Filing summary
Entity and period: The supplied filing is Harmony Merger Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2016—not a NextDecade Corp. filing. Harmony was a blank-check company seeking a business combination.
Financial performance and liquidity
| Metric | Three months ended June 30, 2016 | Six months ended June 30, 2016 | Comparable 2015 period |
|---|---|---|---|
| Revenue | None; the company reported no operating revenue. | ||
| Operating loss | $121,410 | $323,712 | $109,511 quarter; $117,728 six months |
| Interest income | $56,291 | $102,387 | $17,127 quarter; $17,151 six months |
| Net loss | $65,119 | $221,325 | $92,384 quarter; $100,577 six months |
| Basic and diluted loss per share | $0.01 | $0.05 | $0.02 quarter; $0.03 six months |
| Net cash used in operating activities | $296,820 for six months | $279,788 for six months |
At June 30, 2016, cash outside the trust was $113,704, versus $324,991 at December 31, 2015. Trust assets were $117.4 million, restricted primarily to fund a business combination or redemption. Total assets were $117.6 million; total liabilities were $4.35 million, including a $4.325 million deferred underwriting fee payable only upon a successful business combination. The balance sheet also presented $108.0 million of common stock subject to possible conversion as temporary equity. Stockholders’ equity was $5.21 million. No conventional borrowings were reported.
Margins are not meaningful because the company had no revenue. Management said cash and working capital were insufficient for planned activities over the coming year; the filing states this raises substantial doubt about the company’s ability to continue as a going concern.
Material changes and outlook
- Second-quarter net loss narrowed year over year, from $92,384 to $65,119, as interest income increased and partly offset operating costs.
- For the first six months, net loss increased to $221,325 from $100,577, with higher general and administrative expenses, including franchise taxes and professional fees.
- Operating cash outflow was $296,820 for the first half. The company withdrew $85,533 of trust interest to pay taxes.
- Management planned to use remaining non-trust funds and eligible trust interest for acquisition-search activities. It said it might seek vendor deferrals, loans, or additional investments, but no insiders were obligated to provide financing; availability of additional funding was uncertain.
- The company had to complete a business combination by March 27, 2017 or redeem public shares and wind up. A business combination also depended on shareholder approval and limits on public-share conversions.
Risks, contingencies, and other items
- Trust funds could be exposed to creditor claims, potentially reducing public shareholders’ redemption proceeds below the stated initial $10.20 per share. The CEO’s indemnity is limited, and the company had not verified his ability to meet it.
- Up to $4.325 million in deferred underwriting fees would be due if a business combination closed.
- The company reported no off-balance-sheet arrangements and no material change in internal control over financial reporting; management said disclosure controls were effective.
- The filing says no subsequent events requiring recognition or disclosure were identified.
Important facts for investors to verify
- Confirm the issuer: this document identifies Harmony Merger Corp., not NextDecade Corp.
- Verify current cash needs, financing availability, and the going-concern uncertainty described by management.
- Check the status and terms of any business-combination transaction, the March 27, 2017 deadline, and potential public-share conversions.
- Assess trust-account restrictions, creditor-claim exposure, and the conditions attached to the CEO indemnity.
- Confirm the deferred underwriting fee and other transaction costs that could become payable upon a business combination.