Danimer Scientific(DNMR) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements reveal significant declines in cash and equity, ongoing net losses, and substantial doubt about going concern Condensed Consolidated Financial Statements The financial statements show a deteriorating position with reduced cash, declining revenues, and increased cash used in operations Condensed Consolidated Balance Sheet Data (in thousands) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $22,187 | $59,170 | | Total current assets | $69,872 | $108,038 | | Total assets | $643,770 | $698,131 | | Total current liabilities | $21,332 | $15,723 | | Total liabilities | $432,177 | $420,111 | | Total stockholders' equity | $211,593 | $278,020 | Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $8,630 | $10,948 | $26,482 | $35,739 | | Loss from operations | $(18,821) | $(31,239) | $(56,672) | $(94,587) | | Net loss | $(21,839) | $(40,159) | $(71,763) | $(116,039) | | Basic and diluted net loss per share | $(0.18) | $(0.39) | $(0.63) | $(1.14) | Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(46,460) | $(31,331) | | Net cash used in investing activities | $(6,319) | $(25,704) | | Net cash provided by financing activities | $15,578 | $84,488 | | Net (decrease) increase in cash | $(37,201) | $27,453 | Notes to Condensed Consolidated Financial Statements Notes reveal substantial doubt about going concern, details on debt, business suspension, and a post-period reverse stock split - The company has concluded that substantial doubt exists regarding its ability to continue as a going concern for at least one year from the filing date due to a history of negative cash flows and a current lack of financial resources[21] - In July 2024, the company temporarily suspended its Danimer Catalytic Technologies business to conserve capital, following a reduction in force and pending CEO retirement[20] - Construction of the new Greenfield Facility in Georgia remains paused, requiring additional financing for completion, with existing investment at risk of impairment[25] - As of September 30, 2024, the company retired $8.1 million of Convertible Notes by allowing holders to exercise Dividend Warrants, resulting in a $6.8 million gain on debt extinguishment[35][39] - A major class action lawsuit against the company was dismissed, and the dismissal was affirmed on appeal in September 2024, leading to voluntary dismissal of three related shareholder derivative lawsuits[84] - On November 12, 2024, the company effected a 1-for-40 reverse stock split, which is not reflected in the report's share and per-share data[85] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses deteriorating financial condition, reiterating going concern doubt, with declining revenue and constrained liquidity Results of Operations Q3 2024 revenue declined 21% due to lower PHA sales, while net loss improved primarily from reduced stock-based compensation Q3 2024 vs Q3 2023 Performance (in thousands) | Metric | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $8,630 | $10,948 | $(2,318) | | PHA-based Product Sales | $6,600 | $8,400 | $(1,800) | | Gross Profit | $(7,315) | $(7,737) | $422 | | Net Loss | $(21,839) | $(40,159) | $18,320 | Nine Months 2024 vs 2023 Performance (in thousands) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $26,482 | $35,739 | $(9,257) | | PHA-based Product Sales | $20,700 | $21,900 | $(1,200) | | Gross Profit | $(20,529) | $(20,588) | $59 | | Net Loss | $(71,763) | $(116,039) | $44,276 | - The improvement in net loss for both periods was primarily driven by significant decreases in selling, general, and administrative expenses, related to lower stock-based compensation for executive awards fully amortized in December 2023[108][112] Liquidity and Capital Resources Liquidity is critical, with insufficient cash to fund operations, raising going concern doubt and risking debt default upon 10-K filing - The company forecasts it will likely not have adequate liquidity to fund operations and meet financial obligations in the near term, and substantial doubt exists about its ability to continue as a going concern[119] - A filing of an Annual Report on Form 10-K containing a 'going concern' disclosure would constitute an event of default under the Senior Secured Term Loan, which could cause cross-default and acceleration of substantially all of the company's debt[119][123] - The company is analyzing transactions to reduce debt and/or provide liquidity, including restructuring, additional financing, or asset sales, but these may not be successful or favorable to shareholders[119] - Cash used in operating activities increased to $46.5 million for the nine months ended September 30, 2024, from $31.3 million in the prior year period, primarily due to working capital changes and higher interest payments[125][126] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is commodity price volatility, particularly for raw materials like canola oil, impacting margins - The company is exposed to commodity price risk, especially for raw materials like canola oil, whose prices can be volatile due to factors like the war in Ukraine[130][131] Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - Management concluded that as of the end of the period, the company's disclosure controls and procedures were effective[133] - There were no changes in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[135] PART II. OTHER INFORMATION Legal Proceedings Positive legal developments include dismissal of a class action lawsuit and subsequent voluntary dismissal of derivative suits - A consolidated class action lawsuit was dismissed with prejudice, and the dismissal was affirmed on appeal on September 27, 2024[84] - Three shareholder derivative lawsuits were voluntarily dismissed by the plaintiffs following the dismissal of the class action suit[84] Risk Factors New risk factors emphasize going concern doubt, potential debt servicing issues, and NYSE delisting risk triggering cross-defaults - A new risk factor explicitly states that the company's negative cash flows and lack of financial resources raise substantial doubt about its ability to continue as a going concern[138] - The company may not be able to access needed liquidity to service its debt, which could force restructuring, bankruptcy, or liquidation of assets at values below their carrying amounts[140] - There is a risk of being delisted from the NYSE for failing to meet continued listing standards, which would constitute a 'Fundamental Change' under Convertible Notes, potentially triggering cross-defaults on other debt[140][142] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the third quarter of 2024 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the quarter[142] Exhibits This section lists exhibits filed with the quarterly report, including corporate documents, officer certifications, and XBRL data files