rdw-20230930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 001-39733

Redwire Corporation

(Exact name of registrant as specified in its charter)


Delaware						98-1550429
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

8226 Philips Highway, Suite 101 Jacksonville, Florida						32256
(Address of Principal Executive Offices)						(Zip Code)

(650) 701-7722

Registrant's telephone number, including area code

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	RDW	New York Stock Exchange
Warrants, each to purchase one share of Common Stock	RDW 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, a 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 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 Act). Yes ☐ No ☒

The registrant had outstanding 64,799,841 shares of common stock as of October 31, 2023.

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REDWIRE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2023

TABLE OF CONTENTS


ITEM		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	6
	Condensed Consolidated Balance Sheets	6
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	8
	Condensed Consolidated Statements of Changes in Equity (Deficit)	9
	Condensed Consolidated Statements of Cash Flows	11
	Notes to Condensed Consolidated Financial Statements	12
























	Note A – Description of the Business	12
	Note B – Summary of Significant Accounting Policies	12
	Note C – Business Combinations	14
	Note D – Fair Value of Financial Instruments	16
	Note E – Accounts Receivable, net	18
	Note F – Inventory	19



	Note G – Debt	19
	Note H – Leases	20

	Note I – Income Taxes	21
	Note J – Commitments and Contingencies	22
	Note K – Convertible Preferred Stock	23

	Note L – Revenues	25
	Note M – Employee Benefit Plans	26
	Note N – Equity-Based Compensation	27
	Note O – Impairment Expense	29
	Note P – Net Income (Loss) per Common Share	31
	Note Q – Joint Venture	31
	Note R – Related Parties	32
	Note S – Subsequent Events	33
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures Regarding Market Risk	43
Item 4.	Controls and Procedures	43

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3.	Defaults Upon Senior Securities	46
Item 4.	Mine Safety Disclosures	46
Item 5.	Other Information	46
Item 6.	Exhibits	46
Signatures		47

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PART I. FINANCIAL INFORMATION

Each of the terms the “Company,” “Redwire,” “we,” “our,” “us” and similar terms used herein refer collectively to Redwire Corporation, a Delaware corporation, and its consolidated subsidiaries, unless otherwise stated.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that constitute “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, concerning us and other matters. These statements generally may be identified by words such as “anticipate,” “forecast,” “believe,” “outlook,” “trends,” “goals,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include, among other things, statements relating to our future financial condition, results of operations and/or cash flows, and our projects and related timelines. Forward-looking statements are based upon assumptions, expectations, plans and projections that we believe to be reasonable when made, but which may change over time. These statements are not guarantees of future performance and inherently involve a wide range of risks and uncertainties that are difficult to predict.

Redwire believes it is important to communicate its expectations to its security holders. However, there may be events in the future that Redwire’s management is not able to predict accurately or over which Redwire has no control. The risk factors and cautionary language contained in this report, and other reports and documents filed by Redwire with the Securities and Exchange Commission (the “SEC”), provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described in such forward-looking statements, including among other things:

•our limited operating history makes it difficult to evaluate our future prospects and the risks and challenges we may encounter;

•our ability to grow our business depends on the successful development and continued refinement of many of our proprietary technologies, products, and service offerings;

•competition with existing or new companies could cause downward pressure on prices, fewer customer orders, reduced margins, the inability to take advantage of new business opportunities, and the loss of market share;

•our projections of future financial results are based on a number of assumptions by our management, some or all of which may prove to be incorrect, and actual results may differ materially and adversely from such projections;

•if we are unable to successfully integrate recently completed and future acquisitions, including the recent acquisition of QinetiQ Space NV, or successfully select or execute future acquisitions into the business, our operations and financial condition could be materially and adversely affected;

•the issuance and sale of shares of our Series A Convertible Preferred Stock has reduced the relative voting power of holders of our common stock and diluted the ownership of holders of our capital stock;

•AE Industrial Partners and Bain Capital have significant influence over us, which could limit other investors’ ability to influence the outcome of key transactions and/or strategic decisions;

•provisions in the Certificate of Designation related to our Series A Convertible Preferred Stock may delay or prevent our acquisition by a third party, which could also reduce the market price of our capital stock;

•our Series A Convertible Preferred Stock has rights, preferences and privileges that are not held by, and are preferential to, the rights of holders of our other outstanding capital stock;

•there may be additional issuances or sales of a substantial amount of our common stock by our current stockholders, and these sales could cause the price of our common stock to fall;

•the issuance of the Series A Convertible Preferred Stock may impact the price and market for our common stock;

•we have been and may continue to be adversely affected by macroeconomic, business, and/or competitive factors, including inflationary and supply chain pressures as well as rising interest rates and market volatility;

•unsatisfactory performance of our products and services could have a material adverse effect on our business, financial condition and results of operations;

•the market for in-space infrastructure services is still emerging and may not achieve the growth potential that we expect or may grow more slowly than expected;

•we may in the future invest significant resources in developing new offerings and exploring the application of our technologies for other uses and those opportunities may never materialize;

•we may not be able to convert our orders in backlog into revenue;

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•a portion of our business model is related to the in-space manufacture and robotic assembly of space structures, a technology that is still in development and has not been fully validated through in-space deployment and testing;

•we are reliant on third-party launch vehicles to launch our spacecraft and customer payloads into space;

•protecting and defending against intellectual property claims could have a material adverse effect on our business;

•cybersecurity or other data breaches or incidents involving technology or information systems could damage our business, reputation and brand and substantially harm our financial condition and results of operations;

•we are highly dependent on our senior management team and other highly skilled personnel, and if we are not successful in attracting or retaining highly qualified personnel, we may not be able to successfully implement our business strategy;

•we will incur significant expenses and capital expenditures in the future to execute our business plan and we may be unable to adequately control our expenses;

•our ability to successfully implement our business plan will depend on a number of factors outside of our control;

•we may not be able to successfully develop our technology and services;

•we may not be able to adapt to and satisfy customer demands in a timely and cost-effective manner;

•we may not be able to respond to commercial industry cycles in terms of cost structure, manufacturing capacity, and/or personnel needs;

•any delays in the development, design, engineering and manufacturing of our products and services may adversely affect our business, financial condition and results of operations;

•the benefits of our merger with Genesis Park Acquisition Corp. (the “Merger”) may not be realized to the extent currently anticipated by us, or at all. The ability to recognize any such benefits from the Merger may be affected by, among other things, competition, our ability to grow and manage growth profitably, maintain relationships with customers and suppliers and retain our management and key employees;

•we are subject to the requirements of the National Industrial Security Program Operating Manual (“NISPOM”) for our facility security clearance, which is a prerequisite to our ability to perform on classified contracts for the U.S. government;

•the U.S. government’s budget deficit and the national debt, as well as any inability of the U.S. government to complete its budget process for any government fiscal year and consequently having to shut down or operate on funding levels equivalent to its prior fiscal year pursuant to a “continuing resolution,” could have an adverse impact on our business, financial condition, results of operations and cash flows;

•we depend significantly on U.S. and European government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited;

•we are subject to stringent U.S. trade control laws and regulations as well as economic sanction laws and regulations;

•we have government customers, which subjects us to risks including early contract termination, audits, investigations, sanctions and penalties;

•we are exposed to additional risks as a result of our international business, including risks related to global security, geopolitical circumstances and economic factors, misconduct, suppliers, laws and regulations;

•if we fail to adequately protect our intellectual property rights, our competitive position could be impaired and our intellectual property applications for registration may not be issued or be registered;

•our management team has limited experience managing a public company;

•we have identified material weaknesses in our internal control over financial reporting that, if not remediated, may not allow us to report our financial condition or results of operations accurately or timely. Additionally, if we were to identify additional material weaknesses or other deficiencies, or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately and timely report our financial results, in which case our business may be harmed and investors may lose confidence in the accuracy and completeness of our financial reports;

•we may be unable to meet or maintain stock exchange listing standards;

•we may require substantial additional funding to finance our operations, but adequate additional financing may not be available when we need it, on acceptable terms or at all;

•our level of debt places significant demands on our cash resources and the failure of financial institutions or transactional counterparties could adversely affect our current and projected business operations and our financial condition and results of operations;

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•our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or any guidance that we may provide; and

•adverse publicity stemming from any incident involving Redwire or our competitors could have a material adverse effect on our business, financial condition and results of operations.

Undue reliance should not be placed on these forward-looking statements. The forward-looking statements contained in this Report are based on current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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Item 1. Financial Statements and Supplementary Data

REDWIRE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of U.S. dollars, except share data)


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	10,859	$	28,316
Accounts receivable, net	24,641		26,726
Contract assets	39,779		31,041
Inventory	1,687		1,469
Income tax receivable	688		688

Prepaid insurance	1,304		2,240
Prepaid expenses and other current assets	5,464		5,687
Total current assets	84,422		96,167
Property, plant and equipment, net of accumulated depreciation of $5,526 and $3,032, respectively	14,631		12,761
Right-of-use assets	14,041		13,103
Intangible assets, net of accumulated amortization of $16,612 and $11,247, respectively	62,969		66,871
Goodwill	64,413		64,618
Equity method investments	3,241		3,269

Other non-current assets	509		909
Total assets	$	244,226	$	257,698

Liabilities, Convertible Preferred Stock and Equity (Deficit)
Current liabilities:
Accounts payable	$	14,185	$	17,584
Notes payable to sellers	—		1,000
Short-term debt, including current portion of long-term debt	1,976		2,578
Short-term operating lease liabilities	3,677		3,214
Short-term finance lease liabilities	364		299
Accrued expenses	37,678		36,581
Deferred revenue	27,059		29,817
Other current liabilities	2,310		3,666
Total current liabilities	87,249		94,739
Long-term debt, net	79,943		74,745
Long-term operating lease liabilities	13,118		12,670
Long-term finance lease liabilities	883		579
Warrant liabilities	3,789		1,314
Deferred tax liabilities	2,195		3,255
Other non-current liabilities	355		506
Total liabilities	$	187,532	$	187,808
Commitments and contingencies (Note J – Commitments and Contingencies)

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REDWIRE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands of U.S. dollars, except share data)


	September 30, 2023		December 31, 2022

Convertible preferred stock, $0.0001 par value, 88,000.00 shares authorized; 87,289.66 and 81,250.00 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively. Liquidation preference of $179,349 and $162,500 as of September 30, 2023 and December 31, 2022, respectively(1).	$	85,395	$	76,365

Shareholders’ Equity (Deficit):
Preferred stock, $0.0001 par value, 99,912,000 shares authorized; none issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 64,799,841 and 64,280,631 issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	6		6
Treasury stock, 236,012 and 141,811 shares, at cost, as of September 30, 2023 and December 31, 2022, respectively	(629)		(381)
Additional paid-in capital	195,500		198,126
Accumulated deficit	(225,503)		(206,528)
Accumulated other comprehensive income (loss)	1,775		2,076
Total shareholders’ equity (deficit)	(28,851)		(6,701)
Noncontrolling interests	150		226
Total equity (deficit)	(28,701)		(6,475)
Total liabilities, convertible preferred stock and equity (deficit)	$	244,226	$	257,698

(1) Please refer to Note K – Convertible Preferred Stock for additional information.

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

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REDWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands of U.S. dollars, except share and per share data)



	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenues	$	62,612	$	37,249	$	180,315	$	106,844
Cost of sales	45,495		29,300		133,077		86,742
Gross margin	17,117		7,949		47,238		20,102
Operating expenses:
Selling, general and administrative expenses	18,302		15,312		52,026		53,825

Transaction expenses	—		1,819		13		1,913

Impairment expense(1)	—		—		—		80,462
Research and development	1,532		1,133		3,990		4,565
Operating income (loss)	(2,717)		(10,315)		(8,791)		(120,663)
Interest expense, net	2,629		2,401		7,937		5,523
Other (income) expense, net	1,232		(158)		2,689		(14,493)
Income (loss) before income taxes	(6,578)		(12,558)		(19,417)		(111,693)
Income tax expense (benefit)	(253)		(2,135)		(369)		(6,949)
Net income (loss)	(6,325)		(10,423)		(19,048)		(104,744)
Net income (loss) attributable to noncontrolling interests	(72)		—		(73)		—
Net income (loss) attributable to Redwire Corporation	(6,253)		(10,423)		(18,975)		(104,744)
Less: dividends on Convertible Preferred Stock	2,874		—		12,040		—
Net income (loss) available to common shareholders	$	(9,127)	$	(10,423)	$	(31,015)	$	(104,744)

Net income (loss) per common share:
Basic and diluted	$	(0.14)	$	(0.16)	$	(0.48)	$	(1.66)

Weighted-average shares outstanding:
Basic and diluted	64,795,985		63,460,527		64,475,390		63,050,769


Comprehensive income (loss):
Net income (loss) attributable to Redwire Corporation	$	(6,253)	$	(10,423)	$	(18,975)	$	(104,744)
Foreign currency translation gain (loss), net of tax	(860)		(177)		(304)		(663)
Total other comprehensive income (loss), net of tax	(860)		(177)		(304)		(663)
Total comprehensive income (loss)	$	(7,113)	$	(10,600)	$	(19,279)	$	(105,407)

(1) Please refer to Note O – Impairment Expense for additional information.

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

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REDWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(Unaudited)

(In thousands of U.S. dollars, except share data)


Three Months Ended September 30, 2023	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity (Deficit)		Noncontrolling Interests		Total Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of June 30, 2023	64,445,106	$	6	141,811	$	(381)	$	192,962	$	(219,250)	$	2,629	$	(24,034)	$	228	$	(23,806)
Equity-based compensation expense	—	—		—	—		2,451		—		—		2,451		—		2,451
Common stock issued under the committed equity facility	27,948	—		—	—		87		—		—		87		—		87
Common stock issued for share-based awards	326,787	—		—	—		—		—		—		—		—		—
Shares repurchased for settlement of employee tax withholdings on share-based awards	—	—		94,201	(248)		—		—		—		(248)		—		(248)

Foreign currency translation, net of tax	—	—		—	—		—		—		(854)		(854)		(6)		(860)
Net loss	—	—		—	—		—		(6,253)		—		(6,253)		(72)		(6,325)
Balance as of September 30, 2023	64,799,841	$	6	236,012	$	(629)	$	195,500	$	(225,503)	$	1,775	$	(28,851)	$	150	$	(28,701)


Nine Months Ended September 30, 2023	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity (Deficit)		Noncontrolling Interests		Total Equity (Deficit)
	Shares	Amount		Shares	Amount






























Balance as of December 31, 2022	64,280,631	$	6	141,811	$	(381)	$	198,126	$	(206,528)	$	2,076	$	(6,701)	$	226	$	(6,475)
Equity-based compensation expense	—	—		—	—		6,317		—		—		6,317		—		6,317
Common stock issued under the committed equity facility	27,948	—		—	—		87		—		—		87		—		87
Common stock issued for share-based awards	491,262	—		—	—		—		—		—		—		—		—
Shares repurchased for settlement of employee tax withholdings on share-based awards	—	—		94,201	(248)		—		—		—		(248)		—		(248)
Convertible preferred stock paid-in-kind dividend	—	—		—	—		(9,030)		—		—		(9,030)		—		(9,030)
Foreign currency translation, net of tax	—	—		—	—		—		—		(301)		(301)		(3)		(304)
Net loss	—	—		—	—		—		(18,975)		—		(18,975)		(73)		(19,048)
Balance as of September 30, 2023	64,799,841	$	6	236,012	$	(629)	$	195,500	$	(225,503)	$	1,775	$	(28,851)	$	150	$	(28,701)

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

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REDWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

(Unaudited)

(In thousands of U.S. dollars, except share data)


Three Months Ended September 30, 2022	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Shareholders’ Equity (Deficit)
	Shares	Amount
Balance as of June 30, 2022	63,253,836	$	6	$	191,707	$	(170,232)	$	(383)	$	21,098



Equity-based compensation expense	—	—		2,518		—		—		2,518
Common stock issued under the committed equity facility	598,854	—		1,787		—		—		1,787

Foreign currency translation, net of tax	—	—		—		—		(177)		(177)
Net loss	—	—		—		(10,423)		—		(10,423)

Balance as of September 30, 2022	63,852,690	$	6	$	196,012	$	(180,655)	$	(560)	$	14,803


Nine Months Ended September 30, 2022	Common Stock			Additional Paid-in Capital	Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)				Total Shareholders’ Equity (Deficit)
	Shares	Amount
Balance as of December 31, 2021	62,690,869	$	6		$	183,024	$	(75,911)	$	103		$	107,222



Equity-based compensation expense	—	—			8,672		—		—			8,672
Common stock issued under the committed equity facility	909,669	—			3,047		—		—			3,047
Committed equity facility fee settled in common stock	127,751	—			756		—		—			756



Foreign currency translation, net of tax	—	—			—		—		(663)			(663)
Net loss	—	—			—		(104,744)		—			(104,744)
Other	124,401	—			513		—		—			513
Balance as of September 30, 2022	63,852,690	$	6		$	196,012	$	(180,655)	$	(560)		$	14,803

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

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REDWIRE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)



	Nine Months Ended
	September 30, 2023		September 30, 2022
Cash flows from operating activities:
Net income (loss) attributable to Redwire Corporation	$	(18,975)	$	(104,744)
Net income (loss) attributable to noncontrolling interests	(73)		—
Net income (loss)	(19,048)		(104,744)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense	7,971		8,836
Amortization of debt issuance costs and discount	448		345

Equity-based compensation expense	6,317		8,672





(Gain) loss on change in fair value of committed equity facility	179		231
(Gain) loss on change in fair value of warrants	2,475		(16,005)
Deferred provision (benefit) for income taxes	(1,012)		(6,964)
Impairment expense	—		80,462


Non-cash lease expense	248		229
Non-cash interest expense	525		270
Other	157		143
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	2,031		(283)
(Increase) decrease in contract assets	(9,008)		(4,590)
(Increase) decrease in inventory	(221)		(1,362)
(Increase) decrease in prepaid insurance	936		(227)
(Increase) decrease in prepaid expenses and other assets	255		(803)
Increase (decrease) in accounts payable and accrued expenses	(2,202)		6,793
Increase (decrease) in deferred revenue	(2,734)		1,714
Increase (decrease) in operating lease liabilities	(241)		—
Increase (decrease) in other liabilities	(979)		454
Increase (decrease) in notes payable to sellers	(557)		—
Net cash provided by (used in) operating activities	(14,460)		(26,829)

Cash flows from investing activities:

Purchases of property, plant and equipment, net	(3,524)		(2,793)
Purchase of intangible assets	(1,690)		(639)


Net cash provided by (used in) investing activities	(5,214)		(3,432)

Cash flows from financing activities:
Proceeds received from debt	23,696		19,696
Repayments of debt	(19,890)		(4,489)
Payment of debt issuance fees to third parties	—		(1,147)
Repayment of finance leases	(282)		—
Proceeds from issuance of common stock	84		2,956
Payment of committed equity facility transaction costs	(571)		(161)

Payments of issuance costs related to convertible preferred stock	(52)		—
Shares repurchased for settlement of employee tax withholdings on share-based awards	(248)		—


Payment of contingent earnout	(443)		—

Net cash provided by (used in) financing activities	2,294		16,855
Effect of foreign currency rate changes on cash and cash equivalents	(77)		(86)
Net increase (decrease) in cash and cash equivalents	(17,457)		(13,492)
Cash and cash equivalents at beginning of period	28,316		20,523
Cash and cash equivalents at end of period	$	10,859	$	7,031

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

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

Note A – Description of the Business

Redwire Corporation (the “Company”) develops and manufactures mission critical space solutions and high reliability components for the next generation space economy, with valuable intellectual property for solar power generation, in-space 3D printing and manufacturing, avionics, critical components, sensors, digital engineering and space-based biotechnology. The Company serves both U.S. and international customers with products and services that have civil space, national security and commercial applications, with principal customers being agencies of the U.S. and European governments.

The Company’s wholly-owned subsidiary, Space NV, participates in a joint venture operation with SES Techcom S.A. for the purpose of performing maintenance and operations services (“M&O Services”) to the European Space Agency (“ESA”), among others. Pursuant to a shareholders agreement dated June 28, 2007, this joint venture was created under the form of two companies: Redu Space Service SA/NV (“RSS”) and Redu Operations Services SA/NV (“ROS”), both of which are organized under Belgian law. Please refer to Note Q – Joint Venture for additional information.

Note B – Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“U.S. GAAP”) for interim financial statement information and the rules of the SEC. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. The unaudited condensed consolidated balance sheet as of December 31, 2022 was derived from audited financial statements but does not include all disclosures required by U.S. GAAP. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of adjustments associated with acquisition accounting and normal recurring adjustments, necessary for the fair presentation of such financial statements. All intercompany balances and transactions have been eliminated in consolidation.

These unaudited condensed consolidated financial statements should be read in conjunction with the information contained in the Company’s 2022 Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on March 31, 2023. Interim results are not necessarily indicative of the results that may be expected for a full year.

The Company consolidates all entities that are controlled by ownership of a majority voting interest. Additionally, there are situations in which consolidation is required even though the usual condition of consolidation does not apply. Generally, this occurs when an entity holds an interest in another business entity that was achieved through arrangements that do not involve voting interests, which results in a disproportionate relationship between such entity’s voting interests in, and its exposure to the economic risks and potential rewards of, the other business entity. This disproportionate relationship results in what is known as a variable interest, and the entity in which the Company has the variable interest is referred to as a Variable Interest Entity (“VIE”). An entity must consolidate a VIE if it is determined to be the primary beneficiary of the VIE. The primary beneficiary has both (1) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Please refer to Note Q – Joint Venture for additional information.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods.

Management has prepared the estimates using the most current and best available information that are considered reasonable under the circumstances. However, actual results could differ materially from those estimates. Accounting policies subject to estimates include, but are not limited to, valuation of goodwill and intangible assets, contingent consideration, revenue recognition, income taxes, certain equity-based compensation awards, post-retirement benefit plans, paid-in-kind dividends, and warrant liabilities.

Segment Information

Operating segments are defined as components of an entity for which separate financial information is available and that are regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company has concluded that it operates in one operating segment and one

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

reportable segment, space infrastructure, as the CODM reviews financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

Foreign Currency Translation

The Company’s condensed consolidated financial statements are presented in United States dollars (“USD”), which is the functional currency of the Company. The local currency of our operations in Luxembourg and Belgium, the Euro, is considered to be the functional currency of those operations. Assets and liabilities of the Company's foreign subsidiaries, where the functional currency is the local currency, are translated into USD at exchange rates effective as of the balance sheet date. Revenues and expenses are translated using average exchange rates in effect for the periods presented.

Balance sheet translation adjustments are reported in accumulated other comprehensive income (loss). Realized gains and losses on foreign currency transactions are included in other (income) expense, net on the condensed consolidated statements of operations and comprehensive income (loss).

Cash and Cash Equivalents

Cash and cash equivalents includes cash on hand, cash balances with banks and similar institutions and all highly liquid investments with an original maturity of three months or less.

The table below presents supplemental cash flow information during the following periods:


	Nine Months Ended
	September 30, 2023		September 30, 2022
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest	$	7,132	$	4,421



Non-Cash Investing and Financing Activities:
Convertible Preferred Stock dividend paid-in-kind	$	9,030	$	—




Capital expenditures not yet paid	1,473		1,242
Equity financing transaction costs not yet paid	—		571

Emerging Growth Company

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act of 1933, as amended, or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Boards (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments–Credit Losses (Topic 326), an amendment of the FASB Accounting Standards Codification (“ASC”). Subsequent to the issuance of ASU 2016-13, there were various updates that amended and clarified the impact of ASU 2016-13. ASU 2016-13 broadens the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The amendments in ASU 2016-13 require an entity to record an allowance for credit losses for certain financial instruments and financial assets, including accounts receivable, based on expected losses rather than incurred losses. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. The use

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

of forecasted information incorporates more timely information in the estimate of expected credit losses. Effective January 1, 2023, the Company adopted ASU 2016-13 using a modified retrospective transition method with a cumulative effect adjustment in the period of adoption. Adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

In January 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. Subsequent to the issuance of ASU 2020-04, there were various updates that amended and clarified the impact of ASU 2020-04, including an update in December 2022, which deferred the sunset date in Topic 848 from December 31, 2022 to December 31, 2024. ASU 2020-04 provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at modification date or reassess a previous accounting determination. The amendments in this ASU apply to all entities (subject to meeting certain criteria) that have contracts, hedging relationships, or other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The Company has elected the temporary expedients and exceptions afforded to entities with contract modifications affected by reference rate reform. The impact did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

Note C – Business Combinations

QinetiQ Space NV Acquisition

On October 31, 2022, the Company acquired 100% of the equity interests in QinetiQ Space NV (“Space NV”) for $36.9 million (€37 million) in cash. The acquisition supports the Company’s growth in its offering of satellite technologies, berthing and docking equipment, space instruments and advanced payloads, as well as expanded its global footprint.

The following table summarizes the fair value of the consideration transferred and the estimated fair values of the major classes of assets acquired and liabilities assumed as of the acquisition date.


	October 31, 2022
Cash paid	$	36,930
Less: Note receivable from seller	501
Purchase consideration	$	36,429
Assets:
Cash	$	3,700
Accounts receivable and other receivable	3,606
Contract assets	18,830

Prepaid expenses and other current assets	3,100
Property, plant and equipment	5,656
Right-of-use assets	1,166
Intangible assets	13,935
Equity method investments	3,000
Total assets	52,993

Liabilities:
Accounts payable	4,201
Short-term operating lease liabilities	199
Short-term finance lease liabilities	279
Accrued expenses	18,636
Deferred revenue	5,513
Other current liabilities	399
Long-term operating lease liabilities	908
Long-term finance lease liabilities	563
Deferred tax liabilities	2,727

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)


	October 31, 2022
Other non-current liabilities	281
Total liabilities	33,706
Fair value of net identifiable assets acquired	19,287
Less: Fair value of noncontrolling interests in ROS	215
Goodwill	$	17,357

The following table summarizes the intangible assets acquired by class:


	October 31, 2022		Weighted average useful life in years

Technology	$	4,700	7
Customer relationships	7,400		30
Software	235		2
IPR&D	1,600
Total intangible assets	$	13,935

The amounts above represent the current preliminary fair value estimates. During the nine months ended September 30, 2023, the Company recorded an immaterial measurement period adjustment to various assets and liabilities, which increased the balance of goodwill to $17.4 million as of September 30, 2023. The above amounts are preliminary and could be revised as a result of additional information obtained regarding the assets acquired and liabilities assumed, including, but not limited to, certain working capital items and residual goodwill. Finalization of the valuation during the measurement period could result in a change in the amounts recorded for the acquisition date fair value of the assets and liabilities. The completion of the valuation will occur no later than one year from the acquisition date.

The fair value of the acquired technology and IPR&D was estimated using the relief from royalty (“RFR”) method. The fair value of the acquired customer relationships was estimated using the excess earnings method. The fair value of the acquired investment in RSS was estimated using the guideline public company method.

The acquisition was accounted for as a business combination, whereby the excess of the consideration paid over the fair value of identifiable net assets was allocated to goodwill. The goodwill reflects the potential synergies and expansion of the Company’s offerings across product lines and markets complementary to its existing products and markets. For tax purposes, the goodwill is not deductible.

Pro Forma Financial Data (Unaudited)

The table below presents the pro forma combined results of operations for the business combinations for the three and nine months ended September 30, 2022 as though the acquisition of Space NV had been completed as of January 1, 2021.


	Three Months Ended		Nine Months Ended
	September 30, 2022			September 30, 2022
Revenues	$	51,084		$	148,227
Net income (loss) attributable to Redwire Corporation	(10,227)			(103,639)

The amounts included in the pro forma information are based on the historical results and do not necessarily represent what would have occurred if the Space NV acquisition had taken place as of January 1, 2021, nor do they represent the results that may occur in the future. Accordingly, the pro forma financial information should not be relied upon as being indicative of the results that would have been realized had the business combination occurred as of the date indicated or that may be achieved in the future.

The Company incurred nominal costs during the three and nine months ended September 30, 2023 and 2022, respectively, related to completed acquisitions as of the respective periods. Costs incurred in 2023 related to completed acquisitions were primarily attributable to the Space NV, Techshot and Roccor acquisitions, while such costs incurred in 2022 were attributable to the Techshot acquisition. These expenses are included in transaction expenses on the condensed consolidated statements of operations and comprehensive income (loss) and are also reflected in the pro forma results for the periods presented in the table above.

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

Note D – Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other current assets, accounts payable, accrued expenses and current liabilities are reflected on the condensed consolidated balance sheets at amounts that approximate fair value because of the short-term nature of these financial assets and liabilities.

The fair value of the Company’s debt approximates its carrying value and is classified as Level 2 within the fair value hierarchy as it is based on discounted cash flows using a current borrowing rate.

Contingent Consideration

As of December 31, 2022, contingent consideration consisted of estimated future payments related to the Company’s acquisition of Roccor in October 2020. As certain inputs are not observable in the market, contingent consideration payments are classified as Level 3 instruments and included in notes payable to sellers on the condensed consolidated balance sheets. Significant changes in the significant unobservable inputs used in the Black-Scholes Option Pricing Model (“OPM”) to determine the fair value of contingent consideration would result in a significantly lower or higher fair value measurement. The Company adjusts the previous fair value estimate of contingent consideration at each reporting period based on changes in forecasted financial performance and overall risk as well as the period of time elapsed.

The purchase agreement with the sellers of Roccor awarded such sellers with a contingent right to an earnout payment from the Company upon the achievement of certain revenue milestones for the year ended December 31, 2021. The earnout amount is determined based on one of the following: (i) $0 if Roccor revenue for the year ended December 31, 2021 is less than $30.0 million, (ii) $1.0 million if Roccor revenue for the year ended December 31, 2021 is equal to or greater than $30.0 million but less than $40.0 million, (iii) $2.0 million if Roccor revenue for the year ended December 31, 2021 is equal to or greater than $40.0 million.

In January 2023, the Company paid the contingent earnout to the Roccor sellers in the amount of $1.0 million in accordance with the purchase agreement. As of September 30, 2023, there was no additional contingent consideration payable to the Roccor sellers.

Committed Equity Facility

On April 14, 2022, the Company entered into the Purchase Agreement and a Registration Rights Agreement with B. Riley. Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to direct B. Riley to purchase a specified amount of shares (each, a “Purchase”) over the 24-month period from Commencement (as defined in the Purchase Agreement). Shares issued to B. Riley under the Purchase Agreement cannot exceed 19.99% of the shares outstanding prior to the execution of the Purchase Agreement. In addition, the number of shares eligible to be purchased by B. Riley in a single Purchase may not exceed the lesser of (i) 50% of the Purchase Volume Reference Amount, defined as the total aggregate volume of the Company’s shares traded on the NYSE during ten consecutive trading days prior to the Purchase date divided by ten, and (ii) 20% of the total number of the Company’s shares traded on the NYSE during the intraday purchase period, which is determined by the trading day on which B. Riley receives a valid purchase notice from the Company.

Pursuant to a Registration Rights Agreement entered into with B. Riley, the Company filed a registration statement on Form S-1 with the SEC on April 22, 2022, which registered an initial 9,000,000 shares of common stock to permit the subsequent resale of shares purchased under the committed equity facility.

The Company controls the timing and amount of any sales to B. Riley, which depend on a variety of factors including, among other things, market conditions, the trading price of the Company’s common stock, and determinations by the Company as to appropriate sources of funding for its business and operations. However, B. Riley’s obligation to purchase shares is subject to certain conditions. In all instances, the Company may not sell shares of its common stock under the Purchase Agreement if it would result in B. Riley beneficially owning more than 4.99% of its common stock at any one point in time.

At inception, the Company evaluated the Purchase Agreement with B. Riley and determined that the committed equity facility was not indexed to the Company’s own common stock and, therefore, measures the derivative asset at fair value based on the consideration transferred to B. Riley in exchange for its irrevocable commitment to purchase up to $80.0 million in shares of the Company’s common stock. Subsequent changes in the fair value of the derivative asset are dependent upon, among other things, changes in the closing share price of the Company’s common stock, the quantity and purchase price of shares purchased by B. Riley during the reporting period, the unused capacity under the committed equity facility as of the balance sheet date and the cost of raising other forms of capital. As certain inputs are not observable in the market, the derivative asset is classified as a Level 3 instrument within the fair value hierarchy. The Company adjusts the previous fair value estimate of the committed equity facility at each reporting period based on changes in the weighted average purchase price of shares purchased by B. Riley during the period, the unused capacity

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

available under the committed equity facility, expected stock price volatility and other macroeconomic factors which impact the cost of raising comparable forms of capital.

Pursuant to the Purchase Agreement, the purchase price for each share of common stock is equal to 97% of the volume weighted average price (“VWAP”) on the applicable purchase date, which results in a 3% fee on the purchase of the Company’s common stock. During the three and nine months ended September 30, 2023, the Company sold 27,948 shares to B. Riley for proceeds of $0.1 million, respectively. The VWAP of shares purchased by B. Riley was $3.12 per share during the three and nine months ended September 30, 2023, respectively.

Based on the September 30, 2023 closing price of $2.89 per share and registered shares available for purchase under the committed equity facility of 8,062,383, the Company had $23.3 million of unused capacity under the committed equity facility as of September 30, 2023.

Private Warrants

In September 2021, the Company issued 7,732,168 private warrants in a transaction exempt from registration under securities regulations. The warrants, which are not listed for trading on a stock exchange, entitle the holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share, subject to adjustment. The warrants will expire on September 2, 2026, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The private warrants were established as a liability at issuance. Classification of the private warrants as liability instruments was based on an analysis of the guidance in accordance with U.S. GAAP and in a statement issued by the Staff of the SEC regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies.” The Company considered whether the private warrants display the three characteristics of a derivative, and concluded the private warrants meet the definition of a derivative. However, the private warrants fail to meet the equity scope exception and thus are classified as a liability measured at fair value, subject to remeasurement at each reporting period. The changes in fair value of the private warrant liability were an increase of $0.5 million and a decrease of $0.9 million for the three months ended September 30, 2023 and 2022, respectively, and an increase of $2.5 million and a decrease of $16.0 million for the nine months ended September 30, 2023 and 2022, respectively. These changes in fair value are recognized as other (income) expense, net in the condensed consolidated statements of operations and comprehensive income (loss).

The private warrants were valued using a modified Black-Scholes OPM. As certain inputs are not observable in the market, the private warrants are classified as Level 3 instruments within the fair value hierarchy. The table below presents the fair value per warrant and the valuation assumptions under the Black-Scholes OPM:


	September 30, 2023			December 31, 2022
Fair value per share	$	0.49		$	0.17
Warrants outstanding	7,732,168			7,732,168
Exercise price	$	11.50		$	11.50
Common stock price	$	2.89		$	1.98
Expected option term	2.92 years			3.67 years
Expected volatility	72.60		%	60.70		%
Risk-free rate of return	4.80		%	4.10		%
Expected annual dividend yield	—		%	—		%

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

The table below presents the Company’s financial instruments measured at fair value on a recurring basis:



		September 30, 2023
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Committed equity facility	Prepaid expenses and other current assets	$	—	$	—	$	40	$	40

Total assets		$	—	$	—	$	40	$	40

Liabilities:
Private warrants	Warrant liabilities	$	—	$	—	$	3,789	$	3,789
Contingent consideration	Notes payable to sellers	—		—		—		—
Total liabilities		$	—	$	—	$	3,789	$	3,789


		December 31, 2022
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Committed equity facility	Other non-current assets	$	—	$	—	$	216	$	216

Total assets		$	—	$	—	$	216	$	216

Liabilities:
Private warrants	Warrant liabilities	$	—	$	—	$	1,314	$	1,314
Contingent consideration	Notes payable to sellers	—		—		1,000		1,000
Total liabilities		$	—	$	—	$	2,314	$	2,314

Changes in the fair value of Level 3 financial assets and liabilities were as follows:


Assets:	Committed Equity Facility		Total Level 3





















December 31, 2022	$	216	$	216

Changes in fair value	(176)		(176)
Settlements	—		—
September 30, 2023	$	40	$	40


Liabilities:	Contingent Consideration		Private Warrants		Total Level 3





















December 31, 2022	$	1,000	$	1,314	$	2,314
Additions	—		—		—
Changes in fair value	—		2,475		2,475
Settlements	(1,000)		—		(1,000)
September 30, 2023	$	—	$	3,789	$	3,789

Note E – Accounts Receivable, net

The accounts receivable, net balance was as follows:



	September 30, 2023		December 31, 2022
Billed receivables	$	24,405	$	25,518
Unbilled receivables	236		1,208


Total accounts receivable, net	$	24,641	$	26,726

Accounts receivable are recorded for amounts to which the Company is entitled and has invoiced to the customer. Unbilled receivables, presented in the table above, consist of unbilled amounts under time and materials contracts where billing and payment is subject solely to the passage of time.

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

Substantially all accounts receivable as of September 30, 2023 are expected to be collected in 2023. The Company does not believe there is a significant exposure to credit risk as the majority of the Company’s accounts receivable are due from U.S. and foreign governments or large prime contractors of such government entities. As a result, the change in the allowance for credit losses was not material during the nine months ended September 30, 2023.

Note F – Inventory

The inventory balance was as follows:



	September 30, 2023		December 31, 2022
Raw materials	$	1,434	$	995
Work in process	253		474

Inventory	$	1,687	$	1,469

Note G – Debt

The table below presents details of the Company’s debt as of the following periods and the effective interest rate as of September 30, 2023:



	Effective interest rate		September 30, 2023		December 31, 2022
Adams Street Term Loan	12.25	%	$	30,600	$	30,626
Adams Street Revolving Credit Facility	16.35		5,000		—
Adams Street Delayed Draw Term Loan	12.25		14,806		14,819
Adams Street Incremental Term Loan	12.15		31,668		31,695


D&O Financing Loans	2.17		1,196		1,798
Total debt			83,270		78,938
Less: unamortized discounts and issuance costs			1,351		1,615
Total debt, net			81,919		77,323
Less: Short-term debt, including current portion of long-term debt			1,976		2,578
Total long-term debt, net			$	79,943	$	74,745

Adams Street Capital Credit Agreement

On October 28, 2020, the Company entered into a credit agreement with Adams Street Capital (the “Adams Street Credit Agreement”), the terms of which were subsequently modified by various amendments through September 30, 2023. As amended, the Adams Street Credit Agreement includes (i) a $31.0 million term loan commitment, (ii) a $15.0 million delayed draw term loan, (iii) a $32.0 million incremental term loan, and (iv) a $25.0 million revolving credit facility commitment, all of which mature on October 28, 2026. During the three and nine months ended September 30, 2023, the Company borrowed $11.0 million and $22.5 million, respectively, and repaid $6.0 million and $17.5 million, respectively, on the revolving credit facility. As of September 30, 2023, the Company had $5.0 million of borrowings outstanding under the Company’s revolving credit facility and the remaining capacity was $20.0 million.

As of September 30, 2023, the outstanding principal on the Adams Street Credit Agreement incurs cash interest in accordance with the prime rate plus the applicable rates as set forth in the table below:


	Eurocurrency Rate		Base Rate
Term loans	6.00	%	5.00	%
Revolving credit facility:
Aggregate principal of $5.0 million or less	6.00		5.00
Aggregate principal in excess of $5.0 million	7.50		6.50

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

As amended in August 2022, the outstanding principal on the term loans and revolving loans under the Adams Street Credit Agreement incurs additional interest to be paid-in-kind (“PIK”) of 2.00% per annum, which is accrued and added to the outstanding principal balance until the Company is in compliance with the consolidated total net leverage ratio. The requirement to comply with the consolidated total net leverage ratio was suspended through September 30, 2023, and such compliance resumes with the fiscal quarter ending December 31, 2023. In addition, the Company is required to maintain a minimum liquidity covenant of $5.0 million measured on the last day of each fiscal month commencing with the month ending September 30, 2022 through September 30, 2023. During the second quarter of 2023, in accordance with the provisions of the Adams Street Credit Agreement, as amended, the Company met certain requirements to end the incremental 2.00% per annum PIK interest, effective May 1, 2023. The previously suspended requirement to comply with the consolidated total net leverage ratio as discussed above, remains in effect as of September 30, 2023.

There was no accrued PIK interest on the Adams Street Credit Agreement during the three months ended September 30, 2023 and $0.5 million during the nine months ended September 30, 2023, respectively. During the three and nine months ended September 30, 2022, total accrued PIK interest on the Adams Street Credit Agreement was $0.3 million, respectively.

Additionally, in June 2023, the Company entered into the Sixth Amendment to the Adams Street Credit Agreement, in which the LIBOR-based interest rate applicable to borrowings under the Adams Street Credit Agreement was replaced with a SOFR-based interest rate in advance of the cessation of LIBOR which occurred on June 30, 2023.

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 September 30, 2023 and December 31, 2022, the Company was in compliance with its covenant requirements, as amended.

D&O Financing Loan

On September 3, 2021, the Company entered into a $3.0 million loan (the “2021 D&O Financing Loan”) with BankDirect Capital Finance to finance the Company’s directors and officers insurance premium. The 2021 D&O Financing Loan had an interest rate of 1.74% per annum and a maturity date of May 3, 2022. In May 2022, the Company repaid the full outstanding principal and interest on the 2021 D&O Financing Loan.

On September 3, 2022, the Company entered into a $2.7 million loan with AFCO Credit Corporation (the “2022 D&O Financing Loan”) to finance the Company’s directors and officers insurance premium. The 2022 D&O Financing Loan had an interest rate of 4.59% per annum and a maturity date of June 3, 2023. In June 2023, the Company repaid the full outstanding principal and interest on the 2022 D&O Financing Loan.

On September 3, 2023, the Company entered into a $1.2 million loan with AFCO Credit Corporation (the “2023 D&O Financing Loan”) to finance the Company’s directors and officers insurance premium. The 2023 D&O Financing Loan has an interest rate of 7.39% per annum and a maturity date of March 3, 2024.

Note H – Leases

The Company has entered into and acquired long-term leasing arrangements for the right to use various classes of underlying assets including facilities, vehicles and office equipment.

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REDWIRE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Tabular amounts in thousands of U.S. dollars, except percentages, unit, share, and warrant amounts)

Total Lease Costs

The table below summarizes total lease costs for the following periods:



	Three Months Ended				Nine Months Ended
	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Finance lease cost:
Amortization of ROU assets	$	119	$	—	$	311	$	—
Interest on lease liabilities	27		—		71		—
Operating lease costs	1,153		874		3,146		2,350
Variable lease costs	6		—		17		—
Short-term lease costs	—		55		90		227
Total lease costs	$	1,305	$	929	$	3,635	$	2,577

Total lease costs are included in selling