Business context and reporting period
This is Stable Road Acquisition Corp.’s unaudited Form 10-Q for the quarter ended September 30, 2020, filed November 13, 2020. Stable Road was a blank-check company, not an operating report for Momentus Inc.; it reported no operations or operating revenue. Its stated acquisition search focus was cannabis businesses.
After quarter-end, on October 7, 2020, Stable Road agreed to combine with Momentus through a two-step merger. The filing describes the proposed transaction and related financing, but does not provide Momentus’s operating financial results.
Financial results and position
- Revenue: No operating revenue in the three or nine months ended September 30, 2020. Income consisted of interest on trust assets.
- Q3 2020: General and administrative expense was $223,942; trust interest income was $61,541; net loss was $164,610. Non-redeemable common-stock loss per share was $0.04.
- Nine months 2020: General and administrative expense was $776,516; trust interest income was $1,087,154; income tax provision was $179,405; net income was $131,233. Non-redeemable common-stock loss per share was $0.13; redeemable Class A income per share was $0.04.
- Cash flow: Operating activities used $1,161,611 in the first nine months. The company withdrew $848,763 of trust interest for taxes; cash declined by $312,848 to $780,336.
- Liquidity and assets: At September 30, cash outside the trust was $780,336; trust cash and marketable securities were $173,084,402; total assets were $174,232,876. Current assets were $1,148,474 versus current liabilities of $89,141.
- Debt and equity: No outstanding working-capital loans and no long-term debt were reported. Liabilities totaled $6,989,141, including a $6,900,000 deferred underwriting fee payable if a business combination closes. Stockholders’ equity was $5,000,005; $162,243,730 of redeemable Class A shares was presented as temporary equity.
- Margins: Not meaningful because the company had no operating revenue.
Changes versus the prior comparable period
Q3 2019 net loss was zero, versus a $164,610 loss in Q3 2020. For the 2019 inception-to-September period, net loss was $865, versus nine-month 2020 net income of $131,233. The 2020 results reflect substantial trust interest income and related taxes; the company remained pre-operational. Compared with December 31, 2019, outside-trust cash fell from $1,093,184 to $780,336, while trust assets rose from $172,846,011 to $173,084,402.
Outlook, risks, and unusual items
- Proposed Momentus transaction: The stated equity consideration was $1.131 billion, adjusted downward for Momentus borrowed indebtedness and upward for qualifying cash and cash equivalents and the exercise price of outstanding options and warrants. Consideration to Momentus stockholders was to be newly issued Stable Road Class A shares valued at $10 each; Momentus debt was to be paid off at closing. Investors separately agreed to purchase 17.5 million shares at $10 per share in a private placement. Closing remained subject to conditions.
- Deadline and going concern: Stable Road had until May 13, 2021 to complete a business combination. Management said failure to complete one would trigger liquidation and dissolution and raised substantial doubt about the company’s ability to continue as a going concern.
- Redemptions and trust: Public shareholders could redeem shares in connection with a combination. If no combination occurred by the deadline, public shares were to be redeemed from the trust; warrants would expire worthless. The filing notes trust assets could yield negative interest, potentially reducing redemption value below $10 per share.
- COVID-19: Management said the pandemic could adversely affect the search for or completion of a transaction, but the specific impact was not determinable.
- Potential financing and dilution: The company noted that additional equity or debt might be needed to complete a transaction or meet expenses. Issuances could dilute existing holders; debt could add repayment, covenant, and liquidity risks.
- Other disclosures: No legal proceedings, defaults on senior securities, or off-balance-sheet financing arrangements were reported. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether and when the proposed Momentus merger closed, and the final consideration after applying the agreed cash, debt, and option/warrant adjustments.
- Actual PIPE funding, shareholder redemptions, and cash available to the combined company at closing.
- Momentus’s debt, cash restrictions, and operating financial condition, which are not detailed in this 10-Q.
- Whether the May 13, 2021 business-combination deadline was met and what liquidation or redemption terms applied.
- The effect of transaction-related dilution, deferred underwriting fees, COVID-19, and trust investment returns on public shareholders’ value.