Filing identity and business context
The supplied filing is Harmony Merger Corp.’s Form 10-Q for the quarter ended September 30, 2016; it is not a NextDecade Corp. filing. Harmony describes itself as a blank-check company seeking a business combination. It had no operating revenue or business operations beyond evaluating potential combinations.
Financial results and liquidity
| Metric | Q3 2016 / Sep. 30, 2016 | Comparable period / prior balance |
|---|---|---|
| Revenue | None reported | None reported |
| Net loss | $54,486 for the quarter; $275,809 for the nine months | $89,742 and $190,317, respectively, in 2015 |
| Interest income | $71,155 for the quarter; $173,542 for the nine months | $22,574 and $39,726, respectively, in 2015 |
| Operating cash flow | $(375,584) for the nine months | $(378,935) for the nine months of 2015 |
| Cash outside trust | $34,940 | $324,991 at Dec. 31, 2015 |
| Cash and securities in trust | $117,462,767 | $117,374,895 at Dec. 31, 2015 |
| Total assets / liabilities | $117,553,798 / $4,358,920 | $117,812,946 / $4,342,259 at Dec. 31, 2015 |
| Debt | No outstanding borrowing reported; $4,325,000 deferred underwriting fee is payable only if a business combination is completed |
Margins are not meaningful because the company had no revenue. Basic and diluted loss per share were $(0.01) for the quarter and $(0.06) for the nine months, versus $(0.02) and $(0.05) in 2015. The filing does not provide a clear operating-cash-flow figure for the quarter alone.
Changes and management commentary
Quarterly net loss narrowed from $89,742 to $54,486, while nine-month net loss increased from $190,317 to $275,809. Higher trust interest income partly offset operating costs. Nine-month operating cash use was broadly similar year over year. General and administrative costs for the nine months were $336,851, including $112,500 in related-party administrative fees.
Management stated that $34,940 of operating cash and available working capital were insufficient to fund planned activities for the upcoming year, raising substantial doubt about the company’s ability to continue as a going concern. It anticipated using remaining funds outside the trust and trust interest for working capital and said it might seek vendor deferrals, loans, or additional investment; none of its insiders was obligated to provide funding. No assurance of financing was given. No specific acquisition guidance or outlook was provided.
Risks, contingencies, and unusual items
- The company was required to complete a business combination by March 27, 2017 or redeem public shares and proceed toward liquidation. Public-share redemptions, creditor claims, or bankruptcy could reduce trust distributions; the expected initial redemption amount of $10.20 per share was not guaranteed.
- The company reported $117.5 million in restricted trust assets, but only $34,940 in operating cash. Trust funds were generally unavailable for operations, apart from permitted tax withdrawals.
- The CEO’s trust-account indemnity is limited and may not be collectible; the company had not independently verified his ability to pay.
- The filing reported no off-balance-sheet arrangements and no material change in internal control over financial reporting. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Confirm the filing is for Harmony Merger Corp., not NextDecade Corp., and resolve the company-name mismatch in the request metadata.
- Verify business-combination status and available financing relative to the March 27, 2017 deadline.
- Assess the distinction between restricted trust assets and funds available for operating expenses, as well as the going-concern warning.
- Review potential trust claims, redemption terms, and the contingent $4.325 million deferred underwriting fee.