Filing summary
Issuer and period: The supplied filing is Harmony Merger Corp.’s Form 10-K for the fiscal year ended December 31, 2015—not a NextDecade Corp. filing. The period metadata also says “2015 Q4,” but the filing reports the full fiscal year; the 2014 comparison covers only May 21, 2014 through December 31, 2014. Harmony identifies itself as a blank-check company and shell company seeking a business combination.
Financial results and position
| Metric | 2015 | Prior comparison |
|---|---|---|
| Revenue | None | None reported |
| Operating loss | $338,531 | $1,324 |
| Net loss | $263,187 | $1,323 |
| Basic and diluted loss per share | $0.06 | $0.00, rounded |
| Net cash used in operations | $433,883 | $1,323 |
| Cash outside trust | $324,991 at year-end | $1,115 |
| Trust assets | $117,374,895 at year-end | None |
2015 net loss included $75,344 of interest income, offsetting operating expenses. Trust assets were principally short-term U.S. Treasury securities. Total assets were $117,812,946; total liabilities were $4,342,259, including a $4,325,000 deferred underwriting fee payable upon a successful business combination. Stockholders’ equity was $5,426,749, with $108,043,938 presented as common stock subject to possible redemption. Margins are not meaningful because the company had no operating revenue.
Material changes and business activity
Harmony closed its March 27, 2015 IPO of 11.5 million units at $10 each and a concurrent private placement of 558,500 units for $5.585 million. It placed $117.3 million in trust. By year-end, operating cash outside the trust was $324,991. Management said it had not identified an acquisition candidate and had no substantive operating business.
Outlook, risks and unusual items
- The company had until March 27, 2017 to complete a business combination; otherwise it intended to redeem public shares and liquidate. Warrants would receive no liquidation proceeds and could expire worthless.
- Management said available cash and working capital were insufficient for planned activities over the coming year. The auditor and management cited substantial doubt about the company’s ability to continue as a going concern. Additional loans or investment were possible but not committed; failure to obtain funding could lead to curtailed operations or suspension of the search.
- Public shareholders could seek redemption in connection with an approved transaction, subject to a 20% per-holder/group limit. A transaction also required at least $5,000,001 of net tangible assets at closing and majority approval of shares voted. Redemptions, financing needs, and the deadline could impair deal execution or reduce funds available.
- The trust could be exposed to creditor or bankruptcy claims, potentially reducing redemption proceeds below $10.20 per public share. CEO Eric Rosenfeld’s indemnity is limited, his ability to pay was not verified, and the company said it did not intend to follow certain Delaware creditor-claim procedures.
- Related-party arrangements included a $12,500 monthly administrative-services fee to an entity controlled by the CEO. Canaccord Genuity received a $135,000 advisory fee; the CEO’s son was its employee. The company also disclosed possible working-capital loans from insiders and a CEO share-purchase plan of up to $500,000 tied to a future transaction vote.
- No dividends, legal proceedings, off-balance-sheet arrangements, or material market-risk exposure were reported. Management reported effective disclosure controls; the auditor did not express an opinion on internal-control effectiveness.
Investor verification priorities
- Verify issuer identity: the document is for Harmony Merger Corp., not NextDecade Corp.
- Confirm the trust balance, redemption terms, creditor protections, and March 27, 2017 deadline against the filed financial statements and governing agreements.
- Assess the going-concern warning and whether subsequent financing or a business combination changed the company’s liquidity position.
- Review the deferred underwriting fee, insider-related arrangements, conversion limits, and potential dilution from outstanding warrants.
- Check the financial-statement presentation: the balance-sheet heading labels December 31, 2015 figures “unaudited,” while the auditor’s report says it audited the year-end statements.