Momentus Inc. Form 8-K Summary
Business Context and Reporting Period
On August 12, 2021, Stable Road Acquisition Corp. completed its business combination with Legacy Momentus, changed its name to Momentus Inc., and ceased to be a shell company. The transaction was accounted for as a reverse recapitalization, with Legacy Momentus treated as the accounting predecessor. Historical financial information covers Legacy Momentus for the three and six months ended June 30, 2021 and 2020.
Momentus plans to provide in-space transportation, Satellite as a Service, and in-orbit servicing using vehicles under development and water plasma propulsion technology. Its Class A common stock and public warrants began trading on Nasdaq under the symbols MNTS and MNTSW on August 13, 2021.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 |
|---|---|---|
| Service revenue | $0 | $0 |
| Research and development expense | $20.8 million | $4.0 million |
| SG&A expense | $9.7 million | $1.6 million |
| Operating loss | $30.5 million | $5.5 million |
| Net income (loss) | $64.3 million | $(9.2) million |
| Metric | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 |
|---|---|---|
| Service revenue | $130,000 | $0 |
| Gross margin | $81,600 | $0 |
| Research and development expense | $30.7 million | $8.4 million |
| SG&A expense | $23.7 million | $3.4 million |
| Operating loss | $54.4 million | $11.8 million |
| Net income (loss) | $129.0 million | $(15.4) million |
- Net cash used in operating activities was $44.1 million for the six months ended June 30, 2021, compared with $11.4 million in the prior-year period.
- Net cash used in investing activities was $2.2 million, while financing activities provided $55.7 million.
- Cash and cash equivalents were $31.2 million at June 30, 2021, before the business combination.
- The reported 2021 net income was driven primarily by non-cash gains from changes in the fair value of SAFE notes and warrants totaling approximately $194.9 million, partially offset by operating expenses, interest expense, and the SEC settlement.
- Interest expense was $4.4 million for the first six months of 2021, compared with $78,000 in the prior-year period.
Material Changes Versus the Prior Comparable Period
- Research and development expense increased 266% for the first six months, primarily due to higher vehicle-development costs, payroll, subcontractors, materials, and a $9.5 million impairment of prepaid launch deposits.
- SG&A expense increased 594%, reflecting higher legal costs related to SEC and CFIUS matters, stock-based compensation, corporate hiring, and preparation for public-company operations.
- The company recognized $130,000 of revenue from a customer contract cancellation; it had not completed a commercial customer launch through June 30, 2021.
- Prepaid launch costs of approximately $8.7 million were impaired after the company’s 2021 launch plans were affected by a denied FAA application and related notice from SpaceX.
- Prior to closing, holders redeemed 3,535,081 public shares for approximately $35.4 million, leaving approximately $172.7 million in the trust account immediately before closing.
- The PIPE investment consisted of 11 million Class A shares sold at $10.00 per share, with accompanying warrants exercisable at $11.50 per share. After the transaction, 79,772,262 Class A shares were outstanding.
Liquidity, Debt, Commitments, and Transaction Effects
- The business combination and PIPE transaction were expected to increase cash by approximately $247.3 million relative to the June 30, 2021 consolidated balance sheet, before transaction-related uses.
- Estimated business-combination transaction costs were approximately $38.1 million.
- Momentus borrowed $25.0 million under a February 2021 term loan bearing 12% annual interest. Principal and interest were due March 1, 2022, subject to optional 12- or 24-month extensions and amortization. The additional $15.0 million commitment was forfeited.
- The term loan is secured by a first-priority lien on substantially all company assets, subject to specified exceptions.
- The company was required to pay an aggregate $40 million to former foreign holders and related entities following closing under repurchase agreements associated with the National Security Agreement.
- Contractual obligations totaled approximately $34.9 million at June 30, 2021, including operating leases of $10.6 million, purchase obligations of $17.3 million, and SEC settlement payments of $7.0 million.
- Management estimated approximately $750 million of research and development spending and $140 million of capital expenditures over the next seven years, and approximately $260 million of operating, development, and capital expenditures during 2021–2023.
Guidance, Outlook, Risks, and Unusual Items
- The first customer launch was anticipated no earlier than June 2022, subject to licenses, government approvals, and launch-provider availability. Earlier planned launches were cancelled.
- As of August 13, 2021, signed contracts, including firm orders and options, represented approximately $66 million of potential revenue across 25 companies. The contracts are generally cancellable for convenience and may not convert into revenue.
- The early-stage pipeline was approximately $1.7 billion in potential contracts, but the filing provides no assurance that negotiations will result in contracts or revenue.
- The company expected to issue approximately $1.5 million of customer refunds in the third quarter of 2021 related to cancelled 2021 launches.
- The SEC settlement was reached on a neither-admit-nor-deny basis for alleged antifraud violations. The company agreed to a $7 million civil penalty, of which $2 million had been paid and $5 million was payable within one year.
- The National Security Agreement requires divestment by certain former foreign holders and imposes restrictions and compliance requirements affecting facilities, contracts, personnel, vendors, and operations.
- Key risks include technology development and testing, launch and mission failures, regulatory and export-control approvals, CFIUS and National Security Agreement compliance, customer cancellations, capital needs, supplier concentration, intellectual-property protection, COVID-19 effects, litigation, and the ability to convert backlog into revenue.
- Two putative stockholder class actions were filed alleging that disclosures concerning the proposed business combination omitted material information. The company stated that it believes it has viable defenses and intends to defend the cases.
- The company appointed Armanino LLP as its independent registered public accounting firm and dismissed WithumSmith+Brown, PC; the filing reports no disagreements or reportable events with Withum.
Important Facts for Investors to Verify
- Verify the amount and timing of post-closing cash after transaction costs, the $40 million repurchase payment, redemptions, and other closing adjustments.
- Verify whether Momentus obtained required FAA and other governmental approvals and whether the first launch occurred on or after the projected June 2022 date.
- Reconcile future reported results to the reverse-recapitalization accounting treatment and distinguish operating performance from fair-value gains on SAFE notes and warrants.
- Monitor cash burn, additional financing requirements, the $25 million term loan maturity or extension, and compliance-related spending under the National Security Agreement.
- Assess the collectability and cancellation risk of the approximately $66 million contract backlog and the conversion probability of the approximately $1.7 billion pipeline.
- Track the SEC settlement balance, related litigation, customer refunds, launch-deposit impairments, and any further regulatory or government actions.