Filing summary
Entity and period: The supplied filing is Harmony Merger Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2016. This does not match the request metadata identifying NextDecade Corp.; verify the issuer before relying on this summary.
Business context and financial performance
Harmony was a blank-check company seeking a business combination and had no operating revenue. Its activities were limited to evaluating potential targets. The quarter’s results are not necessarily indicative of full-year results.
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Revenue | None | None reported |
| General and administrative costs | $164,801 | $8,217 |
| Related-party administrative costs | $37,500 | None reported |
| Operating loss | $202,301 | $8,217 |
| Interest income | $46,096 | $24 |
| Net loss | $156,205 | $8,193 |
| Basic and diluted loss per share | $0.03 | $0.00, rounded |
| Net cash used in operations | $167,569 | $45,561 |
Margins are not meaningful for a company with no revenue. Net loss increased year over year, reflecting substantially higher administrative and other operating costs, partly offset by trust-account interest.
Financial position and liquidity
- At March 31, 2016, cash outside the trust was $157,422, down from $324,991 at December 31, 2015. Current assets were $205,977 and current liabilities were $53,193.
- Trust assets were $117.42 million, primarily held in U.S. Treasury bills, and were restricted pending a business combination or liquidation. Total assets were $117.69 million.
- Total liabilities were $4.38 million, including a $4.325 million deferred underwriting fee payable only upon successful completion of a business combination. The filing reports no other debt at quarter-end.
- Stockholders’ equity was $5.23 million; 10.59 million shares were classified as subject to possible conversion outside permanent equity.
- Management said available cash and working capital were insufficient for planned activities over the upcoming year, raising substantial doubt about the company’s ability to continue as a going concern. Additional financing was not assured.
Outlook, risks and unusual items
Management planned to use available working capital and permitted trust interest to identify and evaluate targets, and said it might need vendor fee arrangements, loans or new investments. No forecast or specific business-combination target was disclosed. The company had until March 27, 2017 to complete a business combination; otherwise, it was required to redeem public shares and proceed toward liquidation.
Public shareholders could seek conversion of shares in connection with a proposed combination, subject to the filing’s conditions, including a minimum net tangible asset requirement. Trust funds may be exposed to creditor or bankruptcy claims, potentially reducing redemption proceeds below the expected $10.20 per public share. The CEO’s trust-protection indemnity has exceptions, and the company had not verified his ability to pay. Warrants would be worthless if no business combination were completed.
Quarterly costs included $60,900 in Delaware franchise taxes, $41,600 in professional fees, and $37,500 in administrative fees to an affiliate of the CEO. The company paid that affiliate $12,500 per month for office space and administrative services. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Important facts to verify
- Confirm that Harmony Merger Corp., rather than NextDecade Corp., is the intended filing issuer.
- Check the company’s subsequent filings for financing, target identification, transaction progress, and its ability to meet the March 27, 2017 deadline.
- Review the terms and potential impact of share conversions, trust-account creditor claims, and the deferred underwriting fee.
- Assess the going-concern warning, limited unrestricted cash, and whether additional funding became available.