The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with our audited
consolidated financial statements and the notes related thereto which are
included in "Item 8. Consolidated Financial Statements and Supplementary Data"
of this Annual Report on Form 10-K/A. Certain information contained in the
discussion and analysis set forth below includes forward-looking statements. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those set
forth under "Special Note Regarding Forward-Looking Statements," "Item 1A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K/A.
Overview
We are a blank check company incorporated as a Delaware corporation and formed
for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination
("Business Combination") with one or more businesses. We intend to effectuate
our initial Business Combination using cash from the proceeds our initial public
offering ("Initial Public Offering") and the private placement of the placement
units ("Placement Units"), the proceeds of the sale of our shares in connection
with our initial Business Combination (pursuant to backstop agreements we may
enter into), shares issued to the owners of the target, debt issued to banks or
other lenders or the owners of the target, or a combination of the foregoing.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete our initial
Business Combination will be successful.
Proposed Business Combination with Momentus
On October 7, 2020, we entered into the Merger Agreement with First Merger Sub,
Second Merger Sub and Momentus. The Merger Agreement, the Mergers and the other
transactions contemplated by the Merger Agreement are referred to herein as the
"Proposed Transaction".
Pursuant to the Merger Agreement, the aggregate merger consideration payable to
the equityholders of Momentus will be paid in equity consideration equal to
$1,131,000,000, minus Momentus' indebtedness for borrowed money as of the
Closing, plus the amount of Momentus' cash and cash equivalents (excluding
restricted cash as determined in accordance with GAAP, any cash being held on
behalf of Momentus' customers and any security deposits for leases) as of the
Closing, plus the aggregate exercise price of all outstanding options and
warrants (the "Merger Consideration"). The Merger Consideration payable to the
stockholders of Momentus will be paid in shares of newly issued Class A common
stock of SRAC, with a deemed value of $10 per share. In addition, SRAC will pay
off, or cause to be paid off, on behalf of Momentus and in connection with the
Closing, Momentus' outstanding indebtedness for borrowed money.
In connection with the Proposed Transaction, each share of Momentus' capital
stock (subject to limited exceptions) will be cancelled and automatically deemed
for all purposes to represent the right to receive a portion of the Merger
Consideration in accordance with Momentus' organizational documents. In
addition, the Merger Consideration that is paid with respect to any shares of
Momentus' capital stock that is subject to any vesting restrictions or other
conditions shall continue to be subject to such vesting restrictions and
conditions after the Closing.
Each option of Momentus that is outstanding and unexercised immediately prior to
the Closing (whether vested or unvested) will be automatically assumed by SRAC
and converted into an option to acquire an adjusted number of shares of Class A
common stock at an adjusted exercise price per share and will continue to be
governed by substantially the same terms and conditions (including vesting and
exercisability terms) as were applicable to the corresponding former option.
50
Each warrant to purchase shares of capital stock of Momentus that is outstanding
and unexercised immediately prior to the Closing will be automatically converted
into a warrant to acquire an adjusted number of shares of Class A common stock
at an adjusted exercise price per share and will continue to be governed by
substantially the same terms and conditions (including applicable vesting
conditions) as were applicable to the corresponding former warrant.
Consummation of the Proposed Transaction is subject to customary closing
conditions for special purpose acquisition companies, including the following
conditions to each party's obligations, among others: (a) approval by SRAC's
stockholders and Momentus' stockholders, (b) SRAC having at least $5,000,001 of
net tangible assets as of the effective time of the consummation of the Mergers,
and (c) the approval of the listing of the shares of Class A common stock to be
issued in connection with the Closing on The Nasdaq Stock Market LLC and the
effectiveness of a Registration Statement on Form S-4. The Merger Agreement may
be terminated under certain customary and limited circumstances prior to the
consummation of the Mergers.
On October 7, 2020, we entered into Subscription Agreements with certain
investors pursuant to which the investors have agreed to purchase an aggregate
of 17,500,000 shares of Class A common stock in a private placement for $10.00
per share ("Private Placement"). The proceeds from the Private Placement will be
partially used to fund the Repurchase and for general working capital purposes
following the closing. The closing of the transactions contemplated by the
Subscription Agreements is contingent upon, among other customary closing
conditions, the substantially concurrent consummation of the Proposed
Transaction.
Concurrently with the execution of the Merger Agreement, PML, SRAC and Momentus
entered into a Repurchase Agreement pursuant to which, amongst other things,
SRAC has agreed to repurchase a certain number of shares of Class A common stock
from PML, at a purchase price of $10.00 per share, immediately following the
Closing (the "Repurchase"). The Repurchase is contingent on the amount of
available cash SRAC has at the Closing from (a) the Private Placement (and any
alternative financing arranged by SRAC and Momentus in the event the Private
Placement becomes unavailable) and (b) the funds in SRAC's trust account (after
taking into account payments required to satisfy SRAC's stockholder
redemptions), after further deducting the amount of SRAC's transaction expenses
and Momentus' transaction expenses ("Net Proceeds") being in excess of $265
million. If Net Proceeds exceed $265,000,000 but are less than $280,000,000, the
number of shares of Class A common stock subject to the Repurchase will be equal
to the amount by which Net Proceeds exceed $250 million, divided by $10.00. In
the event Net Proceeds are in excess of $280,000,000, the number of shares of
Class A common stock subject to the Repurchase will be equal to
$30,000,000, divided by $10.00. At the closing of the Repurchase, SRAC will be
entitled to deduct from such cash payment an amount equal to 3.3% of such cash
payment (representing PML's obligation to pay Momentus a portion of its
transaction expenses).
For additional information regarding the Proposed Transaction, Momentus, the
Merger Agreement, the Subscription Agreements, the Repurchase Agreement and the
other agreements entered into in connection with the Proposed Transaction,
including risk and uncertainties with respect to Momentus and the parties'
ability to consummate the Proposed Transaction, see the Registration Statement
on Form S-4, including a proxy statement/consent solicitation
statement/prospectus included therein, initially filed by SRAC with the SEC on
November 2, 2020, as subsequently amended.
Results of Operations (As Restated)
We have neither engaged in any operations nor generated any revenues to date.
Our only activities since inception have been organizational activities and
those necessary to prepare for our Initial Public Offering, described below,
identifying a target for our initial Business Combination and we do not expect
to generate any operating revenues until after completion of our initial
Business Combination. We generate non-operating income in the form of interest
income on marketable securities held in the Trust Account. We incur expenses as
a result of being a public company (for legal, financial reporting, accounting
and auditing compliance), as well as for due diligence expenses in connection
with completing our initial Business Combination, including the Proposed
Transaction with Momentus.
51
For the year ended December 31, 2020, we had net loss of $42,986,163, which
consists of operating costs of $3,720,975, a change in the fair value of warrant
liabilities of $40,220,713, and a provision for income taxes of $178,866, offset
by interest income on marketable securities held in the Trust Account of
$1,134,391.
For the three months ended September 30, 2020, we had net loss of $4,866,923,
which consists of operating costs of $223,942, a change in the fair value of
warrant liabilities of $4,702,313, and a provision for income taxes of $2,209,
offset by interest income on marketable securities held in the trust account
(the "Trust Account") of $61,541.
For the nine months ended September 30, 2020, we had net loss of $2,435,680,
which consists of operating costs of $776,516, a change in the fair value of
warrant liabilities of $2,566,913, and a provision for income taxes of $179,405,
offset by interest income on marketable securities held in the Trust Account of
$1,087,154.
For the three months ended June 30, 2020, we had net income of $1,222,072, which
consists of interest income on marketable securities held in the Trust Account
of $355,824 and a change in the fair value of warrant liabilities of $1,185,700,
offset by operating costs of $315,695 and a provision for income taxes of
$3,757.
For the six months ended June 30, 2020, we had net income of $2,431,243, which
consists of interest income on marketable securities held in the Trust Account
of $1,025,613 and a change in the fair value of warrant liabilities of
$2,135,400, offset by operating costs of $552,574 and a provision for income
taxes of $177,196.
For the three months ended March 31, 2020, we had net income of $1,209,171,
which consists of interest income on marketable securities held in the Trust
Account of $669,789 and a change in the fair value of warrant liabilities of
$949,700, offset by operating costs of $236,879 and a provision for income taxes
of $173,439.
For the period from May 28, 2019 (date of inception) through December 31, 2019,
we had net income of $5,343,820, which consists of interest income on marketable
securities held in the trust account of $346,011 and a change in the fair value
of warrant liabilities of $6,139,150, offset by operating costs of $1,093,774
and a provision for income taxes of $47,567.
Liquidity and Capital Resources (As Restated)
On November 13, 2019, we consummated our Initial Public Offering of 17,250,000
Units, which included the full exercise by the underwriter of the over-allotment
option to purchase an additional 2,250,000 Units, at $10.00 per Unit, generating
gross proceeds of $172,500,000. Simultaneously with the closing of our Initial
Public Offering, we consummated the sale of 545,000 Placement Units to the
sponsor and Cantor at a price of $10.00 per Placement Unit, generating gross
proceeds of $5,450,000.
Following our Initial Public Offering, the exercise of the over-allotment option
and the sale of the Placement Units, a total of $172,500,000 was placed in the
Trust Account. We incurred $10,924,857 in transaction costs, including
$3,450,000 of underwriting fees, $6,900,000 of deferred underwriting fees and
$574,857 of other offering costs.
For the year ended December 31, 2020, cash used in operating activities was
$1,751,026. Net loss of $42,986,163 was impacted by interest earned on
marketable securities held in the Trust Account of $1,134,391, a change in the
fair value of warrant liabilities of $40,220,713, and changes in operating
assets and liabilities, which provided $2,148,815 of cash from operating
activities.
For the nine months ended September 30, 2020, cash used in operating activities
was $1,161,611. Net loss of $2,435,680 was offset by interest earned on
marketable securities held in the Trust Account of $1,087,154, a change in the
fair value of warrant liabilities of $2,566,913, and changes in operating assets
and liabilities, which used $205,690 of cash from operating activities.
For the six months ended June 30, 2020, cash used in operating activities was
$984,160. Net income of $2,431,243 was offset by interest earned on marketable
securities held in the Trust Account of $1,025,613, a change in the fair value
of warrant liabilities of $2,135,400, and changes in operating assets and
liabilities, which used $254,390 of cash from operating activities.
For the three months ended March 31, 2020, cash used in operating activities was
$227,767. Net income of $1,209,171 was offset by interest earned on marketable
securities held in the Trust Account of $669,789, a change in the fair value of
warrant liabilities of $949,700, and changes in operating assets and
liabilities, which provided $182,551 of cash from operating activities.
For the period from May 28, 2019 (inception) through December 31, 2019, cash
used in operating activities was $356,959. Net income of $5,343,820 was offset
by interest earned on marketable securities held in the trust account of
$346,011, a change in the fair value of warrant liabilities of $6,139,150,
transaction costs allocable to warrant liabilities of $857,689, and changes in
operating assets and liabilities, which used $73,307 of cash from operating
activities.
As of December 31, 2020, we had cash and marketable securities in the Trust
Account of $173,107,749. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account (less deferred underwriting commissions) to complete our initial
Business Combination. We may withdraw interest to pay taxes. During the year
ended December 31, 2020, we withdrew $872,653 of interest income from the Trust
Account principally to pay for federal and state income taxes. To the extent
that our capital stock or debt is used, in whole or in part, as consideration to
complete our initial Business Combination, the remaining proceeds held in the
Trust Account will be used as working capital to finance the operations of the
target business or businesses, make other acquisitions and pursue our growth
strategies.
52
As of December 31, 2020, we had cash of $214,811 outside of the Trust Account.
We intend to use the funds held outside the Trust Account primarily to identify
and evaluate target businesses, perform business due diligence on prospective
target businesses, travel to and from the offices, plants or similar locations
of prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete our initial Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with our initial Business Combination, our sponsor or an affiliate of
our sponsor or certain of our officers and directors may, but are not obligated
to, loan us funds as may be required. If we complete our initial Business
Combination, we would repay such loaned amounts. In the event that our initial
Business Combination does not close, we may use a portion of the working capital
held outside the Trust Account to repay such loaned amounts but no proceeds from
our Trust Account would be used for such repayment. Up to $1,500,000 of such
loans may be convertible into units identical to the Placement Units, at a price
of $10.00 per unit at the option of the lender.
If our estimate of the costs of identifying a target business, undertaking
in-depth due diligence and negotiating our initial Business Combination are less
than the actual amount necessary to do so, we may have insufficient funds
available to operate our business prior to our initial Business Combination.
Moreover, we may need to obtain additional financing either to complete our
initial Business Combination or because we become obligated to redeem a
significant number of our Public Shares upon consummation of our initial
Business Combination, in which case we may issue additional securities or incur
debt in connection with such Business Combination. Subject to compliance with
applicable securities laws, we would only complete such financing simultaneously
with the completion of our initial Business Combination. If we are unable to
complete our initial Business Combination because we do not have sufficient
funds available to us, we will be forced to cease operations and liquidate the
Trust Account. In addition, following our initial Business Combination, if cash
on hand is insufficient, we may need to obtain additional financing in order to
meet our obligations.
In February 2021, Stable Road Capital and DIBALYD Investments, an affiliate of
Nala Investments, each loaned $300,000 to us pursuant to non-interest bearing
promissory notes in order to finance transaction and working capital costs. The
promissory notes mature upon the earlier of June 30, 2021 or the consummation of
our initial Business Combination.
Going Concern
In connection with our assessment of going concern considerations in accordance
with Financial Accounting Standard Board's Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," we have until August 13, 2021 or the extension date, as
applicable, to consummate a Business Combination. It is uncertain that we will
be able to consummate a Business Combination by this time. If a Business
Combination is not consummated by this date, there will be a mandatory
liquidation and subsequent dissolution. Management has determined that the
mandatory liquidation, should a Business Combination not occur, and potential
subsequent dissolution raises substantial doubt about our ability to continue as
a going concern.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 2020. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of our sponsor a monthly fee of $10,000 for office space, utilities
and administrative support provided to the Company. We began incurring these
fees on November 8, 2019 and will continue to incur these fees monthly until the
earlier of the completion of the initial Business Combination and the Company's
liquidation.
The underwriter is entitled to deferred commissions of $0.40 per unit of the
gross proceeds from the Units sold in the Initial Public Offering, or $6,900,000
in the aggregate. The deferred commissions will become payable to the
underwriter from the amounts held in the Trust Account solely in the event that
we complete a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies
The preparation of consolidated financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the consolidated financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following critical accounting
policies:
53
Warrant Liability
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC 815-40-15-7D under
which the warrants do not meet the criteria for equity treatment and must be
recorded as liabilities. Accordingly, we classify the warrants as liabilities at
their fair value and adjust the warrants to fair value at each reporting period.
This liability is subject to re-measurement at each balance sheet date until
exercised, and any change in fair value is recognized in our statement of
operations.
Class A Common Stock Subject to Possible Redemption
We accounts for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption is classified as a liability instrument and is
measured at fair value. Conditionally redeemable common stock (including common
stock that feature redemption rights that is either within the control of the
holder or subject to redemption upon the occurrence of uncertain events not
solely within our control) is classified as temporary equity. At all other
times, common stock is classified as stockholders' equity. Our Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly,
shares of Class A common stock subject to possible redemption are presented as
temporary equity, outside of the stockholders' equity section of our balance
sheets.
Net Income (Loss) per Common Share
We apply the two-class method in calculating earnings per share. Net income per
common share, basic and diluted for Class A redeemable common stock is
calculated by dividing the interest income earned on the Trust Account, net of
applicable taxes, by the weighted average number of shares of Class A redeemable
common stock outstanding for the period. Net loss per common share, basic and
diluted for and Class B non-redeemable common stock is calculated by dividing
net income (loss) adjusted for net income attributable to Class A redeemable
common stock, by the weighted average number of shares of Class B non-redeemable
common stock outstanding for the period presented.
Recent Accounting Pronouncements
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our consolidated financial statements.
© Edgar Online, source Glimpses
STAE ROAD 
