Agreements, the Company agreed to, among other things, (i) file as soon as practicable after the date that is one hundred twenty (120) days after the consummation of the Series B Warrants, also ifFund Purchaser Offering Closing Date, but in any event within thirty (30) days after the Company simultaneously elects to force a mandatory exercise of all other warrants then-outstanding and unexercised and held by any holder of parity stock (as defined indate that is one hundred twenty (120) from the Certificate of Designations of Series B Convertible Preferred Stock). Pursuant to ASC 815-40, the fair valueconsummation of the Fund Purchaser Offering Closing Date, with the SEC a shelf registration statement to permit the public resale of shares of Common Stock Warrants was recorded as a non-current liability on our Consolidated Balance Sheet on the issuance dates. The Company revalued the Common Stock Warrants as of December 31, 2018 and recognized a gain of approximately $164 thousand. The Common Stock Warrants are included in Level 3 of the fair value hierarchy.
The assumptions used in the Monte Carlo simulation to estimate the fair value of the Common Stock Warrants as of December 31, 2018 are as follows:
|
|
|
|
|
Stock price |
| $ | 5.40 |
|
Exercise price |
| $ | 0.01 |
|
Risk-free rate |
|
| 2.5 | % |
Volatility |
|
| 33.1 | % |
Term (years) |
|
| 2.7 |
|
Initial Fair Value Allocation
Net cash proceeds were allocated on a fair value basis to the Series A Warrants and the Series B Warrants and on a relative fair value basis to the Company common stock,underlying (i) the Series A Preferred Stock and the Series B Preferred Stock. As described below, $2.5 million of the $41.1 million allocated to(including any Common Stock underlying the Series A Preferred Stock was allocated to additional paid-in capital to give effectissued as payment-in-kind dividends) issued pursuant to the intrinsic value of a beneficial conversion feature (“BCF”).
The allocation of net cash proceeds is as follows (in thousands):
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Allocation of Proceeds | ||||||||||||||||
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
| Additional Paid-in Capital | ||||
|
|
|
|
|
|
|
|
|
|
| Series A |
| Series B |
|
|
|
| Beneficial | |||
|
|
|
|
| Series A |
| Series B |
| Convertible |
| Convertible |
| Common |
| Conversion | ||||||
|
|
|
|
| Warrants |
| Warrants |
| Preferred |
| Preferred |
| Stock |
| Feature | ||||||
Gross proceeds |
| $ | 79,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity issuance costs |
|
| (2,104) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds - Initial Fair Value Allocation |
| $ | 76,951 |
| $ | 4,859 |
| $ | 2,746 |
| $ | 41,079 |
| $ | 26,159 |
| $ | 2,108 |
| $ | — |
Allocation to BCF |
|
|
|
|
| — |
|
| — |
|
| (2,530) |
|
| — |
|
| — |
|
| 2,530 |
Per balance sheet upon issuance |
|
|
|
| $ | 4,859 |
| $ | 2,746 |
| $ | 38,549 |
| $ | 26,159 |
| $ | 2,108 |
| $ | 2,530 |
Beneficial Conversion Feature
ASC 470-20-20 – Debt – Debt with conversion and Other Options (“ASC 470-20”) defines a BCF as a nondetachable conversion feature that is in the money at the issuance date. The Company was required by ASC 470-20 to allocate a portion of the proceeds from the Series A Preferred Stock equal to the intrinsic value of the BCF to additional paid-in capital. The intrinsic value of the BCF is calculated at the issuance date as the difference between the “accounting conversion price”Purchase Agreements and the market price of shares of Company common stock multiplied by the number of shares of Company common stock into whichBackstop Agreements, as applicable, and (ii) the Series A Preferred Stock is convertible.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 accounting conversion prices of $5.58 per shareCompany filed such shelf registration statement with the SEC on December 20, 2018 and $6.24 per share for the Fund Purchasers and HGC, respectively, is different than the contractual conversion price of $7.50 per share. such registration statement became effective on December 26, 2018.
Director Independence
The “accounting conversion price” is derived by dividing the proceeds allocatedCompany adheres to the Series A PreferredNasdaq 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 directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. The Board considered the relationships that each director has with us and all other facts and circumstances the Board deemed relevant in determining his or her independence, including the beneficial ownership of our Common Stock owned by the number of shares of Companyeach director. Based upon information requested from and provided by each director concerning his background, employment, affiliations and common stock into whichownership, the Series A Preferred Stock is convertible. WeBoard has determined that each of Messrs. Belke, Bonanno, Gallo, Kripalani, Lee, Magid, Rosenfeld, Vrattos and Wells are recordingindependent under the accretionNasdaq listing rules. Additionally, the Board determined that David Sgro, a former member of the $2.5 million Series A Preferred Stock discount attributable toBoard who served until the BCF2018 Annual Meeting of Stockholders, was independent under the Nasdaq listing rules.
The Board determined that Mr. Schatzman is not an independent director under the Nasdaq listing rules because he currently serves as the President and Chief Executive Officer of the Company and Mrs. 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 deemed dividend usingformer member of the effective yield method overBoard,was not an independent director under the period prior toNasdaq listing rules because he served as executive officer of the expected conversion date.Company until October 2018.
46
Note 9 — Net Loss Per Share Attributable to Common Stockholders
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, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
| Year ended | ||||
|
|
| December 31, | ||||
|
|
| 2018 |
| 2017 | ||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
|
| 106,564 |
|
| 100,926 |
Dilutive unvested stock, convertible preferred stock, Common Stock Warrants and IPO Warrants |
|
|
| — |
|
| — |
Diluted |
|
|
| 106,564 |
|
| 100,926 |
|
|
|
|
|
|
|
|
Basic and diluted net loss per share attributable to common stockholders |
|
| $ | (0.41) |
| $ | (0.35) |
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, | ||||
|
| 2018 |
| 2017 | ||
Unvested stock (1) |
|
| 498 |
|
| 258 |
Convertible preferred stock |
|
| 3,552 |
|
| — |
Common Stock Warrants |
|
| 454 |
|
| — |
IPO Warrants(2) |
|
| 12,082 |
|
| 12,082 |
Total potentially dilutive common shares |
|
| 16,586 |
|
| 12,340 |
|
|
|
|
Note 10 — Share-based Compensation
We have granted shares of Company common stock and restricted stock to employees, consultants and a non-employee director under our 2017 Omnibus Incentive Plan (the “2017 Plan”) and in connection with the special meeting of stockholders on July 24, 2017.
Total share-based compensation consisted of the following (in thousands):
|
|
|
|
|
|
|
|
| Year ended | ||||
|
| December 31, | ||||
|
| 2018 |
| 2017 | ||
Share-based compensation: |
|
|
|
|
|
|
Equity awards |
| $ | 19,032 |
| $ | 19,754 |
Liability awards |
|
| (2,400) |
|
| 4,402 |
Total share-based compensation |
|
| 16,632 |
|
| 24,156 |
Capitalized share-based compensation |
|
| 208 |
|
| (1,463) |
Total share-based compensation expense |
| $ | 16,840 |
| $ | 22,693 |
47
Certain employee contracts provided for cash bonuses upon a positive FID in the Project (the “FID Bonus”). In January 2018, the nominating, corporate governance and compensation committee of the board of directors approved, and certain employees party to such contracts accepted, an amendment to such contracts whereby the FID Bonuses would be settled in shares of Company common stock equal to 110% of the FID Bonus. The associated liability for FID Bonuses to be settled in shares of Company common stock of $0.4 million and $1.0 million is included in share-based compensation liability and non-current compensation liabilities in our Consolidated Balance Sheets at December 31, 2018 and 2017 respectively.
The total unrecognized compensation costs at December 31, 2018 relating to equity-classified awards and liability-classified awards were $23.3 million and $1.1 million, respectively, which are expected to be recognized over a weighted average period of 0.8 years.
Restricted stock awards are awards of Company common stock that are subject to restrictions on transfer and to a risk of forfeiture if the recipient’s employment with the Company is terminated 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, 2018 and changes during the year ended December 31, 2018 (in thousands, except for per share information):
|
|
|
|
|
|
|
|
| Shares |
| Weighted Average Grant Date Fair Value Per Share | ||
Non-vested at January 1, 2018 |
|
| 9,104 |
| $ | 10.15 |
Granted |
|
| 1,868 |
|
| 7.29 |
Vested |
|
| (173) |
|
| 7.76 |
Forfeited |
|
| (3,668) |
|
| 10.17 |
Non-vested at December 31, 2018 |
|
| 7,131 |
| $ | 9.44 |
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 prior to July 24, 2017, 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, 2018 and 2017, 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, 2018 and 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, 2018 or 2017.
48
The reconciliation of the federal statutory income tax rate to our effective income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
| Year Ended |
| |||||
|
| December 31, |
| |||||
|
| 2018 |
|
| 2017 |
| ||
U.S. federal statutory rate, beginning of year |
| 21 | % |
|
| 35 | % |
|
NextDecade LLC pre-merger net loss |
| — |
|
|
| (5) |
|
|
Officers' compensation |
| (5) |
|
|
| (12) |
|
|
U.S. tax reform rate change |
| — |
|
|
| (7) |
|
|
Other |
| (1) |
|
|
| — |
|
|
Valuation allowance |
| (15) |
|
|
| (11) |
|
|
Effective tax rate as reported |
| — | % |
|
| — | % |
|
Significant components of our deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows (in thousands):
|
|
|
|
|
|
|
|
| Year Ended | ||||
|
| December 31, | ||||
|
| 2018 |
| 2017 | ||
Deferred tax assets |
|
|
|
|
|
|
Net operating loss carryforwards and credits |
| $ | 5,302 |
| $ | 1,694 |
Share-based compensation expense |
|
| 3,548 |
|
| 2,203 |
Property, plant and equipment |
|
| 1,399 |
|
| 3 |
Other |
|
| 51 |
|
| 11 |
Less: valuation allowance |
|
| (10,300) |
|
| (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, 2018, we had federal net operating loss (“NOL”) carryforwards of approximately $25.2 million. Approximately $7.8 million of 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, 2018 and 2017. We will continue to evaluate our ability to release the valuation allowance in the future. 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 carryforwards 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 carryforwards 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 carryforwards. 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.
49
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.
Note 12 — Commitments and Contingencies
Operating Leases
During the years ended December 31, 2018 and 2017, we recognized expense for all operating leases of $1.0 million and $0.7 million, respectively, related primarily to office space and site leases.
We currently lease approximately 25,600 square feet of office space for general and administrative purposes in Houston, Texas under a lease agreement that expires on September 30, 2020.
In January 2017, NextDecade LLC executed surface lease agreements with the City of Texas City and the State of Texas for a 994‑acre site for the Galveston Bay Terminal (collectively, the “Galveston Bay Leases”). The term of the Galveston Bay Leases is 36 months with an option to extend for an additional 12 months. 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. In October 2018, NextDecade LLC exercised its option to renew the Brownsville Lease for an additional six-month term, which expires May 6, 2019. 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):
|
|
|
|
Years ending December 31, |
| Operating Leases (1) | |
2019 |
| $ | 1,299 |
2020 |
|
| 1,159 |
2021 |
|
| 3 |
2022 |
|
| — |
2023 |
|
| — |
Thereafter |
|
| — |
Total |
| $ | 2,461 |
|
|
Other Commitments
During the third quarter of 2018, we initiated a competitive EPC bid process. In connection with the EPC bid process, we entered into agreements with potential EPC contractors that provide for payments to be made by us to the EPC contractors as bid milestones are achieved (“Invitation to Bid Contract Costs”). Future potential payments for Invitation to Bid Contract Costs are up to $14.9 million in 2019.
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.
As of December 31, 2018, management is not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse event may not occur.
50
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, 2018:
|
|
|
| |||
|
|
|
|
51
|
|
|
| |||
|
|
|
|
Additionally, the following table provides a brief description of recent accounting standards that were adopted by the Company during the reporting period:
|
|
|
| |||
|
|
|
|
52
|
|
|
| |||
|
|
|
| |||
|
|
|
|
53
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| First |
| Second |
| Third |
| Fourth | ||||
|
| Quarter |
| Quarter |
| Quarter |
| Quarter | ||||
Year ended December 31, 2018: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Total operating loss |
|
| (16,280) |
|
| (3,616) |
|
| (10,979) |
|
| (12,140) |
Net loss attributable to common stockholders |
|
| (16,200) |
|
| (3,482) |
|
| (10,951) |
|
| (12,873) |
Basic and diluted loss per share (1) |
|
| (0.15) |
|
| (0.03) |
|
| (0.10) |
|
| (0.12) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2017: |
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
Total operating loss |
|
| (2,417) |
|
| (2,496) |
|
| (14,290) |
|
| (16,435) |
Net loss attributable to common stockholders |
|
| (2,388) |
|
| (2,453) |
|
| (14,157) |
|
| (16,328) |
Basic and diluted loss per share (1) |
|
| (0.02) |
|
| (0.03) |
|
| (0.14) |
|
| (0.15) |
|
|
5421
Item 9. Changes in14. Principal Accounting Fees and Disagreements with AccountantsServices
None.Dismissal of Marcum LLP
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to beAs previously disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’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 andCompany’s Current Report on Form 8-K filed with the participationSEC 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 our management, including our principal executive officer and principalGrant Thornton LLP (“Grant Thornton”) on August 24, 2018.
Marcum’s audit report on the consolidated financial officer, we conducted an evaluationstatements 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,Company as of and for the end of the fiscal year ended December 31, 2018. Based2017 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 subsequent interim period through August 24, 2018, there were no (i) disagreements (as defined in Item 304(a)(1)(iv) of Regulation S-K) with Marcum on this evaluation, our principal executive officerany 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 copy of the disclosures contained in the Auditor Form 8-K and principal financial officer have concludedrequested 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 ofExhibit 16.1.
Independent Auditors and Fees
Grant Thornton LLP (“Grant Thornton”) was the Company’s independent registered public accounting firm for the year ended December 31, 2018 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 reportingMarcum was the Company’s independent registered public accounting firm for the Company. In order to evaluateyear ended December 31, 2017.
The following table presents (i) fees for professional audit services rendered by (a) Grant Thornton for the effectiveness of internal control over financial reporting, as required by Section 404audit 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”). The Company’s system of internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation ofannual 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 the Company maintained effective internal control over financial reporting as ofyear ended December 31, 2018 basedand (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 criteria in Internal Control—Integrated Framework (2013) issuedAudit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The Audit Committee is responsible for the appointment, retention, termination, compensation and oversight of the independent auditors. The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the COSO.
The JOBS Act permits an emerging growth company such as us to take advantage of specified reduced reporting and other requirements thatindependent auditors. Requests for approval are otherwise generally applicable to public companies. Among these provisions is an exemption from the auditor attestation requirement under Section 404submitted at a meeting of the Sarbanes-Oxley Act of 2002 inAudit Committee. The Audit Committee may delegate pre-approval authority to a committee member, provided that any decisions made by such member shall be presented to 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
During the most recent fiscal quarter, there have been no changes in internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.
full committee at its next scheduled meeting.
5522
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 of the Exchange Act within 120 days after the end of NextDecade’s fiscal year ended December 31, 2018.
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Item 15.Exhibits and Financial Statement Schedules
(a) | Financial Statements, Schedules and Exhibits |
(1) | Financial Statements – |
(2) | Financial Statement Schedules: |
All 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 |
2.1(1) |
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3.1(2) |
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3.2(3) |
| Amended and Restated Bylaws of NextDecade Corporation, dated July 24, 2017 |
3.3(4) |
| 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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4.2(7) |
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4.3(8) |
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4.4(9) |
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4.5(10) |
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4.6(11) |
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10.1(12) |
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10.2(13) |
| Promissory Note issued to Eric Rosenfeld on November 21, 2016 |
10.3(14) |
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10.4(15) |
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10.5(16) |
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10.6(17) |
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10.7(18) |
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10.8(19)† |
| Employment Agreement of Kathleen Eisbrenner, dated May 20, 2015 |
10.9(20)† |
| Letter Agreement with Kathleen Eisbrenner, dated April 17, 2017 |
10.10(21)† |
| Letter Agreement with Kathleen Eisbrenner, dated November 13, 2015 |
10.11(22)† |
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57
10.12(23)† |
| Form of Restricted Stock Award Agreement for Non-Executive Employees and Contractors |
10.13(24) |
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10.14(25) |
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10.15(26) |
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10.16(27) |
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10.17(28) |
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10.18(29) |
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10.19(30) |
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10.20(31) |
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10.21(32) |
| Purchaser Rights Agreement by and between NextDecade Corporation and HGC NEXT INV LLC |
10.22(33) |
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10.23(34) |
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10.24(35) |
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10.25(36) |
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10.26(37) |
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10.27(38) |
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21.1** |
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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. |
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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. |
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(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. |
(7) | 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. |
(8) | 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. |
(9) | 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. |
(10) | 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. |
(13) | Incorporated by reference to Exhibit 10.13 of the Registrant’s Annual Report on Form 10-K, filed March 10, 2017. |
(14) | Incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K, filed April 18, 2017. |
(15) | Incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K, filed April 18, 2017. |
(16) | Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed July 28, 2017. |
(17) | Incorporated by reference to Exhibit 10.2 of the Company’s Form 8‑K, filed July 28, 2017. |
(18) | Incorporated by reference to Exhibit 10.3 of the Company’s Form 8‑K, filed July 28, 2017. |
(19) | Incorporated by reference to Exhibit 10.4 of the Company’s Form 8‑K, filed July 28, 2017. |
(20) | Incorporated by reference to Exhibit 10.5 of the Company’s Form 8‑K, filed July 28, 2017. |
(21) | Incorporated by reference to Exhibit 10.6 of the Company’s Form 8‑K, filed July 28, 2017. |
(22) | Incorporated by reference to Exhibit 10.1 of the Company’s Form 8‑K, filed September 11, 2017. |
(23) | 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.
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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 | |
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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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