Momentus (MNTS) - 2022 Q4 - Annual Report

PART I Business Overview Momentus Inc. provides 'last mile' satellite transportation and in-orbit services using Vigoride OSVs with water plasma propulsion, holding $33 million in backlog and conducting test missions - Momentus Inc. offers 'last mile' satellite transportation, payload-hosting, on-orbit satellite refueling, inspection, maintenance, de-orbiting, and debris removal services[29] - The company's primary vehicle, Vigoride, is designed for fast, versatile, and cost-effective 'last mile' transportation and infrastructure services in LEO[31] - Momentus has signed contracts for approximately $33 million in backlog as of February 28, 2023, with 18 companies across 12 countries[32][77] - The company's water plasma propulsion technology offers a competitive advantage through its balance of fuel efficiency and thrust, utilizing water as a safer and more efficient propellant[52][53][54] - Momentus conducted its inaugural Vigoride test mission in 2022, began its second in January 2023, and plans two more in 2023, pending approvals[31][48] - Competitive advantages include standardized modular vehicles, unique patent-pending water plasma propulsion, a mission-driven strategy, launch provider compatibility, strong relationships with providers like SpaceX, and an experienced team[78] - Momentus is subject to regulations from the FCC, NOAA, FAA, and stringent U.S. export and import control laws (ITAR, EAR)[81][82][83][84] - The company entered a National Security Agreement (NSA) in June 2021, requiring divestment of foreign-controlled interests and imposing compliance measures and costs to protect national security[90][91] Risk Factors Momentus faces significant risks including capital needs, technology development challenges, intense competition, regulatory hurdles from the NSA and export controls, and ongoing litigation - The company has a limited history of delivering customer satellites and experienced anomalies in initial missions, potentially harming its reputation and financial condition[96][97][102] - Momentus requires substantial additional funding for its long-term business plan, with current cash and cash equivalents of $61.1 million as of December 31, 2022, expected to last at least 12 months[111][414] - Successful development and validation of satellite vehicles and water plasma propulsion technology are crucial, facing many uncertainties and potential delays[117][103] - Failure to obtain timely governmental licenses and approvals (FCC, FAA, NOAA) could materially adversely affect financial condition and backlog[105][108] - Momentus operates in highly competitive industries with larger competitors, facing risks of price reduction and slower market growth for in-space infrastructure services[120][126] - The company's $33 million backlog (as of Feb 28, 2023) is subject to customer cancellations and may not convert into expected revenue, posing significant customer concentration risk[127][129][335][336] - Compliance with the National Security Agreement (NSA) incurs significant costs and restrictions, with potential monetary penalties of $100,000 per day (up to $1,000,000 per breach) for non-compliance[185][186] - The NSA-appointed Security Director has substantial authority over business decisions, including blocking or terminating contracts, which could materially affect operations[191][192] - Momentus is subject to stringent U.S. export and import control laws (ITAR, EAR), with past self-reported violations and ongoing risks of penalties or operational restrictions[232][234][235] - The company is involved in substantial litigation, including securities class actions and shareholder derivative actions, potentially resulting in significant legal expenses and liabilities[218][219][222][223][224][225][226][227] Unresolved Staff Comments The company has no unresolved staff comments to report - No unresolved staff comments[283] Properties Momentus leases an approximately 65,000-square-foot facility in San Jose, California, which serves as its headquarters, propulsion laboratory, and Vigoride assembly and test center, with the lease expiring in February 2028 - Momentus' primary facility is a 65,000-square-foot leased space in San Jose, California[93][284] - The facility serves as the company's headquarters, propulsion laboratory, and Vigoride assembly and test center[93] - The lease for the primary facility expires in February 2028[284] Legal Proceedings The company is subject to various claims and lawsuits in the ordinary course of business, but currently does not consider any pending proceedings to be material to its business or likely to have a material adverse effect on future operating results, financial condition, or cash flows - Momentus is subject to various claims, lawsuits, and other legal and administrative proceedings in the ordinary course of business[286] - The company does not currently consider any pending claims, lawsuits, or proceedings to be material to its business or likely to have a material adverse effect on future operating results, financial condition, or cash flows[286] - Further disclosures related to legal proceedings are incorporated by reference from Note 14 to the Consolidated Financial Statements[287] Mine Safety Disclosures The company has no mine safety disclosures to report - No mine safety disclosures are applicable[288] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Momentus Inc.'s Class A common stock (MNTS) and warrants (MNTSW) began trading on Nasdaq on August 13, 2021, with 39 holders of record and no plans for cash dividends - Momentus Inc.'s Class A common stock (MNTS) and public warrants (MNTSW) began trading on the Nasdaq Global Market on August 13, 2021[290] - As of February 28, 2023, there were 39 holders of record for the company's common stock[291] Equity Compensation Plan Summary (as of December 31, 2022) | Category | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 7,509,540 | $1.21 | 3,783,559 | | Equity compensation plans not approved by security holders | 2,828,110 | N/A | 1,083,552 | | Total | 10,337,650 | | 4,867,111 | - The company has no current plans to pay cash dividends on its common stock[292] - No issuer purchases of equity securities were made during the three months ended December 31, 2022[293] [Reserved] This item is reserved and not applicable to the report - This item is not applicable[295] Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Momentus' financial condition, operational results, Vigoride development, and water plasma propulsion, detailing mission impacts, backlog, liquidity, and critical accounting policies - Momentus offers 'last mile' satellite transportation, payload-hosting, on-orbit satellite refueling, inspection, maintenance, de-orbiting, and debris removal services[299] - The company's Vigoride 3 mission in May 2022 experienced anomalies but deployed seven of nine customer satellites; Vigoride 5, launched in January 2023, is in good health and commissioning[304][305][308][309] - As of February 28, 2023, Momentus has $33 million in cancellable backlog from 18 companies in 12 countries, with revenue realization subject to risks[301][335] - The company's water plasma propulsion technology is still in development and has not yet experimentally confirmed its ability to generate thrust in space, crucial for commercial viability[314] - Momentus aims to develop reusable vehicles by mid-decade, leveraging water as a safe and efficient propellant to lower costs and environmental impact[325] - The company incurred operating losses of $91.3 million in 2022 and $99.8 million in 2021, expecting increased operating expenses with scaling operations and R&D investment[109][398] Consolidated Statements of Operations (Years Ended December 31, 2022 and 2021) | (in thousands) | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Service revenue | $299 | $330 | $(31) | (9%) | | Cost of (reversal of) revenue | $26 | $(135) | $161 | (119%) | | Gross profit | $273 | $465 | $(192) | (41%) | | Research and development expenses | $41,721 | $51,321 | $(9,600) | (19%) | | Selling, general and administrative expenses | $49,827 | $48,905 | $922 | 2% | | Operating loss | $(91,275) | $(99,761) | $8,486 | (9%) | | Decrease in fair value of SAFE notes | $— | $209,291 | $(209,291) | (100%) | | Decrease in fair value of warrants | $5,185 | $37,330 | $(32,145) | (86%) | | Realized loss on disposal of asset | $(168) | $(17) | $(151) | N/A | | Interest income | $522 | $2 | $520 | N/A | | Interest expense | $(5,262) | $(14,229) | $8,967 | (63%) | | SEC settlement | $— | $(7,000) | $7,000 | (100%) | | Litigation settlement, net | $(4,500) | $— | $(4,500) | N/A | | Other income (expense) | $54 | $(4,960) | $5,014 | (101%) | | (Loss) income before income taxes | $(95,444) | $120,656 | $(216,100) | (179%) | | Income tax expense | $— | $2 | $(2) | (100%) | | Net (loss) income | $(95,444) | $120,654 | $(216,098) | (179%) | - Net cash used in operating activities was $87.9 million in 2022, primarily due to headcount, R&D, professional fees, and legal expenses[416] - The company's cash and cash equivalents were $61.1 million as of December 31, 2022, anticipated to support operations for at least 12 months[414] - Momentus completed a Registered Direct Offering on February 27, 2023, raising $10.0 million, which triggered a $10.0 million liability under co-founder stock repurchase agreements[345][360] Quantitative and Qualitative Disclosures about Market Risk Momentus is exposed to market risks, including interest rate risk and foreign currency risk, though an immediate 10% change in interest rates would not materially affect cash and cash equivalents due to their short-term, low-risk profile - The company's market risk exposure primarily stems from interest rates and foreign currency fluctuations[464] - An immediate 10% change in interest rates would not materially affect the fair market value of cash and cash equivalents due to their short-term, low-risk profile[466] - The Term Loan bears interest at a fixed rate, making it unaffected by changes in interest rates[467] - Foreign currency transactions were not material for 2022 and 2021, as most cash receipts and expenses are in U.S. dollars[468] Financial Statements and Supplementary Data This section presents Momentus Inc.'s audited consolidated financial statements for 2022 and 2021, including balance sheets, statements of operations, equity, and cash flows, with comprehensive notes on accounting policies and financial items - The consolidated financial statements include the Balance Sheets, Statements of Operations, Statements of Stockholders' Equity (Deficit), and Statements of Cash Flows for the periods ended December 31, 2022 and 2021[473] Consolidated Balance Sheets (as of December 31, 2022 and 2021) | (in thousands) | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $61,094 | $160,036 | | Total current assets | $76,274 | $169,664 | | Total assets | $92,423 | $185,825 | | Total current liabilities | $43,226 | $38,867 | | Total non-current liabilities | $10,590 | $15,070 | | Total liabilities | $53,816 | $53,937 | | Total shareholders' equity | $38,607 | $131,888 | Consolidated Statements of Operations (Years Ended December 31, 2022 and 2021) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Service revenue | $299 | $330 | | Cost of (reversal of) revenue | $26 | $(135) | | Gross profit | $273 | $465 | | Research and development expenses | $41,721 | $51,321 | | Selling, general and administrative expenses | $49,827 | $48,905 | | Loss from operations | $(91,275) | $(99,761) | | Net (loss) income | $(95,444) | $120,654 | | Net (loss) income per share, basic | $(1.17) | $1.85 | | Net (loss) income per share, fully diluted | $(1.17) | $1.70 | Consolidated Statements of Cash Flows (Years Ended December 31, 2022 and 2021) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(87,887) | $(86,712) | | Net cash used in investing activities | $(733) | $(3,090) | | Net cash (used in) provided by financing activities | $(9,514) | $226,829 | | (Decrease) Increase in cash, cash equivalents and restricted cash | $(98,134) | $137,027 | - The company's financial statements are prepared in accordance with U.S. GAAP and reflect a reverse recapitalization from the August 2021 Business Combination[501][507] - Momentus is an 'emerging growth company' and has elected to take advantage of the extended transition period for new or revised financial accounting standards[519] - As of December 31, 2022, the company had federal and state net operating loss (NOL) carryforwards of $78.7 million and $6.5 million, respectively, with a full valuation allowance recorded against deferred tax assets[718][719] - Subsequent events include a February 2023 agreement to settle securities class actions for $8.5 million (partially insured) and a $10.0 million Registered Direct Securities Sale triggering a $10.0 million co-founder stock repurchase liability[730][731] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure matters - There are no changes in and disagreements with accountants on accounting and financial disclosure[733] Controls and Procedures Management concluded disclosure controls and procedures were effective as of December 31, 2022, with no material changes in internal control over financial reporting during the quarter, and no attestation report due to transition period - Management concluded that disclosure controls and procedures were effective as of December 31, 2022[735] - The annual report does not include a management's assessment or attestation report on internal control over financial reporting due to a transition period for newly public companies[736] - No material changes in internal control over financial reporting occurred during the three months ended December 31, 2022[737] Other Information The company has no other information to disclose under this item - No other information is reported[738] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This item is not applicable to the company - This item is not applicable[739] PART III Directors, Executive Officers and Corporate Governance Information regarding the company's directors, executive officers, and corporate governance, including guidelines, committee charters, and code of conduct, is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on directors, executive officers, and corporate governance is available on the company's website and will be set forth in the 2023 Proxy Statement[740] Executive Compensation Information concerning executive compensation is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on executive compensation will be set forth in the 2023 Proxy Statement[741] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, as well as related stockholder matters, is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on security ownership of certain beneficial owners and management and related stockholder matters will be set forth in the 2023 Proxy Statement[742] Certain Relationships and Related Transactions, and Director Independence Information concerning certain relationships, related party transactions, and director independence is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on certain relationships and related party transactions, and director independence will be set forth in the 2023 Proxy Statement[743] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information on principal accountant fees and services will be set forth in the 2023 Proxy Statement[744] PART IV Exhibits and Financial Statement Schedules This section provides a comprehensive list of exhibits and financial statement schedules filed as part of the Annual Report on Form 10-K, including various agreements, corporate documents, equity plans, and certifications - The section lists various exhibits, including sales agreements, merger agreements, corporate charters and bylaws, warrant agreements, equity incentive plans, employment agreements, the National Security Agreement, and certifications[745][746][747] Form 10-K Summary This item is not applicable to the report - This item is not applicable[748] SIGNATURES Signatures The Annual Report on Form 10-K is duly signed on March 7, 2023, by the Chief Executive Officer, John C. Rood, and the Interim Chief Financial Officer, Dennis Mahoney, along with other directors, pursuant to the requirements of the Securities Exchange Act of 1934 - The report is signed by John C. Rood, Chief Executive Officer, and Dennis Mahoney, Interim Chief Financial Officer, on March 7, 2023[751][755] - Additional directors also signed the report on March 7, 2023[755]