Item 5. Market for Registrant’s Common Equity
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
Market Information, Holders and Dividends
 
Our common stock trades on Nasdaq under the symbol “NEXT.” The IPO Warrants trade on the OTC Pink Market under the symbol “NEXTW.”
 
As of March 18, 2021, 122.2 million shares of Company common stock were outstanding held by approximately 69 record owners. All shares of Company common stock held in street name are recorded in our stock register as being held by one stockholder.
 
We currently intend to retain earnings to finance the growth and development of our business and do not anticipate paying any cash dividends on Company common stock in the foreseeable future. Any future change in our dividend policy will be made at the discretion of our board of directors in light of our financial condition, capital requirements, earnings, prospects and any restrictions under any financing agreements, as well as other factors it deems relevant.
 
Purchase of Equity Securities by the Issuer
 
The following table summarizes stock repurchases for the three months ended December 31, 2020:
 
Period
 
Total Number of Shares Purchased (1)
 
Average Price Paid Per Share (2)
 
Total Number of Shares Purchased as a Part of Publicly Announced Plans
 
Maximum Number of Units That May Yet Be Purchased Under the Plans
October 2020
 
 
3,525
 
 
$
2.59
 
 
 
—
 
 
 
—
 
November 2020
 
 
—
 
 
$
—
 
 
 
—
 
 
 
—
 
December 2020
 
 
4,870
 
 
$
2.40
 
 
 
—
 
 
 
—
 
 
(1)
Represents shares of Company common stock surrendered to us by participants in our 2017 Omnibus Incentive Plan (the “2017 Plan”) to settle the participants’ personal tax liabilities that resulted from the lapsing of restrictions on shares awarded to the participants under the 2017 Plan.
(2)
The price paid per share of Company common stock was based on the closing trading price of Company common stock on the dates on which we repurchased shares of Company common stock from the participants under the 2017 Plan.
 
Item 6. Selected Financial Data
 
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
 
 
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
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
 
 
•
Off-Balance Sheet Arrangements
 
 
•
Summary of Critical Accounting Estimates
 
 
•
Recent Accounting Standards
 
Overview of Business
 
We are a LNG development company focused on LNG export projects in the State of Texas. We have focused and continue to focus our development activities on the Terminal and have undertaken and continue to undertake various initiatives to design and engineer the Terminal that we expect will result in demand for contracted capacity at the Terminal, which would allow us to seek construction financing to develop the Terminal. We believe the Terminal possesses competitive advantages in several important areas, including, engineering, commercial, regulatory, and gas supply. We submitted a pre-filing request for the Terminal to the FERC in March 2015 and filed a formal application with the FERC in May 2016. In November 2019, the FERC issued an order authorizing the siting, construction and operation of the Terminal.  We also believe we have robust commercial offtake and gas supply strategies in place.
  
Overview of Significant Events
 
Carbon-Neutrality at the Terminal
 
On March 18, 2021, we announced the formation of NEXT Carbon Solutions, LLC (“NEXT Carbon Solutions”), a wholly owned subsidiary of NextDecade that is expected to:
 
 
•
develop one of the largest carbon capture and storage (“CCS”) projects in North America at the Terminal;
 
 
•
advance proprietary processes to lower the cost of utilizing CCS technology;
 
 
•
help other energy companies to reduce their greenhouse gas (“GHG”) emissions associated with the production, transportation, and use of natural gas; and
 
 
•
generate high-quality, verifiable carbon offsets to support companies in their efforts to achieve net-zero emissions.
 
NEXT Carbon Solutions’ CCS project is expected to reduce permitted CO 2 emissions at the Terminal by more than 90 percent without major design changes to the Terminal. As a result, the Terminal is expected to be the greenest LNG project in the world. 
 
We are working with sustainable Permian and Eagle Ford producers seeking to supply responsibly sourced natural gas to the Terminal. Combining responsibly sourced natural gas with the anticipated CO 2 emissions reduction associated with our CCS project is expected to enable the Terminal to produce the lowest lifecycle GHG LNG on an FOB basis and to be the greenest LNG project in the world.
 
To realize the significant benefits associated with co-development of the Terminal and the CCS project, we anticipate achieving FID on a minimum of two trains at the Terminal in 2021 and FID on the CCS project soon after FID at the Terminal.
 
Terminal Optimization
 
The original front-end engineering and design for the Terminal was based on six LNG trains capable of producing 27 mtpa of LNG for export. The technologies that were selected and filed with the FERC in 2015 and 2016 have evolved over the five-year permitting period; the LNG trains are now more efficient and will produce more LNG with lower total CO 2 e emissions. Multiple optimizations have been identified that will lead to the delivery of a LNG project capable of producing 27 mtpa with just five LNG trains instead of six.
 
We expect these optimizations to result in several environmental and community benefits when compared with our original six-train project, including (i) approximately 21 percent lower CO 2 e emissions, (ii) shortened construction timeline for the full 27 mtpa project, (iii) reduced facility footprint, and (iv) an expected reduction in traffic on roadways.
 
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On August 13, 2020, the FERC approved the change of the design for the Terminal from six trains to five trains. On October 9, 2020, the FERC issued a notice of denial of rehearing for such approval in regards to challenges to its approval of the design change.
 
Any future development of Train 6 will require us to secure authorization from the FERC, the DOE, and any other relevant federal or state agency with jurisdiction over the export project.
 
LNG Sale and Purchase Agreement
 
In March 2019, we entered into the SPA with Shell for the supply of approximately two mtpa of liquefied natural gas from the Terminal. Pursuant to the SPA, Shell will purchase LNG on a FOB basis starting from the date the first liquefaction train of the Terminal that is commercially operable, with approximately three-quarters of the purchased LNG volume indexed to Brent and the remaining volume indexed to domestic United States gas indices, including Henry Hub.
 
In the first quarter of 2020, the SPA became effective upon the conditions precedent in the SPA being satisfied or waived.  The SPA obligates Rio Grande to deliver the contracted volumes of LNG to Shell at the FOB delivery point, subject to the first liquefaction train at the Terminal being commercially operable.
 
Rio Grande Site Lease
 
On March 6, 2019, Rio Grande entered into the Rio Grande Site Lease for the purposes of constructing, operating and maintaining the Terminal and gas treatment and gas pipeline facilities. The Primary Term will commence on the date specified in a written notice by us to BND. We have the option to renew and extend the term of the Rio Grande Site Lease beyond the Primary Term for up to two consecutive renewal periods of ten years each provided that it has not caused an event of default under the Rio Grande Site Lease.
 
On January 27, 2020, the City of Port Isabel, Texas and other parties filed a lawsuit in state court in Cameron County against the BND seeking to enjoin the federally-authorized siting, construction, and operation of LNG terminals on land owned by the BND. On August 5, 2020, the state court dismissed the lawsuit.
 
On April 30, 2020, Rio Grande and the BND amended the Rio Grande Site Lease (the “Rio Grande Site Lease Amendment”) to extend the effective date for commencing the Rio Grande Site Lease to May 6, 2021 (the “Effective Date”). The Rio Grande Site Lease Amendment further provides that Rio Grande has the right, exercisable in its sole discretion, to extend the Effective Date to May 6, 2022 by providing the BND with written notice of its election no later than the close of business on the Effective Date.
 
Extension of Contract Validity of Engineering, Procurement, and Construction Contract
 
During the third quarter of 2018, we initiated a competitive EPC bid process. We received EOIs from multiple EPC contractors to participate in the EPC process. We reviewed the EOIs against a series of selection criteria and issued formal invitations to bid to Bechtel , Fluor and McDermott. In December 2018, each of the EPC bidders provided us with an endorsement of the Terminal’s FEED, which indicates the bidders’ confirmation that the Terminal is technically feasible and can be further designed, engineered, permitted, constructed, commissioned and safely placed into operations.
 
On April 22, 2019, we received EPC bid packages from each of Bechtel and Fluor, two of the global LNG market’s leading EPC contractors. The technical and commercial bid packages, which were received on-schedule, were for LSTK EPC contracts for the Terminal.
 
On May 24, 2019, Rio Grande entered into the EPC Agreements. We agreed to pay to Bechtel a contract price of $7.042 billion for the work under the Trains 1 and 2 EPC Agreement and a contract price of $2.323 billion for the work under the Train 3 EPC Agreement. In each of 2020 and 2019, we issued two limited notices to proceed to Bechtel under the Trains 1 and 2 EPC Agreement.
 
On October 1, 2019, we issued 2,119,728 shares of Company common stock to BDC Oil and Gas Holdings, LLC, an affiliate of Bechtel.  The shares of Company common stock were issued in lieu of a cash payment of $15 million for amounts invoiced by Bechtel pursuant to the Trains 1 and 2 EPC Agreement.
 
As previously disclosed, Rio Grande and Bechtel completed a contract price refresh on the Trains 1 and 2 EPC Agreement and the Train 3 EPC Agreement resulting in no changes to the contract prices and such contract prices are now valid until December 31, 2021. 
 
By amendment dated March 5, 2021, Rio Grande and Bechtel amended the Trains 1 and 2 EPC Agreement to extend the contract validity to July 31, 2022. By amendment dated March 5, 2021, Rio Grande and Bechtel amended the Train 3 EPC Agreement to extend the contract validity to July 31, 2022.
 
FERC Order for Terminal
 
On November 22, 2019, FERC issued an order authorizing the siting, construction and operation of the Terminal.  Following receipt of the Final Order from FERC two requests for re-hearing were filed. One of those requests for rehearing also requested that the FERC stay its Final Order. On January 22, 2020, the FERC issued an order extending the time by which it would respond to these requests for rehearing. On January 23, 2020, the FERC issued its Order on Rehearing and Stay, by which FERC denied all re-hearings and requests for stay. The parties who filed the requests for re-hearing have petitioned the U.S. Court of Appeals for the District of Columbia to review the FERC Order and the FERC order denying rehearing, and that appeal is still pending. Similar appeals are also pending in the U.S. Court of Appeals for the Fifth Circuit in respect of other permits issued by the U.S. Army Corps of Engineers and the U.S. Fish and Wildlife Service.
 
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Export of LNG to Non-FTA countries 
 
On September 7, 2016, Rio Grande obtained an authorization for export of LNG to countries with which the U.S. has a FTA on our own behalf and as an agent for others for a term of 30 years. On February 10, 2020, the DOE issued an order granting authorization to export LNG from the Terminal to non-FTA countries.
 
Sale of Rio Bravo Pipeline Company, LLC
 
On March 2, 2020, NextDecade LLC closed the transactions (the “Closing”) contemplated by that certain Omnibus Agreement, dated February 13, 2020, with Buyer, pursuant to which NextDecade LLC sold one hundred percent of the Equity Interests in Rio Bravo to Buyer in consideration of approximately $19.4 million.  Buyer paid $15.0 million of the purchase price to NextDecade LLC at the Closing and the remainder will be paid within five business days after the date that Rio Grande has received, after a final positive investment decision, the initial funding of financing for the development, construction and operation of the Terminal. In connection with the Closing, Rio Grande Gas Supply entered into (i) a Precedent Agreement for Firm Natural Gas Transportation Service for the Rio Bravo Pipeline (the “RBPL Precedent Agreement”) with Rio Bravo and (ii) a Precedent Agreement for Natural Gas Transportation Service (the “VCP Precedent Agreement”) with VCP. VCP and Rio Bravo are wholly owned subsidiaries of Enbridge. The Valley Crossing Pipeline is owned and operated by VCP.
 
Pursuant to the RBPL Precedent Agreement, Rio Bravo agreed to provide Rio Grande Gas Supply with firm natural gas transportation services on the Pipeline in a quantity sufficient to match the full operational capacity of each proposed liquefaction train of the Terminal. Rio Bravo’s obligation to construct, install, own, operate and maintain the Pipeline is conditioned on its receipt, no later than December 31, 2023, of notice that Rio Grande Gas Supply or its affiliate has issued a full notice to proceed to the engineering, procurement and construction contractor (the “EPC Contractor”) for the construction of the Terminal. Under the RBPL Precedent Agreement, in consideration for the provision of such firm transportation services, Rio Bravo will be remunerated on a dollar-per-dekatherm, take-or-pay basis, subject to certain adjustments, over a term of at least twenty years, all in compliance with the federal and state authorizations associated with the Pipeline.
 
Pursuant to the VCP Precedent Agreement, VCP agreed to provide Rio Grande Gas Supply with natural gas transportation services on the Valley Crossing Pipeline in a quantity sufficient to match the commissioning requirements of each proposed liquefaction train of the Terminal. VCP’s obligation to construct, install, own, operate and maintain the necessary interconnection to the Terminal and the Pipeline is conditioned on its receipt, no later than December 31, 2023, of notice that Rio Grande Gas Supply or its affiliate has issued a full notice to proceed to the EPC Contractor for the construction of the Terminal. VCP will be responsible, at its sole cost and expense, to construct, install, own, operate and maintain the tap, riser and valve facilities (the “VCP Transporter Facilities”), which shall connect to Rio Grande Gas Supply’s custody transfer meter and such other facilities as necessary in order for the Terminal to receive gas from the VCP Transporter Facilities (the “Rio Grande Gas Supply Facilities”). Rio Grande Gas Supply will be responsible, at its sole cost and expense, to construct, install, own, operate and maintain the Rio Grande Gas Supply Facilities. Under the VCP Precedent Agreement, in consideration for the provision of the commissioning transportation services, VCP will be remunerated on the same dollar-per-dekatherm, take-or-pay basis as set forth in the RBPL Precedent Agreement for the duration of such commissioning services, all in compliance with the federal and state authorizations associated with the Valley Crossing Pipeline.
 
If Rio Grande or its affiliate fail to issue a full notice to proceed to the EPC Contractor on or prior to December 31, 2023, Buyer has the right to sell the Equity Interests back to NextDecade LLC and NextDecade LLC has the right to repurchase the Equity Interests from Buyer, in each case at a price not to exceed $23 million.
 
Series C Convertible Preferred Stock Purchase Agreements
 
As previously disclosed, we entered into a Series C Convertible Preferred Stock Purchase Agreement (collectively, the “Series C Stock Purchase Agreements”) with each of (i) York Capital Management, L.P. and certain of its affiliates (“York”), (ii) certain affiliates of Bardin Hill Investment Partners LP (“Bardin Hill”), and (iii) Avenue Energy Opportunities Fund II, L.P (“Avenue” and together with York and Bardin Hill, the “Purchasers”) pursuant to which the Company agreed to sell, and the Purchasers agreed to purchase shares of the Company’s Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), together with associated warrants, for an aggregate purchase price of $24.5 million.  The consummation of the transactions contemplated by the Series C Stock Purchase Agreements occurred at multiple closings on or prior to March 22, 2021.
 
For additional details on the Series C Stock Purchase Agreements and the transactions in connection therewith, please refer to our Current Report on Form 8-K filed with the Securities and Exchange Commission on March 18, 2021.
 
COVID-19 Pandemic and its Effect on our Business
 
The business environment in which we operate has been impacted by the recent downturn in the energy market as well as the outbreak of COVID-19 and its progression into a pandemic in March 2020. We have modified and may continue to modify certain business and workforce 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 beyond 2020.
 
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Liquidity and Capital Resources
 
Capital Resources
 
We have funded and continue to fund the development of the Terminal and general working capital needs through our cash on hand and proceeds from the issuances of equity and equity-based securities. Since January 2019, capital raising events have included the following:
 
In May 2019, we sold an aggregate of 20,945 shares of Series B Preferred Stock, at $1,000 per share for an aggregate purchase price of $20.945 million to York Tactical Energy Fund, L.P. and York Tactical Energy Fund PIV-AN, L.P., (ii) Bardin Hill Investment Partners LP (formerly known as Halcyon Capital Management LP), severally on behalf of certain funds or accounts managed by it or its affiliates, (iii) Valinor Management, L.P., severally on behalf of certain funds or accounts for which it is investment manager (“Valinor”), and (iv) HGC NEXT INV LLC. Series B Warrants were issued together with such shares of Series B Preferred Stock.
 
In October 2019, we sold an aggregate of 7,974,482 shares of Company common stock at $6.27 per share for an aggregate purchase price of $50.0 million to Ninteenth Investment Company LLC.
 
In March 2021, we sold an aggregate of 24,500 shares of Series C Preferred Stock at $1,000 per share for an aggregate purchase price of $24.5 million to the Series C Purchasers together with associated warrants.
 
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,
 
 
2020
 
2019
Operating cash flows
 
$
(26,253
)
 
$
(40,700
)
Investing cash flows
 
 
18,521
 
 
 
(16,693
)
Financing cash flows
 
 
14,604
 
 
 
69,960
 
 
 
 
 
 
 
 
 
 
Net increase in cash and cash equivalents
 
 
6,872
 
 
 
12,567
 
Cash and cash equivalents – beginning of period
 
 
15,736
 
 
 
3,169
 
Cash and cash equivalents – end of period
 
$
22,608
 
 
$
15,736
 
 
Operating Cash Flows
 
Operating cash outflows during the years ended December 31, 2020 and 2019 were $26.3 million and $40.7 million, respectively. The decrease in operating cash outflows in 2020 compared to 2019 was primarily related to the decrease in invitation to bid contract costs of $10.2 million and a decrease in general and administrative costs of $2.5 million.
 
Investing Cash Flows
 
Investing cash inflows during the year ended December 31, 2020 was $18.5 million and investing cash outflows during the year ended December 31, 2019 was $16.7 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. The investing cash outflows in 2019 were the result of cash used in the development of the Terminal and the Pipeline of $27.2 million and a net redemption of $10.5 million in investment securities.
 
Financing Cash Flows
 
Financing cash inflows during the years ended December 31, 2020 and 2019 were $14.6 million and $70.0 million, respectively. Financing cash inflows in 2020 were primarily the result of proceeds from the sale of Rio Bravo of  $15.0 million. Financing cash inflows in 2019 were the result of $71.0 million of proceeds from the issuance of preferred and common equity offset by $0.3 million of equity issuance costs and $0.7 million of shares repurchased related to share based compensation.
 
Pre-FID Liquidity
 
In 2020, we incurred approximately $67 million on pre-FID development activities in support of the Terminal. To preserve pre-FID liquidity, we have implemented certain measures to manage costs:
 
 
•
Since December 31, 2019, full-time headcount has decreased 38 percent.
 
 
•
Our Chief Executive Officer and certain other members of our executive team voluntarily reduced their base salaries by ten percent during 2020.
 
 
•
We and Bechtel have agreed to a limited scope of ongoing work which will provide for continued engineering progress for the Terminal.
 
 
•
We have reduced our office space under lease and deferred additional information technology spending until FID is achieved.
 
We expect pre-FID development spending to average approximately $3 million per month through year-end 2021. We believe that the measures taken to manage costs will not negatively affect our ability to successfully deliver the Terminal and will create value for stockholders.
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Capital Development Activities
 
We are primarily engaged in developing the Terminal, which may require additional capital to support further project development, engineering, regulatory approvals and compliance, and commercial activities in advance of a FID made to finance and construct the Terminal. Even if successfully completed, the Terminal will not begin to operate and generate significant cash flows until at least several years from now. Construction of the Terminal would not begin until, among other requirements for project financing, all required federal, state and local permits have 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, to bring it into operation on a commercially viable basis and to finance our staffing, operating and expansion costs during that process.
 
We have engaged SG Americas Securities, LLC (a business unit of Société Générale) and Macquarie Capital (USA) Inc. to advise and assist us in raising capital for post-FID construction activities.
 
We currently expect that the long-term capital requirements for the Terminal will be financed predominately through project financing and proceeds from future debt, equity-based, and equity offerings by us. 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, 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.
 
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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, 2020:
 
 
 
Total
 
2021
 
2022-2023
 
2024-2025
 
Thereafter
Operating lease obligations
 
$
2,685
 
 
$
2,685
 
 
$
—
 
 
$
—
 
 
$
—
 
Other
 
 
85
 
 
 
53
 
 
 
32
 
 
 
—
 
 
 
—
 
Total
 
$
2,770
 
 
$
2,738
 
 
$
32
 
 
$
—
 
 
$
—
 
 
 
Operating lease obligations primarily relate to our Rio Grande Site Lease and office space in Houston, Texas.
 
A discussion of these obligations can be found at — Note 7 – 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 year ended December 31, 2020 and 2019 (in thousands):
 
 
 
Year Ended
 
 
 
December 31,
 
 
 
2020
 
 
2019
 
 
Change
 
Revenues
 
$
—
 
 
$
—
 
 
$
—
 
General and administrative expenses
 
 
20,213
 
 
 
22,548
 
 
 
(2,335
)
Invitation to Bid Contract Costs
 
 
—
 
 
 
10,163
 
 
 
(10,163
)
Land option and lease expenses
 
 
1,603
 
 
 
2,039
 
 
 
(436
)
Depreciation expense
 
 
196
 
 
 
251
 
 
 
(55
)
Operating loss
 
 
(22,012
)
 
 
(35,001
)
 
 
12,989
 
Gain (loss) on Common Stock Warrant Liabilities
 
 
7,870
 
 
 
(2,657
)
 
 
10,527
 
Loss on redemption of investment securities
 
 
(412
)
 
 
—
 
 
 
(412
)
Interest income, net
 
 
243
 
 
 
1,718
 
 
 
(1,475
)
Other
 
 
(18
)
 
 
69
 
 
 
(87
)
Net loss attributable to NextDecade Corporation
 
 
(14,329
)
 
 
(35,871
)
 
 
21,542
 
Preferred stock dividends
 
 
(14,327
)
 
 
(11,164
)
 
 
(3,163
)
Deemed dividends on Series A Convertible Preferred Stock
 
 
(128
)
 
 
(1,517
)
 
 
1,389
 
Net loss attributable to common stockholders
 
$
(28,784
)
 
$
(48,552
)
 
$
19,768
 
 
Our consolidated net loss was $14.3 million, or $0.24 per common share (basic and diluted), for the year ended December 31, 2020 compared to a net loss of  $35.9 million, or $0.45 per common share (basic and diluted), for the year ended December 31, 2019. The $21.5 million decrease in net loss was primarily a result of a decrease in invitation to bid contract costs, a decrease in general and administrative expense and an increase in the gain on common stock warrant liabilities, partially offset by a decrease in interest income, discussed separately below.
 
General and administrative expenses during the year ended December 31, 2020 decreased $2.3 million compared to the year ended December 31, 2019, due primarily to decreases in salaries and wages, professional fees, office expenses, travel expenses and marketing and conference sponsorship costs of $11.7 million, partially offset by an increase in share-based compensation expense of $9.3 million. The increase in share-based compensation expense is primarily a result of forfeitures of restricted stock during the year ended December 31, 2019.
 
For the year ended December 31, 2020, there were no invitation to bid contract costs compared to approximately $10.2 million incurred during the year ended December 31, 2019.  The decrease in invitation to bid contract costs is due to the conclusion of the competitive EPC bid process. 
 
The gain on Common Stock Warrant Liabilities of approximately $7.9 million in 2020 was primarily due to a decrease in the price of common stock from $6.14 per share at December 31, 2019 to $2.09 per share at December 31, 2020.
 
Interest income, net during the year ended December 31, 2020 decreased $1.5 million compared to the year ended December 31, 2019 due to lower average balances maintained in our cash, cash equivalent and investment securities accounts.
 
Preferred stock dividends of $14.3 million in 2020 consisted of dividends paid-in-kind with the issuance of an additional 7,310 shares of Series A Preferred Stock and 6,967 additional shares of Series B Preferred Stock.  
 
Deemed dividends on the Series A Preferred Stock for the year ended December 31, 2020 and December 31, 2019 represents the accretion of the beneficial conversion feature associated with the Series A Preferred Stock issued in 2018. 
 
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Off-Balance Sheet Arrangements
 
We did not have any off-balance sheet arrangements as of December 31, 2020.
 
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 10 – 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.
 
Recent Accounting Standards
 
For descriptions of recently issued accounting standards, see Note 15 – Recent Accounting Pronouncements of our Notes to Consolidated Financial Statements.
 
 
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information under this item.
 
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