REDWIRE CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion and analysis should be read in conjunction with the
condensed consolidated financial statements and accompanying notes included in
this Quarterly Report on Form 10-Q. Certain information contained in this
discussion and analysis includes forward looking statements that involve risks
and uncertainties. Our actual results may differ materially from those
anticipated in these forward looking statements as a result of many factors. For
information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward looking statements,
please refer to "Item 1A. Risk Factors" and the "Cautionary Note Regarding
Forward-Looking Statements" sections of this Quarterly Report on Form 10-Q.
Unless the context otherwise requires, all references in this section to the
"Company," "Redwire," "we," "us" or "our" refer to Redwire Corporation and its
consolidated subsidiaries.

Business Overview

We are a leader in mission critical space solutions and high reliability
components for the next generation space economy, with valuable intellectual
property for solar power generation and in-space 3D printing and manufacturing.
With decades of flight heritage combined with the agile and innovative culture
of a commercial space platform, we are uniquely positioned to assist our
customers in solving the complex challenges of future space missions.

We manufacture and deliver space infrastructure to our customers. We offer a
broad array of products and services, many of which have been enabling space
missions since the 1960s and have been flight-proven on over 200 spaceflight
missions, including missions such as the GPS constellation, New Horizons and
Perseverance. We are also a provider of innovative technologies with the
potential to help transform the economics of space and create new markets for
its exploration and commercialization. One example of this is our patented suite
of in-space manufacturing and robotic assembly technologies (referred to herein
as on-orbit servicing, assembly, and manufacturing, or "OSAM"). Other examples
of our proprietary technologies include deployable structures, human-rated
camera systems and digital engineering.

We have grown organically while also continuing to integrate several
acquisitions from a fragmented landscape of space-focused technology companies
with innovative capabilities and deep flight heritage. Many of our technologies
are flight-proven and have been adopted by a broad range of customers across
national security, civil and commercial space. Combining heritage and innovation
has enabled us to accelerate the delivery of disruptive technologies.

We believe the space economy is at an inflection point. The reduction of launch
costs over the last decade has eliminated the single largest economic barrier to
entry for the expanded utilization of space, and the increasing cadence of
launches provides more flexible, reliable access. This lower cost access has
resulted in both the expansion and modernization of traditional national
security and civil uses of space and has enticed new commercial entrants to
invest substantial capital to develop new space-based business models. Our goal
is to provide a full suite of infrastructure solutions, including
mission-critical components, services and systems that will contribute to a
dramatic expansion of the space-based economy. We believe that our products and
services are essential to the growth of space as a strategic military and
commercial domain, as well as a frontier for science and exploration.

Recent Developments


During the first quarter of 2022, the Company continued to serve as a critical
mission partner to commercial, civil, and national security customers. Redwire
hardware was utilized on four launches and Redwire payloads operated on the
International Space Station ("ISS") and successfully returned to Earth. These
deployments represent Redwire's continued enablement of the missions of today
and demonstrate our dedication to accelerating humanity's expansion into space
by delivering reliable, economical, and sustainable infrastructure for future
generations. Our products and technologies are enabling multiple constellations
and multi-shipset, multi-year programs for partners like the Space Development
Agency ("SDA"), the U.S. Space Force, National Aeronautics and Space
Administration ("NASA"), and commercial customers.

Of particular note among our first quarter accomplishments: in January, Redwire
successfully delivered multiple L-Band Link-16 Helical Antenna systems for the
first generation of the SDA's National Defense Space Architecture
constellation's Transport Layer. Redwire continues to provide solar array
solutions for a variety of customers, including early delivery relative to its
baseline schedule of the fourth ROSA solar array for augmentation of the ISS's
power generation capabilities. Following up on the successful installation of
wings 1 and 2 in 2021, wings 3 and 4 are currently scheduled for launch to the
ISS this year, with wings 5 and 6 launching thereafter. Roll-Out Solar Array
("ROSA") is an innovative solar array technology proprietary to Redwire and is
operating on a variety of missions such as NASA's Double Asteroid Redirection
Test ("DART"). Redwire's solar array product lines have a robust production
pipeline including the Power and Propulsion Element of the Lunar Gateway and a
variety of small low Earth orbit ("LEO") satellites. In the fourth quarter of
2021, Redwire completed the critical design review for OSAM-2, a
first-of-its-kind satellite which will manufacture and assembly portions of
itself in space. Validating the importance and potential of this technology, The
White House and the National Space Council released a national in-space
servicing, assembly and manufacturing ("ISAM") strategy
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calling for investment and adoption of in-space manufacturing and assembly for
satellite missions. Redwire is a leader in this technology area which can enable
more capability at a lower cost, larger apertures for spacecraft, and the
ability to sustain and protect assets in orbit. Cost increases and additional
research and development investment in this area impacted the Company's
performance for the three months ended March 31, 2022. We expect to continue to
invest in technologies through the remainder of 2022.

Merger with Genesis Park Acquisition Corp. (“GPAC”)


On March 25, 2021, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement"), by and among GPAC, Shepard Merger Sub Corporation, a
Delaware corporation and direct, wholly owned subsidiary of GPAC ("Merger Sub"),
Cosmos Intermediate, LLC ("Cosmos") and AE Red Holdings, LLC formerly known as
Redwire, LLC ("Holdings").

Pursuant to the Merger Agreement, the parties completed a business combination
transaction by which, (i) GPAC domesticated as a Delaware corporation in
accordance with Section 388 of the Delaware General Corporation Law and the
Companies Act of the Cayman Islands (the "Domestication"), (ii) Merger Sub
merged with and into Cosmos, with Cosmos being the surviving entity in the
merger (the "First Merger"), and (iii) immediately following the First Merger,
Cosmos merged with and into GPAC, with GPAC being the surviving entity in the
merger (the "Second Merger" and, together with the First Merger, the "Mergers"
or the "Merger" and, together with the other transactions contemplated by the
Merger Agreement, the "Transactions"). In this Quarterly Report on Form 10-Q, we
refer to the Domestication and the Transactions, collectively, as the "Merger".

On September 2, 2021, the Company consummated the Merger. Upon the closing of
the Merger, GPAC was renamed to Redwire Corporation. The Merger was accounted
for as a reverse recapitalization in which GPAC was treated as the acquired
company. A reverse recapitalization does not result in a new basis of
accounting, and the consolidated financial statements of the combined entity
represent the continuation of the consolidated financial statements of the
Company in many respects. MIS was deemed the accounting predecessor and the
combined entity is the successor SEC registrant, Redwire.

The aggregate consideration paid to Holdings consisted of a combination of cash
and stock. The cash consideration was comprised of $75.0 million (such amount,
the "Closing Cash Consideration"). The remainder of the consideration was
comprised of (i) 37,200,000 shares of common stock, par value $0.0001 per share,
of GPAC (the "Closing Share Consideration") and (ii) 2,000,000 warrants to
purchase one share of common stock per warrant (the "Closing Warrant
Consideration"), with such amount of warrants corresponding to the forfeiture of
certain warrants acquired by GPAC's Sponsor, Genesis Park Holdings, a Cayman
Islands limited liability company and Jefferies LLC in connection with GPAC's
initial public offering. At the effective time of the First Merger, the units of
Cosmos were cancelled and automatically deemed for all purposes to represent the
right to receive, in the aggregate, the Closing Cash Consideration, the Closing
Share Consideration and the Closing Warrant Consideration.

COVID-19 Operational Posture and Impact


We continue to evaluate the ongoing impact of the pandemic. As aerospace
manufacturing, communications and defense are federal critical infrastructure
sectors, we continue to keep some of our workforce onsite to maintain critical
operations. As such, our operations continue to expose our workforce to risks
associated with the COVID-19 pandemic.

In response to this exposure, our pandemic crisis response plan remains
activated to protect the health and safety of our team members, families,
customers, and communities, while continuing to meet our commitments to
customers. Given the ongoing nature of the outbreak and consequences on the
economy, at this time we cannot reasonably estimate the magnitude of the
ultimate impact that COVID-19 will have on our business, financial performance,
and operating results. The pandemic has caused program execution delays as a
result of variant resurgences. Therefore, the near and long-term impacts of the
pandemic on the cost and schedule of the numerous programs in our existing
backlog and the timing of new awards remains uncertain. We are also observing
stress in our supplier base inside and outside the U.S., which is tied to global
supply chain constraints, labor shortages and inflationary pressures globally.
We will continue to monitor and assess the actual and potential COVID-19 impacts
on employees, customers, suppliers and the productivity of the work being done,
all of which, to some extent, has and will continue to impact revenues,
estimated costs to complete projects, earnings and cash flow.









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Results of Operations

The following table presents our results of operations for the three months
ended March 31, 2022 compared to the three months ended March 31, 2021 expressed
in U.S. thousands of dollars, along with the percentage of revenues and the
dollar and percent change compared to the prior period:


                                                                                                 Three Months Ended                                     

$ Change from % Change from

                                                                                                                  March 31,                               prior year     prior year
(in thousands, except percentages)                                    March 31, 2022      % of revenues              2021        % of revenues              period         period
Revenues                                                            $        32,867                 100  %       $  31,698                 100  %       $     1,169              4  %
Cost of sales                                                                27,696                  84             24,221                  76                3,475             14
Gross margin                                                                  5,171                  16              7,477                  24               (2,306)           (31)
Operating expenses:
Selling, general and administrative
expenses                                                                     20,951                  64             11,256                  36                9,695             86

Transaction expenses                                                             46                   -              2,417                   8               (2,371)           (98)

Research and development                                                      1,724                   5                996                   3                  728             73
Operating income (loss)                                                     (17,550)                (53)            (7,192)                (23)             (10,358)           144

Interest expense, net                                                         1,452                   4              1,421                   4                   31              2
Other (income) expense, net                                                   1,180                   4                 87                   -                1,093          1,256
Income (loss) before income taxes                                           (20,182)                (61)            (8,700)                (27)             (11,482)           132
Income tax expense (benefit)                                                 (2,889)                 (9)            (1,026)                 (3)              (1,863)           182
Net income (loss)                                                   $       (17,293)                (53) %       $  (7,674)                (24) %       $    (9,619)           125  %


For purposes of the following discussion and analysis, any financial impact
related to the acquisition of Oakman Aerospace, Inc. (“Oakman”), Deployable
Space Systems, Inc.
(“DPSS”) and Techshot, Inc. (Techshot“) is collectively
referred to as the “2021 Acquisitions.”

Revenues


Revenues increased by $1.2 million, or 4%, for the three months ended March 31,
2022 compared to the three months ended March 31, 2021. The year-over-year
increase in revenues was primarily driven by $3.7 million of contributed revenue
from 2021 Acquisitions and the timing of product deliveries in the deployables
and engineering solutions space. This activity was partially offset by the
timing of subcontracted work in addition to macroeconomic headwinds, including
inflation and supply chain pressures that increased production costs.

Cost of Sales


Cost of sales increased $3.5 million, or 14%, for the three months ended March
31, 2022 compared to the three months ended March 31, 2021. The year-over-year
increase in cost of sales was primarily driven by $3.7 million of contributed
cost of sales from 2021 Acquisitions, equity-based compensation of $0.8 million,
increased costs associated with revenue growth for the period, and the
macroeconomic factors discussed above. These activities were partially offset by
changes in contract mix and the investment of operational resources in future
technologies through research and development.

Gross Margin


Gross margin decreased $2.3 million, or 31%, for the three months ended March
31, 2022 compared to the three months ended March 31, 2021. As a percentage of
sales, gross margin was 16% and 24% for the three months ended March 31, 2022
and March 31, 2021, respectively. The year-over-year decrease in gross margin
was primarily driven by changes in contract mix and an increase in production
costs and equity-based compensation.
Selling, General and Administrative expenses ("SG&A")

SG&A expenses increased $9.7 million, or 86%, for the three months ended March
31, 2022 compared to the three months ended March 31, 2021. The year-over-year
increase in SG&A was primarily driven by equity-based compensation expense of
$3.6 million, litigation-related expenses of $2.3 million and increased payroll
costs of $1.5 million related to our expanded workforce. The remaining increase
was primarily related to increased professional fees and other costs associated
with being a public company. Contributed SG&A from the 2021 Acquisitions was
$2.0 million for the three months ended March 31, 2022. SG&A expenses are
expected to increase as we continue to invest in the development of our business
and centralized corporate functions.

Transaction Expenses

Transaction expenses decreased $2.4 million, or 98%, for the three months ended
March 31, 2022 compared to the three months ended March 31, 2021. The
transaction expenses incurred in the three months ended March 31, 2022 were
primarily related to the acquisition

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of Techshot, while transaction expenses incurred in the three months ended March
31, 2021
included the acquisition of Oakman and DPSS.

Research and Development


Research and development expenses increased $0.7 million, or 73%, for the three
months ended March 31, 2022 compared to the three months ended March 31, 2021.
The increase was primarily driven by the strategic decision to invest in future
technologies despite macroeconomic factors that increased the cost of research
and development activities. The remaining increase was due to varied spending on
projects related to solar arrays, modeling and simulation environments, and
technologies related to low-earth orbit commercialization, including
biofabrication, polymer and metal manufacturing, and cold stowage services.
Contributed expenses from the 2021 Acquisitions was $0.4 million for the three
months ended March 31, 2022.

Interest Expense, net


Interest expense, net was relatively consistent for the three months ended March
31, 2022 as compared to the three months ended March 31, 2021. Please refer to
Note G of the accompanying notes to the condensed consolidated financial
statements for additional information related to the Company's debt obligations.

Other (Income) Expense, net


Other (income) expense, net increased $1.1 million, or 1,256%, for the three
months ended March 31, 2022 compared to the three months ended March 31, 2021.
The year-over-year increase was primarily due to a loss recognized as a result
of an increase in the private warrant liability of $1.2 million during the three
months ended March 31, 2022. Refer to Note D of the accompanying notes to the
condensed consolidated financial statements for additional information related
to the private warrants.

Income Tax Expense (Benefit)

The table below provides information regarding our income tax expense (benefit)
for the following periods:

                                                      Three Months Ended
(in thousands, except percent)                March 31, 2022      March 31, 

2021

Income tax expense (benefit)                 $      (2,889)      $      (1,026)
Effective tax rate                                    14.3  %             11.8  %


The increase in our effective tax rate for the three months ended March 31, 2022
compared to the three months ended March 31, 2021 is primarily due to the impact
of equity-based compensation, the valuation of warrants, and a partial valuation
allowance on net operating loss carryforwards originating during the three
months ended March 31, 2022. Refer to Note I of the accompanying notes to the
condensed consolidated financial statements for further discussion.

Supplemental Non-GAAP Information


We use certain financial measures to evaluate our operating performance,
generate future operating plans, and make strategic decisions, including those
relating to operating expenses and the allocation of internal resources which
are not calculated in accordance with U.S. Generally Accepted Accounting
Principles ("U.S. GAAP") and are considered to be Non-GAAP financial performance
measures. These Non-GAAP financial performance measures are used to supplement
the financial information presented on a U.S. GAAP basis and should not be
considered in isolation or as a substitute for the relevant U.S. GAAP measures
and should be read in conjunction with information presented on a U.S. GAAP
basis. Because not all companies use identical calculations, our presentation of
Non-GAAP measures may not be comparable to other similarly titled measures of
other companies.

Adjusted EBITDA and Pro Forma Adjusted EBITDA are two such Non-GAAP financial
measures that we use. Adjusted EBITDA is defined as net income (loss) adjusted
for interest expense (income), net, income tax (benefit) expense, depreciation
and amortization, acquisition costs, acquisition integration costs, purchase
accounting fair value adjustment related to deferred revenue, capital market and
advisory fees, write-off of long-lived assets, and equity-based compensation.
Pro Forma Adjusted EBITDA is computed to give effect to the business
combinations as if they occurred on January 1 of the year in which they were
acquired.

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The table below presents a reconciliation of Adjusted EBITDA and Pro Forma
Adjusted EBITDA to net income (loss), computed in accordance with U.S. GAAP for
the following periods:
                                                                                              Three Months Ended
(in thousands)                                                                      March 31, 2022           March 31, 2021
Net income (loss)                                                                 $       (17,293)         $        (7,674)
Interest expense                                                                            1,452                    1,422
Income tax expense (benefit)                                                               (2,889)                  (1,026)
Depreciation and amortization                                                               3,658                    2,271
Acquisition deal cost (i)                                                                      46                    2,417
Acquisition integration cost (i)                                                              458                      314

Purchase accounting fair value adjustment related to deferred revenue
(ii)

                                                                                           26                       73
Capital market and advisory fees (iii)                                                      1,958                    3,180

Litigation-related expenses (iv)                                                            2,266                        -
Equity-based compensation (v)                                                               4,411                        -
Warrant liability change in fair value adjustment (vi)                                      1,238                        -
Adjusted EBITDA                                                                            (4,669)                     977
Pro forma impact on EBITDA (vii)                                                                -                      699
Pro forma adjusted EBITDA                                                         $        (4,669)         $         1,676

i.Redwire incurred acquisition costs including due diligence and integration
costs.

ii.Redwire incurred purchase accounting fair value adjustments to unwind
deferred revenue for MIS and DPSS.

iii.Redwire incurred capital market and advisory fees related to advisors
assisting with preparation for the Merger and transitional costs associated with
becoming a public company.


iv.Redwire incurred expenses related to the Audit Committee investigation and
securities litigation as further described in Note J of the accompanying notes
to the condensed consolidated financial statements.

v.Redwire incurred expenses related to equity-based compensation under Redwire’s
equity-based compensation plan.


vi.Redwire adjusted the fair value of the private warrants between the initial
valuation as of September 2, 2021, the date the warrants were assumed, and March
31, 2022.

vii.Pro forma impact represents the incremental results of a full period of
operations assuming the entities acquired during the periods presented were
acquired from January 1 of the year in which they occurred. For the three months
ended March 31, 2021, the pro forma impact included the results of Oakman, DPSS
and the incremental results of Techshot, which was acquired in November 2021.

Key Performance Indicators

Book-to-bill Ratio


Book-to-bill is the ratio of total contract awarded to revenues recorded in the
same period. The contracts awarded balance includes firm contract orders
including time and material contracts which were awarded during the period and
does not include unexercised contract options or potential orders under
indefinite delivery/indefinite quantity contracts. Although the contracts
awarded balance reflects firm contract orders, terminations, amendments, or
contract cancellations may occur which could result in a reduction to the
contracts awarded balance.

We view book-to-bill as an indicator of future revenue growth potential. To
drive future revenue growth, our goal is for the level of contract awarded in a
given period to exceed the revenue recorded, thus yielding a book-to-bill ratio
greater than 1.0.

Our book-to-bill ratio was as follows for the periods presented:

                                                       Three Months Ended
(in thousands, except ratio)                  March 31, 2022       March 31, 2021
Contracts awarded                            $        30,426      $        67,234
Revenues                                              32,867               31,698
Book-to-bill ratio                                        0.93                 2.12



Our book-to-bill ratio was 0.93 for three months ended March 31, 2022, as
compared to 2.12 for three months ended March 31, 2021. For the three months
ended March 31, 2022, none of the contracts awarded balance relates to acquired
contract value. For the three
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months ended March 31, 2021, $38.6 million of the contracts awarded balance
relates to acquired contract value from the Oakman and DPSS acquisitions.

Backlog


We view growth in backlog as a key measure of our business growth. Contracted
backlog represents the estimated dollar value of firm funded executed contracts
for which work has not been performed (also known as the remaining performance
obligations on a contract). Our contracted backlog includes $29.6 million and
$10.7 million in remaining contract value from time and materials contracts as
of March 31, 2022 and as of December 31, 2021, respectively.

Organic contracted backlog change excludes backlog activity from acquisitions
for the first four full quarters since the entities' acquisition date.
Contracted backlog activity for the first four full quarters since the entities'
acquisition date is included in acquisition-related contracted backlog change.
After the completion of four fiscal quarters, acquired entities are treated as
organic for current and comparable historical periods.

Organic contract value includes the remaining contract value as of January 1 not
yet recognized as revenue and additional orders awarded during the period for
those entities treated as organic. Acquisition-related contract value includes
remaining contract value as of the acquisition date not yet recognized as
revenue and additional orders awarded during the period for entities not treated
as organic. Similarly, organic revenue includes revenue earned during the period
presented for those entities treated as organic, while acquisition-related
revenue includes the same for all other entities, excluding any pre-acquisition
revenue earned during the period.
                                                                                                    December 31,
(in thousands)                                                               March 31, 2022             2021
Organic backlog as of January 1                                            $       133,115          $  122,273
Organic additions during the period                                                 27,674             146,880
Organic revenue recognized during the period                                       (31,714)           (136,038)
Organic backlog at end of period                                                   129,075             133,115

Acquisition-related contract value beginning of period                               6,627                   -
Acquisition-related additions during the period                                      2,752               8,190
Acquisition-related revenue recognized during the period                            (1,153)             (1,563)
Acquisition-related backlog at end of period                                         8,226               6,627

Contracted backlog at end of period                                        

$ 137,301 $ 139,742




The acquisition-related contracted backlog activity includes contracted backlog
activity of Techshot. The organic contracted backlog activity includes
contracted backlog activity of Adcole, DSS, MIS, Roccor, LoadPath, Oakman, and
DPSS.

Although contracted backlog reflects business associated with contracts that are
considered to be firm, terminations, amendments or contract cancellations may
occur, which could result in a reduction in our total backlog. In addition, some
of our multi-year contracts are subject to annual funding. Management fully
expects all amounts reflected in contracted backlog to ultimately be fully
funded. Contracted backlog related to contracts from MIS operations in
Luxembourg of $4.1 million as of March 31, 2022 and $5.3 million as of
December 31, 2021 is subject to foreign exchange rate conversions from euros to
U.S. dollars that could cause the remaining backlog balance to fluctuate with
the foreign exchange rate at the time of measurement.

Our total backlog as of March 31, 2022, which includes both contracted and
uncontracted backlog, was $273.9 million. Uncontracted backlog represents the
anticipated contract value, or portion thereof, of goods and services to be
delivered under existing contracts which have not been appropriated or otherwise
authorized. Our uncontracted backlog as of March 31, 2022 was $136.6 million.
Uncontracted backlog includes $74.6 million of contract extensions under
negotiation that are priced, fully scoped, verbally awarded, and expected to be
executed shortly.

Liquidity and Capital Resources


Our primary sources of liquidity are cash flows provided by our operations,
access to existing credit facilities and proceeds from the Merger. Since its
inception, the Company has incurred net losses and negative operating cash flow,
and has used its cash to fund capital expenditures, costs associated with the
Company's acquisitions, and costs associated with the Merger, among other uses.
While some of these cash outflows have been non-recurring in nature, the Company
has continued to experience net cash outflows from operating activities. While
the Company believes its continued growth and cash flow management will result
in improvements in cash from operating activities going forward, there can be no
assurance these improvements will be achieved.
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Our primary short-term cash requirements are to fund working capital, operating
lease obligations, and short-term debt, including current maturities of
long-term debt. Working capital requirements can vary significantly from period
to period, particularly as a result of the timing of receipts and disbursements
related to long-term contracts. Significant fluctuations in working capital
could adversely impact the Company's cash position and short-term liquidity
needs.

Our medium-term to long-term cash requirements are to service and repay debt,
expand our breadth and footprint through acquisitions as well as invest in
facilities, equipment, technologies, and research and development for our growth
initiatives. To support these initiatives, we expect to continue to make
significant investments in our business, including hiring additional staff,
implementing processes and procedures to address public company requirements and
other customary practices as well as evaluating strategic acquisitions. As a
result, we will likely incur additional operating expenses and capital
expenditures.

Our ability to fund our cash needs is dependent upon the successful execution of
our business strategy and future operating results. Our future operating results
are subject to, among others, general economic conditions, including as a result
of the COVID-19 pandemic, inflation and supply chain pressures, competitive
dynamics in our target markets as well as legislative and regulatory factors
that may be outside of our control. As part of our business and debt management
strategy, we continuously evaluate opportunities to further strengthen our
financial and liquidity position including the issuance of additional equity or
debt securities, refinance or otherwise restructure our existing credit
facilities, or enter into new financing arrangements. On April 14, 2022, the
Company entered into a committed equity facility. See below for more
information. In addition, the Company has identified a plan to execute certain
cost reduction actions including, among others, integration-related workforce
rationalizations, real estate synergies, business unit optimization initiatives,
and cost savings associated with certain Corporate level employment costs. There
can be no assurances that any of these actions will be sufficient to allow us to
service our debt obligations, meet our debt covenants, or that such actions will
not result in an adverse impact on our business.

As of March 31, 2022, our available liquidity totaled $30.9 million, which was
comprised of $5.9 million in cash and cash equivalents, and $25.0 million in
available borrowings from our existing credit facilities. We believe that our
existing sources of liquidity will be sufficient to meet our working capital
needs and comply with our debt covenants for at least the next twelve months
from the date on which our consolidated financial statements were issued.
However, the Company's current liquidity may not be sufficient to meet the
required long-term liquidity needs associated with continued use of cash from
operating activities at historical levels, in addition to its other liquidity
needs associated with its capital expenditures, debt payments, and other
investing and financing requirements.

The table below summarizes our outstanding debt as of the following periods:
                                                                    March 31,           December 31,
(in thousands)                                                        2022                  2021
Adams Street Term Loan                                            $   30,613          $      30,690
Adams Street Revolving Credit Facility                                     -                      -
Adams Street Delayed Draw Term Loan                                   14,813                 14,850
Adams Street Incremental Term Loan                                    31,680                 31,760

D&O Financing Loan                                                       761                  1,904
Total debt                                                            77,867                 79,204
Less: unamortized discounts and issuance costs                         1,580                  1,653
Total debt, net                                                       76,287                 77,551
Less: Short-term debt, including current portion of long-term
debt                                                                   1,542                  2,684
Total long-term debt, net                                         $   74,745          $      74,867



Adams Street Credit Agreement

On October 28, 2020, we entered into the Adams Street Credit Agreement, which
included the following:


i.$31.0 million term loan (the "Adams Street Term Loan"). Proceeds from the
Adams Street Term Loan were used to finance the acquisition of Roccor, pay
acquisition-related costs, fund working capital needs (including the payment of
any working capital adjustment pursuant to the Roccor acquisition agreement) and
other general corporate purposes;

ii.$5.0 million revolving credit facility (the “Adams Street Revolving Credit
Facility”); and

iii.$15.0 million delayed draw term loan (the “Adams Street Delayed Draw Term
Loan”).

On January 15, 2021, we drew $15.0 million on the delayed draw term loan to
finance the Oakman acquisition. On February 17, 2021, we amended the Adams
Street Credit Agreement to increase the principal amount of the Adams Street
Term Loan by an additional

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$32.0 million to finance the DPSS acquisition. On July 30, 2021, we drew $3.0
million on the revolving credit facility and repaid the $3.0 million draw down
on September 23, 2021.

On September 2, 2021, the Adams Street Credit Agreement was amended to provide
that the consolidated total net leverage ratio not exceed 6.50:1.00 on the last
day of any quarter ("the Financial Covenant"), to remove the cap on the amount
of unrestricted cash which may be netted for purposes of the Financial Covenant,
to redefine "Consolidated EBITDA", and to reset the call protection terms.

The Adams Street Credit Agreement has a maturity date of October 28, 2026. The
Adams Street Credit Agreement is secured by a first lien security interest in
all right, title or interest in or to certain assets and properties owned by us
and the guarantors included in the Adams Street Credit Agreement. The Adams
Street Credit Agreement requires us to meet customary affirmative and negative
covenants, default provisions, representations and warranties and other terms
and conditions. We are required to make mandatory prepayments of the outstanding
principal and accrued interest under the Adams Street Credit Agreement (i) upon
the occurrence of certain events and (ii) to the extent a specified net leverage
ratio is exceeded as evaluated on any test period ending date. The test period
ending dates are March 31, June 30, September 30 and December 31 each year,
starting on March 31, 2021, through the maturity of the agreement.

On March 25, 2022, the Company entered into a Third Amendment (the "Amendment")
to the Adams Street Capital Credit Agreement to, among other things, increase
commitments under the revolving credit facility from $5.0 million to
$25.0 million.

The Amendment also modified certain negative covenants and increased the per
annum interest rate (i) with respect to revolving loans in an aggregate
principal amount of $5.0 million or less, to 6.00% for Eurocurrency rate loans
and 5.00% for Base Rate Loans, and (ii) with respect to revolving loans in an
aggregate principal amount in excess of $5.0 million, to 7.50% for Eurocurrency
rate loans and 6.50% for Base Rate Loans.

The Adams Street Capital Credit Agreement, as amended, contains certain
customary representations and warranties, affirmative and other covenants and
events of default, including among other things, payment defaults, breach of
representations and warranties, and covenant defaults. As of March 31, 2022, we
were in compliance with our debt covenants under the Adams Street Credit
Agreement.

In connection with the entry into the Amendment, AEI and certain of its
affiliates (the "AEI Guarantors"), provided a limited guarantee for the payment
of outstanding revolving loans in excess of $10.0 million, with a $15.0 million
cap in the aggregate. In the event that the AEI Guarantors are required to make
payments to the lenders under the Adams Street Capital Credit Agreement pursuant
to the terms of the limited guarantee, each AEI Guarantor would be subrogated to
the rights of the lenders. In connection with the limited guarantee, the Lead
Borrower agreed to pay to the AEI Guarantors, a fee equal to 2% of any amount
actually paid by such guarantors under the limited guarantee. The fee is
waivable by the AEI Guarantors in their discretion.

SVB Loan Agreement


On August 31, 2020, we entered into a $45.4 million loan agreement with Silicon
Valley Bank (the "Original SVB Loan Agreement") maturing on August 31, 2021,
which was subsequently modified on October 28, 2020 to (i) increase the
available commitment by $5.7 million and (ii) pay $0.6 million toward the
outstanding principal under the Original SVB Loan Agreement. This resulted in a
modified loan (the "SVB Loan Agreement") for $50.5 million. On October 30, 2020,
we made a $4.0 million principal payment. On April 2, 2021, we extended the
maturity date to September 30, 2022.

On September 2, 2021, we repaid the full outstanding principal and interest of
$41.6 million on the SVB Loan.

Paycheck Protection Program Loan


On May 1, 2020, prior to its acquisition by the Company, Deep Space Systems,
Inc. ("DSS") received a Paycheck Protection Program ("PPP") loan for $1.1
million (the "DSS PPP Loan"), with a maturity date of May 1, 2022. Under the
terms of the DSS PPP Loan, DSS could apply for forgiveness under the PPP
regulations if DSS used the proceeds of the loan for its payroll costs and other
expenses in accordance with the requirements of the PPP. As the funds were
disbursed to DSS prior to the acquisition, the Company intended to repay any
unforgiven balance with funds held in a DSS savings account as of the date of
the DSS acquisition. On June 18, 2021, $0.6 million of the DSS PPP Loan was
forgiven and as a result reclassified as a note payable to the seller of DSS.
During the Successor 2021 Period, we repaid the $0.6 million note payable to the
seller of DSS and the remaining outstanding principal and interest of $0.5
million on the DSS PPP loan.

D&O Financing Loan

On September 3, 2021, we entered into a $3.0 million loan with BankDirect
Capital Finance
(the “D&O Financing Loan”) to finance our directors and officers
insurance premium. The D&O Financing Loan has an interest rate of 1.74% per
annum, an effective interest rate of 1.75%, and a maturity date of May 3, 2022.

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Committed Equity Facility


On April 14, 2022, the Company entered into an $80 million common stock purchase
agreement with B. Riley Principal Capital, LLC ("B. Riley") to further support
its growth strategy through initiatives such as accretive acquisitions and
internal investments, to bolster working capital, and/or for general corporate
purposes. The agreement governs a committed equity facility that provides the
Company with the right, without obligation, to sell and issue up to $80 million
of its common stock over a period of 24 months to B. Riley at the Company's sole
discretion, subject to certain limitations and conditions.

Contractual Obligations


The following table presents our contractual obligations as of March 31, 2022:

                                    Remainder of
(in thousands)                          2022               2023             2024             2025             2026             Thereafter            Total
Adams Street Term Loan             $       233          $   310          $   310          $   310          $ 29,450          $         -          $ 30,613
Adams Street Delayed Draw Term
Loan                                       113              150              150              150            14,250                    -            

14,813

Adams Street Incremental Term Loan         240              320              320              320            30,480                    -            31,680
D&O Financing Loan                         761                -                -                -                 -                    -               761

Total long-term debt maturities          1,347              780              780              780            74,180                    -            

77,867

Future minimum lease payments            2,183            3,068            2,850            2,266             1,631                3,183            

15,181

Total contractual obligations $ 3,530 $ 3,848 $ 3,630 $ 3,046 $ 75,811 $ 3,183 $ 93,048




The Company is obligated under certain operating leases for its facilities and
office equipment. Certain facility leases contain predetermined fixed escalation
of minimum rents at rates ranging from 1.96% to 4.00% per annum and renewal
options that could extend certain leases up to an additional nine years; the
office equipment lease contains a renewal option that could extend the lease to
consecutive 60-day terms and a purchase option. As of March 31, 2022, the future
annual minimum lease payments for operating leases for the year 2022 was
estimated at $2.2 million with estimated aggregate minimum lease payments of
$15.2 million through expiration of current leases. Refer to Note H of the
accompanying notes to the condensed consolidated financial statements for
further information.

As of March 31, 2022, the Company had one facility lease that had not yet
commenced but created significant future lease obligations in the amount of
$3.9 million. The contract was determined to be an operating lease, whereby the
Company is required to make rent payments prior to the lease commencement date
while construction is completed on the underlying asset. Due to the nature of
the work and the amount of the Company's contribution to construction period
costs, the Company was determined not to be the accounting owner of the asset
under construction as the landlord had substantially all of the construction
period risks.

Cash Flows

The table below summarizes certain information from the condensed consolidated
statements of cash flows for the following periods:


                                                                              Three Months Ended
(in thousands)                                                      March 31, 2022           March 31, 2021
Net cash provided by (used in) operating activities               $       (11,446)         $       (12,525)
Net cash provided by (used in) investing activities                        (1,014)                 (34,087)
Net cash provided by (used in) financing activities                        (2,107)                  40,919

Effect of foreign currency rate changes on cash and cash
equivalents

                                                                   (18)                    (158)
Net increase (decrease) in cash and cash equivalents                      (14,585)                  (5,851)
Cash and cash equivalents at end of period                        $         5,938          $        16,225



Operating activities

For the three months ended March 31, 2022 net cash used in operating activities
was $11.4 million. Net loss before deducting depreciation, amortization and
other non-cash items generated a cash outflow of $10.7 million and was further
impacted by an unfavorable change in net working capital of $0.8 million during
this period. The unfavorable change in net working capital was largely driven by
increase in contract assets of $5.7 million and prepaid expenses and other
assets of $1.3 million, and decrease in deferred revenue of $1.8 million, offset
by the increase in accounts payable and accrued expenses of $3.1 million and
decrease in accounts receivable of $4.3 million and prepaid insurance of $1.1
million. The changes in accounts receivable, contract assets and deferred
revenue relates to the timing of billable milestones occurring during the three
months ended March 31, 2022. The change in accounts payable and accrued expenses
is related to timing in payments.
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For the three months ended March 31, 2021, net cash used in operating activities
was $12.5 million. Net income before deducting depreciation, amortization and
other non-cash items generated a cash outflow of $6.4 million and was further
impacted by an unfavorable change in net working capital of $6.2 million during
this period. The unfavorable change in net working capital was largely driven by
the increase in accounts receivable of $5.1 million, contract assets of $2.7
million and prepaid expenses and other assets of $2.1 million, offset by the
increase in accounts payable and accrued expenses of $5.1 million. The changes
in accounts receivable and deferred revenue relates to the timing of billable
milestones occurring during the three months ended March 31, 2021.

Investing activities


For the three months ended March 31, 2022 net cash used in investing activities
was $1.0 million, consisting of $0.9 million used for the purchase of property,
plant and equipment and $0.1 million used for the purchase of intangible assets.

For the three months ended March 31, 2021, net cash used in investing activities
was $34.1 million, consisting of $38.4 million used for the acquisition of
Oakman and DPSS as well as $0.6 million used for the purchase of property, plant
and equipment. This was offset by the settlement of related party receivables
resulting in cash received of $4.9 million.

Financing activities


For the three months ended March 31, 2022 net cash used in financing activities
was $2.1 million, consisting of $1.3 million used for the repayment of debt as
well as $0.8 million of loan fees paid to third parties in the execution of the
Amendment to the ASP Agreement.

For the three months ended March 31, 2021 net cash provided by financing
activities was $40.9 million, consisting of proceeds from debt of $46.0 million
offset by the repayment of debt of $5.0 million.

Foreign Currency Exposures

There were no material changes to our foreign currency exposures that occurred
in the periods covered by this report.

Critical Accounting Estimates


For the critical accounting estimates used in preparing our condensed
consolidated financial statements, we make assumptions and judgments that can
have a significant impact on net revenues, cost and expenses, and other expense
(income), net, in our condensed consolidated statements of operations and
comprehensive income (loss), as well as, on the value of certain assets and
liabilities on our condensed consolidated balance sheets. We base our
assumptions, judgments and estimates on historical experience and various other
factors that we believe are reasonable under the circumstances. Actual results
could differ materially from these estimates under different assumptions or
conditions.

In accordance with the Company's policies, we regularly evaluate estimates,
assumptions, and judgments; our estimates, assumptions, and judgments are based
on historical experience and on factors we believe are reasonable under the
circumstances. The results involve judgments about the carrying values of assets
and liabilities not readily apparent from other sources. If our assumptions or
conditions change, the actual results the Company reports may differ from these
estimates.

There were no material changes to our critical accounting policies, estimates or
judgments, that occurred in the periods covered by this report from those
disclosed in the Annual Report on Form 10-K filed with the SEC on April 11,
2022
.

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