Business Context and Reporting Period
This Form 8-K is filed by Harmony Merger Corp. (not Nextdecade Corp, which is a potential target) on March 20, 2017. The company is a special purpose acquisition company (SPAC) scheduled to hold an annual stockholder meeting on March 27, 2017. The primary purpose of the meeting is to vote on an "Extension Amendment" to extend the deadline for consummating an initial business combination from March 27, 2017, to July 27, 2017.
Key Financial Metrics and Obligations
The filing details specific financial arrangements contingent upon the approval of the extension:
- Trust Account Contribution: Insiders and NextDecade, LLC have agreed to contribute $0.0275 per public share for each month (or pro rata portion) of the extension period. If the full four-month extension is utilized, aggregate contributions would be approximately $1,265,000 (assuming no share redemptions).
- Trust Account Value: If the full extension is taken, the conversion amount per share would increase from approximately $10.21 to approximately $10.32.
- Working Capital Loan: Insiders have agreed to loan the company an aggregate of $150,000 for working capital requirements.
- Loan Terms: Both the extension contributions and the working capital loans are non-interest bearing. They are repayable upon consummation of a business combination or convertible into units at $10.00 per unit (for the working capital loan). If no business combination occurs, these amounts are forgiven.
Material Changes and Events
The filing reports the creation of direct financial obligations (Item 2.03) and unregistered sales of equity securities (Item 3.02) contingent on the extension vote. The material change is the potential extension of the liquidation deadline by four months, which requires additional funding from insiders and NextDecade to maintain the trust account value per share.
Outlook, Risks, and Contingencies
Outlook: The company is in active discussions with NextDecade, LLC, an LNG development company, regarding a proposed business combination. The board has discretion to extend the deadline in monthly increments up to July 27, 2017.
Contingencies:
- If the Extension Amendment is not approved, the company will wind up affairs and redeem 100% of public shares.
- If the board decides not to continue extending for additional months before the Extended Date, the obligation to make further contributions terminates, and the company will liquidate.
- Loans are forgiven if a business combination is not consummated.
Risks: The filing includes standard forward-looking statement disclaimers regarding economic conditions, regulatory changes, and the uncertainty of completing a business combination.
Investor Verification Checklist
- Verify the outcome of the stockholder vote on the Extension Amendment scheduled for March 27, 2017.
- Confirm the number of public shares outstanding to calculate the exact dollar amount of the required insider contributions.
- Review the definitive proxy statement filed on March 13, 2017, and the supplement filed on March 20, 2017, for detailed terms of the proposed business combination with NextDecade.
- Monitor whether the board exercises its discretion to extend the deadline in full or in partial increments.