10-Q

ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


	☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023


	☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-40170

TERRAN ORBITAL CORPORATION

(Exact Name of Registrant as Specified in its Charter)


Delaware		98-1572314
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
	6800 Broken Sound Parkway NW, Suite 200 Boca Raton, FL 33487 (561) 988-1704
	(Address of principal executive offices, including zip code, Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbols	Name of each exchange on which registered
Common stock, par value $0.0001 per share	LLAP	New York Stock Exchange
Warrants to purchase one share of common stock, each at an exercise price of $11.50 per share	LLAP WS	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 8, 2023, the registrant had 145,049,152 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
	Condensed Consolidated Statements of Shareholders' Deficit (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
Signatures		40

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TERRAN ORBITAL CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share amounts)



	March 31, 2023			December 31, 2022
Assets:
Cash and cash equivalents	$	57,427		$	93,561
Accounts receivable, net of allowance for credit losses of $41 and $764 as of March 31, 2023 and December 31, 2022, respectively		2,836			4,754
Contract assets, net		5,383			6,763
Inventory		28,576			24,133
Prepaid expenses and other current assets		10,068			9,710
Total current assets		104,290			138,921
Property, plant, and equipment, net		31,192			24,743
Other assets		21,327			18,990
Total assets	$	156,809		$	182,654
Liabilities and shareholders' deficit:
Current portion of long-term debt	$	9,815		$	7,739
Accounts payable		26,357			21,188
Contract liabilities		19,191			27,228
Reserve for anticipated losses on contracts		1,137			2,860
Accrued expenses and other current liabilities		16,642			11,721
Total current liabilities		73,142			70,736
Long-term debt		148,042			142,620
Warrant and derivative liabilities		49,405			39,950
Other liabilities		21,545			20,769
Total liabilities		292,134			274,075
Commitments and contingencies (Note 12)
Shareholders' deficit:
Preferred stock - authorized 50,000,000 shares of $0.0001 par value as of March 31, 2023 and December 31, 2022; zero issued and outstanding		-			-
Common stock - authorized 300,000,000 shares of $0.0001 par value as of March 31, 2023 and December 31, 2022; issued and outstanding shares of 144,680,223 and 142,503,771 as of March 31, 2023 and December 31, 2022, respectively		14			14
Additional paid-in capital		280,095			269,574
Accumulated deficit		(415,613	)		(361,168	)
Accumulated other comprehensive income		179			159
Total shareholders' deficit		(135,325	)		(91,421	)
Total liabilities and shareholders' deficit	$	156,809		$	182,654

The accompanying notes are an integral part of these condensed consolidated financial statements.

TERRAN ORBITAL CORPORATION

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended March 31,
	2023			2022
Revenue	$	28,198		$	13,120
Cost of sales		29,597			15,953
Gross loss		(1,399	)		(2,833	)
Selling, general, and administrative expenses		32,530			30,217
Loss from operations		(33,929	)		(33,050	)
Interest expense, net		10,934			2,923
Loss on extinguishment of debt		-			23,141
Change in fair value of warrant and derivative liabilities		9,455			11,853
Other expense		109			403
Loss before income taxes		(54,427	)		(71,370	)
Provision for income taxes		18			2
Net loss		(54,445	)		(71,372	)
Other comprehensive income, net of tax:
Foreign currency translation adjustments		20			47
Total comprehensive loss	$	(54,425	)	$	(71,325	)

Weighted-average shares outstanding
Basic and diluted		144,062,103			83,643,940

Net loss per share
Basic and diluted	$	(0.38	)	$	(0.85	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TERRAN ORBITAL CORPORATION

Condensed Consolidated Statements of Shareholders’ Deficit (Unaudited)

(In thousands, except share amounts)


					Three Months Ended March 31, 2023
	Mezzanine Equity				Shareholders' Deficit
	Redeemable Convertible Preferred Stock				Common Stock
	Shares		Amount		Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)		Total Shareholders' Deficit
Balance as of December 31, 2022		-	$	-		142,503,771	$	14	$	269,574	$	(361,168	)	$	159	$	(91,421	)
Net loss		-		-		-		-		-		(54,445	)		-		(54,445	)
Other comprehensive income, net of tax		-		-		-		-		-		-			20		20
Share-based compensation		-		-		-		-		10,166		-			-		10,166
Settlement of vested restricted stock units, net of net share settlements		-		-		1,665,333		-		-		-			-		-
Exercise of stock options		-		-		511,119		-		355		-			-		355
Balance as of March 31, 2023		-	$	-		144,680,223	$	14	$	280,095	$	(415,613	)	$	179	$	(135,325	)

The accompanying notes are an integral part of these condensed consolidated financial statements

TERRAN ORBITAL CORPORATION

Condensed Consolidated Statements of Shareholders’ Deficit (Unaudited)

(In thousands, except share amounts)


							Three Months Ended March 31, 2022
	Mezzanine Equity						Shareholders' Deficit
	Redeemable Convertible Preferred Stock						Common Stock
	Shares			Amount			Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Shareholders' Deficit
Balance as of December 31, 2021		396,870		$	8,000			2,849,414	$	-	$	97,745		$	(197,066	)	$	(36	)	$	(99,357	)
Retrospective application of reverse recapitalization		10,550,816			-			75,751,869		8		(8	)		-			-			-
Balance as of December 31, 2021 - Recast		10,947,686		$	8,000			78,601,283	$	8	$	97,737		$	(197,066	)	$	(36	)	$	(99,357	)
Adoption of accounting standard, net of tax		-			-			-		-		-			(122	)		-			(122	)
Net loss		-			-			-		-		-			(71,372	)		-			(71,372	)
Other comprehensive income, net of tax		-			-			-		-		-			-			47			47
Conversion of redeemable convertible preferred stock into common stock		(10,947,686	)		(8,000	)		10,947,686		1		7,999			-			-			8,000
Net settlement of liability-classified warrants into common stock		-			-			694,873		-		7,616			-			-			7,616
Net settlement of equity-classified warrants into common stock		-			-			22,343,698		2		(2	)		-			-			-
Issuance of common stock in connection with the Tailwind Two Merger and PIPE Investment, net of issuance costs		-			-			16,114,695		2		6,926			-			-			6,928
Issuance of common stock in connection with financing transactions, net of issuance costs		-			-			4,325,000		1		40,733			-			-			40,734
Reclassification of liability-classified warrants and derivatives to equity-classified		-			-			-		-		11,007			-			-			11,007
Issuance of contingently issuable common stock		-			-			4,095,569		-		44,887			-			-			44,887
Share-based compensation		-			-			-		-		17,335			-			-			17,335
Exercise of stock options		-			-			172,651		-		146			-			-			146
Balance as of March 31, 2022		-		$	-			137,295,455	$	14	$	234,384		$	(268,560	)	$	11		$	(34,151	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TERRAN ORBITAL CORPORATION

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities:
Net loss	$	(54,445	)	$	(71,372	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		919			846
Non-cash interest expense		7,053			1,215
Share-based compensation expense		10,166			17,335
Provision for losses on receivables and inventory		3			169
Loss on extinguishment of debt		-			23,141
Change in fair value of warrant and derivative liabilities		9,455			11,853
Amortization of operating right-of-use assets		279			305
Changes in operating assets and liabilities:
Accounts receivable, net		1,992			(15,002	)
Contract assets		1,423			(928	)
Inventory		(3,990	)		(1,550	)
Accounts payable		1,009			2,134
Contract liabilities		(8,021	)		6,708
Reserve for anticipated losses on contracts		(1,723	)		79
Accrued interest		(88	)		(4,803	)
Other, net		3,145			570
Net cash used in operating activities		(32,823	)		(29,300	)
Cash flows from investing activities:
Purchases of property, plant, and equipment		(3,162	)		(4,030	)
Net cash used in investing activities		(3,162	)		(4,030	)
Cash flows from financing activities:
Proceeds from long-term debt		-			35,942
Proceeds from warrants and derivatives		-			42,247
Proceeds from Tailwind Two Merger and PIPE Investment		-			58,424
Proceeds from issuance of common stock		-			14,791
Repayment of long-term debt		(518	)		(27,171	)
Payment of issuance costs		-			(41,681	)
Proceeds from exercise of stock options		339			135
Net cash (used in) provided by financing activities		(179	)		82,687

Effect of exchange rate fluctuations on cash and cash equivalents		30			(28	)

Net (decrease) increase in cash and cash equivalents		(36,134	)		49,329
Cash and cash equivalents at beginning of period		93,561			27,325
Cash and cash equivalents at end of period