Momentus (MNTS) - 2023 Q2 - Quarterly Report

Part I - Financial Information This section presents Momentus Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, equity, cash flows, and detailed notes Item 1. Unaudited Condensed Consolidated Financial Statements This section presents Momentus Inc.'s unaudited condensed consolidated financial statements for the periods ended June 30, 2023, and December 31, 2022, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes on the company's operations, significant accounting policies, and financial position Condensed Consolidated Balance Sheets This section details the company's financial position, presenting assets, liabilities, and stockholders' equity at specific dates | ASSETS (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $21,298 | $61,094 | | Total current assets | $32,991 | $76,274 | | Total assets | $48,716 | $92,423 | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | June 30, 2023 | December 31, 2022 | | Total current liabilities | $28,956 | $43,226 | | Total liabilities | $35,959 | $53,816 | | Total stockholders' equity | $12,757 | $38,607 | | Total liabilities and stockholders' equity | $48,716 | $92,423 | - Cash and cash equivalents decreased significantly from $61.094 million at December 31, 2022, to $21.298 million at June 30, 2023, indicating substantial cash usage[16] - Total stockholders' equity declined from $38.607 million to $12.757 million, reflecting ongoing net losses[16] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, detailing revenues, expenses, and net loss | (in thousands, except per share data) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Service revenue | $1,705 | $50 | $1,727 | $50 | | Cost of revenue | $388 | $12 | $388 | $12 | | Gross profit | $1,317 | $38 | $1,339 | $38 | | Research and development expenses | $10,204 | $10,896 | $20,323 | $20,867 | | Selling, general and administrative expenses | $10,007 | $12,861 | $20,277 | $27,714 | | Loss from operations | $(18,894) | $(23,719) | $(39,261) | $(48,543) | | Net loss | $(18,835) | $(22,872) | $(39,660) | $(49,706) | | Net loss per share, basic | $(0.20) | $(0.28) | $(0.43) | $(0.62) | - Service revenue increased significantly to $1.705 million for the three months ended June 30, 2023, from $50 thousand in the prior year, and to $1.727 million for the six months ended June 30, 2023, from $50 thousand in the prior year[18] - Net loss decreased to $(18.835) million for the three months ended June 30, 2023, from $(22.872) million in the prior year, and to $(39.660) million for the six months ended June 30, 2023, from $(49.706) million in the prior year[18] Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity accounts, including common stock, additional paid-in capital, and accumulated deficit | (in thousands, except share data) | Balance, December 31, 2022 | Balance, June 30, 2023 | | :-------------------------------- | :------------------------- | :--------------------- | | Common stock – Class A (Shares) | 84,441,153 | 97,865,351 | | Common stock – Class A (Amount) | $1 | $1 | | Additional paid-in capital | $342,733 | $356,543 | | Accumulated deficit | $(304,127) | $(343,787) | | Total stockholders' equity | $38,607 | $12,757 | - Total stockholders' equity decreased from $38.607 million at December 31, 2022, to $12.757 million at June 30, 2023, primarily due to net losses[21] - Common stock shares outstanding increased from 84,441,153 to 97,865,351, driven by issuance upon exercise of stock options, vesting of RSUs, ESPP purchases, and exercise of Pre-Funded Warrants[21] Condensed Consolidated Statements of Cash Flows This section reports the cash generated and used by the company through its operating, investing, and financing activities | (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(33,228) | $(45,943) | | Net cash used in investing activities | $(15) | $(945) | | Net cash used in financing activities | $(7,018) | $(3,277) | | Decrease in cash, cash equivalents and restricted cash | $(40,261) | $(50,165) | | Cash, cash equivalents and restricted cash, end of period | $22,152 | $110,382 | - Net cash used in operating activities decreased to $33.228 million for the six months ended June 30, 2023, from $45.943 million in the prior year[25] - Net cash used in financing activities increased to $7.018 million, primarily due to loan principal repayments and stock repurchase liability payments, partially offset by proceeds from a securities offering[25] Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and additional information supporting the condensed consolidated financial statements Note 1. Nature of Operations This note describes Momentus Inc.'s business, including its in-space infrastructure services, recent mission successes, and going concern considerations - Momentus Inc. is a U.S. commercial space company offering in-space infrastructure services, including transportation, hosted payloads, and in-orbit services, utilizing its water plasma-based propulsion system[26] - The company successfully launched Vigoride 5 and Vigoride 6 OSVs in January and April 2023, respectively, with Vigoride 5 testing the Microwave Electrothermal Thruster (MET) and supporting customer payloads, and Vigoride 6 changing orbital inclination for six customer payloads[28][29][32] - Momentus is operating two spacecraft concurrently and plans its next Vigoride mission in early 2024, subject to licenses and approvals[34][35] - The company's financial position raises substantial doubt about its ability to continue as a going concern, with net losses of $18.8 million (Q2 2023) and $39.7 million (H1 2023), and cash and cash equivalents of $21.3 million as of June 30, 2023[38][40] Note 2. Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the company's financial statements - The interim unaudited condensed consolidated financial statements are prepared in accordance with GAAP and SEC rules, with certain disclosures condensed or omitted[44] - The Company is an 'emerging growth company' and has elected to take advantage of the extended transition period for new or revised financial accounting standards[49] - Revenue from transportation services is recognized at a point in time upon payload delivery, while in-orbit services revenue is recognized ratably over time[61][62] - Warrant liabilities are classified as Level 3 in the fair value hierarchy and valued using the Black-Scholes Option Pricing model, with changes recognized in the statements of operations[67][72] Note 3. Prepaids and Other Current Assets This note details the composition and changes in the company's prepaid expenses and other current assets | Prepaid and Other Current Assets (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Prepaid launch costs, current | $1,523 | $3,000 | | Prepaid research and development | $2,377 | $2,841 | | Prepaid insurance and other assets | $2,871 | $4,332 | | Total | $6,771 | $10,173 | - Total prepaids and other current assets decreased from $10.173 million at December 31, 2022, to $6.771 million at June 30, 2023[100] Note 4. Property, Machinery and Equipment, net This note provides information on the company's property, machinery, and equipment, including gross values, accumulated depreciation, and net book values | Property, Machinery and Equipment (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------------------------------- | :------------ | :---------------- | | Property, machinery and equipment, gross | $5,752 | $5,808 | | Less: accumulated depreciation | $(2,147) | $(1,792) | | Property, machinery and equipment, net | $3,605 | $4,016 | - Net property, machinery and equipment decreased from $4.016 million at December 31, 2022, to $3.605 million at June 30, 2023[101] - Depreciation expense was $0.4 million for the six months ended June 30, 2023, down from $0.5 million in the prior year period[101] Note 5. Intangible Assets, net This note details the company's intangible assets, primarily patents and intellectual property, including their gross and net values | Intangible Assets (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------- | :------------ | :---------------- | | Patents/Intellectual Property (Gross Value) | $485 | $461 | | Patents/Intellectual Property (Net Value) | $335 | $337 | - Net intangible assets (patents) remained relatively stable at $335 thousand as of June 30, 2023, compared to $337 thousand at December 31, 2022[102] - Amortization expense for intangible assets was $0.03 million for the six months ended June 30, 2023, a decrease from $0.08 million in the prior year period[102] Note 6. Leases This note provides information on the company's lease agreements, including lease terms and associated expenses - The Company leases office space in San Jose, California, with the lease expiring in February 2028, incurring approximately $11 million over the term[104] | Lease Expense (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--------------------------- | :----------------------------- | :----------------------------- | | Operating lease cost | $735 | $844 | | Variable lease expense | $259 | $291 | | Total lease expense | $994 | $1,135 | - Total lease expense decreased to $994 thousand for the six months ended June 30, 2023, from $1.135 million in the prior year period[106] Note 7. Accrued Liabilities This note details the various accrued liabilities of the company, including legal, compensation, and research and development expenses | Accrued Liabilities (in thousands) | June 30, 2023 | December 31, 2022 | | :--------------------------------- | :------------ | :---------------- | | Legal and other professional services | $3,204 | $3,128 | | Compensation expense | $1,897 | $3,584 | | Research and development projects | $1,532 | $981 | | Other accrued liabilities | $152 | $333 | | Total | $6,785 | $8,026 | - Total accrued liabilities decreased from $8.026 million at December 31, 2022, to $6.785 million at June 30, 2023, primarily due to a decrease in compensation expense[108] Note 8. Loan Payable This note provides information on the company's term loan, including outstanding amounts, accrued interest, and future maturity schedules - The Company has a Term Loan with $9.0 million gross payable and $0.2 million accrued interest as of June 30, 2023, with future scheduled maturities of $6.7 million for the remainder of 2023 and $2.3 million for 2024[113] - Interest expense amortization was $0.9 million for the six months ended June 30, 2023, down from $1.5 million in the prior year period, due to the effective interest method as the loan approaches maturity[112] Note 9. Stockholders' Equity This note details changes in stockholders' equity, including common stock issuances, warrant activity, and capital raising efforts - In February 2023, the Company issued 9,396,000 shares of Class A common stock, pre-funded warrants for 2,170,043 shares, and warrants for 11,566,043 shares, raising approximately $10.0 million gross proceeds[115][117] - The $10.0 million proceeds were used to satisfy a stock repurchase obligation to Co-Founders, triggered by cumulative capital raising exceeding $250 million[121][122] - As of June 30, 2023, the Company had public and private warrants outstanding to purchase 8,625,000 and 11,272,500 shares, respectively, related to the Business Combination, plus 11,566,043 additional warrants from the February 2023 offering[123][124] Note 10. Stock-based Compensation This note provides information on the company's stock-based compensation plans, including shares available for issuance and related expenses - The 2021 Equity Incentive Plan's evergreen provision increased shares available for issuance by 2,533,234 during the six months ended June 30, 2023[132] - Total stock-based compensation expense for the six months ended June 30, 2023, was $4.297 million, a decrease from $5.247 million in the prior year period[142] - As of June 30, 2023, unrecognized compensation cost for unvested RSUs was $21.1 million, expected to be recognized over a weighted-average period of 1.7 years[141] Note 11. Diluted Earnings Per Share This note explains the calculation of diluted earnings per share and the exclusion of anti-dilutive securities due to net losses - Due to net losses, all potential common shares (options, unvested stock units, warrants, and contingent Sponsor Earnout Shares) were excluded from diluted loss per share calculation as their effect would be anti-dilutive[148] | Potential Common Shares Excluded | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2023 | | :------------------------------- | :------------------------------- | :----------------------------- | | Options and unvested stock units outstanding | 14,552,254 | 7,397,561 | | Warrants outstanding | 31,463,543 | 31,463,543 | | Contingent Sponsor Earnout Shares | 1,437,500 | 1,437,500 | | Total | 47,453,297 | 40,298,604 | Note 12. Commitments and Contingencies This note outlines the company's future purchase obligations, legal proceedings, and other contingent liabilities - The Company's future unconditional purchase obligations total $16.292 million, with $15.752 million due in the remainder of 2023 and $540 thousand in 2024[149] - An agreement in principle was reached to settle the Securities Class Actions for $8.5 million, with $4.0 million expected from insurance proceeds, resulting in a net $4.5 million litigation settlement contingency recorded[151][152] - The Company continues to face multiple shareholder derivative actions and founder litigation, disputing allegations and vigorously defending against claims for indemnification and advancement of expenses[159][160][161][162][167][168] - Legal expenses related to CFIUS and SEC matters were $0.3 million for the six months ended June 30, 2023, down from $1.3 million in the prior year period[157] Note 13. Income Taxes This note explains the company's income tax position, including its effective tax rate and the reasons for a full valuation allowance on deferred tax assets - The Company's effective tax rate for the three and six months ended June 30, 2023 and 2022, was zero percent[176] - The zero effective tax rate is primarily due to certain nondeductible items, state and local income taxes, absence of current income tax, and a full valuation allowance for deferred tax assets[176] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Momentus Inc.'s financial condition and results of operations, highlighting its services, technology, mission successes, and financial challenges Overview This section introduces Momentus's in-space infrastructure services, technology, and contract backlog, along with recent mission achievements - Momentus offers in-space infrastructure services, including 'last mile' satellite transportation, payload-hosting, and future in-orbit services, targeting satellite operators and U.S. Government missions[179][180][181] - The company has signed contracts for approximately $32 million in backlog as of July 31, 2023, spanning 18 companies in 14 countries, though customers can cancel contracts by forfeiting deposits[182] - Momentus successfully completed initial on-orbit tests of its Microwave Electrothermal Thruster (MET) on the Vigoride 5 mission, demonstrating orbital velocity and altitude adjustments using water plasma propulsion[188][189] Services Overview This section describes Momentus's planned service offerings, including space transportation, hosted payloads, and future in-orbit servicing capabilities - Momentus plans to provide space transportation via a 'hub-and-spoke' model, hosted payload services with modular satellite systems, and future in-orbit servicing capabilities like inspection, refueling, and de-orbiting[194][197][198] - The company is also offering a modified Vigoride OSV as a satellite bus for commercial and government customers[199] Factors Affecting Our Performance This section discusses key factors influencing the company's performance, including technology development, mission success, and backlog conversion - Momentus' performance depends on the successful development and commercialization of its in-space transfer and service vehicles, particularly the water plasma propulsion technology (MET)[201][193] - The company plans its next Vigoride test mission in early 2024 and has secured launch service agreements with SpaceX through the end of 2024, but all missions are subject to licenses and government approvals[203][204][207] - Backlog decreased from $86 million (March 2021) to $32 million (July 2023) due to customer cancellations from mission delays, with 89% of current backlog concentrated among three providers[213][214][319] Recent Developments This section highlights recent corporate events, including a securities offering, executive appointments, and ongoing legal expenses - In February 2023, Momentus completed a securities offering, raising approximately $10.0 million gross proceeds, which were used to satisfy stock repurchase obligations to Co-Founders[217] - Eric Williams was appointed as the permanent Chief Financial Officer and principal accounting officer in April 2023[219] - The company continues to incur significant legal expenses related to CFIUS compliance and the NSA, with $0.3 million incurred for the six months ended June 30, 2023[222] Components of Results of Operations This section explains the key components of the company's financial results, including revenue recognition, cost of revenue, and research and development expenses - Service revenue is recognized upon satisfaction of performance obligations (payload delivery) or contract cancellation, or ratably over time for in-orbit services[227] - Cost of revenue primarily includes orbital service vehicle and third-party launch costs, with current vehicle design costs expensed as R&D until design is finalized for production[231] - Research and development expenses cover activities for developing existing and future vehicle technologies, including equipment, materials, labor, and launch costs for Vigoride vehicle testing[232] Results of Operations This section presents a comparative analysis of the company's financial performance for the three and six months ended June 30, 2023 and 2022 Comparison of Financial Results (Three Months Ended June 30) | (in thousands) | 2023 | 2022 | $ Change | % Change | | :------------- | :-------- | :-------- | :-------- | :------- | | Service revenue | $1,705 | $50 | $1,655 | 3310 % | | Gross profit | $1,317 | $38 | $1,279 | 3366 % | | R&D expenses | $10,204 | $10,896 | $(692) | (6 %) | | SG&A expenses | $10,007 | $12,861 | $(2,854) | (22 %) | | Net loss | $(18,835) | $(22,872) | $4,037 | (18 %) | Comparison of Financial Results (Six Months Ended June 30) | (in thousands) | 2023 | 2022 | $ Change | % Change | | :------------- | :-------- | :-------- | :-------- | :------- | | Service revenue | $1,727 | $50 | $1,677 | 3354 % | | Gross profit | $1,339 | $38 | $1,301 | 3424 % | | R&D expenses | $20,323 | $20,867 | $(544) | (3 %) | | SG&A expenses | $20,277 | $27,714 | $(7,437) | (27 %) | | Net loss | $(39,660) | $(49,706) | $10,046 | (20 %) | - Service revenue for both three and six months ended June 30, 2023, was primarily driven by Vigoride 5 and Vigoride 6 missions and customer deposit forfeitures[244][255] - Selling, general and administrative expenses decreased by $2.854 million (22%) for the three months and $7.437 million (27%) for the six months ended June 30, 2023, primarily due to reduced NSA/legal spending, executive turnover, and lower IT/corporate costs[248][258] Liquidity and Capital Resources This section discusses the company's cash position, cash flow activities, and its ability to meet short-term and long-term financial obligations - The Company's ability to continue as a going concern is in substantial doubt due to insufficient revenues, net losses of $39.7 million (H1 2023), and cash and cash equivalents of $21.3 million as of June 30, 2023[265][266] - Net cash used in operating activities was $33.2 million for the six months ended June 30, 2023, primarily for headcount, R&D, and legal/professional fees[270] - Net cash used in financing activities was $7.0 million, driven by $6.3 million in loan repayments and $10.0 million for stock repurchase liability, partially offset by $10.0 million from a securities offering[273] Critical Accounting Policies and Estimates This section identifies the accounting policies and estimates that require significant judgment and can materially impact the company's financial reporting - Key accounting policies include revenue recognition (point-in-time for transportation, ratable for in-orbit services), loss contingencies, deferred fulfillment and prepaid launch costs, contract liabilities, stock-based compensation, and income taxes[283][288][289][290][291][295] - Significant judgment is required for estimates such as fair value of stock-based payments (using Black-Scholes-Merton model) and valuation allowances against deferred tax assets[294][296] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses Momentus Inc.'s exposure to market risks, specifically interest rate risk and foreign currency risk, and concludes that these risks do not currently have a material impact on the company's financial position - The Company is exposed to market risks including changes in interest rates and inflation, but an immediate 10% change in interest rates would not materially affect the fair value of its cash and cash equivalents due to their short-term maturities[301][302] - The Term Loan indebtedness bears a fixed interest rate, making it unaffected by changes in interest rates[303] - There were no material foreign currency transactions for the three and six months ended June 30, 2023 and 2022, as a significant portion of cash receipts and expenses are in U.S. dollars[304] Item 4. Controls and Procedures This section details the evaluation of Momentus Inc.'s disclosure controls and procedures, concluding their effectiveness as of June 30, 2023, and reporting no material changes in internal control over financial reporting during the quarter - Management, with CEO and CFO participation, evaluated the effectiveness of disclosure controls and procedures as of June 30, 2023, and concluded they were effective at a reasonable assurance level[307] - No changes in internal control over financial reporting were identified during the fiscal quarter ended June 30, 2023, that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting[308] Part II - Other Information This section provides additional disclosures beyond financial statements, covering legal proceedings, risk factors, equity sales, and other corporate matters Item 1. Legal Proceedings This section refers to the detailed disclosures on legal proceedings provided in Note 12 of the condensed consolidated financial statements, which include information on securities class actions, CFIUS review, shareholder derivative litigation, SAFE note litigation, and founder litigation - Legal proceedings information is incorporated by reference from Note 12 of the condensed consolidated financial statements[310] Item 1A. Risk Factors This section updates the risk factors from the Annual Report on Form 10-K, emphasizing the risks associated with the company's limited history of satellite delivery, potential for mission setbacks, inability to convert backlog into revenue, and substantial doubt about its ability to continue as a going concern - The company has a limited history of delivering customer satellites, and setbacks in initial or future missions could materially harm its business and reputation[312][315] - Backlog of $32 million (as of July 31, 2023) is subject to cancellation by customers, and delays have already caused significant erosion from $86 million (March 2021)[317][319] - There is substantial doubt about the company's ability to continue as a going concern, which could adversely affect its share price, ability to raise capital, and relationships with stakeholders[320][321] - A workforce reduction in July 2023 (18 employees) was implemented to increase cash runway, with potential for further reductions if additional capital is not secured[322] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds were reported[325] Item 3. Defaults Upon Senior Securities This section indicates that there were no defaults upon senior securities during the reporting period - No defaults upon senior securities were reported[326] Item 4. Mine Safety Disclosures This section confirms that there are no mine safety disclosures to report - No mine safety disclosures were reported[327] Item 5. Other Information This section provides other relevant information, including the absence of Rule 10b5-1 trading plan adoptions or terminations by Section 16 officers and directors, and the authorization of letter agreements for accelerated equity award vesting upon a Change in Control to enhance employee retention - No adoption or termination of Rule 10b5-1 trading plans by Section 16 officers and directors occurred during the three months ended June 30, 2023[328] - The Compensation Committee authorized letter agreements for active, full-time employees to provide accelerated vesting of outstanding equity awards upon a Change in Control, aimed at enhancing employee retention[329] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including merger agreements, amendments to equity plans, certifications, and XBRL related documents - The exhibits include various merger agreements, amendments to the 2022 Inducement Equity Plan, a Form of Change in Control Letter Agreement, and certifications pursuant to the Sarbanes-Oxley Act[331] - XBRL (eXtensible Business Reporting Language) documents are also included as exhibits for interactive data filing[331] Signatures This section contains the required signatures for the Form 10-Q, confirming its submission by Momentus Inc.'s Chief Executive Officer and Chief Financial Officer - The report is signed by John Rood, Chief Executive Officer, and Eric Williams, Chief Financial Officer, on August 14, 2023[336]