Introduction

The following discussion and analysis presents management's view of our business, financial condition and overall performance and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes in "Financial Statements and Supplementary Data." This information is intended to provide investors with an understanding of our past performance, current financial condition and outlook for the future. Our discussion and analysis include the following subjects:




  • Overview of Business



  • Overview of Significant Events



  • Liquidity and Capital Resources



  • Contractual Obligations



  • Results of Operations



  • Summary of Critical Accounting Estimates



  • Recent Accounting Standards




Overview of Business

NextDecade Corporation engages in development activities related to the liquefaction and sale of LNG and the capture and storage of CO2 emissions. We have undertaken and continue to undertake various initiatives to evaluate, design and engineer the Terminal, including the Terminal CCS project, that we expect will result in demand for LNG supply at the Terminal, and other CCS projects that would be hosted at industrial source facilities.

Overview of Significant Events

COVID-19 Pandemic and its Effect on our Business

The business environment in which we operate has been impacted by the downturn in the energy market as well as the COVID-19 pandemic. The COVID-19 pandemic has caused us to modify our business practices to protect the safety and welfare of our employees. Furthermore, we have implemented and may continue to implement certain mitigation efforts to ensure business continuity. We will continue to actively monitor the situation and may take further actions altering our business operations that we determine are in the best interests of our employees, customers, partners, suppliers, and stakeholders, or as required by federal, state, or local authorities. It is not clear what the potential effects any such alterations or modifications may have on our business, including the effects on our customers, employees, and prospects, or on our financial results for fiscal year 2022 or beyond.





NEXT Carbon Solutions

On March 18, 2021, we announced the formation of NEXT Carbon Solutions. NEXT Carbon Solutions offers end-to-end CCS solutions for industrial facilities. Leveraging our team's years of engineering and project management experience, we have developed proprietary processes that lower the capital and operating costs of deploying CCS on industrial facilities. We expect to partner with customers to invest in the deployment of CCS to reduce and permanently store CO2 emissions. We believe that integrating CCS with an industrial facility's operations has the potential to increase the value of the industrial facility. Through commercial agreements and by investment, NEXT Carbon Solutions looks to share in the value created from this integration.

Series C Convertible Preferred Stock Offering

In March, April and July 2021, we sold an aggregate of 39,500 shares of Series C Convertible Preferred Stock, par value $0.0001 per share (the "Series C Preferred Stock"), at $1,000 per share for an aggregate purchase price of $39.5 million and issued an additional 790 shares of Series C Preferred Stock in aggregate as origination fees. Warrants representing the right to acquire an aggregate number of shares of our common stock equal to approximately 56 basis points (0.56%) of all outstanding shares of Company common stock, measured on a fully diluted basis, on the applicable exercise date with a strike price of $0.01 per share were issued together with the issuances of the Series C Preferred Stock.

For further descriptions of the Series C Preferred Stock and associated warrants, see Note 9 - Preferred Stock and Common Stock Warrants in the Notes to Consolidated Financial Statements.





Heads of Agreement

In March 2022, we entered into a binding Heads of Agreement ("HOA") with Guangdong Energy Group Natural Gas Co., Ltd. ("Guangdong Energy") for the supply of up to 1.5 mtpa of LNG from the Terminal. The HOA contemplates that Guangdong Energy will purchase LNG indexed to Henry Hub starting from the commercial operation date of the first train of the Terminal. The HOA provides that we will complete the sale and purchase agreement with Guangdong Energy in the second quarter of 2022.







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Liquidity and Capital Resources

Near Term Liquidity and Capital Resources

Our consolidated financial statements as of and for the year ended December 31, 2021 have been prepared on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Based on our balance of cash and cash equivalents of $25.6 million at December 31, 2021, there is substantial doubt about our ability to continue as a going concern within one year after the date that our consolidated financial statements were issued. Our ability to continue as a going concern will depend on managing certain operating and overhead costs and our ability to generate positive cash flows through equity, equity-based or debt financings. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, which could have a material adverse effect on our financial condition.

We expect to spend approximately $3 million per month on similar development activities during 2022 and until a positive FID is made on the Terminal or a FEED for a CCS project commences. Because our businesses and assets are in development, we have not historically generated cash flow from operations, nor do we expect to do so during 2022. We intend to fund the remaining portion of 2022 development activities through the sale of additional equity or equity-based securities in us or our subsidiaries. There can be no assurance that we will succeed in selling equity or equity-based securities or, if successful, that the capital we raise will not be expensive or dilutive to stockholders.

Our primary cash needs have historically been funding development activities in support of the Terminal and our CCS projects, which include payments of initial direct costs of our Rio Grande site lease and expenses in support of engineering and design activities, regulatory approvals and compliance, commercial and marketing activities and corporate overhead. We spent approximately $37 million on such development activities during 2021, which we funded through our cash on hand and proceeds from the issuances of equity and equity-based securities. Our capital raising activities since January 1, 2020 have included the following:

In March 2020, we sold our equity interests in Rio Bravo for initial proceeds of $15 million, with an additional $4.4 million due from the buyer promptly after the initial funding of post-FID financing for the Terminal.

In March, April and July 2021, we sold an aggregate of 39,500 shares of Series C Preferred Stock, at $1,000 per share for an aggregate purchase price of $39.5 million and issued an additional 790 shares of Series C Preferred Stock in aggregate as origination fees.

In September and November 2021, we sold an aggregate of 163,332 shares of Company common stock for proceeds, net of placement fees, of approximately $0.6 million pursuant to our at-the-market program.

In March 2022, we sold 10,500 shares of Series C Preferred Stock, at $1,000 per share for a purchase price of $10.5 million and issued an additional 210 shares of Series C Preferred Stock as origination fees.

Long Term Liquidity and Capital Resources

The Terminal will not begin to operate and generate significant cash flows unless and until the Terminal is operational, which is expected to be at least four years away, and the construction of the Terminal will require a significant amount of capital expenditure. CCS projects will similarly take an extended period of time to develop, construct and become operational and will require significant capital deployment. We currently expect that the long-term capital requirements for the Terminal and any CCS projects will be financed predominately through project financing and proceeds from future debt, equity-based, and equity offerings by us. Construction of the Terminal and CCS projects would not begin until such financing has been obtained. As a result, our business success will depend, to a significant extent, upon our ability to obtain the funding necessary to construct the Terminal and any CCS projects, to bring them into operation on a commercially viable basis and to finance our staffing, operating and expansion costs during that process. There can be no assurance that we will succeed in securing additional debt and/or equity financing in the future to complete the Terminal or any CCS projects or, if successful, that the capital we raise will not be expensive or dilutive to stockholders. Additionally, if these types of financing are not available, we will be required to seek alternative sources of financing, which may not be available on terms acceptable to us, if at all.





Sources and Uses of Cash



The following table summarizes the sources and uses of our cash for the periods
presented (in thousands):


                                                         Year Ended
                                                        December 31,
                                                     2021          2020
Operating cash flows                              $ (17,960 )   $ (26,253 )
Investing cash flows                                (18,534 )      18,521
Financing cash flows                                 39,438        14,604

Net increase in cash and cash equivalents             2,944         6,872

Cash and cash equivalents - beginning of period 22,608 15,736 Cash and cash equivalents - end of period $ 25,552 $ 22,608






Operating Cash Flows

Operating cash outflows during the years ended December 31, 2021 and 2020 were $18.0 million and $26.3 million, respectively. The decrease in operating cash outflows in 2021 compared to 2020 was primarily related to a decrease in general and administrative and lease expenses.





Investing Cash Flows

Investing cash outflows during the year ended December 31, 2021 was $18.5 million and investing cash inflows during the year ended December 31, 2020 was $18.5 million. The investing cash outflows in 2021 were primarily the result cash used in the development of the Terminal of $12.1 million and cash used in the acquisition of other assets of $6.4 million. The investing cash inflows in 2020 were primarily the result of the sale of investment securities of $62.0 million partially offset by cash used in the development of the Terminal of $32.4 million and cash used in the acquisition of other assets of $10.9 million.




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Financing Cash Flows

Financing cash inflows during the years ended December 31, 2021 and 2020 were $39.4 million and $14.6 million, respectively. Financing cash inflows in 2021 were primarily the result of proceeds from the sale of Series C Preferred Stock of $39.5 million. Financing cash inflows in 2020 were primarily the result of proceeds from the sale of Rio Bravo of $15.0 million.

Contractual Obligations

We are committed to make cash payments in the future pursuant to certain of our contracts. The following table summarizes certain contractual obligations (in thousands) in place as of December 31, 2021:




                                Total       2022       2023-2024     2025-2026      Thereafter
Operating lease obligations   $ 3,467     $ 3,465     $     2       $     -       $       -
Permitting costs                  466         466           -             -               -
Other                              51          51           -             -               -
Total                         $ 3,984     $ 3,982     $     2       $     -       $       -

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Operating lease obligations primarily relate to our Rio Grande Site Lease, and amounts due thereunder until the lease term commences, and office space in Houston, Texas.

A discussion of these obligations can be found at Note 6 - Leases and Note 14 - Commitments and Contingencies of our Notes to Consolidated Financial Statements.





Results of Operations

The following table summarizes costs, expenses and other income for the years ended December 31, 2021 and 2020 (in thousands):




                                                               Year Ended
                                                              December 31,
                                                  2021            2020           Change
Revenues                                       $         -     $         -     $         -
General and administrative expenses                 16,803          20,213          (3,410 )
Development expense                                  1,615               -           1,615
Land option and lease expenses                         905           1,603            (698 )
Depreciation expense                                   184             196             (12 )
Operating loss                                     (19,507 )       (22,012 )         2,505
Gain (loss) on Common Stock Warrant
Liabilities                                         (2,533 )         7,870         (10,403 )
Loss on redemption of investment securities              -            (412 )           412
Interest income, net                                     2             243            (241 )
Other                                                   (1 )           (18 )            17
Net loss attributable to NextDecade
Corporation                                        (22,039 )       (14,329 )        (7,710 )
Preferred stock dividends                          (18,294 )       (14,327 )        (3,967 )
Deemed dividends on Series A Convertible
Preferred Stock                                        (63 )          (128 )            65

Net loss attributable to common stockholders $ (40,396 ) $ (28,784 ) $ (11,612 )

Our consolidated net loss was $22.0 million, or $0.34 per common share (basic and diluted), for the year ended December 31, 2021 compared to a net loss of $14.3 million, or $0.24 per common share (basic and diluted), for the year ended December 31, 2020. The $7.7 million increase in net loss was primarily a result of a loss on common stock warrant liabilities, partially offset by a decrease in general and administrative expenses and land option and lease expenses, discussed separately below.

General and administrative expenses during the year ended December 31, 2021 decreased $3.4 million compared to the year ended December 31, 2020, due primarily to decreases in professional fees, office expenses, IT and communications costs and share-based compensation expense of $5.3 million, partially offset by an increase in salaries and wages of $4.0 million. The decrease in share-based compensation expense is primarily a result of forfeitures of restricted stock during the year ended December 31, 2021. The increase in salaries and wages is primarily due to accrued bonuses.

Development expense during the year ended December 31, 2021 increased $1.6 million compared to the year ended December 31, 2020, due to NEXT Carbon Solutions' preliminary FEED assessments performed on third-party industrial facilities. Similar preliminary FEED assessments were not performed during the year ended December 31, 2020.

The loss on Common Stock Warrant Liabilities of approximately $2.5 million in 2021 was primarily due to an increase in the share price of Company common stock from December 31, 2020 to December 31, 2021 and an increase in the Common Stock Warrants outstanding associated with the issuance of Series C Preferred Stock.

Preferred stock dividends of $18.3 million in 2021 consisted of dividends paid-in-kind with the issuance of an additional 8,206 shares of Series A Preferred Stock, 7,821 additional shares of Series B Preferred Stock and 2,200 additional shares of Series C Preferred Stock.

Deemed dividends on the Series A Preferred Stock for the year ended December 31, 2021 and December 31, 2020 represents the accretion of the beneficial conversion feature associated with the Series A Preferred Stock issued in 2018.




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Summary of Critical Accounting Estimates

The preparation of our Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make certain estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying notes. Management evaluates its estimates and related assumptions regularly, including those related to the value of properties, plant, and equipment, share-based compensation, Common Stock Warrant liabilities, and income taxes. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Management considers the following to be its most critical accounting estimates that involve significant judgment.

Impairment of Long-Lived Assets

A long-lived asset, including an intangible asset, is evaluated for potential impairment whenever events or changes in circumstances indicate that its carrying value may not be recoverable. Recoverability generally is determined by comparing the carrying value of the asset to the expected undiscounted future cash flows of the asset. If the carrying value of the asset is not recoverable, the amount of impairment loss is measured as the excess, if any, of the carrying value of the asset over its estimated fair value. We use a variety of fair value measurement techniques when market information for the same or similar assets does not exist. Projections of future operating results and cash flows may vary significantly from results. Management reviews its estimates of cash flows on an ongoing basis using historical experience and other factors, including the current economic and commodity price environment.





Share-based Compensation

The assumptions used in calculating the fair value of share-based payment awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management's judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future.

For additional information regarding our share-based compensation, see Note 12 - Share-based Compensation of our Notes to Consolidated Financial Statements.

Valuation of Common Stock Warrant Liabilities

The fair value of Common Stock Warrant liabilities is determined using a Monte Carlo valuation model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrant requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The estimated volatility of our common stock at the date of issuance, and at each subsequent reporting period, is based on our historical volatility. The risk-free interest rate is based on rates published by the government for bonds with maturity similar to the expected remaining life of the Common Stock Warrants at the valuation date. The expected life of the Common Stock Warrants is assumed to be equivalent to their remaining contractual term.

The Common Stock Warrants are not traded in an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from those recorded in the consolidated financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the consolidated statement of operations each reporting period.

For additional information regarding the valuation of Common Stock Warrant liabilities, see Note 9 - Preferred Stock and Common Stock Warrants of our Notes to Consolidated Financial Statements.





Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the tax basis of assets and liabilities and their reported amounts in the Consolidated Financial Statements. Deferred tax assets and liabilities are included in the Consolidated Financial Statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the current period's provision for income taxes. We routinely assess our deferred tax assets and reduce such assets by a valuation allowance if we deem it is more likely than not that some portion or all of the deferred tax assets will not be realized. This assessment requires significant judgment and is based upon our assessment of our ability to generate future taxable income among other factors.

For additional information regarding the valuation of deferred tax assets, see

Note 13 - Income Taxes of our Notes to Consolidated Financial Statements.

Recent Accounting Standards

For descriptions of recently issued accounting standards, see Note 15 - Recent Accounting Pronouncements of our Notes to Consolidated Financial Statements.

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