Momentus Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Amounts below are in U.S. dollars; financial statement amounts are generally converted from thousands to millions. The August 12, 2021 business combination with Stable Road Acquisition Corp. was accounted for as a reverse recapitalization, so historical results represent Legacy Momentus.
Business context and results
Momentus is developing in-space transportation and related services using planned water-plasma propulsion vehicles. It had not completed a commercial customer launch by September 30, 2021. Management reported approximately $65 million of contract backlog, including options; contracts are generally cancellable and backlog may not become revenue.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Service revenue | $0.2m | $0 | $0.33m | $0 |
| Operating expenses | $21.1m | $9.4m | $75.5m | $21.2m |
| Operating loss | $20.7m | $9.4m | $75.1m | $21.2m |
| Net income (loss) | $(5.6)m | $(110.9)m | $123.4m | $(126.3)m |
| Operating cash flow | Not separately provided | Not separately provided | $(72.1)m | $(21.1)m |
The filing reports gross margin of $0.384 million for Q3 and $0.465 million for the nine-month period, despite revenue of $0.2 million and $0.33 million, respectively. The filing attributes the positive amounts to a reversal of prior loss-contract cost accruals; the reported cost-of-revenue presentation therefore does not yield a conventional gross margin percentage.
Financial position and liquidity
- Cash and cash equivalents were $178.1 million at September 30, 2021, versus $23.0 million at December 31, 2020; total current assets were $189.3 million and current liabilities $35.3 million.
- Total assets were $205.6 million, total liabilities $78.1 million, and stockholders’ equity $127.5 million, compared with a $289.5 million stockholders’ deficit at year-end 2020.
- Cash, cash equivalents and restricted cash totaled $179.2 million. Operating activities used $72.1 million and investing activities used $2.9 million in the first nine months; financing provided $230.7 million.
- The company received $247.3 million in gross proceeds in connection with the business combination and PIPE investment. It also paid $40 million to repurchase founders’ equity interests and incurred transaction costs.
- Term-loan principal of $25 million bears 12% stated annual interest; the loan’s net carrying amount was $17.6 million after unamortized discount and costs. Principal is due March 1, 2022, subject to the company’s option to repay over one or two years. The filing’s contractual-obligations table lists $27.75 million of principal and minimum interest payments due within one year.
- A $5 million balance of the SEC civil penalty was payable within one year. Contractual obligations totaled $59.8 million, including leases and purchase obligations.
Changes, unusual items and management outlook
- Nine-month net income was driven by a $209.3 million gain from the change in fair value of SAFE liabilities, which converted into equity at the business-combination closing. This non-operating accounting gain more than offset the $75.1 million operating loss; it should not be read as evidence of operating profitability.
- Research and development expense rose to $39.7 million for the nine months, from $13.8 million, reflecting vehicle development, increased staffing and subcontractor costs, and launch-cost impairment. Selling, general and administrative expense rose to $35.8 million from $7.5 million, including legal costs and stock-based compensation.
- The filing describes an $8.7 million impairment of prepaid launch costs after the FAA denied a payload review and a launch provider terminated two 2021 launch agreements. A later note says $2.7 million might be recoverable following a new launch schedule; no adjustment was recorded by the filing date.
- The company settled an SEC matter for a $7 million civil penalty ($2 million paid and $5 million due later) and recorded a $7 million expense. It also faces consolidated securities class actions alleging disclosure violations; outcomes and potential losses are uncertain.
- A National Security Agreement (NSA) imposes security requirements and operating restrictions, with potential liquidated damages of up to $1 million per breach. Management reported $9.6 million of legal expenses related to SEC and CFIUS matters for the nine months and expected further NSA-related costs.
- Management said business-combination funding alleviated the previously identified substantial doubt about going concern for the next 12 months. It also cautioned that spending could exceed estimates and additional financing may be needed.
- Management anticipated a first Vigoride customer launch as early as June 2022, subject to government licenses and approvals and successful vehicle readiness. A launch-services agreement signed in October 2021 reserved space targeting that date. Management expected expenses to increase as development, manufacturing, staffing and public-company costs grow.
- Management stated disclosure controls and procedures were effective at the reasonable-assurance level as of September 30, 2021.
Key investor verification points
- Confirm progress toward required government approvals, NSA compliance, vehicle readiness and the targeted June 2022 launch; the filing gives no assurance the launch will occur.
- Assess cash burn against the $178.1 million cash balance, the March 2022 loan maturity and the company’s stated potential need for additional financing.
- Evaluate the quality and conversion prospects of the approximately $65 million backlog, given customer cancellation rights, options and limited customer deposits.
- Separate operating performance from fair-value accounting: nine-month reported net income chiefly reflected the SAFE-liability remeasurement gain, while the company incurred substantial operating losses and cash outflows.
- Track the launch-cost impairment and potential $2.7 million recovery, SEC penalty balance, securities litigation, NSA-related obligations and continuing legal and compliance costs.