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 June 30, 2023

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

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 August 7, 2023, the registrant had 172,377,853 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	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44
Signatures		45

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TERRAN ORBITAL CORPORATION

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share amounts)



	June 30, 2023			December 31, 2022
Assets:
Cash and cash equivalents	$	48,554		$	93,561
Accounts receivable, net of allowance for credit losses of $191 and $764 as of June 30, 2023 and December 31, 2022, respectively		5,432			4,754
Contract assets, net		4,628			6,763
Inventory		28,153			24,133
Prepaid expenses and other current assets		12,376			9,710
Total current assets		99,143			138,921
Property, plant, and equipment, net		41,571			24,743
Other assets		18,249			18,990
Total assets	$	158,963		$	182,654
Liabilities and shareholders' deficit:
Current portion of long-term debt	$	11,331		$	7,739
Accounts payable		24,299			21,188
Contract liabilities		18,047			27,228
Reserve for anticipated losses on contracts		858			2,860
Accrued expenses and other current liabilities		15,690			11,721
Total current liabilities		70,225			70,736
Long-term debt		157,521			142,620
Warrant and derivative liabilities		37,919			39,950
Other liabilities		19,017			20,769
Total liabilities		284,682			274,075
Commitments and contingencies (Note 12)
Shareholders' deficit:
Preferred stock - authorized 50,000,000 shares of $0.0001 par value as of June 30, 2023 and December 31, 2022; zero issued and outstanding		-			-
Common stock - authorized 600,000,000 and 300,000,000 shares of $0.0001 par value as of June 30, 2023 and December 31, 2022, respectively; issued and outstanding shares of 165,189,534 and 142,503,771 as of June 30, 2023 and December 31, 2022, respectively		17			14
Additional paid-in capital		317,871			269,574
Accumulated deficit		(443,743	)		(361,168	)
Accumulated other comprehensive income		136			159
Total shareholders' deficit		(125,719	)		(91,421	)
Total liabilities and shareholders' deficit	$	158,963		$	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 June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Revenue	$	32,232		$	21,364		$	60,430		$	34,484
Cost of sales		31,430			25,038			61,027			40,991
Gross profit (loss)		802			(3,674	)		(597	)		(6,507	)
Selling, general, and administrative expenses		28,732			29,370			61,262			59,587
Loss from operations		(27,930	)		(33,044	)		(61,859	)		(66,094	)
Interest expense, net		11,729			6,937			22,663			9,860
Loss on extinguishment of debt		-			-			-			23,141
Change in fair value of warrant and derivative liabilities		(11,486	)		(8,177	)		(2,031	)		3,676
Other (income) expense		(26	)		468			83			871
Loss before income taxes		(28,147	)		(32,272	)		(82,574	)		(103,642	)
(Benefit from) provision for income taxes		(17	)		2			1			4
Net loss		(28,130	)		(32,274	)		(82,575	)		(103,646	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments		(43	)		142			(23	)		189
Total comprehensive loss	$	(28,173	)	$	(32,132	)	$	(82,598	)	$	(103,457	)

Weighted-average shares outstanding
Basic and diluted		156,502,662			142,378,037			150,316,749			113,173,237

Net loss per share
Basic and diluted	$	(0.18	)	$	(0.23	)	$	(0.55	)	$	(0.92	)

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 June 30, 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 March 31, 2023		-	$	-		144,680,223	$	14	$	280,095	$	(415,613	)	$	179		$	(135,325	)
Net loss		-		-		-		-		-		(28,130	)		-			(28,130	)
Other comprehensive loss, net of tax		-		-		-		-		-		-			(43	)		(43	)
Issuance of common stock, net of issuance costs		-		-		16,000,000		2		10,724		-			-			10,726
Issuance of warrants, net of issuance costs		-		-		-		-		23,398		-			-			23,398
Share-based compensation		-		-		-		-		3,589		-			-			3,589
Settlement of vested restricted stock units		-		-		484,886		-		-		-			-			-
Exercise of equity-classified warrants		-		-		3,965,000		1		-		-			-			1
Exercise of stock options		-		-		59,425		-		65		-			-			65
Balance as of June 30, 2023		-	$	-		165,189,534	$	17	$	317,871	$	(443,743	)	$	136		$	(125,719	)


					Three Months Ended June 30, 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 March 31, 2022		-	$	-		137,295,455	$	14	$	234,384		$	(268,560	)	$	11	$	(34,151	)
Net loss		-		-		-		-		-			(32,274	)		-		(32,274	)
Other comprehensive income, net of tax		-		-		-		-		-			-			142		142
Share-based compensation		-		-		-		-		13,815			-			-		13,815
Settlement of vested restricted stock units		-		-		295,353		-		-			-			-		-
Other		-		-		-		-		(66	)		-			-		(66	)
Balance as of June 30, 2022		-	$	-		137,590,808	$	14	$	248,133		$	(300,834	)	$	153	$	(52,534	)

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)


					Six Months Ended June 30, 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		-		-		-		-		-		(82,575	)		-			(82,575	)
Other comprehensive loss, net of tax		-		-		-		-		-		-			(23	)		(23	)
Issuance of common stock, net of issuance costs						16,000,000		2		10,724								10,726
Issuance of warrants, net of issuance costs		-		-		-		-		23,398		-			-			23,398
Share-based compensation		-		-		-		-		13,755		-			-			13,755
Settlement of vested restricted stock units		-		-		2,150,219		-		-		-			-			-
Exercise of equity-classified warrants		-		-		3,965,000		1		-		-			-			1