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Loan Payable
 12 Months Ended
Dec. 31, 2024
Debt Disclosure [Abstract]  
Loan Payable
Note 8. Loan Payable
December Loan
On December 13, 2024, the Company and J.J. Astor & Co. entered into a loan agreement (the “December Loan”) pursuant to which the Company borrowed $2.0 million and paid debt issuance costs of $0.3 million. The December Loan had a maturity date of September 19, 2025, and was payable in 40 weekly installments of $68 thousand. The December Loan could be prepaid at any time on or before January 13, 2025, for $2.4 million and at any time thereafter through the maturity date for $2.7 million.
Amounts borrowed under the December Loan are secured by a lien on substantially all of the assets of the Company. Upon event of default, amounts owing under the December Loan are convertible into shares of Class A common stock at a conversion price of $5.92 per share prior to May 5, 2025, and thereafter the conversion price will be reduced to 80% of the average of the four lowest volume weighted average closing prices of the Class A common stock during the 20 trading days immediately prior to conversion.
In addition, in connection with the December Loan, the Company agreed to issue J.J. Astor & Co. warrants to purchase up to 28,572 shares of Class A common stock with an exercise price of $5.92 per share (the “J.J. Astor Warrants”). The J.J. Astor Warrants had a relative value of $0.1 million which was as accounted for as an additional debt issuance cost for the December Loan. The warrants are fully vested, and expire five years from the date of issuance. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 5.01 years, stock price of $5.92, exercise price of $5.92, volatility of 100.00%, risk-free rate of 4.25%, and no forfeiture rate.
On December 18, 2024, the Company prepaid $2.4 million in order to extinguish the December Loan. The Company recognized a $0.8 million loss on extinguishment in the consolidated statements of operations related to the December Loan.
In connection with the December Loan, the Company agreed to issue J.J. Astor & Co. a second warrant that is exercisable and issuable upon certain customary events of default to purchase up to 285,715 shares of Class A common stock with an exercise price per share equal to the closing price of the Class A common stock as traded in the applicable trading market on the date of the event of default, subject to adjustment (the “Default Warrants”). The Default Warrants were an embedded derivative that required bifurcation and recognition as a derivative liability (the “Default Warrant Derivative”). The Default Warrant Derivative instrument is recorded at fair value and marked‑to‑market each reporting period with changes in fair value being reflected in earnings. As of the issuance date, and immediately prior to extinguishment of the December Loan on December 18, 2024, the Default Warrant Derivative was valued at zero.
Convertible Promissory Notes
On July 12, 2024, the Company and Space Infrastructure Ventures (“SIV”) entered into a secured convertible promissory note (the “July Convertible Note”) pursuant to which the Company borrowed $2.3 million as of September 26, 2024. The July Convertible Note bears an annual interest rate of 15%. Principal on the July Convertible Note is to be re-paid in four equal payments on a quarterly basis, commencing on December 1, 2024, and maturing on September 1, 2025, at which time all accrued interest is due.
Amounts borrowed under the July Convertible Note are secured by a lien on substantially all of the assets of the Company. In lieu of cash payments of accrued interest, SIV, in its sole discretion, may elect to receive shares of Class A common stock at a conversion price of $7.45 per share. On the maturity date, subject to the satisfaction of applicable legal and regulatory conditions, all outstanding obligations under the July Convertible Note automatically convert into Class A common stock at the conversion price.
The July Convertible Note requires SIV’s consent to take certain actions, such as increasing compensation, purchasing assets, extending financing, making capital expenditures, repaying debts outside the ordinary course of business or investing in any entity or enterprise.
The July Convertible Note can be prepaid in full at any time, subject to a prepayment penalty fee of 10%. The July Convertible Note will accelerate and become immediately due upon the occurrence of certain customary events of default, including failure to pay amounts owing when due and/or certain events involving a discontinuation of our business or certain types of proceedings involving insolvency, bankruptcy, receivership and the like, or a change of control of Momentus. Contingent interest related to these events of default was an embedded derivative that required bifurcation and recognition as a derivative liability (“Default Interest Derivative”). The Default Interest Derivative instrument is recorded at fair value and marked-to-market each reporting period with changes in fair value being reflected in earnings. As of both the issuance date and December 31, 2024, the Default Interest Derivative was valued at zero.
On October 24, 2024, the Company and SIV entered into a secured convertible promissory note (the “October Convertible Note”) pursuant to which the Company borrowed $3.0 million in two tranches, consisting of (i) an initial loan in the principal amount of $2.0 million, and (ii) up to an additional $1.0 million in principal amount which could be borrowed from December 2, 2024 through February 14, 2025. Borrowings under the October Convertible Note bear interest at 15% per annum. The October Convertible Note has a maturity date of October 24, 2025, at which time all principal and accrued interest is due. The Company paid debt issuance costs of $0.1 million in relation to borrowing $2.0 million under the first tranche of the October Convertible Note.
As a third-party debt issuance cost related to the October Convertible Note, the Company agreed to issue an investor warrants to purchase up to 357,143 shares of Class A common stock with an exercise price of $8.05 per share (the “Investor Warrants”). The Investor Warrants had a fair value of $2.0 million which was as accounted for as debt issuance costs allocated between two tranches of the October Convertible Note; $1.3 million was allocated to the first tranche and $0.7 million was allocated to the second tranche. The investor may not exercise the Investor Warrants prior to April 24, 2025, and the Investor Warrants will expire April 24, 2030. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 5.50 years, stock price of $7.41, exercise price of $8.05, volatility of 97.50%, risk-free rate of 4.05%, and no forfeiture rate.
Amounts borrowed under the October Convertible Note are secured by a lien on substantially all of the assets of the Company. At any time after the date that is six months after the original issuance date of the October Convertible Note, SIV, in its sole discretion, may convert some or all of the outstanding obligations under the October Convertible Note into shares of Class A common stock at a conversion price of $7.41 per share.
In addition, in connection with the first tranche of the October Convertible Note, the Company agreed to issue SIV warrants to purchase up to 269,950 shares of Class A common stock with an exercise price of $7.41 per share (the “October SIV Warrants”). The October SIV Warrants had a relative value of $0.8 million which was as accounted for as an additional debt issuance cost for the October Convertible Note. SIV may not exercise the October SIV Warrants prior to April 24, 2025, and the October SIV Warrants will expire April 24, 2030. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 5.44 years, stock price of $8.82, exercise price of $7.41, volatility of 97.50%, risk‑free rate of 4.33%, and no forfeiture rate.
Neither the October Convertible Note nor the October SIV Warrants can be converted or exercised if it would cause the aggregate number of shares of Class A common stock beneficially owned by SIV to exceed 9.99% of the number of shares of Class A common stock outstanding immediately after giving effect to the conversion or exercise, as applicable. Conversion of the October Convertible Note and exercise of the October SIV Warrants is also subject to compliance with applicable Nasdaq rules, and if shareholder approval is required the Company will use commercially reasonable efforts to obtain such approval.
The October Convertible Note requires SIV’s consent to take certain actions, such as purchasing assets outside the ordinary course of business, extending financing, making capital expenditures in excess of $0.1 million, repaying debts outside the ordinary course of business or investing in any entity or enterprise.
The October Convertible Note can be prepaid in full at any time, subject to a prepayment fee of 10%. The October Convertible Note will accelerate and become immediately due upon the occurrence of certain customary events of default, including failure to pay amounts owing when due and/or certain events involving a discontinuation of our business or certain types of proceedings involving insolvency, bankruptcy, receivership and the like, or a change of control of the Company. Contingent interest related to these events of default was an embedded derivative that required bifurcation and recognition as a derivative liability (“Default Interest Derivative”). The Default Interest Derivative instrument is recorded at fair value and marked-to-market each reporting period with changes in fair value being reflected in earnings. As of both the issuance date and December 31, 2024, the Default Interest Derivative was valued at zero.
In November 2024, the Company amended the July Convertible Note and the October Convertible Note (the “November Amendment”). The November Amendment, among other things, accelerated the borrowing date for the second tranche of the October Convertible Note, for which the Company immediately borrowed the $1.0 million available under the second tranche, and provided that owed under both the July Convertible Note and the October Convertible Note may be converted to Class A common stock at any time. The November Amendment was accounted for as an extinguishment of both the July Convertible Note and the October Convertible Note. The Company recognized a $3.2 million loss on extinguishment in the consolidated statements of operations related to the November Amendment, resulting from the difference between the carrying value and reacquisition price of the July Convertible Note and the first tranche of the October Convertible Note. The Company recognized an aggregate debt premium of $1.2 million related to the July Convertible Note and the first tranche of the October Convertible Note as a result. Furthermore, the Company recognized an additional $0.3 million loss on extinguishment in the consolidated statements of operations for a debt premium resulting from the difference between the proceeds received and fair value of the second tranche of the October Convertible Note.
In addition, in connection with the November Amendment, the Company agreed to issue SIV warrants to purchase up to 193,273 shares of Class A common stock with an exercise price of $7.41 per share (the “December SIV Warrants”). The December SIV Warrants had a relative value of $0.5 million which was as accounted for as an additional debt issuance cost for the second tranche of the October Convertible Note. SIV may not exercise the December SIV Warrants prior to April 24, 2025, and the December SIV Warrants will expire April 24, 2030. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 5.38 years, stock price of $7.84, exercise price of $7.41, volatility of 97.50%, risk-free rate of 4.08%, and no forfeiture rate.
The Company capitalized cash debt issuance costs of $0.1 million in relation to the November Amendment. The debt issuance costs, including $0.7 million allocated from the Investor Warrants and $0.5 million related to the December SIV Warrants, and $0.3 million debt premium for the second tranche of the October Convertible Note are being amortized over the term of the October Convertible Note using an effective interest rate of 348%. Debt premiums of $0.5 million and $0.7 million related to the July Convertible Note and the first tranche of the October Convertible Note, respectively, are being amortized over their respective debt terms using effective interest rates of (37)% and (18)%, respectively.
As of December 31, 2024, the aggregate unamortized discount and premium related to July Convertible Note and the October Convertible Note was $1.2 million and $1.3 million, respectively. The total loan payable consisted of convertible promissory note principal of $4.7 million and accrued interest of $0.1 million. The convertible notes have future scheduled maturities of $4.7 million for 2025.
Term Loan
On February 22, 2021, the Company entered into a Term Loan and Security Agreement (the “Term Loan”) with Western Technology Investment which provided the Company with up to $40.0 million in borrowing capacity at an annual interest rate of 12.0%. The Company borrowed $25.0 million of the Term Loan at inception of the agreement on March 1, 2021. The remaining $15.0 million of borrowing capacity is no longer available as the Company did not achieve certain milestones by the June 30, 2021 deadline. The repayment terms of the Term Loan provide for interest-only payments from March 1, 2021 through February 28, 2022.
Under the original terms, the principal amount was due and payable on March 1, 2022. However, during January 2022 the Company exercised its option to pay back the principal amount of the Term Loan over two years beginning on March 1, 2022 and ending on February 28, 2024.
The Company allocated the proceeds from the Term Loan agreement to the note and warrants issued in conjunction with the Term Loan comprising the financing agreement based on the relative fair value of the individual securities on the February 22, 2021 closing date of the agreements. The discount attributable to the note, an aggregate of $15.8 million, primarily related to the value of the warrant liability with immaterial issuance costs, is amortized using the effective interest method over the term of the note, originally maturing on March 1, 2022, but now being repaid over two years, recorded as interest expense. Because the discount on the note exceeds 62.6% of its initial face value, and because the discount is amortized over the period from issuance to maturity, the calculated effective interest rate up until January 2022 was 126.0%.
As a result of the exercised extended repayment schedule, the unamortized discount and issuance costs were recast over the updated term of the loan and resulted in a recalculated effective interest rate of 28.2%. Interest expense amortization related to the Term Loan was $45.7 thousand and $1.4 million for the years ended December 31, 2024 and 2023, respectively.
In January 2024, the Company repaid the remaining principal balance of the Term Loan.