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 September 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 November 7, 2023, the registrant had 194,461,361 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)



	September 30, 2023			December 31, 2022
Assets:
Cash and cash equivalents	$	38,676		$	93,561
Accounts receivable, net of allowance for credit losses of $258 and $764 as of September 30, 2023 and December 31, 2022, respectively		15,298			4,754
Contract assets, net		4,748			6,763
Inventory		34,045			24,133
Prepaid expenses and other current assets		11,772			9,710
Total current assets		104,539			138,921
Property, plant, and equipment, net		47,090			24,743
Other assets		18,608			18,990
Total assets	$	170,237		$	182,654
Liabilities and shareholders' deficit:
Current portion of long-term debt	$	11,632		$	7,739
Accounts payable		31,379			21,188
Contract liabilities		13,439			27,228
Reserve for anticipated losses on contracts		1,013			2,860
Accrued expenses and other current liabilities		15,770			11,721
Total current liabilities		73,233			70,736
Long-term debt		164,257			142,620
Warrant and derivative liabilities		32,416			39,950
Other liabilities		19,108			20,769
Total liabilities		289,014			274,075
Commitments and contingencies (Note 12)
Shareholders' deficit:
Preferred stock - authorized 50,000,000 shares of $0.0001 par value as of September 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 September 30, 2023 and December 31, 2022, respectively; issued and outstanding shares of 187,817,268 and 142,503,771 as of September 30, 2023 and December 31, 2022, respectively		19			14
Additional paid-in capital		351,203			269,574
Accumulated deficit		(470,172	)		(361,168	)
Accumulated other comprehensive income		173			159
Total shareholders' deficit		(118,777	)		(91,421	)
Total liabilities and shareholders' deficit	$	170,237		$	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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	43,885		$	27,830		$	104,315		$	62,314
Cost of sales		34,194			27,793			95,221			68,784
Gross profit (loss)		9,691			37			9,094			(6,470	)
Selling, general, and administrative expenses		29,003			24,696			90,265			84,283
Loss from operations		(19,312	)		(24,659	)		(81,171	)		(90,753	)
Interest expense, net		12,657			7,147			35,320			17,007
Loss on extinguishment of debt		-			-			-			23,141
Change in fair value of warrant and derivative liabilities		(5,503	)		(6,001	)		(7,534	)		(2,325	)
Other (income) expense		(59	)		1,496			24			2,367
Loss before income taxes		(26,407	)		(27,301	)		(108,981	)		(130,943	)
Provision for income taxes		22			54			23			58
Net loss		(26,429	)		(27,355	)		(109,004	)		(131,001	)
Other comprehensive income, net of tax:
Foreign currency translation adjustments		37			138			14			327
Total comprehensive loss	$	(26,392	)	$	(27,217	)	$	(108,990	)	$	(130,674	)

Weighted-average shares outstanding
Basic and diluted		178,624,492			143,276,708			159,856,355			123,317,997

Net loss per share
Basic and diluted	$	(0.15	)	$	(0.19	)	$	(0.68	)	$	(1.06	)

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 September 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 June 30, 2023		-	$	-		165,189,534	$	17	$	317,871	$	(443,743	)	$	136	$	(125,719	)
Net loss		-		-		-		-		-		(26,429	)		-		(26,429	)
Other comprehensive loss, net of tax		-		-		-		-		-		-			37		37
Issuance of common stock, net of issuance costs		-		-		11,678,575		1		8,734		-			-		8,735
Issuance of warrants, net of issuance costs		-		-		-		-		20,784		-			-		20,784
Share-based compensation		-		-		-		-		3,774		-			-		3,774
Settlement of vested restricted stock units		-		-		1,872,782		-		-		-			-		-
Exercise of equity-classified warrants		-		-		9,035,000		1		-		-			-		1
Exercise of stock options		-		-		41,377		-		40		-			-		40
Balance as of September 30, 2023		-	$	-		187,817,268	$	19	$	351,203	$	(470,172	)	$	173	$	(118,777	)


					Three Months Ended September 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 June 30, 2022		-	$	-		137,590,808	$	14	$	248,133	$	(300,834	)	$	153	$	(52,534	)
Net loss		-		-		-		-		-		(27,355	)		-		(27,355	)
Other comprehensive income, net of tax		-		-		-		-		-		-			138		138
Issuance of common stock under the Committed Equity Facility		-		-		637,487		-		2,795		-			-		2,795
Share-based compensation		-		-		-		-		9,204		-			-		9,204
Settlement of vested restricted stock units		-		-		1,637,188		-		-		-			-		-
Exercise of stock options		-		-		97,173		-		123		-			-		123
Other		-		-		-		-		25		-			-		25
Balance as of September 30, 2022		-	$	-		139,962,656	$	14	$	260,280	$	(328,189	)	$	291	$	(67,604	)

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)


					Nine Months Ended September 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		-		-		-		-		-		(109,004	)		-		(109,004	)
Other comprehensive loss, net of tax		-		-		-		-		-		-			14		14
Issuance of common stock, net of issuance costs						27,678,575		3		19,458							19,461
Issuance of warrants, net of issuance costs		-		-		-		-		44,182		-			-		44,182
Share-based compensation		-		-		-		-		17,529		-			-		17,529
Settlement of vested restricted stock units		-		-		4,023,001		-		-		-			-		-
Exercise of equity-classified warrants		-		-		13,000,000		2		-		-			-		2
Exercise of stock options		-		-		611,921		-		460		-			-		460
Balance as of September 30, 2023		-	$	-		187,817,268	$	19	$	351,203	$	(470,172	)	$	173	$	(118,777	)


					Nine Months Ended September 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 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