of the Merger. Upon consummation of the Merger, approximately 774 thousand shares of Terran Orbital Corporations common stock were issued related to the Combination Equity. In addition,
approximately 2.8 million warrants were issued related to the Combination Warrants. Subsequent to the Merger, the Combination Warrants now represent equity-classified financial instruments.
Public Warrants
As part of the Merger,
we assumed outstanding warrants giving the holders the right to purchase an aggregate of approximately 11.5 million shares of the Terran Orbital Corporations common stock for $11.50 per share (the public warrants). The
public warrants became exercisable on April 24, 2022, 30 days after the completion of the Merger, and will expire five years from the completion of the Merger.
We will not be obligated to deliver any shares of common stock pursuant to the exercise of a public warrant and will have no obligation to
settle such warrant exercise unless a registration statement with respect to the shares underlying the warrants is then effective and a related prospectus is current, unless a valid exemption from registration is available. No public warrant will be
exercisable for cash or on a cashless basis and we will not be obligated to issue shares upon exercise of a public warrant unless the underlying shares have been registered, qualified or deemed to be exempt under the securities laws of the state of
residence of the registered holder of the warrants. The registration statement on Form S-1, of which this prospectus forms a part, once declared effective by the SEC, will register the shares of common stock issuable by us upon exercise of the
public warrants.
Once the public warrants become exercisable, we may redeem the outstanding warrants when the price per share of the
Terran Orbital Corporations common stock equals or exceeds $18.00 as follows:
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in whole and not in part; |
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at a price of $0.01 per warrant; |
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upon not less than of 30 days prior written notice of redemption to each warrant holder; and
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if, and only if, the closing price of the Terran Orbital Corporations shares of common stock equals or
exceeds $18.00 per share (as adjusted) for any 20 trading days within a 30-trading day period ending three trading days before we send the notice of redemption to the warrant holders. |
In addition, once the public warrants become exercisable, we may redeem the outstanding warrants when the price per share of Terran Orbital
Corporations common stock equals or exceeds $10.00 as follows:
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in whole and not in part; |
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at $0.10 per warrant upon a minimum of 30 days prior written notice of redemption; provided that holders
will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined based on the redemption date and the fair market value of Terran Orbital Corporations shares of common stock;
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if, and only if, the closing price of the Terran Orbital Corporations shares of common stock equals or
exceeds $10.00 per share (as adjusted) for any 20 trading days within the 30-trading day period ending three trading days before we send the notice of redemption of the warrant holders; and |
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if the closing price of Terran Orbital Corporations shares of common stock for any 20 trading days within a
30-trading day period ending on the third trading day prior to the date on which we send the notice of redemption to the warrant holders is less than $18.00 per share (as adjusted), the private placement warrants must also be concurrently called for
redemption on the same terms as the outstanding public warrants, as described above. |
If and when the public warrants
become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
If we call the public warrants for redemption, as described above, we will have the option to require any holder that wishes to exercise the
public warrants to do so on a cashless basis, as described in the warrant agreement. The exercise price and number of common shares issuable upon exercise of the public warrants may be adjusted in certain circumstances including in the
event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, the public warrants will not be adjusted for issuances of common shares at a price below its exercise price. Additionally, in no
event will we be required to net cash settle the public warrants.
Private Placement Warrants
As part of the Merger, we assumed outstanding warrants that were previously issued in a private placement and that give the holders thereof the
right to purchase an aggregate of 7.8 million shares of Terran Orbital Corporations common stock for $11.50 per share (the private placement warrants). The private placement warrants are identical to the public warrants, except
that the private placement warrants and the common shares issuable upon their exercise were not transferable, assignable or salable until 30 days after the completion of the Merger. Additionally, the private placement warrants will be exercisable on
a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees. If the private placement warrants are held by someone other than the initial purchasers or their
permitted transferees, the private placement warrants will be redeemable by us and exercisable by such holders on the same basis as the public warrants. The registration statement on Form S-1, of which this prospectus forms a part, once declared
effective by the SEC, will register the shares of common stock issuable by us upon exercise of the private placement warrants.
Detachable Warrants
As part of the Merger, all of the warrants issued by Legacy Terran Orbital in connection with the extinguishment of the Convertible
Notes due 2028 (the Detachable Warrants) were ultimately net settled into approximately 22.3 million shares of Terran Orbitals common stock.
Dividends
The Company intends to
retain future earnings, if any, for future operations, expansion and debt repayment (if any) and there are no current plans to pay any cash dividends for the foreseeable future. In addition, the Companys ability to pay dividends is limited by
covenants of the Companys existing and outstanding indebtedness, including the Francisco Partners Facility, and may be limited by covenants of any future indebtedness. There are no current restrictions in the covenants of the Companys
existing and outstanding indebtedness on the Companys wholly-owned subsidiaries from distributing earnings in the form of dividends, loans or advances and through repayment of loans or advances to Terran Orbital Corporation.
Following the Merger, the Companys existing and outstanding indebtedness allows for the declaration and payment of dividends or
prepayment of junior debt obligations in cash in an amount not to exceed $5 million.
Cash Flow Analysis
The following table is a summary of the Companys cash flow activity for the three months ended March 31, 2022 and 2021:
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Three Months Ended March 31, |
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(in thousands) |
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2022 |
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2021 |
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$ Change |
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Net cash used in operating activities |
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$ |
(29,300 |
) |
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$ |
(548 |
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$ |
(28,752 |
) |
Net cash used in investing activities |
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(4,030 |
) |
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(2,422 |
) |
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(1,608 |
) |
Net cash provided by financing activities |
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82,687 |
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44,348 |
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38,339 |
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Effect of exchange rate fluctuations on cash and cash equivalents |
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(28 |
) |
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(66 |
) |
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38 |
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Net increase in cash and cash equivalents |
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$ |
49,329 |
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$ |
41,312 |
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$ |
8,017 |
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Cash Flows from Operating Activities
The increase in net cash used in operating activities was primarily due to an increase in selling, general and administrative expense largely
related to salaries and wages, legal and accounting fees, and facility expenses as a result of the Companys growth initiatives as well as cash interest payments of approximately $6.2 million related to the partial extinguishment of the Senior
Secured Notes due 2026. The remainder of the activity in net cash used in operating activities related to changes in assets and liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the
transactions are reflected in earnings.
Refer to the discussions above under Results of Operations for further details.
Cash Flows from Investing Activities
The
increase in net cash used in investing activities was primarily due to an increase of $745 thousand related to the payment of capital expenditures incurred in previous reporting periods, an increase in the development of company-owned satellites of
$327 thousand, and the buildout of other manufacturing facilities and office space.
Cash Flows from Financing Activities
During the three months ended March 31, 2022, net cash provided by financing activities primarily consisted of $58 million of proceeds received
from the Merger and the PIPE Investment, $42 million of proceeds received allocated to warrant and derivative instruments, $36 million of proceeds received allocated to the issuance of debt, and $15 million of proceeds received allocated to the
issuance of common stock in relation to our financing transactions. These increases were partially offset by $42 million of payments of issuance costs related to our equity and debt transactions coupled with $27 million related to the repayment of
long-term debt.
During the three months ended March 31, 2021, net cash provided by financing activities primarily consisted of $47.5
million of proceeds received allocated to the issuance of debt and $2.5 million of proceeds received allocated to warrant and derivative instruments. These increases were partially offset by $5.7 million of payments of issuance costs related to our
debt transactions.
The following table is a summary of the Companys cash flow activity for the years ended December 31, 2021 and 2020:
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Years Ended December 31, |
(in thousands) |
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2021 |
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2020 |
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$ Change |
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Net cash used in operating activities |
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$ |
(34,887 |
) |
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$ |
(11,474 |
) |
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$ |
(23,413 |
) |
Net cash used in investing activities |
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(16,352 |
) |
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(7,325 |
) |
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(9,027 |
) |
Net cash provided by financing activities |
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66,352 |
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15,101 |
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51,251 |
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Effect of exchange rate fluctuations on cash and cash equivalents |
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|
(124 |
) |
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138 |
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(262 |
) |
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Net increase (decrease) in cash and cash equivalents |
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$ |
14,989 |
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$ |
(3,560 |
) |
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$ |
18,549 |
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Cash Flows from Operating Activities
The increase in net cash used in operating activities was primarily due to an increase in selling, general and administrative expense largely
related to salaries and wages and legal and accounting fees as a result of the Companys buildout of operational and corporate capacity. The remainder of the activity in net cash used in operating activities related to changes in assets and
liabilities due to the volume and timing of other operating cash receipts and payments with respect to when the transactions are reflected in earnings.
Refer to the discussions above under Results of Operations for further details.
83