FATHOM DIGITAL MANUFACTURING CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Form 10-K)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with Fathom Digital Manufacturing
Corporation's financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K. This discussion and analysis contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth elsewhere
in this Annual Report on Form 10-K.

Insight

Fathom Digital Manufacturing Corporation was incorporated in Delaware in
December 2021. However, our roots stretch back over 35 years with the founding
of several of our subsidiaries. The terms "Fathom" the "Company," "we," "us,"
and "our" as used herein refer to the business and operations of Fathom Digital
Manufacturing Corporation and its consolidated subsidiaries.

We are a leading national on-demand digital manufacturing platform at the
forefront of the Industry 4.0 revolution. Industry 4.0 utilizes e-commerce,
automation, and data sharing in a cyber-physical system to communicate and
cooperate in the manufacturing process over the Internet of Things ("IoT").
Using our expansive manufacturing footprint and extensive expertise in both
additive and traditional manufacturing, we provide comprehensive product
development and on-demand manufacturing services to many of the largest and most
innovative companies in the world. Our unified suite of manufacturing
technologies, processes, and proprietary software enables us to deliver
hybridized solutions that meet the specific needs of our customers, empowering
them to tackle complex manufacturing problems and accelerate product development
cycles.

Our differentiated strategy focuses on speed, problem solving, adaptive technical responsiveness and a technology independent approach in our more than 25 manufacturing processes to meet customer design intent. This allows our customers to iterate faster, often reducing their product development and production cycles from months to days.

We seamlessly blend in-house capabilities consisting of plastic and metal
additive technologies, injection molding and tooling, computer numerical control
("CNC") machining, and precision sheet metal fabrication. We operate over 530
advanced manufacturing systems across 25 unique manufacturing processes and a
450,000 sq. ft. manufacturing footprint, spanning 12 facilities located
primarily within the U.S. We believe we are positioned to serve the largest
geographic markets in which our customers are located and enable cost effective
and rapid turnaround times for our customers. Our scale and the breadth of
offerings allow our customers to consolidate their supply chain and product
development needs through the ability to source through a single manufacturing
supplier. Fathom's manufacturing technologies and capacity are further extended
through the utilization of a selected group of highly qualified suppliers that
specialize in injection molding and tooling and CNC machining.

We have experienced significant growth since inception both organically and
through our successful and proven acquisition playbook, which is enabled by our
proprietary software platform that allows for a streamlined integration of
acquired companies. Over the past three years, we have successfully completed 13
acquisitions to bolster our operations and offerings. Fathom started as Midwest
Composite Technologies, LLC ("MCT"), a leader in prototyping and low-volume
services. Founded in 1984, MCT specialized in model making, industrial design,
and rapid prototyping. Today, MCT serves companies through a variety of in-house
additive manufacturing technologies, including 3D printing and processing, CNC
machining, injection molding, and industrial design capabilities. In September
2019, we acquired Kemeera, LLC to expand our additive, CNC machining injection
molding, and development and engineering services, as well as bring urethane
casting capabilities. In December 2019, we acquired ICOMold LLC ("ICOMold") to
expand our injection molding capabilities and significantly enhance our customer
experience by bringing in-house an interactive, automated quotation system
capable of providing feedback in 30 seconds with an intuitive, customer-facing
project management portal, which we have continued to develop and enhance. Our
acquisition of ICOMold also expanded our capabilities into China. In July 2020,
we acquired Incodema, LLC and Newchem, LLC to expand our in-house manufacturing
processes to include precision sheet metal engineering solutions, including a
broad array of sheet metal cutting and forming solutions such as laser cutting,
micro waterjet, specialty stamping, and photochemical etching, among others, for
quick and complex, tight tolerance parts. In August 2020, we acquired GPI
Prototype & Manufacturing Services, LLC ("GPI") to expand our additive
manufacturing capabilities. GPI was one of the first metal additive
manufacturing service providers in the U.S., bringing metallurgical expertise
in-house and enabling the Company to produce metal parts with complex geometries
for on-demand manufacturing applications. In December 2020, we acquired
Dahlquist Machine, LLC to expand our precision machining capabilities with
state-of-the-art CNC mills and lathes for high-speed precision machining of
light metals, aluminum, and plastics. In December 2020, we also acquired
Majestic Metals, LLC, further expanding our precision sheet metal fabrication
capabilities. Further, in December 2020, we acquired Mark Two Engineering, LLC
expanding our precision machining services and footprint in the medical device
industry. In February 2021, we acquired Summit Tooling, Inc. and Summit Plastics
LLC, further expanding our plastic injection mold manufacturing capabilities. In
April 2021, we acquired Centex Machine and Welding Inc. and Laser Manufacturing,
Inc. to expand our high-precision manufacturing services specializing in CNC
machining and medical device manufacturing. In April 2021, we also acquired
Sureshot Precision LLC d/b/a Micropulse West expanding our Electrical Discharge
Machine ("EDM") services, and CNC and manual machining capabilities. Further, in
April 2021, we acquired Precision Process, LLC specializing in CNC machining,
engineering support, and EDM services.
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We continue to invest significantly in the enhancement and expansion of our
technologies, processes, and capabilities with the aim of better serving the
needs of a broader set of customers and end-markets. As a result of our efforts
described above, we have developed a loyal base of approximately 3,000
customers, including many of the most innovative companies in the world. Our
customers span across a diverse range of end-markets, including, but not limited
to, the aerospace, defense, technology, medical, automotive, and IoT sectors.
This diverse customer base has allowed for no single customer to represent more
than 4.4% and 5.6% of our revenue in 2021 and 2020, respectively.

We believe the market for our on-demand digital manufacturing services across
manufacturing applications is largely unsaturated as companies continue to
realize the efficiency and effectiveness of our rapid quotation system and 3D
CAD driven manufacturing processes. Our market is projected to grow from $25
billion in 2021 to $33 billion in 2025, fueled by growth in demand for additive
manufacturing and continuation of the trend of customers increasingly
outsourcing their prototyping and low-to-medium volume production needs. We
believe our position as the only on-demand digital manufacturing platform
purpose-built to serve the rapid prototyping and low-to-medium volume production
needs of the largest and most innovative companies, coupled with our competitive
strengths, will allow us to maintain and extend our market leading position.

Factors affecting the comparability of our results of operations

As a result of a number of factors, our historical results of operations are not
comparable from period to period and may not be comparable to our financial
results of operations in future periods. Set forth below is a brief discussion
of the key factors that may impact the comparability of our results of
operations in future operations.

Impact of business combination

Fathom is subject to corporate level tax rates at the federal, state and local
levels. Fathom OpCo was and is treated as a flow-through entity for U.S. federal
income tax purposes, and as such, has generally not been subject to U.S. federal
income tax at the entity level. Accordingly, other than for certain consolidated
subsidiaries of the Predecessor that are structured as corporations and unless
otherwise specified, the historical results of operations and other financial
information presented does not include any provision for U.S. federal income
tax.

Fathom pays U.S. federal and state income taxes as a corporation on its share of
our taxable income. The Business Combination was accounted for as a business
combination using the acquisition method of accounting. Accordingly, the assets
and liabilities, including any identified intangible assets, were recorded at
their preliminary fair values at the date of completion of the Business
Combination, with any excess of the purchase price over the preliminary fair
value recorded as goodwill. The application of business combination accounting
required the use of significant estimates and assumptions.

As a result of the application of accounting for the Business Combination, the
historical consolidated financial statements of Fathom OpCo are not necessarily
indicative of the Fathom's future results of operations, financial position and
cash flows. For example, increased tangible and intangible assets resulting from
adjusting the basis of tangible and intangible assets to their fair value would
result in increased depreciation and amortization expense in the periods
following the consummation of the Business Combination.

In connection with the Business Combination, we entered into a Tax Receivable
Agreement ("TRA") with certain of our pre-Business Combination owners that
provides for the payment by Fathom to such owners of 85% of the benefits that
Fathom is deemed to realize as a result of the Company's share of existing tax
basis acquired in the Business Combination and other tax benefits related to
entering into the TRA.

Additionally, in connection with the Business Combination, we have accounted for
the issuance of warrants and earnout shares as liabilities which require
re-measurement to fair value at the end of each reporting period, as applicable,
and adopted the Fathom 2021 Omnibus Incentive Plan which will result in higher
share-based compensation expenses.

Impact of becoming a Public company

We expect to incur additional costs associated with operating as a public
company, including human resources, legal, consulting, regulatory, insurance,
accounting, investor relations and other expenses that we did not incur as a
private company. The Sarbanes-Oxley Act and rules adopted by the SEC require
public companies to implement specified corporate governance practices that are
not applicable to a private company. These additional rules and regulations
increased our legal, regulatory and financial compliance costs and will make
some activities more time-consuming and costly.

Key Factors Affecting Our Results

Our financial condition and results of operations depend to a large extent on the following players:

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Industry Opportunity and Competitive Landscape

As discussed above, the market in which we operate is projected to grow from $25
billion in 2021 to $33 billion in 2025, fueled by growth in demand for additive
manufacturing and continuing trends in customer outsourcing of production needs.
We operate in a large, fragmented, and competitive industry, competing for
customers with a range of digital manufacturers, digital manufacturing brokers,
and regional design bureaus. We believe we are uniquely positioned as the only
full-service outsourced solution built specifically to cater to the
manufacturing needs of enterprise-level corporate customers. In particular, we
believe we compare favorably to other industry participants on the basis of the
following competitive factors:

     •    Fathom owns a wide breadth of advanced manufacturing processes,
          including additive 2.0 and emerging technologies;


• We have a proven track record of delivering top-notch, enterprise-level service

          corporate customers;


• We offer our clients turnaround times in as little as 24 hours, nationwide;


     •    Our unified digital customer experience supplemented by with embedded
          support teams;


• Fathom provides the industry’s only team dedicated to customers

engineers, unlocking the widest parts envelope and providing customers

          with high-value customized parts;


• Our list of certifications validates our capabilities and accuracy

          (tight tolerances, handling of sensitive client data, etc.);



     •    We possess a wealth of material expertise, technical design

engineering capabilities and resources we leverage to provide

          superior customer results regardless of manufacturing process and
          production material; and


• Our successful and proven acquisition integration manual for

growth opportunities.

Customer Product Lifecycle and Connectivity

We believe that a number of trends affecting our industry have affected our
results of operations and may continue to do so. For example, we believe that
many of our target customers are facing three mega trends which are disrupting
long-term product growth models including (i) increased pressure to shorten
product life-cycles, (ii) manufactured parts on-demand, and (iii) expectation to
deliver products that are personalized and customized to unique customer
specifications. We believe we continue to be well positioned to benefit from
these trends given our proprietary technology alignment with Industry 4.0 trends
that enables us to automate and integrate processes involved in manufacturing
custom parts. The COVID-19 pandemic has also impacted the manufacturing
environment. For example, the pandemic accelerated the digitization of
manufacturing as companies pivoted to a work-from-home and socially-distanced
manufacturing plant environment. As a result, the adoption of e-commerce was
accelerated, which allows opportunity for us to provide valuable solutions to
manufacturers looking to build resiliency in their supply chains through fast,
on-demand manufacturers. While our business may be positively affected by these
trends, our results may also be favorably or unfavorably impacted by other
trends that affect product developer and engineer orders for custom parts in low
volumes, including, among others, economic conditions, changes in product
developer and engineer preferences or needs, developments in our industry and
among our competitors, and developments in our customers' industries. For a more
complete discussion of the risks facing our business, see Item 1A. "Risk
Factors" of this Annual Report on Form 10-K.

Manufacturing facilities and capacity

We believe our combined facilities are adequate for our development and
production needs in the near future. Should we need to add space or transition
into new facilities, we believe we have the ability to expand our footprint on
commercially reasonable terms.

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Impacts of the COVID-19 pandemic

On March 11, 2020, the World Health Organization declared the outbreak of a
respiratory disease caused by a new coronavirus as a "pandemic." First
identified in late 2019 and now known as COVID-19, the outbreak has impacted
millions of individuals worldwide. As of the date of issuance of the
consolidated financial statements, our operations have not been significantly
impacted, but we continue to monitor the situation. No impairments were recorded
as of the consolidated balance sheet date, as no triggering events or changes in
circumstances had occurred during 2021; however, due to uncertainty surrounding
the situation, and specifically as it pertains to the current global supply
chain disruptions, and management's judgment could change in the future. In
addition, while our results of operations, cash flows and financial condition
were not significantly impacted, the extent of any future impact cannot be
reasonably estimated at this time. The health and well-being of our employees is
critical to our ongoing ability to operate and serve our customers. We are
committed to ensuring the safety and well-being of our employees across each
location and job function, which includes providing broad benefits to support
their health and wellness needs. In order to address the challenges posed by
COVID-19,we implemented a number of measures across our locations to ensure
maximum protection for our employees and their families, including allowing
remote work arrangements where possible. We continue to place the utmost
importance on complying with governmental regulations and health authority
guidance to ensure that the appropriate steps are taken to protect the
well-being of all people engaged with our business.

Comparison of completed exercises December 31, 2021 and 2020

For the purposes of this section, the period from January 1, 2021 to December
22, 2021 is the "predecessor period", and the period from December 23, 2021 to
December 31, 2021 is the 2021 "successor period". The predecessor period and the
successor period collectively are referred to as the "2021 predecessor and
successor periods."

                                                                   Period From
                                         December 23 -            January 1 -         January 1 - December
                                           31, 2021            December 22, 2021            31, 2020
                                          (Successor)            (Predecessor)           (Predecessor)

Revenue                                 $         4,840       $           147,356     $             61,289
Cost of revenue                                   2,725                    90,278                   33,064
Gross profit                                      2,115                    57,078                   28,225
Operating expenses
Selling, general, and administrative              3,133                    37,507                   24,642
Depreciation and amortization                       416                    10,357                    4,672
Total operating expenses                          3,549                    47,864                   29,314
Operating (loss) income                          (1,434 )                   9,214                   (1,089 )
Interest expense and other (income)
expense
Interest expense                                    251                    13,063                    3,635
Other expense                                       308                    21,007                    3,824
Other income                                    (35,460 )                  (5,174 )                   (585 )
Total interest expense and other
(income) expense, net                           (34,901 )                  28,896                    6,874
Net income (loss) before income tax     $        33,467       $           (19,682 )   $             (7,963 )
Income tax benefit                                   (3 )                  (3,208 )                      -
Net income (loss)                       $        33,470       $           (16,474 )   $             (7,963 )
Net loss attributable to Fathom OpCo
non-controlling interest (Note 14)                 (968 )                       -                        -
Net income attributable to
controlling interest                             34,438                         -                        -
Comprehensive income (loss):
Gain (loss) from foreign currency
translation adjustments                               -                       113                      (68 )
Comprehensive income (loss), net of
tax                                     $        34,438       $           (16,361 )   $             (8,031 )



Revenue

The turnover was $4.8 million and $147.4 million for the successor and predecessor periods of 2021, respectively, compared to $61.3 million for the year ended
December 31, 2020. The raise of $90.9 millionor 148.3%, was mainly driven by our 2021 and 2020 acquisitions and organic growth of 8.8%.

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Gross profit

Gross profit, or revenue less cost of revenue, is primarily affected by our
sales growth and was $2.1 million and $57.1 million for the 2021 successor and
predecessor periods, respectively, compared to $28.2 million for the year ended
December 31, 2020. The $31.0 million, or 109.9%, increase from was primarily
driven by our 2021 and 2020 acquisitions. Gross margin percentage decreased to
38.9% for the combined 2021 predecessor and successor periods from 46.1% for the
year ended December 31, 2020. This is primarily driven by increases in material
costs of 3.4% and the dilutive impact from our 2021 acquisitions of 3.6%.

Functionnary costs

Selling, general and administrative (SG&A) expenses were $3.1 million and $37.5
million for the 2021 successor and predecessor periods, respectively, compared
to $24.6 million for the year ended December 31, 2020. The $16.0 million, or
65.0%, increase in SG&A expenses was primarily driven by the cost related to our
2021 and 2020 acquisitions and the additional costs associated with the Business
Combination.

Depreciation and amortization expenses were $0.4 million and $10.4 million for
the 2021 successor and predecessor periods, respectively, compared to $4.7
million for the year ended December 31, 2020. The increase of $6.1 million, or
129.8%, was primarily driven by property, plant and equipment and intangible
assets added from our 2021 and 2020 acquisitions.

Operating profit (loss)

The operating result was $9.2 million for the previous period of 2021 and the operating loss was $1.4 million for the 2021 successor period, against an operating loss of $1.1 million for the year ended December 31, 2020. The increase in operating profit is mainly due to the increase in revenue and gross profit from our 2021 and 2020 acquisitions.

Interest and other expenses (income)

Interest expense was $0.3 million and $13.1 million for the 2021 successor and
predecessor periods, respectively, compared to $3.6 million for the year ended
December 31, 2020. The increase of $9.8, million or 272.2%, is driven by
interest on a $172.0 million bridge loan executed in April 2021 to finance our
2021 acquisitions.

Other expenses were $0.3 million and $16.5 million for the 2021 successor and
predecessor periods, respectively, compared to $3.8 million for the year ended
December 31, 2020. The increase of $13.0 million, or 342.1%, is driven by
transaction related expenses related to the acquisition of Fathom OpCo and
acquisition related expenses of $12.5 million and $4.0 million, respectively, in
the 2021 predecessor period. In addition, the change in fair value of the TRA of
$0.3 million is represented in the 2021 successor period.

Other income was $35.5 million and $5.2 million for the 2021 successor and
predecessor periods, respectively, compared to $0.6 million for the year ended
December 31, 2020. The increase of $40.1 million represents the changes in fair
value in our Earnout Share liability, Sponsor Earnout Share liability, and
Warrant liability during the 2021 successor period of $26.9 million, $3.4
million, and $8.2 million, respectively. Other income for the 2021 predecessor
period included a change in fair value of contingent consideration and a gain on
PPP loan forgiveness of $3.6 million and $1.6 million, respectively.

Income taxes

We recorded a tax benefit of $0.0 million and $3.2 million for the 2021
successor and predecessor periods and a tax provision of $0.0 million for the
year ended December 31, 2020. During the 2021 predecessor period, certain
subsidiaries of Fathom OpCo which were previously held as corporations for U.S.
federal tax purposes, were reorganized into flow-through entities in non-taxable
transactions. As a result, deferred tax liabilities pertaining to the corporate
subsidiaries were reversed as income tax benefits during the 2021 predecessor
period. During the 2021 successor period, the Company was in a small taxable
loss position after accounting for permanent differences on income from the
change in warrant liability, earnout share liability, and sponsor earnout
liability. As we have assessed that deferred tax assets in the form of net
operating losses are not more likely than not to be realized, no income tax
benefit was recorded from the taxable loss position.

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Non-GAAP Information

This Annual Report on Form 10-K includes Adjusted Net Income (Loss) and Adjusted
Earnings Before Interest Taxes Depreciation and Amortization ("Adjusted
EBITDA"), which are non-GAAP financial measures that we use to supplement our
results presented in accordance with U.S. GAAP. We believe Adjusted Net Income
(Loss) and Adjusted EBITDA are useful in evaluating our operating performance,
as they are similar to measures reported by our public competitors and regularly
used by security analysts, institutional investors, and other interested parties
in analyzing operating performance and prospects. Adjusted Net Income (Loss) and
Adjusted EBITDA are not intended to be a substitute for any U.S. GAAP financial
measure and, as calculated, may not be comparable to other similarly titled
measures of performance of other companies in other industries or within the
same industry. These non-GAAP financial measures supplement and should be
considered in addition to and not in lieu of our, U.S. GAAP results.

We include these non-GAAP financial measures because they are used by management
to evaluate Fathom's core operating performance and trends and to make strategic
decisions regarding the allocation of capital and new investments. Adjusted
EBITDA excludes certain expenses that are required in accordance with U.S. GAAP
because they are non-recurring (for example, in the case of transaction-related
costs), non-cash (for example, in the case of depreciation and amortization) or
are not related to our underlying business performance (for example, in the case
of interest income and expense).

Adjusted net profit (loss)

We define and calculate Adjusted Net Income (Loss) as net loss before the impact
of any increase or decrease in the estimated fair value of the Company's
warrants and earnout shares as well as transaction-related costs and certain
other non-cash and non-core items.

The table below presents our adjusted net income (loss) reconciled to our net income (loss), whichever is closer WE GAAP measurement, for the periods indicated:

                                                         Period From
                       December 23 - December       January 1 - December       January 1 - December 31,
                        31, 2021 (Successor)       22, 2021 (Predecessor)         2020 (Predecessor)
Net income (loss)      $                33,470     $               (16,474 )   $                 (7,963 )
Acquisition                                  -                       4,045                        1,254
expenses(1)
Transaction costs(2)                         -                      12,515                            -
Change in fair value                       300                           -                            -
of the TRA
Change in fair value                    (8,200 )                         -                            -
of Warrant
liability(3)
Change in fair value                   (27,260 )                         -                            -
of earnout share
liabilities(3)
Integration,                                 -                           -                        2,511
non-recurring,
non-operating, cash,
and non-cash
costs(4)
Adjusted net income    $                (1,690 )   $                    86 
   $                 (4,198 )
(loss)



(1) Represents expenses incurred related to business acquisitions;
(2) Represents legal, consulting, and auditing costs associated with the
Business Combination;
(3) Represents the income statement impacts from the change in fair value
related to both the Sponsor Earnout Share liability, the Fathom Earnout Share
liability, and the Warrant liability associated with the Business Combination.
(4) Represents adjustments for other integration, non-recurring, non-operating,
cash, and non-cash costs related primarily to integration costs for new
acquisitions, severance, and charges for the increase of fair value of inventory
related to acquisitions, and management fees paid to our principal owner.

Adjusted EBITDA

We define and calculate Adjusted EBITDA as net losses before the impact of
interest income or expense, income tax expense and depreciation and
amortization, and further adjusted for the following items: transaction-related
costs, the impact of any increase or decrease in the estimated fair value of the
Company's warrants and earnout shares, and certain other non-cash and non-core
items, as described in the reconciliation included below.

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The table below presents our adjusted EBITDA reconciled with net income, the closest WE Measured in accordance with GAAP, for the periods indicated.

                                                         Period From
                       December 23 - December       January 1 - December       January 1 - December 31,
                        31, 2021 (Successor)       22, 2021 (Predecessor)         2020 (Predecessor)
Net income (loss)      $                33,470     $               (16,474 )   $                 (7,963 )
Depreciation and                           510                      16,108                        7,239
amortization
Interest expense,                          251                      13,063                        3,635
net
Income tax expense                          (3 )                    (3,208 )                          -
Contingent                                   -                      (3,550 )                      1,055
consideration(1)
Acquisition                                  -                       4,045                        1,254
expenses(2)
Loss on                                      -                       2,031                            -
extinguishment of
debt(3)
Transaction costs(4)                         -                      12,515                            -
Change in fair value                       300                           -                            -
of the TRA
Change in fair value                    (8,200 )                         -                            -
of Warrant
liability(5)
Change in fair value                   (27,260 )                         -                            -
of earnout share
liabilities(5)
Integration,                               215                      10,538                        5,791
non-recurring,
non-operating, cash,
and non-cash
costs(6)
Adjusted EBITDA        $                  (717 )   $                35,068     $                 11,011



(1) Represents the change in fair value of contingent consideration payable to
former owners of acquired businesses;
(2) Represents expenses incurred related to business acquisitions;
(3) Represents amounts paid to refinance debt in April 2021;
(4) Represents legal, consulting, and auditing costs associated with the
Business Combination.
(5) Represents the impacts from the change in fair value related to both the
earnout share liabilities and the warrant liabilities associated with the
Business Combination;
(6) Represents adjustments for other integration, non-recurring, non-operating,
cash, and non-cash costs related primarily to integration costs for new
acquisitions, severance, and charges for the increase of fair value of inventory
related to acquisitions, and management fees paid to our principal owner.

Cash and capital resources

We measure liquidity in terms of our ability to fund the cash requirements of
our business operations, including working capital and capital expenditure
needs, contractual obligations and other commitments, with cash flows from
operations and other sources of funding. Our current working capital needs
relate mainly to our growth strategies, including business combination activity,
capital equipment investments, and business development efforts, as well as
compensation and benefits of our employees. In addition, under our New Credit
Agreements (as defined below), the Company is subject to various financial
covenants, including quarterly net leverage and interest coverage covenants. As
of December 31, 2021, the Company was in compliance with all covenant
requirements. Our ability to expand and grow our business will depend on many
factors, including our working capital needs and the evolution of our operating
cash flows.

We had $20.4 million in cash as of December 31, 2021. We believe our operating
cash flows, together with amounts available under the New Credit Agreement and
our cash on hand will be sufficient to meet our anticipated working capital and
capital expenditure requirements during the next 12 months.

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We may, however, need additional cash resources due to changed business
conditions or other developments, including unanticipated regulatory
developments, significant acquisitions and competitive pressures. We expect our
capital expenditures and working capital requirements to continue to increase in
the immediate future, as we seek to expand our product offerings across more of
the U.S. Our capital expenditures in 2021 of $9.0 million were approximately
6.0% of annual revenue We believe future growth capital expenditures, excluding
any expenditures for buildings and maintenance capital we might purchase for our
operations, are likely to be approximately 6.0% of annual revenue. To the extent
that our current resources are insufficient to satisfy our cash requirements, we
may need to seek additional equity or debt financing. If the needed financing is
not available, or if the terms of financing are less desirable than we expect,
we may be forced to decrease our level of investment in new product launches and
related marketing initiatives or to scale back our existing operations, which
could have an adverse impact on our business and financial prospects. See Note
3-Business Combination with Fathom OpCo in the accompanying notes to our
consolidated financial statements for further information.

Loans and lines of credit

On December 23, 2021, the Company entered into a financing transaction, which
included a $50.0 million revolving credit facility and a $125.0 million term
loan (collectively, the "New Credit Agreement"). The Company's borrowings under
the revolving credit facility were $27.0 million at December 31, 2021. The loans
made under the New Credit Agreement will mature in December 2026. The total
$152.0 million proceeds from the New Credit Agreement was used to repay existing
indebtedness.

The Company recorded deferred financing costs of $1.8 million in conjunction
with the New Credit Agreement and the balance is presented net within Long-Term
debt, net on the Company's Consolidated Balance Sheet. The Company amortizes the
deferred financing costs using the effective interest method.

The revolving credit facility under the New Credit Agreement is available for
working capital and other general corporate purposes and includes a letter of
credit sub-facility of up to $5.0 million. The New Credit Agreement also
includes an uncommitted incremental facility, which, subject to certain
conditions, provides for additional term loan facilities, an increase in
commitments under the New Credit Agreement and/or an increase in commitments
under the revolving credit facility, in an aggregate amount of up to $100
million.

Agreement on tax claims

In connection with the Business Combination, we entered into the TRA with
certain of our pre-Business Combination owners that provides for the payment by
Fathom to such owners of 85% of the benefits that Fathom is deemed to realize as
a result of the Company's share of existing tax basis acquired in the Business
Combination and other tax benefits related to entering into the TRA.

Actual tax benefits realized by Fathom may differ from tax benefits calculated
under the TRA as a result of the use of certain assumptions in the TRA,
including the use of an assumed weighted-average state and local income tax rate
to calculate tax benefits. While the amount of existing tax basis, the
anticipated tax basis adjustments and the actual amount and utilization of tax
attributes, as well as the amount and timing of any payments under the TRA, will
vary depending upon a number of factors, we expect that the payments that Fathom
may make under the TRA will be substantial. As of December 31, 2021, we do not
expect to make any material payments within the next two years, and anticipate
payments to become more material beginning in 2024.

Cash Flow Analysis


                                                                    Period From
                                           December 23 -           January 1 -             January 1 -
                                            December 31,        December 22, 2021       December 31, 2020
(dollars in thousands)                    2021 (Successor)        (Predecessor)           (Predecessor)
Net cash provided by (used in) :
Operating Activities                      $            521     $             7,223     $             1,870
Investing Activities                                     -     $           (76,400 )   $           (96,038 )
Financing Activities                                     -     $            70,566     $           101,330
Net Change in Cash and Cash Equivalents   $            521     $             1,389     $             7,162



Operating Activities

Net cash provided from operating activities was $7.2 million and $0.5 million
for the 2021 predecessor and successor periods, respectively, and $1.9 million
for the year ended December 31, 2020. This increase of $5.9 million is primarily
driven by an improved financial performance and an increase in non-cash items
related to the business acquisitions in the 2021 predecessor period, partially
offset by an increase in working capital requirements.
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Investing activities

Cashed used for investing activities for the 2021 predecessor and successor
periods, was $76.4 million and $0.0 million, respectively, compared to $96.0
million for the year ended December 31, 2020. This decrease of $19.6 million was
driven by a reduction of the overall cash used in acquisitions under Fathom OpCo
for the 2021 predecessor period compared to the year ended December 31, 2020,
partially offset by an increase in capital expenditures.

Fundraising activities

Cash provided by financing activities for the 2021 predecessor period was $70.6
million. The primary drivers were the proceeds related to the 2021 Bridge Loan
of $183.5 million, as described in Note 10 Long-Term Debt, in the accompanying
notes to our consolidated financial statements. This was partially offset by
payments on the 2021 Term Loan and extinguishment of our 2020 credit facilities
of $104.1 million.

Cash provided by financing activities for the year ended December 31, 2020 were
primarily due to borrowings under our 2020 credit facility of $65.1 million and
proceeds from issuance of member's units of $40.4 million.

Significant Accounting Policies and Use of Estimates

Preparation of our financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses. See Note 2-Significant Accounting Policies in the
accompanying notes to our audited consolidated financial statements describes
the significant accounting policies used in preparation of the consolidated
financial statements. We believe that the most complex and sensitive judgments,
because of their potential significance to the consolidated financial
statements, result primarily from the need to make estimates about the effects
of matters that are inherently uncertain and are described subsequently. Actual
results could differ from management's estimates.

Business combinations

We account for business acquisitions in accordance with Accounting Standards
Codification ("ASC") 805, Business Combinations ("ASC 805"). We measure the cost
of an acquisition as the aggregate of the acquisition date fair values of the
assets transferred and liabilities assumed and equity instruments issued.
Transaction costs directly attributable to the acquisition are expensed as
incurred. We record goodwill for the excess of (i) the total costs of
acquisition, fair value of any non-controlling interests and acquisition date
fair value of any previously held equity interest in the acquired business over
(ii) the fair value of the identifiable net assets of the acquired business.

The acquisition method of accounting requires us to exercise judgment and make
estimates and assumptions based on available information regarding the fair
values of the elements of a business combination as of the date of acquisition,
including the fair values of identifiable intangible assets, deferred tax asset
valuation allowances, liabilities related to uncertain tax positions and
contingencies. We must also refine these estimates over a one-year measurement
period, to reflect any new information obtained about facts and circumstances
that existed as of the acquisition date that, if known, would have affected the
measurement of the amounts recognized as of that date. If we are required to
retroactively adjust provisional amounts that we have recorded for the fair
value of assets and liabilities in connection with an acquisition, these
adjustments could materially impact our results of operations and financial
position. Estimates and assumptions that we must make in estimating the fair
value of future acquired technology, user lists and other identifiable
intangible assets include future cash flows that we expect to generate from the
acquired assets. If the subsequent actual results and updated projections of the
underlying business activity change compared with the assumptions and
projections used to develop these values, we could record impairment charges. In
addition, we have estimated the economic lives of certain acquired assets and
these lives are used to calculate depreciation and amortization expense. If our
estimates of the economic lives change, depreciation or amortization expenses
could be accelerated or slowed, which could materially impact our results of
operations.

Good will and intangible assets

We recognize goodwill in accordance with ASC 350, Intangibles-Goodwill and Other
("ASC 350"). Goodwill is the excess of cost of an acquired entity over the fair
value amounts assigned to assets acquired and liabilities assumed in a business
combination. Goodwill is not amortized. Goodwill is tested for impairment
annually in the fourth quarter of each year, and is tested for impairment
between annual tests if an event occurs or circumstances change that would
indicate the carrying amount may be impaired. An impairment charge for goodwill
is recognized only when the estimated fair value of a reporting unit, including
goodwill, is less than its carrying amount. As of December 31, 2021 and December
31, 2020, no impairment charges for goodwill have been recognized.

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We recognize intangibles assets in accordance with ASC 350. Acquired intangible
assets subject to amortization are stated at cost and are amortized using the
straight-line method over the estimated useful lives of the assets. Intangible
assets that are subject to amortization are reviewed for potential impairment
whenever events or circumstances indicate that carrying amounts may not be
recoverable. Assets not subject to amortization are tested for impairment at
least annually. As of December 31, 2021 and December 31, 2020, no impairment
charges for intangible assets have been recognized.

The estimates of fair value are based on the best information available as of
the date of the assessment, which primarily incorporates management assumptions
about expected future cash flows. Although these assets are not currently
impaired, there can be no assurance that future impairments will not occur. See
Note 3-Business Combination with Fathom OpCo, note 4 - Fathom OpCo Predecessor
Period Acquisitions, and Note 8-Goodwill and Intangible Assets in the
accompanying notes to the consolidated financial statements for more
information.

Recognition of revenue from contracts with customers

On January 1, 2019, the Company adopted ASC 606, Revenue from Contracts with
Customers ("ASC 606"), using the modified retrospective approach. Most of the
Company's revenue has one performance obligation and is recognized on a
point-in-time basis upon shipment. The majority of the Company's injection
molding contracts have multiple performance obligations including one obligation
to produce the mold and sample part and a second obligation to produce
production parts. For injection molding contracts with multiple performance
obligations, the Company allocates revenue to each performance obligation based
on its relative standalone selling price and recognizes revenue for each
performance obligation on a point-in-time basis upon shipment. We generally
determine standalone selling price based on the price charged to customers. The
Company's payments terms are consistent with industry standards and never exceed
12 months. The adoption of ASC 606 did not have a material impact on our
consolidated financial statements.

Contingent liabilities

Our contingent liabilities, which are included within the "Other non-current
liabilities" caption on our consolidated balance sheets, are uncertain by nature
and their estimation requires significant management judgment as to the
probability and estimation of the amount of liability. These contingencies
include, but may not be limited to, warrants, TRA liabilities, earnout shares,
litigation, and management's evaluation of complex laws and regulations,
including those relating to indirect taxes, and the extent to which they may
apply to our business and industry. See Note 19-Fair Value Measurement and Note
20-Commitments and Contingencies in the accompanying notes to our consolidated
financial statements for more information.

We regularly review our contingencies to determine whether the likelihood of a
liability is probable and to assess whether a reasonable estimate of the
liability can be made. Determination of whether a liability estimate can be made
is a complex undertaking that considers the judgement of management, third-party
research, the prospect of negotiation and interpretations by regulators and
courts, among other information. When liabilities can be reasonably estimated,
an estimated contingent liability is recorded. We continually reevaluate our
indirect tax and other positions for appropriateness.

Compensation based on sharing

The grant date fair value of the time-based and performance-based awards issued
under the 2021 Omnibus Plan were valued using the closing stock price for the
Company's Class A common stock on December 23, 2021 (i.e., the grant date), less
a discount for lack of marketability ("DLOM") due to certain transfer
restrictions applicable to the awards. The higher these discounts, the lower the
compensation expense taken over time for these grants. See Note 12 - Share Based
Compensation in the accompanying notes to our consolidated financial statements
for more information.

Liability relating to the supplementary shares and liability relating to the warrants

The fair values of the Sponsor earnout shares liability, Fathom earnout shares
liability, and Warrants liability were determined using Monte Carlo simulations
that have various significant unobservable inputs. The assumptions used could
have a material impact on the valuation of these liabilities, and include our
best estimate of expected volatility, expected holding periods and appropriate
discounts for lack of marketability. Changes in the estimated fair values of
these liabilities may have material impacts on our results of operations in any
given period, as any increases in these liabilities have a corresponding
negative impact on our U.S. GAAP results of operations in the period in which
the changes occur. See Note 3 - Business Combination with Fathom OpCo and Note 9
- Warrant Liability in the accompanying notes to our consolidated financial
statements for more information.

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Impact of Accounting Changes on Recent and Future Trends

The Financial Accounting Standards Board ("FASB") issued Accounting Standards
Update ("ASU") 2016-02, Leases, ("ASC 842") which will supersede the current
lease requirements in ASC 840. ASC 842 requires lessees to recognize a
right-to-use asset and related lease liability for all leases, with a limited
exception for short-term leases. Leases will be classified as either finance or
operating, with the classification affecting the pattern of expense recognition
in the statement of operations. Currently, leases are classified as either
capital or operating, with only capital leases recognized on the balance sheet.
The new lease guidance will be effective for the Company's fiscal year ending
December 31, 2022 and will be applied using a modified retrospective transition
method to either the beginning of the earliest period presented or the beginning
of the year of adoption. The new lease standard is expected to have a
significant effect on the Company's financial statements as a result of the
Company's operating leases, that will be reported on the balance sheet at
adoption. Upon adoption, the Company will recognize a lease liability and
corresponding right-to-use asset based on the present value of the minimum lease
payments. The effects on the results of operations are not expected to be
significant as recognition and measurement of expenses and cash flows for leases
will be substantially the same under the new standard.

Accounting Election for Emerging Growth Companies

Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 ("JOBS
Act") exempts emerging growth companies from being required to comply with new
or revised financial accounting standards until private companies are required
to comply with the new or revised financial accounting standards. The JOBS Act
provides that a company can choose not to take advantage of the extended
transition period and comply with the requirements that apply to non-emerging
growth companies, and any such election to not take advantage of the extended
transition period is irrevocable. Altimar II was an emerging growth company as
defined in Section 2(a) of the Securities Act of 1933, as amended, and has
elected to take advantage of the benefits of this extended transition period.
Fathom is expected to remain an emerging growth company at least through the end
of the 2022 and is expected to continue to take advantage of the benefits of the
extended transition period. This may make it difficult or impossible to compare
Fathom financial results with the financial results of another public company
that is either not an emerging growth company or is an emerging growth company
that has chosen not to take advantage of the extended transition period
exemptions for emerging growth companies because of the potential differences in
accounting standards used.

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