rdw-20240930

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, 2024


☐			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						88-1818410
(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 66,540,871 shares of common stock as of October 31, 2024.

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REDWIRE CORPORATION

QUARTERLY REPORT ON FORM 10-Q

SEPTEMBER 30, 2024

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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	15
	Note E – Accounts Receivable, net	17
	Note F – Inventory	17



	Note G – Debt	17
	Note H – Leases	19

	Note I – Income Taxes	20
	Note J – Commitments and Contingencies	21
	Note K – Convertible Preferred Stock	22

	Note L – Revenues	23
	Note M – Employee Benefit Plans	25
	Note N – Equity-Based Compensation	26

	Note O – Net Income (Loss) per Common Share	29
	Note P – Joint Venture	30
	Note Q – Related Parties	31
	Note R – Subsequent Events	32
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures Regarding Market Risk	42
Item 4.	Controls and Procedures	42

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3.	Defaults Upon Senior Securities	44
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	44
Signatures		46

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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. Words such as “will,” “expect,” “anticipate,” “intend,” “may,” “could,” “should,” “plan,” “project,” “forecast,” “believe,” “estimate,” “outlook,” “trends,” “goals,” “contemplate,” “continue,” “might,” “possible,” “potential,” “predict,” “would” and similar expressions, generally identify these forward-looking statements, 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:

•risks associated with economic uncertainty, including high inflation, supply chain challenges, labor shortages, high interest rates, foreign currency exchange volatility, concerns of economic slowdown or recession and reduced spending or suspension of investment in new or enhanced projects;

•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;

•our limited operating history in an evolving industry and history of losses to date makes it difficult to evaluate our future prospects and the risks and challenges we may encounter;

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

•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;

•a limited number of customers make up a high percentage of our revenue;

•matters relating to or arising from our Audit Committee investigation, including litigation matters and potential additional expenses, may adversely affect our business and results of operations;

•natural disasters, geopolitical conflicts, or other natural or man-made catastrophic events could disrupt and impact our business;

•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;

•our business involves significant risks and uncertainties that may not be covered by insurance or indemnity;

•our business could be seriously harmed if we fail to respond to commercial industry cycles in terms of our cost structure, manufacturing capacity, and/or personnel needs;

•any delays in the development, design, engineering and manufacturing of our core offerings may adversely impact our business, financial condition and results of operations;

•unsatisfactory performance of our core offerings resulting from challenges in the space environment, extreme space weather events or otherwise could have a material adverse effect on our business, financial condition and results of operations;

•our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts;

•our cash flow and profitability could be reduced if expenditures are incurred prior to the final receipt of a contract;

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•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;

•we may use artificial intelligence in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations;

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

•we may experience a total loss of our technology and products and our customers’ payloads, if there is an accident on launch or during the journey into space;

•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;

•cyber-attacks and other security threats and disruptions could have a material adverse effect on our business;

•if we are not successful in attracting or retaining highly qualified personnel, we may not be able to successfully implement our business strategy;

•our business, financial condition and results of operations are subject to risks resulting from broader geographic operations;

•our net earnings could be materially affected by an impairment of goodwill;

•our pension funding and costs are dependent on several economic assumptions which, if changed, may cause our future results of operations and cash flows to fluctuate significantly over time;

•our ability to use net operating loss carryforwards and certain other tax attributes may be limited;

•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. government contracts, which often are only partially funded, subject to immediate termination, and heavily regulated and audited;

•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;

•we are subject to stringent U.S. economic sanctions, and trade control laws and regulations;

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

•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;

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

•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 sales of a substantial amount of our common stock by our current shareholders and these sales could cause the price of our common stock to fall;

•the trading price of our common stock and warrants is and may continue to be volatile; and

•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.

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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, 2024		December 31, 2023
Assets
Current assets:
Cash, cash equivalents and restricted cash	$	43,094	$	30,278
Accounts receivable, net	22,653		32,411
Contract assets	46,069		36,961
Inventory	2,055		1,516
Income tax receivable	636		636

Prepaid insurance	1,291		1,083
Prepaid expenses and other current assets	10,738		6,428
Total current assets	126,536		109,313
Property, plant and equipment, net of accumulated depreciation of $9,539 and $6,538, respectively	16,929		15,909
Right-of-use assets	10,668		13,181
Intangible assets, net of accumulated amortization of $24,151 and $18,509, respectively	62,516		62,985
Goodwill	72,572		65,757
Equity method investments	—		3,613

Other non-current assets	724		511
Total assets	$	289,945	$	271,269

Liabilities, Convertible Preferred Stock and Equity (Deficit)
Current liabilities:
Accounts payable	$	19,936	$	18,573
Notes payable to sellers	11		—
Short-term debt, including current portion of long-term debt	1,751		1,378
Short-term operating lease liabilities	3,518		3,737
Short-term finance lease liabilities	501		439
Accrued expenses	27,813		32,902
Deferred revenue	56,684		52,645
Other current liabilities	20,807		2,362
Total current liabilities	131,021		112,036
Long-term debt, net	121,553		86,842
Long-term operating lease liabilities	9,790		12,302
Long-term finance lease liabilities	1,089		1,137
Warrant liabilities	11,436		3,325
Deferred tax liabilities	2,379		2,402
Other non-current liabilities	401		400
Total liabilities	$	277,669	$	218,444
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, 2024		December 31, 2023

Convertible preferred stock, $0.0001 par value, 125,292.00 shares authorized; 100,912.65 and 93,890.20 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively. Liquidation preference of $239,860 and $187,780 as of September 30, 2024 and December 31, 2023, respectively(1).	$	108,696	$	96,106

Shareholders’ Equity (Deficit):
Preferred stock, $0.0001 par value, 99,874,708 shares authorized; none issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 66,540,871 and 65,546,174 issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	7		7
Treasury stock, 614,654 and 353,470 shares, at cost, as of September 30, 2024 and December 31, 2023, respectively	(2,688)		(951)
Additional paid-in capital	184,325		188,323
Accumulated deficit	(280,937)		(233,791)
Accumulated other comprehensive income (loss)	2,873		2,903
Total shareholders’ equity (deficit)	(96,420)		(43,509)
Noncontrolling interests	—		228
Total equity (deficit)	(96,420)		(43,281)
Total liabilities, convertible preferred stock and equity (deficit)	$	289,945	$	271,269

(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, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Revenues	$	68,638	$	62,612	$	234,541	$	180,315
Cost of sales	56,615		45,495		194,709		133,077
Gross profit	12,023		17,117		39,832		47,238
Operating expenses:
Selling, general and administrative expenses	17,521		18,302		52,971		52,026

Transaction expenses	5,121		—		5,399		13


Research and development	1,893		1,532		4,681		3,990
Operating income (loss)	(12,512)		(2,717)		(23,219)		(8,791)
Interest expense, net	3,610		2,629		9,537		7,937
Other (income) expense, net	5,309		1,232		14,734		2,689
Income (loss) before income taxes	(21,431)		(6,578)		(47,490)		(19,417)
Income tax expense (benefit)	(472)		(253)		(348)		(369)
Net income (loss)	(20,959)		(6,325)		(47,142)		(19,048)
Net income (loss) attributable to noncontrolling interests	—		(72)		4		(73)
Net income (loss) attributable to Redwire Corporation	(20,959)		(6,253)		(47,146)		(18,975)
Less: dividends on Convertible Preferred Stock	3,383		2,874		16,125		12,040
Net income (loss) available to common shareholders	$	(24,342)	$	(9,127)	$	(63,271)	$	(31,015)

Net income (loss) per common share:
Basic and diluted	$	(0.37)	$	(0.14)	$	(0.96)	$	(0.48)

Weighted-average shares outstanding:
Basic and diluted	66,529,288		64,795,985		65,936,597		64,475,390


Comprehensive income (loss):
Net income (loss) attributable to Redwire Corporation	$	(20,959)	$	(6,253)	$	(47,146)	$	(18,975)
Foreign currency translation gain (loss), net of tax	877		(860)		127		(304)
Total other comprehensive income (loss), net of tax	877		(860)		127		(304)
Total comprehensive income (loss)	$	(20,082)	$	(7,113)	$	(47,019)	$	(19,279)

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, 2024	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, 2024	65,980,697	$	7	373,420	$	(1,007)	$	180,716	$	(259,978)	$	1,996	$	(78,266)	$	—	$	(78,266)
Equity-based compensation expense	—	—		—	—		3,593		—		—		3,593		—		3,593


Common stock issued for share-based awards	560,174	—		—	—		16		—		—		16		—		16
Shares repurchased for settlement of employee tax withholdings on share-based awards	—	—		241,234	(1,681)		—		—		—		(1,681)		—		(1,681)


Foreign currency translation, net of tax	—	—		—	—		—		—		877		877		—		877
Net loss	—	—		—	—		—		(20,959)		—		(20,959)		—		(20,959)

Balance as of September 30, 2024	66,540,871	$	7	614,654	$	(2,688)	$	184,325	$	(280,937)	$	2,873	$	(96,420)	$	—	$	(96,420)


Nine Months Ended September 30, 2024	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 period end December 31, 2023	65,546,174	$	7	353,470	$	(951)	$	188,323	$	(233,791)	$	2,903	$	(43,509)	$	228	$	(43,281)
Equity-based compensation expense	—	—		—	—		8,046		—		—		8,046		—		8,046


Common stock issued for share-based awards	994,697	—		—	—		546		—		—		546		—		546
Shares repurchased for settlement of employee tax withholdings on share-based awards	—	—		261,184	(1,737)		—		—		—		(1,737)		—		(1,737)
Convertible preferred stock paid-in-kind dividend	—	—		—	—		(12,590)		—		—		(12,590)		—		(12,590)
Sale of joint ventures	—	—					—		—		(164)		(164)		(225)		(389)
Foreign currency translation, net of tax	—	—		—	—		—		—		134		134		(7)		127
Net loss	—	—		—	—		—		(47,146)		—		(47,146)		4		(47,142)

Balance as of September 30, 2024	66,540,871	$	7	614,654	$	(2,688)	$	184,325	$	(280,937)	$	2,873	$	(96,420)	$	—	$	(96,420)

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 CASH FLOWS

(Unaudited)

(In thousands of U.S. dollars)


	Nine Months Ended
	September 30, 2024		September 30, 2023
Cash flows from operating activities:


Net income (loss)	$	(47,142)	$	(19,048)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization expense	8,538		7,971
Amortization of debt issuance costs and discount	584		448

Equity-based compensation expense	8,046		6,317





(Gain) loss on sale of joint ventures	(1,303)		—
(Gain) loss on change in fair value of committed equity facility	—		179
(Gain) loss on change in fair value of warrants	8,111		2,475
Deferred provision (benefit) for income taxes	(47)		(1,012)



Non-cash lease expense	23		248
Non-cash interest expense	—		525
Other	(74)		157
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	14,496		2,031
(Increase) decrease in contract assets	(8,754)		(9,008)
(Increase) decrease in inventory	(537)		(221)
(Increase) decrease in prepaid insurance	(208)		936
(Increase) decrease in prepaid expenses and other assets	(4,039)		255
Increase (decrease) in accounts payable and accrued expenses	(4,964)		(2,202)
Increase (decrease) in deferred revenue	(7,448)		(2,734)
Increase (decrease) in operating lease liabilities	(256)		(241)
Increase (decrease) in other liabilities	10,551		(979)
Increase (decrease) in notes payable to sellers	11		(557)
Net cash provided by (used in) operating activities	(24,412)		(14,460)

Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	(796)		—
Net proceeds from sale of joint ventures	4,598		—
Purchases of property, plant and equipment, net	(4,064)		(3,524)
Purchase of intangible assets	(2,788)		(1,690)


Net cash provided by (used in) investing activities	(3,050)		(5,214)

Cash flows from financing activities:
Proceeds received from debt	42,971		23,696
Repayments of debt	(8,183)		(19,890)
Payment of debt issuance fees to third parties	(780)		—
Repayment of finance leases	(357)		(282)
Proceeds from third-party advances	7,820		—
Proceeds from issuance of common stock	546		84
Payment of committed equity facility transaction costs	—		(571)

Payments of issuance costs related to convertible preferred stock	—		(52)
Shares repurchased for settlement of employee tax withholdings on share-based awards	(1,737)		(248)


Payment of contingent earnout	—		(443)

Net cash provided by (used in) financing activities	40,280		2,294
Effect of foreign currency rate changes on cash, cash equivalents and restricted cash	(2)		(77)
Net increase (decrease) in cash, cash equivalents and restricted cash	12,816		(17,457)
Cash, cash equivalents and restricted cash at beginning of period	30,278		28,316
Cash, cash equivalents and restricted cash at end of period	$	43,094	$	10,859

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”) provides mission critical space solutions and high-reliability space infrastructure for the next generation space economy. The Company develops and provides core space infrastructure offerings for government and commercial customers through long-duration projects. These core offerings include technologies and production capability for avionics and sensors; power generation; structures and mechanisms; radio frequency systems; platforms, payloads and missions; and microgravity payloads. The Company serves both U.S. and international customers with these core offerings that have civil space, national security and commercial applications.

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, 2023 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 2023 Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 20, 2024. 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 P – 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, 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 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 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.

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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)

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 the Company’s 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, Cash Equivalents and Restricted Stock

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. Restricted cash includes cash balances which are restricted as to withdrawal or usage by contractual agreement and consists of a cash-collateralized standby letter of credit for a submitted proposal.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported on the condensed consolidated balance sheets to the condensed consolidated statements of cash flows for the following periods:


	September 30, 2024		September 30, 2023
Cash and cash equivalents	$	27,796	$	10,859
Restricted cash(1)	15,298		—
Total cash, cash equivalents and restricted cash	$	43,094	$	10,859

(1) Amount includes $7.8 million of proceeds received from third-parties that is refundable except in certain limited circumstances and is also included as other current liabilities on the condensed consolidated balance sheets.

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


	Nine Months Ended
	September 30, 2024		September 30, 2023
Supplemental cash flow information:
Cash paid (received) during the period for:
Interest	$	8,383	$	7,132
Income taxes	225		—


Non-Cash Investing and Financing Activities:
Convertible Preferred Stock dividend paid-in-kind	$	12,590	$	9,030




Capital expenditures not yet paid	2,225		1,473

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.

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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)

Recently Adopted Accounting Pronouncements

In January 2020, the Financial Accounting Standards Boards (“FASB”) issued Accounting Standards Update (“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 optional expedients and exceptions afforded to entities with contract modifications affected by reference rate reform for the periods available. The impact of this election did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis, provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually and require a public entity that has a single reportable segment to provide all the disclosures required by the amendments in the ASU and existing requirements under Topic 280. Additionally, it requires a public entity to disclose the title and position of the CODM. The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. A public entity should apply the amendments in this ASU retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adoption, which is expected to have an impact on disclosures with no impact on the Company’s results of operations, cash flows and financial condition.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires a public business entity (“PBE”) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign, as well as by jurisdiction, if the amount is at least 5% of total income tax payments, net of refunds received. For PBEs, the new guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. The Company is currently evaluating the impact of adoption, which is expected to have an impact on disclosures with no impact on the Company’s results of operations, cash flows and financial condition.

Note C – Business Combinations

On August 30, 2024, the Company completed the acquisition of Hera Systems, Inc. (“Hera”), a spacecraft developer focused on specialized missions for national security space customers. Hera’s primary operations include developing high-performance spacecraft to support the evolving requirements for national security missions operating in contested space. Hera's advanced platform incorporates cyber-secure communications, resilient power systems, highly accurate pointing, extensive maneuverability and massive on-board computing power supporting mission- and payload-specific machine learning. This acquisition is not material individually to the Company’s financial position as of September 30, 2024, or the results of operations for the three and nine months ended September 30, 2024. Therefore, the pro forma operating results and other disclosures for the Hera acquisition are not presented.

The Company incurred $1.1 million of costs during the three and nine months ended September 30, 2024, respectively, and incurred nominal costs during the same periods in 2023, respectively, related to completed acquisitions as of the respective periods. These expenses are included in transaction expenses on the condensed consolidated statements of operations and comprehensive income (loss).

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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, cash equivalents and restricted cash, accounts receivable, contract assets, inventories, prepaid expenses and other current assets, accounts payable, accrued expenses, deferred revenue and other 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.

Committed Equity Facility

On April 14, 2022, the Company entered into a common stock Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement with B. Riley Principal Capital, LLC (“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 New York Stock Exchange (“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 Securities and Exchange Commission (“SEC”) on April 22, 2022, as amended by Post-Effective Amendment No. 1 to Form S-1 on Form S-3 filed on June 8, 2023, 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 available under the committed equity facility, expected stock price volatility and other macroeconomic factors which impact the cost of raising comparable forms of capital. On April 14, 2024, the Purchase Agreement with B. Riley expired in accordance with its terms and was not extended. As a result, the Company no longer recognized a derivative asset related to the committed equity facility after April 14, 2024.

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. The Company did not sell shares to B. Riley during the three and nine months ended September 30, 2024.

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

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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)

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 a decrease of $1.9 million and an increase of $0.5 million for the three months ended September 30, 2024 and 2023, respectively, and an increase of $8.1 million and $2.5 million for the nine months ended September 30, 2024 and 2023, 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 Option Pricing Model (“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, 2024			December 31, 2023
Fair value per share	$	1.48		$	0.43
Warrants outstanding	7,732,168			7,732,168
Exercise price	$	11.50		$	11.50
Common stock price	$	6.87		$	2.85
Expected option term	1.92 years			2.67 years
Expected volatility	65.30		%	74.20		%
Risk-free rate of return	3.69		%	4.00		%
Expected annual dividend yield	—		%	—		%

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



		September 30, 2024
	Balance Sheet Location	Level 1		Level 2		Level 3		Total





Liabilities:
Private warrants	Warrant liabilities	$	—	$	—	$	11,436	$	11,436

Total liabilities		$	—	$	—	$	11,436	$	11,436


		December 31, 2023
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Committed equity facility	Prepaid expenses and other current assets	$	—	$	—	$	—	$	—

Total assets		$	—	$	—	$	—	$	—

Liabilities:
Private warrants	Warrant liabilities	$	—	$	—	$	3,325	$	3,325

Total liabilities		$	—	$	—	$	3,325	$	3,325

There were no changes in the fair value of Level 3 financial assets during the nine months ended September 30, 2024. Changes in the fair value of Level 3 financial liabilities were as follows:


Liabilities:	Private Warrants		Total Level 3

























December 31, 2023	$	3,325	$	3,325

Changes in fair value	8,111		8,111

September 30, 2024	$	11,436	$	11,436

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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 E – Accounts Receivable, net

The accounts receivable, net balance was as follows:



	September 30, 2024		December 31, 2023
Billed receivables	$	22,653	$	28,926
Unbilled receivables	—		3,485


Total accounts receivable, net	$	22,653	$	32,411

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-material (“T&M”) contracts where billing and payment is subject solely to the passage of time.

Substantially all accounts receivable as of September 30, 2024 are expected to be collected in 2024. 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 allowance for credit losses was not material as of September 30, 2024 and December 31, 2023, respectively.

Note F – Inventory

The inventory balance was as follows:



	September 30, 2024		December 31, 2023
Raw materials	$	1,715	$	1,452
Work in process	340		64

Inventory	$	2,055	$	1,516

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, 2024:



	Effective interest rate		September 30, 2024		December 31, 2023
Adams Street Term Loan	12.14	%	$	30,289	$	30,522
Adams Street Revolving Credit Facility	14.10		47,000		12,000
Adams Street Delayed Draw Term Loan	12.13		14,656		14,769
Adams Street Incremental Term Loan	11.90		31,348		31,588


D&O Financing Loans	2.21		971		598
Total debt			124,264		89,477
Less: unamortized discounts and issuance costs			960		1,257
Total debt, net			123,304		88,220
Less: Short-term debt, including current portion of long-term debt			1,751		1,378
Total long-term debt, net			$	121,553	$	86,842

Adams Street 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, 2024. 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 $65.0 million revolving credit facility commitment, all of which mature on October 28, 2026. During the three and nine months ended September 30, 2024, the Company borrowed $27.0 million and $42.0 million, respectively. The Company made no repayments during the three months ended September 30, 2024 and repaid $7.0 million during the nine months ended September 30, 2024, on the revolving credit facility. As of September 30, 2024, the Company had $18.0 million of remaining capacity under the Company’s revolving credit facility.

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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 of September 30, 2024, 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

As amended in March 2022, AE Industrial Partners Fund II, LP (“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 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 Company 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 at their discretion.

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 resumed with the fiscal quarter ending December 31, 2023. In addition, the Company was 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, is no longer in effect and the Company is required to comply with the consolidated total net leverage ratio as of September 30, 2024.

There was no accrued PIK interest on the Adams Street Credit Agreement recorded during the three and nine months ended September 30, 2024. 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.

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.

In December 2023, the Company entered into a Seventh Amendment to the Adams Street Credit Agreement, in which the commitments under the revolving credit facility increased from $25.0 million to $30.0 million.

In June 2024, the Company entered into an Eighth Amendment to the Adams Street Credit Agreement (“Eighth Amendment”), in which the commitments under the revolving credit facility increased from $30.0 million to $45.0 million. Pursuant to the Eighth Amendment, the Company is required to maintain an aggregate principal amount of outstanding revolving credit loans in an amount no less than $10.0 million.

In August 2024, the Company entered into a Ninth Amendment to the Adams Street Credit Agreement (“Ninth Amendment”), in which the commitments under the revolving credit facility increased from $45.0 million to $65.0 million. Pursuant to the Ninth Amendment, the aggregate principal amount of outstanding revolving credit loans the Company is required to maintain increased from no less than $10.0 million to no less than $30.0 million.

The Adams Street 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, 2024 and December 31, 2023, the Company was in compliance with its covenant requirements, as amended.

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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)

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. In March 2024, the Company repaid the full outstanding principal and interest on the 2023 D&O Financing Loan.

On August 28, 2024, the Company entered into a $1.0 million loan with AFCO Credit Corporation (the “2024 D&O Financing Loan”) to finance the Company’s directors and officers insurance premium. The 2024 D&O Financing Loan has an interest rate of 7.53% per annum and a maturity date of March 3, 2025.

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.

Total Lease Costs

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



	Three Months Ended				Nine Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Finance lease cost:
Amortization of ROU assets	$	131	$	119	$	389	$	311
Interest on lease liabilities	31		27		93		71
Operating lease costs	1,074		1,153		3,194		3,146
Variable lease costs	12		6		34		17
Short-term lease costs	216		—		385		90
Total lease costs	$	1,464	$	1,305	$	4,095	$	3,635

Total lease costs are included in selling, general and administrative expenses and cost of sales on the condensed consolidated statements of operations and comprehensive income (loss).

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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)

Other Supplemental Information

The table below presents other supplemental information related to the Company’s leases for the following periods:


	Three Months Ended
	September 30, 2024						September 30, 2023
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Cash paid for lease liabilities	$	1,153		$	152		$	1,070		$	133
Right-of-use assets obtained in exchange for new lease liabilities	—			130			84			275




	Nine Months Ended
	September 30, 2024						September 30, 2023
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Cash paid for lease liabilities	$	3,434		$	449		$	3,130		$	351
Right-of-use assets obtained in exchange for new lease liabilities	35			357			3,418			726

	September 30, 2024						September 30, 2023
	Operating Leases			Finance Leases			Operating Leases			Finance Leases
Weighted average remaining lease term (in years)	3.9			3.4			4.6			3.7
Weighted average discount rate	6.7		%	8.1		%	6.4		%	8.6		%

As of September 30, 2024, the Company had two facility leases that had not yet commenced but created significant future lease obligations in the amount of $7.3 million. The contracts were determined to be operating leases, whereby the Company is not 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 the construction period costs for each lease, the Company was determined not to be the owner of the assets under construction as the landlords have substantially all of the construction period risks.

Note I – Income Taxes

The table below presents the Company’s effective income tax rate on pre-tax income from continuing operations for the following periods:



	Three Months Ended				Nine Months Ended
	September 30, 2024		September 30, 2023		September 30, 2024		September 30, 2023
Effective tax rate	2.2	%	3.8	%	0.7	%	1.9	%

The effective tax rate was 2.2% and 3.8% for the three months ended September 30, 2024 and 2023, respectively. The difference in effective tax rate between periods was primarily related to the Company’s mix in earnings between U.S. and foreign jurisdictions.

The effective tax rate was 0.7% and 1.9% for the nine months ended September 30, 2024 and 2023, respectively. The effective tax rate for the nine months ended September 30, 2024 and 2023, differs from the U.S. federal income tax rate of 21.0% primarily due to the valuation allowance on the realization of deferred tax assets.

The Company assesses the deferred tax assets for recoverability on a quarterly basis. In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating loss (“NOL”) carryforwards are available. For the nine months ended September 30, 2024 and 2023, the Company concluded that it is more-likely-than-not that substantially all of its deferred tax assets will not be realized and established a full valuation allowance.

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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 J – Commitments and Contingencies

Contingencies in the Normal Course of Business

Under certain contracts with the U.S. government and certain governmental entities, contract costs, including indirect costs, are subject to audit by and adjustment through negotiation with governmental representatives. Revenue is recorded in amounts expected to be realized on final settlement of any such audits.

Legal Proceedings

The Company is subject to litigation, claims, investigations and audits arising from time to time in the ordinary course of business. Although legal proceedings are inherently unpredictable, the Company believes that it has valid defenses with respect to any matters currently pending against it and intends to defend itself vigorously. Excluding pending matters disclosed below, the outcome of these matters, individually and in the aggregate, is not expected to have a material impact on the Company’s condensed consolidated financial statements. The Company has established reserves for matters where the Company believes that losses are probable and can be reasonably estimated. For matters, including certain of those described herein, where the Company has not established a reserve, the ultimate outcome or resolution cannot be predicted at this time, or the amount of ultimate loss, if any, cannot be reasonably estimated. These matters are subject to many uncertainties and the outcome of the individual litigated matters is not predictable with certainty. It is possible that certain of the actions, claims, inquiries or proceedings, including those discussed herein, could be decided unfavorably to the Company or any of its subsidiaries involved. Accordingly, it is possible that an adverse outcome from such a proceeding could exceed the amount accrued in an amount that could be material to the accompanying consolidated financial position, results of operations or cash flows in any particular reporting period. The Company recognizes legal expenses when incurred as selling, general and administrative expense in the condensed consolidated statements of operations and comprehensive income (loss).

On December 17, 2021, the Company, our Chairman and Chief Executive Officer, Peter Cannito, and then current, but now former Chief Financial Officer, William Read, were named as defendants in a putative class action complaint filed in the United States District Court for the Middle District of Florida. That litigation is captioned Lemen v. Redwire Corp. et al., Case No. 3:21-cv-01254-TJC-PDB (M.D. Fla.). On March 7, 2022, the Court appointed a lead plaintiff. On June 17, 2022, the lead plaintiff filed an amended complaint. In the amended complaint, the lead plaintiff alleges that the Company and certain of its directors and officers made misleading statements and/or failed to disclose material facts about the Company’s business, operations, and prospects, allegedly in violation of Section 10(b) (and Rule 10b-5 promulgated thereunder) and Section 20(a) of the Exchange Act. As relief, the plaintiffs are seeking, among other things, compensatory damages. The defendants believe the allegations are without merit and intend to defend the suit vigorously. On August 16, 2022, the defendants moved to dismiss the complaint in its entirety, and such motion was denied by the Court on March 22, 2023. The Company has recognized a loss contingency of $8.0 million as of September 30, 2024, which is its best estimate of probable loss and recovery based on the current circumstances. The loss contingency is included as other current liabilities in the condensed consolidated balance sheets.

On May 25, 2022, a plaintiff commenced derivative litigation in the United States District Court for the District of Delaware on behalf of the Company against Peter Cannito, Les Daniels, Reggie Brothers, Joanne Isham, Kirk Konert, Jonathan Baliff, and John S. Bolton. That litigation is captioned Yingling v. Cannito, et al., Case No. 1:22-cv-00684-MN (D. Del.). The complaint’s allegations are similar to those of the class action lawsuit filed in December 2021, namely, that statements about Redwire’s business and operations were misleading due to alleged material weaknesses in the Company’s financial reporting internal controls. The plaintiff alleges the defendants violated Section 10(b) (and Rule 10b-5 promulgated thereunder) and Section 20(a) of the Exchange Act, breached their fiduciary duty by allowing misleading disclosures to be made, and caused the Company to overpay compensation and bonuses tied to the Company’s financial performance. As relief, the plaintiffs are seeking, among other things, compensatory and punitive damages. This litigation has been stayed until the earlier of: (i) fifteen (15) days following the issuance of a decision resolving a motion for summary judgment in or public disclosure of a potential settlement of the class action lawsuit filed on December 17, 2021, or (ii) twenty (20) days following notice by either party of another pending derivative action and where the continuance of such stay may or will prejudice the noticing party’s rights. The defendants believe the allegations are without merit and intend to defend the lawsuit vigorously. The Company is currently unable to predict the likely outcome of the proceedings or estimate the range of reasonably possible losses, which may be material. However, the amount of any reasonable possible loss or range of loss is expected to be recoverable through the Company’s D&O insurance policy.

Business Combinations

The Company has acquired and plans to continue to acquire businesses with prior operating histories. These acquisitions may have unknown or contingent liabilities, which the Company may become responsible for and could have a material impact on the Company’s future operating results and cash flows. In addition, the Company may incur acquisition costs, regardless of whether or not the acquisition is ultimately completed, which may be material to future periods.

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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)

Commitments

During the year-ended December 31, 2023, the Company entered into an economic development agreement to serve as the anchor tenant at the new Novaparke Innovation & Technology Campus in Floyd County, Indiana, the construction of which is anticipated to be completed during fiscal year 2025. In accordance with the agreement, the Company has committed to enter into a lease for a 30,000 square foot property. As of September 30, 2024, the Company had entered into the associated lease. Refer to Note H – Leases for additional information.

Letters of Credit

The Company has entered into letters of credit issued on our behalf by financial institutions secured by restricted cash. Letters of credit generally are available for draw down in the event we do not fulfill our contractual obligations. The Company had outstanding letters of credit of $15.3 million as of September 30, 2024. The Company had no outstanding letters of credit as of December 31, 2023.

Note K – Convertible Preferred Stock

The table below presents activity of the Company’s Series A Convertible Preferred Stock:


	Shares	Amount







Balance as of December 31, 2023	93,890.20	$	96,106
Dividends paid-in-kind