Danimer Scientific(DNMR) - 2022 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Presents unaudited condensed consolidated financial statements for Q2 2022, detailing cash, operating losses, and capital expenditures Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements for Q2 2022, including balance sheets, operations, equity, and cash flows Condensed Consolidated Balance Sheets Cash and cash equivalents decreased to $140.4 million by June 30, 2022, due to capital expenditures, with total assets slightly declining Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $140,388 | $286,487 | | Total current assets | $202,043 | $340,358 | | Property, plant and equipment, net | $408,885 | $316,181 | | Total assets | $790,717 | $838,597 | | Liabilities & Equity | | | | Total current liabilities | $30,611 | $43,475 | | Long-term debt, net | $262,032 | $260,934 | | Total liabilities | $318,862 | $338,332 | | Total stockholders' equity | $471,855 | $500,265 | Condensed Consolidated Statements of Operations Q2 2022 reported a $30.4 million net loss, a reversal from prior year, due to lower revenue, higher costs, and increased operating expenses Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2022 (in thousands) | Q2 2021 (in thousands) | Six Months 2022 (in thousands) | Six Months 2021 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $12,703 | $14,471 | $27,446 | $27,652 | | Cost of revenue | $14,934 | $12,460 | $30,999 | $24,185 | | Gross (Loss) Profit | ($2,231) | $2,011 | ($3,553) | $3,467 | | Loss from operations | ($32,120) | ($21,076) | ($62,809) | ($32,359) | | Gain (loss) on remeasurement of private warrants | $2,012 | $58,740 | $7,007 | ($21,957) | | Net (Loss) Income | ($30,445) | $39,248 | ($56,831) | ($55,486) | | Diluted net (loss) income per share | ($0.30) | $0.39 | ($0.56) | ($0.64) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $471.9 million by June 30, 2022, primarily due to a $56.8 million net loss partially offset by stock-based compensation - The accumulated deficit grew from $(118.9) million at the beginning of the year to $(175.7) million by the end of Q2 2022, reflecting the net loss of $56.8 million incurred during the period[16] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $37.4 million, while investing activities more than doubled to $108.8 million for facility expansions Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($37,393) | ($22,641) | | Net cash used in investing activities | ($108,809) | ($51,566) | | Net cash provided by financing activities | $71 | $111,189 | | Net (decrease) increase in cash | ($146,131) | $36,982 | Notes to Condensed Consolidated Financial Statements Provides detailed accounting policies and financial item disclosures, including the Novomer acquisition, debt composition, and ongoing legal proceedings - On August 11, 2021, the company acquired Novomer, Inc. for $153.9 million in cash, integrating it as Danimer Catalytic Technologies to produce Rinnovo PHA[22] - Due to COVID-related delays on an R&D project, a partner cancelled the arrangement, leading the company to record a $1.2 million reserve against the outstanding contract asset in Q2 2022[56] - As of June 30, 2022, total long-term debt was $264.3 million (net), with $240 million in 3.25% Convertible Senior Notes due 2026 as the largest component[41][42] - The company is subject to consolidated class action lawsuits and shareholder derivative lawsuits, as well as a non-public, fact-finding inquiry from the SEC, with no estimable potential loss[65][67] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2022 financial performance, highlighting decreased revenue, a gross loss from product mix, increased operating expenses, and capital expansion needs Results of Operations Q2 2022 total revenue decreased to $12.7 million, resulting in a $2.2 million gross loss and a $32.1 million loss from operations due to product mix and higher costs - PHA-based products constituted 61% of total revenue in Q2 2022, up from 29% in Q2 2021, reflecting a strategic shift towards lower-margin, pre-scale production[95] - The decline in gross profit was primarily due to the sales mix shift to lower-margin PHA products, lower R&D revenue, and higher per-unit costs for PLA products due to lower volume[96] - The increase in R&D expense was driven by costs from the newly acquired Danimer Catalytic Technologies ($2.4 million), a $1.2 million reserve for a cancelled contract asset, and higher consulting and personnel costs[97] Liquidity and Capital Resources Liquidity relies on $140.4 million cash and debt, with significant capital expenditures for facility expansion requiring additional financing - As of June 30, 2022, the company had $140.4 million in cash and cash equivalents[112] - The company has invested $136 million in its Greenfield Facility, but its completion requires additional financing[112] - On August 5, 2022, the company terminated its Credit Agreement with Truist Bank, anticipating a $1.4 million loss on early debt extinguishment in Q3 2022[112][68] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risk from commodity price fluctuations for raw materials, particularly canola oil, impacted by the Ukraine conflict - The company is exposed to price volatility in raw materials, with the Russian invasion of Ukraine specifically impacting canola oil prices, a key feedstock for PHA production[123][89] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of June 30, 2022, due to previously identified material weaknesses in internal control - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were not effective as of the end of the period[125] - The ineffectiveness is due to previously disclosed material weaknesses, and remediation plans are currently being implemented[125][127] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is defending against class action and derivative lawsuits and cooperating with an SEC inquiry, unable to estimate potential losses - The company is involved in four consolidated class action lawsuits alleging materially false and misleading statements between October 2020 and May 2021[65] - The company has been responding to information requests from the SEC as part of a non-public, fact-finding inquiry that began in May 2021[65][67] Item 1A. Risk Factors No material changes to risk factors were reported from those disclosed in the 2021 Annual Report on Form 10-K - No material changes in risk factors were reported from those disclosed in the 2021 Form 10-K[131] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds occurred during the reporting period Item 5. Other Information The company terminated its Credit Agreement with Truist Bank on August 5, 2022, expecting a $1.4 million loss on early debt extinguishment - The company terminated its Credit Agreement with Truist Bank on August 5, 2022, and expects to incur a $1.4 million loss on early debt extinguishment in Q3 2022[132] Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including the Truist Credit Agreement payoff, CEO/CFO certifications, and XBRL data