Financial Update

• With the support from the Commonwealth, CCAM continues to make progress in the execution of its growth plan for long term sustainability.

• CCAM is in the process of completing its annual audit for Fiscal Year 2023. Final audit results are expected later this year with an expected designation of an unqualified opinion. Audited financial statements for FY 2023 can be provided once received by CCAM.

• All trade debt is current as of September 29, 2023.

• Legislative actions were put in place for DGS to acquire the CCAM property (HB1800 Chapter 552, approved April 7, 2021), however the transaction has not been finalized as of September 29, 2023. DGS is working with CCAM, CCALS, UVA Foundation (UVAF), and the U.S. Economic Development Association (EDA) to facilitate use of bond proceeds of the Virginia Public Building Authority for the acquisition.

• While CCAM awaits finalization of the building acquisition, preparation for co-location of the Commonwealth Center for Advanced Logistics Systems (CCALS) at the CCAM building has been on hold. Once the acquisition has been completed, CCAM has been directed by DGS to cover an estimated in Tenant Improvement “TI" expenses to benefit CCALS.

CCAM Economic Impact

• CCAM contracted Chmura Economics & Analytics Group to develop an objective assessment of CCAM’s impact on the economy of the Commonwealth. Chmura’s analysis concluded:

o each dollar of state funding generating $17.3 in economic activity within the Commonwealth.

o CCAM’s total cumulative impact (direct, indirect, and induced) has reached $229.1 million and supported 1,259 jobs in the state. This equates to $19.1 million and 105 jobs, annually.

o These impact estimates exclude the impact from Rolls-Royce operations (part of business attraction impact), which closed their operations in Prince George County in 2021.

Business Development

• CCAM is utilizing the data and recommendations from the 2022 Chmura Report to build on our strengths and better understand how we can support the growth of the manufacturing base in Virginia, keying in on priority industries like advanced pharmaceutical manufacturing.

• Additionally, CCAM has engaged with specialists from GENEDGE to conduct best-in-class benchmarking of the CCAM Membership model. Currently underway, this activity has:

o holistically examined our membership model to better understand our value proposition from both absolute and relative perspectives,

o gathered significant Voice of the Customer data and benchmarking information to understand how we are perceived today and inform how to best serve our stakeholders going forward.

• As a result of this work, CCAM is currently finalizing a new membership structure that includes elements identified as both needs from the manufacturing community and differentiators in the marketplace.

• It is expected that these changes will make CCAM more attractive with membership features that complement our technology development and validation. Some of these are already being deployed with current members.

• The goals of the new model include being simpler to navigate and offering much lower barriers to entry for small and medium-sized companies, particularly those with operations in Virginia.

Federal Funding: Federal funding momentum continues with significant future impact

• Commonwealth support has accelerated CCAM’s engagement in attracting federally funded programs.

• CCAM continues to make progress in securing new federal grants: new award amounts increased YOY to $1.3M.

• Revenue from (i.e., CCAM expenditures against) these federal grants has increased YOY by 122% in FY23 to $1.1M. In FY24, we project to again see a YOY increase.

• The pipeline of CCAM campaigns and proposals showed continued strength, with conservative probability weighted awards estimated at $3-4M in the near term.

• CCAM has become a leading partner in major collaborative initiatives, including supporting the regional pharmaceutical cluster in the Alliance for Building Better Medicines, NSF Regional Engine, and addressing critical submarine supply chain risks for the US Navy.

• CCAM has a major role in defining new technology pipelines and digital strategies for the US Navy’s AM Pro/Subs program. CCAM current award levels for this program are ~ $1M and future (near term) awards are expected on the order of $2-5M.

Workforce Development: CCAM now a holistic partner for developing a talent pipeline

• The Central Virginia Chapter of the Federation of Advanced Manufacturing Education (FAME) has expanded its impact on manufacturing companies in the region, with a total of sixteen companies now participating as Core Members. The first cohort of students who entered the program in 2021 have now graduated, and all were offered full-time employment by their sponsoring companies.

• With CCAM now identified as the In-Region Coordinating Entity for GO TEC (short for Great Opportunities in Technology and Engineering Careers) in Central Virginia, we have secured GO Virginia grant approval and will deploy GO TEC Career Connections labs in five area middle schools by the beginning of the 2024-2025 School Year. The proven success model of GO TEC will help spark students’ interest to pursue STEM careers.

• CCAM continued to grow and refine its internship program for engineering students and was again recognized by Virginia’s Talent + Opportunity Partnership as a 2023 “Top Employer for Interns".

• CCAM is developing and deploying a structured Talent Incubator model available to all CCAM members. Customizable to meet companies’ needs, this approach will strengthen engineering students’ technology skills in critical and emerging areas, like Industry 4.0 and AI, to make them “job-ready" when they graduate.

• CCAM is working with its university partners to make this happen. Starting with VSU, CCAM is developing laboratory-based course content that augments the learning for undergraduate students. Current CCAM member companies are already utilizing elements of this program to upskill their incumbent technical teams.

Operational Risks

• Staffing – CCAM has taken positive steps to be able to successfully compete in a very competitive labor market and has performed well in FY23, though the risk of staff attrition remains. This presents two key risks: a) delayed execution resulting in decreased revenue and increased research liability, and b) potential resource constraints with an anticipated ramp up in Federal program activity. CCAM continues to balance the need to prepare staffing levels for any anticipated federal award wins against the consequences of hiring too early.

• Recessionary – The threat of a potential recession remains and is likely to have an effect on corporate spending on research and development in FY24/5. For CCAM, this could put pressure on existing membership status, slow new industry memberships, and reduce additional spend by existing members above their annual member fees. Some prospective members have delayed engagement until 2025 as they are wary of an impending economic slowdown. CCAM’s efforts to diversify its revenue sources via Federal program growth is a valuable lever to offset a potential decline in spending in the industrial sector. CCAM is also assessing its tiered membership levels among other best-in-class research organizations to align with the needs of the changing market.

• Federal Program Growth – Submission of a single federal award proposal is a probability weighted activity which could result in zero dollars awarded. To mitigate this risk, CCAM continues to diligently grow its pipeline of business and proposal development activities which should provide greater odds of overall return, including working with our US House and Senate representatives in the pursuit of Congressional funding. While we have tried to remain conservative on our probability projections, there are a few large awards in our pipeline which are binary in terms of win/loss. This could result in a large fluctuation in what CCAM actually receives in terms of awarded contract value and could be exacerbated by the following risk:

• Federal Government Shutdown – An extended government shutdown without a continuing resolution in place looms large. Current projections include > 15% of revenues from the federal government. An extended shutdown will be a significant roadblock. This could affect FY24 revenues as well as delay potential new program wins. Leadership is currently outlining management strategies to offset this risk.