Filed pursuant to Rule 424(b)(3)

Registration No. 333-252515

 

PROSPECTUS SUPPLEMENT NO. 23

(to Prospectus dated February 16, 2021)

 

 

 

 

Danimer Scientific, Inc.

 

Up to 32,435,961 Shares of Common Stock

Up to 16,279,253 Shares of Common Stock Issuable Upon Exercise of Warrants and Options

 

This prospectus supplement supplements the prospectus dated February 16, 2021 (as supplemented or amended from time to time, the “Prospectus”), which forms a part of our registration statement on Form S-1 (No. 333-252515). This prospectus supplement is being filed to update and supplement the information in the Prospectus with the information contained in our quarterly report on Form 10-Q, filed with the Securities and Exchange Commission on May 10, 2022 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this prospectus supplement. The Prospectus and this prospectus supplement relate to the issuance by us of up to an aggregate of up to 16,279,253 shares of our Class A common stock, $0.0001 par value per share (“Common Stock”), which consists of (i) up to 6,000,000 shares of Common Stock that are issuable upon the exercise of 6,000,000 warrants (the “Private Warrants”) originally issued in a private placement in connection with the initial public offering of Live Oak Acquisition Corp., our predecessor company (“Live Oak”), (ii) up to 10,000,000 shares of Common Stock that are issuable upon the exercise of 10,000,000 warrants (the “Public Warrants” and, together with the Private Warrants, the “Warrants”) originally issued in the initial public offering of Live Oak and (iii) up to 279,253 shares of Common Stock issuable upon exercise of Non-Plan Legacy Danimer Options. We will receive the proceeds from any exercise of any Warrants for cash.

 

The Prospectus and this prospectus supplement also relate to the offer and sale from time to time by the selling securityholders named in the Prospectus (the “Selling Securityholders”), or their permitted transferees, of (i) up to 32,435,961 shares of Common Stock (including up to 6,000,000 shares of Common Stock that may be issued upon exercise of the Private Warrants) and (ii) up to 6,000,000 Private Warrants. We will not receive any proceeds from the sale of shares of Common Stock or the Private Warrants by the Selling Securityholders pursuant to the Prospectus and this prospectus supplement.

 

Our registration of the securities covered by the Prospectus and this prospectus supplement does not mean that the Selling Securityholders will offer or sell any of the shares. The Selling Securityholders may sell the shares of Common Stock covered by the Prospectus and this prospectus supplement in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares in the section entitled “Plan of Distribution.”

 

Our Common Stock is listed on The New York Stock Exchange under the symbol “DNMR”. On August 9, 2022, the closing price of our Common Stock was $4.07. Our Public Warrants were previously traded on The New York Stock Exchange under the symbol “DNMR WS”; however, the Public Warrants ceased trading on the New York Stock Exchange and were delisted following their redemption.

 

This prospectus supplement updates and supplements the information in the Prospectus and is not complete without, and may not be delivered or utilized except in combination with, the Prospectus, including any amendments or supplements thereto. This prospectus supplement should be read in conjunction with the Prospectus and if there is any inconsistency between the information in the Prospectus and this prospectus supplement, you should rely on the information in this prospectus supplement.

 

See the section entitled “Risk Factors” beginning on page 4 of the Prospectus to read about factors you should consider before buying our securities.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

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The date of this prospectus supplement is August 9, 2022.

 

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o

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 June 30, 2022

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number: 001-39280

 

DANIMER SCIENTIFIC, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware	84-1924518
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
140 Industrial Boulevard Bainbridge, GA	39817
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (229) 243-7075

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Class A Common stock, $0.0001 par value per share		DNMR		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, 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 to Section 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 Exchange Act). Yes ☐ No ☒

As of August 9, 2022, the registrant had 101,170,634 shares of common stock, $0.0001 par value per share, outstanding.

 

 

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Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Stockholders' Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
PART II.	OTHER INFORMATION	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32

 

FORWARD-LOOKING STATEMENTS

Certain statements contained herein, as well as in other filings we make with the United States Securities and Exchange Commission (“SEC”) and other written and oral information we release, regarding our future performance constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements may relate to, among other things, the impact on our business, operations and financial results of the COVID-19 pandemic and the ongoing conflict in Ukraine (each of which, among other things, may affect many of the items listed below); the demand for our products and services; revenue growth; effects of competition; supply chain and technology initiatives; inventory and in-stock positions; state of the economy; state of the credit markets, including mortgages, home equity loans, and consumer credit; impact of tariffs; demand for credit offerings; management of relationships with our employees, suppliers and vendors, and customers; international trade disputes, natural disasters, public health issues (including pandemics and related quarantines, shelter-in-place orders, and similar restrictions), and other business interruptions that could disrupt supply or delivery of, or demand for, our products or services; continuation of equity programs; net earnings performance; earnings per share; capital allocation and expenditures; liquidity; return on invested capital; expense leverage; stock-based compensation expense; commodity price inflation and deflation; the ability to issue debt on terms and at rates acceptable to us; the impact and expected outcome of investigations, inquiries, claims, and litigation; the effect of accounting charges; the effect of adopting certain accounting standards; the impact of regulatory changes; financial outlook; and the integration of acquired companies into our organization and the ability to recognize the anticipated synergies and benefits of those acquisitions.

Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. You should not rely on our forward-looking statements. These statements are not guarantees of future performance and are subject to future events, risks and uncertainties – many of which are beyond our control, dependent on the actions of third parties, or currently unknown to us – as well as potentially inaccurate assumptions that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those described in Part II, Item 1A, "Risk Factors" and elsewhere in this report and as also may be described from time to time in future reports we file with the SEC. You should read such information in conjunction with our Condensed Consolidated Financial Statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. There also may be other factors that we cannot anticipate or that are not described in this report, generally because we do not currently perceive them to be material. Such factors could cause results to differ materially from our expectations.

Forward-looking statements speak only as of the date they are made, and we do not undertake to update these statements other than as required by law. You are advised, however, to review any further disclosures we make on related subjects in our periodic filings with the SEC.

 

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PART I—FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS (UNAUDITED)

DANIMER SCIENTIFIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

 

		June 30,				December 31,
(in thousands, except share and per share data)		2022				2021
Assets:
Current assets:
Cash and cash equivalents		$	140,388			$	286,487
Accounts receivable, net			18,224				17,149
Other receivables, net			1,408				3,836
Inventories, net			32,729				24,573
Prepaid expenses and other current assets			5,394				4,737
Contract assets, net			3,900				3,576
Total current assets			202,043				340,358
Property, plant and equipment, net			408,885				316,181
Intangible assets, net			82,495				84,659
Goodwill			62,663				62,649
Right-of-use assets			19,133				19,240
Leverage loans receivable			13,408				13,408
Restricted cash			449				481
Loan fees			1,413				1,397
Other assets			228				224
Total assets		$	790,717			$	838,597
Liabilities and Stockholders' equity:
Current liabilities:
Accounts payable		$	11,748			$	20,790
Accrued liabilities			10,994				18,777
Unearned revenue and contract liabilities			2,290				214
Current portion of lease liability			3,337				3,337
Current portion of long-term debt, net			2,242				357
Total current liabilities			30,611				43,475
Private warrants liability			2,571				9,578
Long-term lease liability, net			22,412				22,693
Long-term debt, net			262,032				260,934
Deferred income taxes			483				1,014
Other long-term liabilities			753				638
Total liabilities		$	318,862			$	338,332
Commitments and Contingencies (Note 15)
Stockholders' equity:
Common stock, $0.0001 par value; 200,000,000 shares authorized: 101,114,861 and 100,687,820 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		$	10			$	10
Additional paid-in capital			647,566				619,145
Accumulated deficit			(175,721	)			(118,890	)
Total stockholders’ equity			471,855				500,265
Total liabilities and stockholders’ equity		$	790,717			$	838,597

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3

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DANIMER SCIENTIFIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands, except share and per share data)		2022				2021				2022				2021
Revenue:
Products		$	11,575			$	11,294			$	24,791			$	22,318
Services			1,128				3,177				2,655				5,334
Total revenue			12,703				14,471				27,446				27,652
Costs and expenses:
Cost of revenue			14,934				12,460				30,999				24,185
Selling, general and administrative			20,975				19,079				43,211				29,199
Research and development			8,913				3,975				16,044				6,594
Loss on sale of assets			1				33				1				33
Total costs and expenses			44,823				35,547				90,255				60,011
Loss from operations			(32,120	)			(21,076	)			(62,809	)			(32,359	)
Nonoperating income (expense):
Gain (loss) on remeasurement of private warrants			2,012				58,740				7,007				(21,957	)
Interest, net			(652	)			(203	)			(1,644	)			(352	)
Gain on forgiveness of debt			-				1,776				-				1,776
Loss on loan extinguishment			-				-				-				(2,604	)
Other, net			75				11				84				10
Total nonoperating income (expense):			1,435				60,324				5,447				(23,127	)
(Loss) income before income taxes			(30,685	)			39,248				(57,362	)			(55,486	)
Income taxes			240				-				531				-
Net (loss) income		$	(30,445	)		$	39,248			$	(56,831	)		$	(55,486	)
Basic net (loss) income per share		$	(0.30	)		$	0.44			$	(0.56	)		$	(0.64	)
Diluted net (loss) income per share		$	(0.30	)		$	0.39			$	(0.56	)		$	(0.64	)
Weighted average number of shares used to compute:
Basic net (loss) income per share			101,047,650				88,806,086				100,888,185				86,760,615
Effect of dilutive instruments			-				12,718,858				-				-
Diluted net (loss) income per share			101,047,650				101,524,944				100,888,185				86,760,615

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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DANIMER SCIENTIFIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
(in thousands)		2022				2021				2022				2021
Common stock:
Balance, beginning of period		$	10			$	8			$	10			$	8
Issuance of common stock			-				1				-				1
Balance, end of period			10				9				10				9
Additional paid-in capital:
Balance, beginning of period			633,213				435,782				619,145				414,819
Stock-based compensation expense			14,233				14,031				27,983				20,696
Fair value of private warrants converted to public warrants			-				31,593				-				45,515
Stock issued under stock compensation plans			120				1,275				493				2,466
Exercise of warrants, net of issuance costs			-				138,202				-				138,202
Issuance of common stock, net of issuance costs			-				(75	)			-				(890	)
Costs related to warrants			-				-				(55	)			-
Balance, end of period			647,566				620,808				647,566				620,808
Accumulated deficit:
Balance, beginning of period			(145,276	)			(153,517	)			(118,890	)			(58,783	)
Net (loss) income			(30,445	)			39,248				(56,831	)			(55,486	)
Balance, end of period			(175,721	)			(114,269	)			(175,721	)			(114,269	)
Total stockholders' equity		$	471,855			$	506,548			$	471,855			$	506,548

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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DANIMER SCIENTIFIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

		Six Months Ended
		June 30,
(in thousands)		2022				2021
Cash flows from operating activities:
Net loss		$	(56,831	)		$	(55,486	)
Adjustments to reconcile net loss to net cash used in operating activities:
(Gain) loss on remeasurement of private warrants			(7,007	)			21,957
Stock-based compensation			27,983				20,696
Depreciation and amortization			8,588				4,311
Inventory reserves			597				-
Deferred income taxes			(531	)			-
Loss on write-off of deferred loan costs			-				1,900
Amortization of debt issuance costs and debt discounts			1,152				207
Gain on forgiveness of debt			-				(1,776	)
Amortization of right-of-use assets and lease liability			(173	)			(806	)
Contract asset reserve			1,216				-
Other			872				66
Changes in operating assets and liabilities, net of effects of acquisition:
Accounts receivable, net			(2,166	)			(3,229	)
Other receivables			2,692				(235	)
Inventories, net			(10,838	)			(4,011	)
Prepaid expenses and other current assets			1,434				(1,520	)
Contract assets			(1,540	)			(1,552	)
Other assets			(5	)			40
Accounts payable			(2,693	)			1,967
Accrued and other long-term liabilities			(2,220	)			(3,537	)
Unearned revenue and contract liabilities			2,077				(1,633	)
Net cash used in operating activities			(37,393	)			(22,641	)
Cash flows from investing activities:
Purchases of property, plant and equipment			(108,850	)			(51,906	)
Acquisition of Novomer, net of cash acquired			(14	)			-
Proceeds from sales of property, plant and equipment			55				340
Net cash used in investing activities			(108,809	)			(51,566	)
Cash flows from financing activities:
Proceeds from exercise of warrants, net of issuance costs			-				138,202
Proceeds from long-term debt			-				169
Cash paid for debt issuance costs			(279	)			(1,684	)
Proceeds from exercise of stock options			197				2,375
Proceeds from employee stock purchase plan			296				92
Principal payments on long-term debt			(88	)			(27,075	)
Cost related to warrants			(55	)			-
Proceeds from issuance of common stock, net of issuance costs			-				(890	)
Net cash provided by financing activities			71				111,189
Net (decrease) increase in cash and cash equivalents and restricted cash			(146,131	)			36,982
Cash and cash equivalents and restricted cash-beginning of period			286,968				379,897
Cash and cash equivalents and restricted cash-end of period		$	140,837			$	416,879
Supplemental cash flow information:
Cash paid for interest, net of interest capitalized		$	481			$	242
Cash paid for operating leases		$	1,771			$	1,589
Supplemental non-cash disclosure:
Inventory consumed in constructing property, plant and equipment		$	2,084			$	-
Changes in accounts payable and accrued liabilities related to purchase of PP&E		$	(11,797	)		$	5,983

The accompanying notes are an integral part of these condensed consolidated financial statements.

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DANIMER SCIENTIFIC, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

Description of Business

Danimer Scientific, Inc., together with its subsidiaries (“Company”, “Danimer”, “we”, “us”, or “our”), is a performance polymer company specializing in bioplastic replacements for traditional petroleum-based plastics. Our common stock is listed on the New York Stock Exchange under the symbol “DNMR”.

The Company (formerly Live Oak Acquisition Corp. (“Live Oak”)), was originally incorporated in the State of Delaware on May 24, 2019 as a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization, or similar business combination with one or more businesses. Live Oak completed its initial public offering in May 2020. On December 29, 2020, Live Oak consummated a business combination (“Business Combination”) pursuant to an Agreement and Plan of Merger, dated as of October 3, 2020 (as amended by Amendment No. 1, dated as of October 8, 2020, and Amendment No. 2, dated as of December 11, 2020 (collectively “Merger Agreement”), by and among Live Oak, Green Merger Corp. (“Merger Sub.”), and Meredian Holdings Group, Inc. (“Legacy Danimer”). Immediately upon consummation of the Business Combination, Merger Sub. merged with and into Legacy Danimer, with Legacy Danimer surviving the merger as a wholly owned subsidiary of Live Oak. In connection with the Business Combination, Live Oak changed its name to Danimer Scientific, Inc.

On August 11, 2021, we closed the acquisition of Novomer, Inc. (integrated into our business as “Danimer Catalytic Technologies”). Our consolidated results include those of Danimer Catalytic Technologies from the acquisition date forward. Refer to Note 2 for further discussion of the acquisition.

Financial Statements

The accompanying condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and consolidate all assets and liabilities of the Company and its wholly owned subsidiaries. GAAP requires us to make certain estimates and assumptions in recording assets, liabilities, sales and expenses as well as in the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All intercompany transactions and balances have been eliminated. Certain reclassifications have been made to previously reported amounts to conform to the current presentation. In preparing these condensed consolidated financial statements, we have considered and, where appropriate, included the effects of the COVID-19 pandemic on our operations. The pandemic continues to provide significant challenges to the U.S. and global economies.

Since we do not have any items of other comprehensive income or loss, there is no difference between net (loss) income and comprehensive (loss) income for the three and six month periods ended June 30, 2022 or 2021, so a separate condensed consolidated statement of comprehensive (loss) income that would otherwise be required is not presented.

Recently Issued Accounting Pronouncements

There have been no new accounting pronouncements not yet effective that we believe will have a significant effect, or potential significant effect, on our condensed consolidated financial statements.

Note 2. Business Combination

Danimer Catalytic Technologies

On August 11, 2021, we acquired all of the outstanding shares of Novomer, Inc., a privately held company, in exchange for $153.9 million in cash, gross of cash acquired, subject to certain customary adjustments as set forth in the merger agreement. We also entered into employment or consulting agreements with, and granted stock options to, certain key employees and consultants of Novomer Inc. We have also recorded contingent purchase price payable that will be payable to the sellers upon our collection of an income tax refund receivable. We have integrated Novomer, Inc. into our business as Danimer Catalytic Technologies.

Danimer Catalytic Technologies uses its proprietary thermal catalytic conversion process to produce a unique type of PHA, referred to under its brand name as Rinnovo, that can be incorporated into some of our products as a complement to our existing PHA polymer at reduced cost.

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The table below sets forth the preliminary fair values of assets acquired and liabilities assumed including the adjustments recorded in the six months ended June 30, 2022:

		December 31,								June 30,
(in thousands)		2021				Adjustments				2022
Cash and restricted cash		$	2,741			$	-			$	2,741
Property, plant and equipment			18,622				-				18,622
Other assets acquired			2,302				-				2,302
Right-of-use asset			2,715				-				2,715
Acquired technology			84,400				-				84,400
Goodwill			62,649				14				62,663
Deferred tax liability			(14,246	)			-				(14,246	)
Lease liability			(2,759	)			-				(2,759	)
Liabilities assumed			(2,004	)			(14	)			(2,018	)
Contingent purchase price payable			(500	)			-				(500	)
Total preliminary purchase price		$	153,920			$	-			$	153,920

We have recognized the assets acquired and liabilities assumed at their estimated acquisition date fair values, with the excess of the purchase price over the estimated fair values of the identifiable net assets acquired recorded as goodwill.

The accounting for the business combination is based on currently available information and is considered preliminary. The final accounting for the business combination may differ materially from that presented above as future events may provide additional information about the realizability of other assets or the existence of other liabilities at the acquisition date. In addition, income tax returns for 2021 have yet to be filed, and we are validating certain state income tax allocations, which could result in changes to acquisition-date deferred tax liability.

The preliminary estimated goodwill is attributable to the strategic opportunities and synergies that we expect to arise from the acquisition and the value of its existing workforce. The goodwill is not deductible for federal income tax purposes.

The following table compares pro forma revenue and loss from operations for the combined entity for the three and six months ended June 30, 2021 as if the acquisition had taken place on January 1, 2021 to actual results for the three and six months ended June 30, 2022. These pro forma results do not necessarily reflect what the combined entity's results would have been had the acquisition taken place at that time, and this pro forma financial information may not be useful in predicting our future financial results. The actual results might have differed significantly from the pro forma amounts reflected herein due to a variety of factors. The following includes pro forma adjustments to reflect amortization of acquired technology intangible assets. We do not disclose pro forma impact related to income taxes or earnings-per-share as we do not believe those are useful to the reader in our situation.

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2022				2021				2022				2021
Revenue		$	12,703			$	14,492			$	27,446			$	27,687
Loss from operations			(32,120	)			(23,921	)			(62,809	)			(40,193	)

During the three and six months ended June 30, 2022, Danimer Catalytic Technologies incurred $2.9 and $5.8 million in expenses, respectively, including amortization expense.

Note 3. Fair Value Considerations

Fair value is defined as the price we would receive to sell an asset, or pay to transfer a liability, in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. GAAP provides a three-tier hierarchy for measuring fair value based on the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

The three levels of the fair value hierarchy are as follows:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities;

Level 2 - Observable inputs other than quoted prices in active markets, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

Level 3 - Unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

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Level 1

The carrying amounts of our cash and cash equivalents and restricted cash were measured using quoted market prices in active markets and represent Level 1 investments. Our other financial instruments such as accounts receivable, accounts payable and accrued expenses, approximate their fair values due to their short maturities. The fair value of our Notes (see Note 11), based on trades made around June 30, 2022, was approximately $186.1 million.

We value our restricted stock that does not include market or performance factors at the closing price of a share of our common stock on the grant date.

We value our restricted stock with performance factors at the closing price of a share of our common stock on each period end date, or $4.56 at June 30, 2022, since such grants include a cash settlement feature.

Level 2

We value our restricted stock that contain a market-based vesting provision using a Monte Carlo simulation, which takes into account a large number of potential stock price scenarios over time and incorporates varied assumptions about volatility and exercise behavior for those various scenarios. These assumptions are based on market data but cannot be directly observed. A fair value is determined for each potential outcome. There were no restricted stock units that contained a market-based vesting condition issued during the three and six months ended June 30, 2022.

Level 3

We use the Black-Scholes option pricing model to value stock options, including ESPP awards, and our outstanding warrants to purchase shares of our common stock at an exercise price of $11.50 per share, subject to adjustments, that had been privately placed prior to the Business Combination (“Private Warrants”). The Private Warrants and stock options with a cash-settlement feature are re-valued each period end, and all other stock options are valued on the date of grant only. Other than this mark to market factor, we recognize this expense on a straight-line basis over the respective vesting periods. Since our stock price history as a publicly traded company is shorter in duration than the expected lives of our options (other than ESPP awards), we use a peer group to assess volatility. We have not paid and do not currently anticipate paying a cash dividend on our common stock, so we have set the expected annual dividend yield to zero for all calculations. We used risk-free rates equal to the U.S. Treasury yield curves in effect as of the valuation dates for durations equal to the expected lives of each option. We use the simplified method under Staff Accounting Bulletin Topic 14, defined as the mid-point between the vesting period and the contractual term for each grant, to determine the expected lives of stock options and we use the remaining contractual life of the warrants as their expected life.

The following table sets forth the fair values we calculated and the ranges of values used in our Black Scholes calculations for stock options, other than ESPP awards.

		June 30,		Three Months Ended June 30,
		2022		2022		2021
Share prices of our common stock		$4.56		$4.04 - $4.56		$15.89 - $38.33
Expected volatilities		47.05%		45.72% - 47.39%		41.50% - 41.50%
Risk-free rates of return		2.97%		2.81% - 2.98%		1.05% - 1.05%
Expected option terms (years)		5.28		5.06 - 6.00		6.00 - 6.00
Calculated option values		$1.05		$0.33 - $2.32		$18.52 - $18.52

The table below sets forth the inputs we used in our Black Scholes models for Private Warrants valuations and the fair values determined.

		June 30, 2022				December 31, 2021
Share price of our common stock		$	4.56			$	8.52
Expected volatility			50.9	%			47.6	%
Risk-free rate of return			2.95	%			1.11	%
Expected warrant term (years)			3.50				3.99
Fair value determined per warrant		$	0.66			$	2.45

 

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Note 4. Inventories, net

Inventories, net consisted of the following:

		June 30,				December 31,
(in thousands)		2022				2021
Raw materials		$	18,535			$	11,555
Work in process			981				928
Finished goods and related items			13,213				12,090
Total inventories, net		$	32,729			$	24,573

At June 30, 2022 and December 31, 2021, finished goods and related items included $5.9 million and $5.6 million of finished neat PHA. Inventory at June 30, 2022 is stated net of reserves of $0.6 million related to interim assessments to reduce the carrying value of inventory to the lower of cost or net realizable value.

Note 5. Property, Plant and Equipment, net

Property, plant and equipment, net, consisted of the following:

				June 30,				December 31,
(in thousands)		Estimated Useful Life (Years)		2022				2021
Land and improvements		20		$	92			$	92
Leasehold improvements		Shorter of useful life or lease term			28,036				27,845
Buildings		15-40			2,156				2,156
Machinery and equipment		5-20			100,977				97,923
Motor vehicles		7-10			921				912
Furniture and fixtures		7-10			443				420
Office equipment		3-10			3,509				3,368
Construction in progress		N/A			308,148				212,647
					444,282				345,363
Accumulated depreciation and amortization					(35,397	)			(29,182	)
Property, plant and equipment, net				$	408,885			$	316,181

We reported depreciation and amortization expense (which included amortization of intangible assets) as follows:

		Three Months Ended June 30,								Six Months Ended June 30,
(in thousands)		2022				2021				2022				2021
Cost of revenue		$	2,289			$	1,951			$	4,517			$	3,790
Selling, general and administrative			163				177				323				273
Research and development			1,876				83				3,748				248
Total depreciation and amortization expense		$	4,328			$	2,211			$	8,588			$	4,311

Construction in progress consists primarily of the early stages of construction of our Greenfield facility in Bainbridge, Georgia and the build-out of our facility in Winchester, Kentucky, as noted in the table below.

		June 30,  2022				December 31,  2021
Georgia		$	155,329			$	83,660
Kentucky			150,016				128,289
New York			2,803				698
		$	308,148			$	212,647

We anticipate placing the Phase II expansion of our facility in Winchester, Kentucky in service during the quarter ending September 30, 2022. We do not have an expected in-service date for our Greenfield facility in Bainbridge, Georgia at this time, since that project is still in an early stage of completion.

Property, plant and equipment includes gross capitalized interest of $9.3 million and $5.7 million as of June 30, 2022 and December 31, 2021, respectively. For the three months ended June 30, 2022 and 2021, interest costs of $2.0 million and $0.05 million, respectively, were capitalized to property, plant and equipment. For the six months ended June 30, 2022 and 2021, interest costs of $3.6 million and $0.3 million, respectively, were capitalized to property, plant and equipment.

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Note 6. Intangible Assets and Goodwill

Intangible Assets

Our recognized intangible assets consist of patents and the unpatented technological know-how of Danimer Catalytic Technologies. Our legacy patents were initially recorded at cost. The values of Danimer Catalytic Technologies' patents and unpatented know-how are inseparable and represent their acquisition-date fair value, less subsequent amortization.

We capitalize the costs of patent acquisition as well as the costs of the defense of patents when we believe a successful defense of that patent is probable and that a successful defense increases the value of the patent. Patent costs are amortized on a straight-line basis over their estimated useful lives, which range from 13 to 20 years. Our intangible portfolio has an estimated weighted average useful life of 19 years.

Intangible assets, net, consisted of the following:

		June 30,				December 31,
(in thousands)		2022