next20200331

next20200331_10q.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended March 31, 2021

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

For the transition period from to

Commission File No. 001-36842

NEXTDECADE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware		46-5723951
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1000 Louisiana Street, Suite 3900, Houston, Texas 77002

(Address of principal executive offices) (Zip Code)

(713) 574-1880

(Registrant’s telephone number, including area code)

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

Title of each class:		Trading Symbol		Name of each exchange on which registered:
Common Stock, $0.0001 par value		NEXT		The Nasdaq Stock Market LLC

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

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

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

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

As of May 7, 2021, the issuer had 122,201,565 shares of common stock outstanding.

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NEXTDECADE CORPORATION

FORM 10-Q FOR THE QUARTER ENDED March 31, 2021

TABLE OF CONTENTS

	Page
Organizational Structure

Part I. Financial Information	1
Item 1. Consolidated Financial Statements	1
Consolidated Balance Sheets	1
Consolidated Statements of Operations	2
Consolidated Statements of Stockholders’ Equity and Convertible Preferred Stock	3
Consolidated Statements of Cash Flows	4
Notes to Consolidated Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3. Quantitative and Qualitative Disclosures About Market Risk	16
Item 4. Controls and Procedures	16
Part II. Other Information	17
Item 1. Legal Proceedings	17
Item 1A. Risk Factors	17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	18
Item 3. Defaults Upon Senior Securities	18
Item 4. Mine Safety Disclosures	18
Item 5. Other Information	18
Item 6. Exhibits	19
Signatures	20

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Organizational Structure

The following diagram depicts our abbreviated organizational structure as of March 31, 2021 with references to the names of certain entities discussed in this Quarterly Report on Form 10-Q.

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

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

NextDecade Corporation

Consolidated Balance Sheets

(in thousands, except per share data)

(unaudited)

	*March 31,*			*December 31,*
	*2021*			*2020*
Assets
Current assets
Cash and cash equivalents	$	39,290		$	22,608
Prepaid expenses and other current assets		818			670
Total current assets		40,108			23,278
Property, plant and equipment, net		164,205			161,662
Operating lease right-of-use assets, net		290			429
Other non-current assets, net		17,478			16,299
Total assets	$	222,081		$	201,668

Liabilities, Convertible Preferred Stock and Stockholders’ Equity
Current liabilities
Accounts payable	$	224		$	207
Share-based compensation liability		182			182
Accrued liabilities and other current liabilities		2,147			1,032
Current common stock warrant liabilities		4,520			3,290
Current operating lease liabilities		274			432
Total current liabilities		7,347			5,143
Non-current common stock warrant liabilities		2,499			874
Other non-current liabilities		23,000			22,916
Total liabilities		32,846			28,933

Commitments and contingencies (Note 12)

Series A Convertible Preferred Stock, $1,000 per share liquidation preference Issued and outstanding: 67,485 shares and 65,507 shares at March 31, 2021 and December 31, 2020, respectively		57,516			55,522
Series B Convertible Preferred Stock, $1,000 per share liquidation preference Issued and outstanding: 64,496 shares and 62,612 shares at March 31, 2021 and December 31, 2020, respectively		58,665			56,781
Series C Convertible Preferred Stock, $1,000 per share liquidation preference Issued and outstanding: 24,990 shares and no shares at March 31, 2021 and December 31, 2020, respectively		23,629			—
Stockholders’ equity
Common stock, $0.0001 par value Authorized: 480.0 million shares at March 31, 2021 and December 31, 2020 Issued and outstanding: 118.3 million shares and 117.8 million shares at March 31, 2021 and December 31, 2020, respectively		12			12
Treasury stock: 269,354 shares and 249,742 shares at March 31, 2021 and December 31, 2020, respectively, at cost		(1,075	)		(1,031	)
Preferred stock, $0.0001 par value Authorized: 0.8 million, after designation of the Series A, Series B and Series C Convertible Preferred Stock Issued and outstanding: none at March 31, 2021 and December 31, 2020		—			—
Additional paid-in-capital		202,176			209,481
Accumulated deficit		(151,688	)		(148,030	)
Total stockholders’ equity		49,425			60,432
Total liabilities, convertible preferred stock and stockholders’ equity	$	222,081		$	201,668

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

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NextDecade Corporation

Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

	*Three Months Ended*
	*March 31,*
	*2021*			*2020*
Revenues	$	—		$	—
Operating expenses
General and administrative expense		1,369			6,814
Land option and lease expense		204			411
Depreciation expense		48			16
Total operating expenses		1,621			7,241
Total operating loss		(1,621	)		(7,241	)
Other income (expense)
(Loss) gain on common stock warrant liabilities		(2,038	)		8,339
Loss on redemption of investment securities		—			(412	)
Interest income, net		1			233
Other		—			(17	)
Total other (expense) income		(2,037	)		8,143
Net ( loss) income attributable to NextDecade Corporation		(3,658	)		902
Preferred stock dividends		(3,875	)		(3,443	)
Deemed dividends on Series A Convertible Preferred Stock		(16	)		(76	)
Net loss attributable to common stockholders	$	(7,549	)	$	(2,617	)

Net loss per common share - basic and diluted	$	(0.06	)	$	(0.02	)

Weighted average shares outstanding - basic and diluted		118,262			117,353

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

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NextDecade Corporation

Consolidated Statement of Stockholders’ Equity and Convertible Preferred Stock

(in thousands)

(unaudited)

	*For the Three Months Ended March 31, 2021*
	*Common Stock*					*Treasury Stock*														*Series A*		*Series B*		*Series C*
				*Par*							*Additional*						*Total*			*Convertible*		*Convertible*		*Convertible*
				*Value*							*Paid-in*			*Accumulated*			*Stockholders’*			*Preferred*		*Preferred*		*Preferred*
	*Shares*			*Amount*		*Shares*		*Amount*			*Capital*			*Deficit*			*Equity*			*Stock*		*Stock*		*Stock*
Balance at December 31, 2020		117,829		$	12		249	$	(1,031	)	$	209,481		$	(148,030	)	$	60,432		$	55,522	$	56,781	$	—
Share-based compensation		—			—		—		—			(3,414	)		—			(3,414	)		—		—		—
Restricted stock vesting		134			—		—		—			—			—			—			—		—		—
Shares repurchased related to share-based compensation		(20	)		—		20		(44	)		—			—			(44	)		—		—		—
Stock dividend		399			—		—		—			—			—			—			—		—		—
Issuance of Series C Convertible Preferred Stock		—			—		—		—			—			—			—			—		—		23,629
Preferred stock dividends		—			—		—		—			(3,875	)		—			(3,875	)		1,978		1,884		—
Deemed dividends - accretion of beneficial conversion feature		—			—		—		—			(16	)		—			(16	)		16		—		—
Net loss		—			—		—		—			—			(3,658	)		(3,658	)		—		—		—
Balance at March 31, 2021		118,342		$	12		269	$	(1,075	)	$	202,176		$	(151,688	)	$	49,425		$	57,516	$	58,665	$	23,629

	*For the Three Months Ended March 31, 2020*
	*Common Stock*					*Treasury Stock*														*Series A*		*Series B*
				*Par*							*Additional*						*Total*			*Convertible*		*Convertible*
				*Value*							*Paid-in*			*Accumulated*			*Stockholders’*			*Preferred*		*Preferred*
	*Shares*			*Amount*		*Shares*		*Amount*			*Capital*			*Deficit*			*Equity*			*Stock*		*Stock*
Balance at December 31, 2019		117,329		$	12		137	$	(685	)	$	224,091		$	(133,701	)		89,717		$	48,084	$	49,814
Share-based compensation		—			—		—		—			(1,600	)		—			(1,600	)		—		—
Restricted stock vesting		70			—		—		—			—			—			—			—		—
Shares repurchased related to share-based compensation		(11	)		—		11		(57	)		—			—			(57	)		—		—
Preferred stock dividends		—			—		—		—			(3,443	)		—			(3,443	)		1,757		1,673
Deemed dividends - accretion of beneficial conversion feature		—			—		—		—			(76	)		—			(76	)		76		—
Net income		—			—		—		—			—			902			902			—		—
Balance at March 31, 2020		117,388		$	12		148	$	(742	)	$	218,972		$	(132,799	)	$	85,443		$	49,917	$	51,487

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

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NextDecade Corporation.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

	*Three Months Ended*
	*March 31,*
	*2021*			*2020*
Operating activities:
Net loss (income) attributable to NextDecade Corporation	$	(3,658	)	$	902
Adjustment to reconcile net loss (income) to net cash used in operating activities
Depreciation		48			16
Share-based compensation expense (forfeiture)		(3,729	)		(1,860	)
Loss (gain) on common stock warrant liabilities		2,038			(8,339	)
Realized loss on investment securities		—			423
Amortization of right-of-use assets		139			324
Amortization of other non-current assets		354			177
Changes in operating assets and liabilities:
Prepaid expenses		(169	)		(218	)
Accounts payable		(45	)		(28	)
Operating lease liabilities		(158	)		(271	)
Accrued expenses and other liabilities		1,390			(5,364	)
Net cash used in operating activities		(3,790	)		(14,238	)
Investing activities:
Acquisition of property, plant and equipment		(2,384	)		(13,826	)
Acquisition of other non-current assets		(1,533	)		(6,107	)
Proceeds from sale of investment securities		—			61,972
Purchase of investment securities		—			(188	)
Net cash (used in) provided by investing activities		(3,917	)		41,851
Financing activities:
Proceeds from sale of Rio Bravo		—			15,000
Proceeds from equity issuance		24,500			—
Preferred stock dividends		(13	)		(13	)
Equity issuance costs		(54	)		—
Shares repurchased related to share-based compensation		(44	)		(57	)
Net cash provided by financing activities		24,389			14,930
Net increase in cash and cash equivalents		16,682			42,543
Cash and cash equivalents – beginning of period		22,608			15,736
Cash and cash equivalents – end of period	$	39,290		$	58,279

Non-cash investing activities:
Accounts payable for acquisition of property, plant and equipment	$	79		$	3,341
Accrued liabilities for acquisition of property, plant and equipment		395			7,862
Pipeline assets obtained in exchange for other non-current liabilities		84			—
Non-cash financing activities:
Paid-in-kind dividends on Series A and Series B Convertible Preferred Stock		3,862			3,430
Accretion of deemed dividends on Series A Convertible Preferred Stock		16			76

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

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NextDecade Corporation

Notes to Consolidated Financial Statements

(unaudited)

Note 1 — Background and Basis of Presentation

NextDecade Corporation engages in development activities related to the liquefaction and sale of liquefied natural gas (“LNG”) and the reduction of CO₂ emissions. 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 a carbon capture and storage project at the Terminal (the “CCS project”).

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and disclosures required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, all adjustments, consisting only of normal recurring items, which are considered necessary for a fair presentation of the unaudited consolidated financial statements, have been included. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results for the full year.

Note 2 — Prepaid Expenses and Other Current Assets

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

	*March 31,*		*December 31,*
	*2021*		*2020*
Prepaid subscriptions	$	477	$	29
Prepaid insurance		117		314
Prepaid marketing and sponsorships		60		60
Other		164		267
Total prepaid expenses and other current assets	$	818	$	670

Note 3 — Sale of Equity Interests in Rio Bravo

On March 2, 2020, NextDecade LLC closed the transactions (the “Closing”) contemplated by that certain Omnibus Agreement, dated February 13, 2020, with Spectra Energy Transmission II, LLC, a wholly owned subsidiary of Enbridge Inc. (“Buyer”), pursuant to which NextDecade LLC sold one hundred percent of the equity interests (the “Equity Interests”) in Rio Bravo Pipeline Company, LLC (“Rio Bravo”) to Buyer for consideration of approximately $19.4 million. Buyer paid $15.0 million of the Purchase Price to NextDecade LLC at the Closing and the remainder will be paid within five business days after the date that Rio Grande has received, after a final positive investment decision, the initial funding of financing for the development, construction and operation of the Terminal. Rio Bravo is developing a proposed interstate natural gas pipeline (the “Pipeline”) to supply natural gas to the Terminal. In connection with the Closing, Rio Grande LNG Gas Supply LLC, an indirect wholly-owned subsidiary of the Company (“Rio Grande Gas Supply”), entered into (i) a Precedent Agreement for Firm Natural Gas Transportation Service for the Rio Bravo Pipeline (the “RBPL Precedent Agreement”) with Rio Bravo and (ii) a Precedent Agreement for Natural Gas Transportation Service (the “VCP Precedent Agreement”) with Valley Crossing Pipeline, LLC (“VCP”). VCP and, as of the Closing, Rio Bravo are wholly owned subsidiaries of Enbridge Inc. The Valley Crossing Pipeline is owned and operated by VCP.

Pursuant to the RBPL Precedent Agreement, Rio Bravo agreed to provide Rio Grande Gas Supply with firm natural gas transportation services on the Pipeline in a quantity sufficient to match the full operational capacity of each proposed liquefaction train of the Terminal. Rio Bravo’s obligation to construct, install, own, operate and maintain the Pipeline is conditioned on its receipt, no later than December 31, 2023, of notice that Rio Grande Gas Supply or its affiliate has issued a full notice to proceed to the engineering, procurement and construction contractor (the “EPC Contractor”) for the construction of the Terminal. Under the RBPL Precedent Agreement, in consideration for the provision of such firm transportation services, Rio Bravo will be remunerated on a dollar-per-dekatherm, take-or-pay basis, subject to certain adjustments, over a term of at least twenty years, all in compliance with the federal and state authorizations associated with the Pipeline.

Pursuant to the VCP Precedent Agreement, VCP agreed to provide Rio Grande Gas Supply with natural gas transportation services on the Valley Crossing Pipeline in a quantity sufficient to match the commissioning requirements of each proposed liquefaction train of the Terminal. VCP’s obligation to construct, install, own, operate and maintain the necessary interconnection to the Terminal and the Pipeline is conditioned on its receipt, no later than December 31, 2023, of notice that Rio Grande Gas Supply or its affiliate has issued a full notice to proceed to the EPC Contractor for the construction of the Terminal. VCP will be responsible, at its sole cost and expense, to construct, install, own, operate and maintain the tap, riser and valve facilities (the “VCP Transporter Facilities”), which shall connect to Rio Grande Gas Supply’s custody transfer meter and such other facilities as necessary in order for the Terminal to receive gas from the VCP Transporter Facilities (the “Rio Grande Gas Supply Facilities”). Rio Grande Gas Supply will be responsible, at its sole cost and expense, to construct, install, own, operate and maintain the Rio Grande Gas Supply Facilities. Under the VCP Precedent Agreement, in consideration for the provision of the commissioning transportation services, VCP will be remunerated on the same dollar-per-dekatherm, take-or-pay basis as set forth in the RBPL Precedent Agreement for the duration of such commissioning services, all in compliance with the federal and state authorizations associated with the Valley Crossing Pipeline.

If Rio Grande or its affiliate fails to issue a full notice to proceed to the EPC Contractor on or prior to December 31, 2023, Buyer has the right to sell the Equity Interests back to NextDecade LLC and NextDecade LLC has the right to repurchase the Equity Interests from Buyer, in each case at a price not to exceed $23 million. Accordingly, the proceeds from the sale of the Equity Interests and additional costs incurred by Buyer are presented as a non-current liability and the assets of Rio Bravo have not been de-recognized in the consolidated balance sheet at March 31, 2021.

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Note 4 — Property, Plant and Equipment

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

	*March 31,*			*December 31,*
	*2021*			*2020*
Fixed Assets
Computers	$	487		$	487
Furniture, fixtures, and equipment		464			464
Leasehold improvements		101			101
Total fixed assets		1,052			1,052
Less: accumulated depreciation		(708	)		(660	)
Total fixed assets, net		344			392
Project Assets (not placed in service)
Terminal		142,760			140,253
Pipeline		21,101			21,017
Total Terminal and Pipeline assets		163,861			161,270
Total property, plant and equipment, net	$	164,205		$	161,662

Depreciation expense was $48 thousand and $16 thousand for the three months ended March 31, 2021 and 2020, respectively.

Note 5 — Leases

Our leased assets primarily consist of office space and land sites.

Operating lease right-of-use assets are as follows (in thousands):

	*March 31,*		*December 31,*
	*2021*		*2020*
Office leases	$	290	$	429
Total operating lease right-of-use assets, net	$	290	$	429

Operating lease liabilities are as follows (in thousands):

	*March 31,*		*December 31,*
	*2021*		*2020*
Office leases	$	274	$	432
Total current lease liabilities	$	274	$	432

Operating lease expense is as follows (in thousands):

	*Three Months Ended March 31,*
	*2021*		*2020*
Office leases	$	150	$	205
Land leases		—		107
Total operating lease expense		150		312
Short-term lease expense		54		91
Land option expense		—		8
Total land option and lease expense	$	204	$	411

Maturity of operating lease liabilities as of March 31, 2021 are as follows (in thousands, except lease term and discount rate):

2021 (remaining)	$	282
2022		—
2023		—
2024		—
2025		—
Thereafter		—
Total undiscounted lease payments		282
Discount to present value		(8	)
Present value of lease liabilities	$	274

Weighted average remaining lease term - years		0.4
Weighted average discount rate - percent		12.0

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Other information related to our operating leases is as follows (in thousands):

	*Three Months Ended March 31,*
	*2021*		*2020*
Cash paid for amounts included in the measurement of operating lease liabilities:
Cash flows from operating activities	$	170	$	259

Note 6 — Other Non-Current Assets

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

	*March 31,*		*December 31,*
	*2021*		*2020*
Permitting costs⁽¹⁾	$	7,385	$	7,385
Enterprise resource planning system, net		1,451		1,805
Rio Grande Site Lease initial direct costs		8,642		7,109
Total other non-current assets, net	$	17,478	$	16,299

⁽¹⁾

Permitting costs primarily represent costs incurred in connection with permit applications to the United States Army Corps of Engineers and the U.S. Fish and Wildlife Service for mitigation measures for potential impacts to wetlands and habitat that may be caused by the construction of the Terminal and the Pipeline.

Note 7 — Accrued Liabilities and Other Current Liabilities

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

	*March 31,*		*December 31,*
	*2021*		*2020*
Employee compensation expense	$	1,265	$	14
Terminal costs		395		650
Accrued legal services		61		5
Other accrued liabilities		426		363
Total accrued liabilities and other current liabilities	$	2,147	$	1,032

Note 8 – Preferred Stock and Common Stock Warrants

Preferred Stock

In August 2018, we sold an aggregate of 50,000 shares of Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock), at $1,000 per share for an aggregate purchase price of $50 million and we issued an additional 1,000 shares of Series A Preferred Stock in aggregate as origination fees to the purchasers of the Series A Preferred Stock.

In September 2018, 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”), at $1,000 per share for an aggregate purchase price of $29.055 million and we issued an additional 581 shares of Series B Preferred Stock in aggregate as origination fees to the purchasers of the Series B Preferred Stock.

In May 2019, we sold an aggregate of 20,945 shares of Series B Preferred Stock at $1,000 per share for an aggregate purchase price of $20.945 million and we issued an additional 418 shares of Series B Preferred Stock in aggregate as origination fees to the purchasers of such shares of Series B Preferred Stock. Common Stock Warrants were issued together with such shares of Series B Preferred Stock.

In March 2021, we sold an aggregate of 24,500 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock” and, together with the Series A Preferred Stock and the Series B Preferred Stock, the “Convertible Preferred Stock”), at $1,000 per share for an aggregate purchase price of $24.5 million and we issued an additional 490 shares of Series C Preferred Stock in aggregate as origination fees to the purchasers of the Series C Preferred Stock.

Warrants, exercisable for Company common stock, were issued together with the shares of Convertible Preferred Stock (collectively, “Common Stock Warrants”).

The shares of Convertible Preferred Stock bear dividends at a rate of 12% per annum, which are cumulative and accrue daily from the respective dates of issuance on the $1,000 stated value. Such dividends are payable quarterly and may be paid in cash or in-kind. During the three months ended March 31, 2021 and 2020, the Company paid-in-kind $3.9 million and $3.4 million of dividends, respectively, to the holders of the Convertible Preferred Stock. On April 6, 2021, the Company declared dividends to the holders of the Convertible Preferred Stock as of the close of business on March 15, 2021. On April 15, 2021, the Company paid-in-kind $3.9 million of dividends to the holders of the Convertible Preferred Stock.

As of March 31, 2021, shares of Series A Preferred Stock and Series B Preferred Stock were convertible into shares of common stock at a conversion price of $6.84 per share and shares of Series C Preferred Stock were convertible into shares of common stock at a conversion price of $2.96 per share.

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Initial Fair Value Allocation

Net proceeds from the sales of Series C Preferred Stock in 2021 were allocated on a fair value basis to the warrants issued together with the shares of the Series C Preferred Stock and on a relative fair value basis to the Series C Preferred Stock. The allocation of net cash proceeds from the sale of Series C Preferred Stock in March 2021 is as follows (in thousands):

			Allocation of Proceeds
					Series C
			*Series C*		*Preferred*
			*Warrants*		*Stock*
Gross proceeds	$	24,500
Equity issuance costs		54
Net proceeds - Initial Fair Value Allocation	$	24,446	$	817	$	23,629
Per balance sheet upon issuance			$	817	$	23,629

Common Stock Warrants

The Company revalues the Common Stock Warrants at each balance sheet date and recognized a loss of $2.0 million and a gain of $8.3 million during the three months ended March 31, 2021 and 2020, respectively. The Common Stock Warrant liabilities are included in Level 3 of the fair value hierarchy.

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

	*March 31,*			*December 31,*
	*2021*			*2020*
Stock price	$	2.67		$	2.09
Exercise price	$	0.01		$	0.01
Risk-free rate		0.1	%		0.1	%
Volatility		35.8	%		58.6	%
Term (years)		1.0			0.8

Beneficial Conversion Feature

ASC 470-20-20 – Debt – Debt with conversion and Other Options (“ASC 470-20”) defines a beneficial conversion feature (“BCF”) as a nondetachable conversion feature that is in the money at the issuance date. The Company was required by ASC 470-20 to allocate a portion of the proceeds from the Series A Preferred Stock equal to the intrinsic value of the BCF to additional paid-in capital. We are recording the accretion of the $2.5 million Series A Preferred Stock discount attributable to the BCF as a deemed dividend using the effective yield method over the period prior to the expected conversion date.

Note 9 — Net Loss Per Share

The following table (in thousands, except for loss per share) reconciles basic and diluted weighted average common shares outstanding for each of the three months ended March 31, 2021 and 2020:

	*Three Months Ended*
	*March 31,*
	*2021*			*2020*
Weighted average common shares outstanding:
Basic		118,262			117,353
Dilutive unvested stock, convertible preferred stock, Common Stock Warrants and IPO Warrants		—			—
Diluted		118,262			117,353

Basic and diluted net loss per share attributable to common stockholders	$	(0.06	)	$	(0.02	)

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Potentially dilutive securities not included in the diluted net loss per share computations because their effect would have been anti-dilutive were as follows (in thousands):

	*Three Months Ended*
	*March 31,*
	*2021*		*2020*
Unvested stock ⁽¹⁾		1,350		1,160
Convertible preferred stock		20,337		15,905
Common Stock Warrants		2,069		1,964
IPO Warrants⁽²⁾		12,082		12,082
Total potentially dilutive common shares		35,838		31,111

⁽¹⁾	Does not include 2.6 million shares for the three months ended March 31, 2021 and 2.8 million shares for the three months ended March 31, 2020, of unvested stock because the performance conditions had not yet been satisfied as of March 31, 2021 and 2020, respectively.

⁽²⁾

The IPO Warrants were issued in connection with our initial public offering in 2015. The IPO Warrants are exercisable at a price of $11.50 per share and expire on July 24, 2022. The Company may redeem the IPO Warrants at a price of $0.01 per IPO Warrant upon 30 days’ notice only if the last sale price of our common stock is at least $17.50 per share for any 20 trading days within a 30-trading day period. If the Company redeems the IPO Warrants in this manner, the Company will have the option to do so on a cashless basis with the issuance of an economically equivalent number of shares of Company common stock.

Note 10 — Share-based Compensation

We have granted shares of Company common stock and restricted Company common stock to employees, consultants and non-employee directors under our 2017 Omnibus Incentive Plan, as amended (the “2017 Plan”), and in connection with our special meeting of stockholders held on July 24, 2017.

Total share-based compensation consisted of the following (in thousands):

	*Three months Ended*
	*March 31,*
	*2021*		*2020*
Share-based compensation:
Equity awards	$	(3,414)	$	(1,600)
Liability awards		—		—
Total share-based compensation		(3,414)		(1,600)
Capitalized share-based compensation		(315)		(260)
Total share-based compensation expense	$	(3,729)	$	(1,860)

Note 11 — Income Taxes

Due to our cumulative loss position, we have established a full valuation allowance against our deferred tax assets at March 31, 2021 and December 31, 2020. Due to our full valuation allowance, we have not recorded a provision for federal or state income taxes during either of the three months ended March 31, 2021 or 2020.

In response to the global pandemic related to COVID-19, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020 and the Consolidated Appropriations Act, 2021 (the “CAA”) on December 27, 2020. The CARES Act and the CAA provide numerous relief provisions for corporate taxpayers, including modification of the utilization limitations on NOLs, favorable expansions of the deduction for business interest expense under Internal Revenue Code Section 163(j), and the ability to accelerate timing of refundable alternative minimum tax credits. For the three months ended March 31, 2021, there were no material tax impacts to our consolidated financial statements from the CARES Act, the CAA or other COVID-19 measures. The Company continues to monitor additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others.

Note 12 — Commitments and Contingencies

Rio Grande Site Lease

On March 6, 2019, Rio Grande entered into a lease agreement (the “Rio Grande Site Lease”) with the Brownsville Navigation District of Cameron County, Texas (“BND”) for the lease by Rio Grande of approximately 984 acres of land situated in Brownsville, Cameron County, Texas for the purposes of constructing, operating, and maintaining (i) a liquefied natural gas facility and export terminal and (ii) gas treatment and gas pipeline facilities.

On April 30, 2020, Rio Grande and the BND amended the Rio Grande Site Lease (the “Rio Grande Site Lease Amendment”) to extend the effective date for commencing the Rio Grande Site Lease to May 6, 2021 (the “Effective Date”). The Rio Grande Site Lease Amendment further provides that Rio Grande has the right, exercisable in its sole discretion, to extend the Effective Date to May 6, 2022 by providing the BND with written notice of its election no later than the close of business on the Effective Date.

In connection with the Rio Grande Site Lease Amendment, Rio Grande is committed to pay approximately $1.5 million per quarter to the BND through the earlier of the Effective Date and lease commencement.

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Obligation under LNG Sale and Purchase Agreement

In March 2019, we entered into a 20-year sale and purchase agreement (the “SPA”) with Shell NA LNG LLC (“Shell”) for the supply of approximately two million tonnes per annum of liquefied natural gas from the Terminal. Pursuant to the SPA, Shell will purchase LNG on a free-on-board (“FOB”) basis starting from the date the first liquefaction train of the Terminal that is commercially operable, with approximately three-quarters of the purchased LNG volume indexed to Brent and the remaining volume indexed to domestic United States gas indices, including Henry Hub.

In the first quarter of 2020, pursuant to the terms of the SPA, the SPA became effective upon the conditions precedent in the SPA being satisfied or waived. The SPA obligates Rio Grande to deliver the contracted volumes of LNG to Shell at the FOB delivery point, subject to the first liquefaction train at the Terminal being commercially operable.

Legal Proceedings

From time to time the Company may be subject to various claims and legal actions that arise in the ordinary course of business. As of March 31, 2021, management is not aware of any claims or legal actions that, separately or in the aggregate, are likely to have a material adverse effect on the Company’s financial position, results of operations or cash flows, although the Company cannot guarantee that a material adverse effect will not occur.

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 March 31, 2021:

Standard

Description

Expected Date of Adoption

Effect on our Consolidated Financial Statements or Other Significant Matters

ASU 2020-06, Accounting for Convertible Instruments and Contracts in Entity's Own Equity

(Subtopic 815-40)

This standard requires entities to provide expanded disclosures about the terms and features of
convertible instruments. For convertible instruments, the instruments primarily affected are those issued with beneficial conversion features or cash conversion features because the accounting models for those specific features are removed.

January 1, 2022

We are currently evaluating the effect of this standard on our Consolidated Financial Statements.

Note 14 — Subsequent Events

Series C Preferred Stock

On April 12, 2021, pursuant to the Series C Convertible Preferred Stock Agreement, dated as of March 26, 2021, by and between the Company and OGCI Climate Investments Holdings LLP (“OGCI”), the Company issued to OGCI (i) 10,000 shares of Series C Preferred Stock at $1,000 per share for a purchase price of $10 million, (ii) an additional 200 shares of Series C Preferred Stock as an origination fee and (iii) warrants representing the right to acquire in the aggregate a number of shares of the Company's common stock equal to approximately 14.2 basis points (0.142%) of all outstanding shares of common stock, measured on a fully diluted basis, on the exercise date for an exercise price of $0.01 per share.

Leases

As described in Note 12 - Commitments and Contingencies, the Rio Grande Site Lease Amendment further provides that Rio Grande has the right, exercisable in its sole discretion, to extend the Effective Date to May 6, 2022 by providing the BND with written notice of its election no later than the close of business on the Effective Date. On April 28, 2021, Rio Grande delivered a notice to the Port of Brownsville electing to extend the Effective Date of the Rio Grande Site Lease Amendment to May 6, 2022.

On April 30, 2021, the Company amended the lease agreement for its corporate headquarters to extend the lease termination date from September 30, 2021 to December 31, 2022. The Company's commitment under the amended lease agreement in 2021 and 2022 is approximately $0.1 million and $0.7 million, respectively.

The Company has evaluated subsequent events through May 13, 2021, the date the financial statements were issued. Any material subsequent events that occurred during this time have been properly recognized and/or disclosed in these financial statements.

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “anticipate,” “contemplate,” “estimate,” “expect,” “project,” “plan,” “intend,” “believe,” “may,” “might,” “will,” “would,” “could,” “should,” “can have,” “likely,” “continue,” “design” and other words and terms of similar expressions, are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short-term and long-term business operations and objectives and financial needs.

Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ from those expressed in our forward-looking statements. Our future financial position and results of operations, as well as any forward-looking statements are subject to change and inherent risks and uncertainties, including those described in the section titled “Risk Factors” in our most recent Annual Report on Form 10-K. You should consider our forward-looking statements in light of a number of factors that may cause actual results to vary from our forward-looking statements including, but not limited to:

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