0001779020 Q12021false--12-310001779020us-gaap:MeasurementInputRiskFreeInterestRateMember2020-12-310001779020dnmr:VehicleAndEquipmentNotesMember2021-03-310001779020dnmr:NMTCNotesMember2021-03-310001779020us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-03-310001779020us-gaap:VehiclesMembersrt:MaximumMember2021-01-012021-03-310001779020us-gaap:RetainedEarningsMember2021-01-012021-03-3100017790202020-12-310001779020us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-03-3100017790202020-01-012020-12-310001779020srt:MinimumMemberus-gaap:MeasurementInputExpectedTermMember2021-03-3100017790202020-03-3100017790202020-01-012020-03-310001779020srt:MaximumMemberus-gaap:BuildingMember2021-01-012021-03-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMembersrt:MinimumMember2021-03-180001779020dnmr:ThirdAnniversaryMember2021-03-310001779020us-gaap:RestrictedStockMember2020-01-012020-03-310001779020dnmr:PaycheckProtectionProgramLoanMember2020-04-300001779020dnmr:WarrantToPurchaseMember2021-01-012021-03-310001779020us-gaap:MeasurementInputExpectedDividendRateMember2020-12-310001779020us-gaap:AdditionalPaidInCapitalMember2020-12-310001779020us-gaap:OfficeEquipmentMember2021-03-310001779020us-gaap:ServiceMember2020-01-012020-03-310001779020us-gaap:ProductMember2021-01-012021-03-3100017790202020-07-012020-09-300001779020dnmr:CapitalExpenditureLineMemberus-gaap:SubsequentEventMemberdnmr:TruistBankMember2021-04-290001779020dnmr:TwoThousandTwentyEmployeeStockPurchasePlanMember2021-03-310001779020dnmr:PaycheckProtectionProgramLoanMember2021-03-310001779020srt:MinimumMemberus-gaap:MeasurementInputExercisePriceMember2021-03-3100017790202020-10-012020-12-310001779020dnmr:MortgageNotesMember2021-03-310001779020us-gaap:AdditionalPaidInCapitalMember2020-03-310001779020dnmr:SecondAnniversaryMember2021-03-310001779020dnmr:LegacyDanimerOptionsMember2021-01-012021-03-310001779020dnmr:MortgageNotesMember2020-12-310001779020dnmr:PublicWarrantsMember2021-03-310001779020us-gaap:VehiclesMembersrt:MinimumMember2021-01-012021-03-310001779020us-gaap:CostOfSalesMember2020-01-012020-03-310001779020dnmr:PrivateWarrantsMember2021-01-012021-03-310001779020dnmr:FirstAnniversaryMember2021-03-310001779020us-gaap:MeasurementInputRiskFreeInterestRateMember2021-03-3100017790202021-01-012021-03-310001779020dnmr:TwentyNineteenTermLoanMember2019-03-212019-03-310001779020us-gaap:CommonStockMember2020-12-310001779020us-gaap:RetainedEarningsMember2020-01-012020-03-310001779020srt:MaximumMemberus-gaap:MachineryAndEquipmentMember2021-01-012021-03-310001779020us-gaap:CommonClassAMember2021-01-012021-03-310001779020us-gaap:RetainedEarningsMember2020-12-310001779020dnmr:PaycheckProtectionProgramLoanMemberus-gaap:SubsequentEventMember2021-04-122021-04-120001779020us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001779020us-gaap:SellingGeneralAndAdministrativeExpensesMember2021-01-012021-03-310001779020us-gaap:MeasurementInputExpectedTermMember2021-03-310001779020us-gaap:CommonStockMember2021-01-012021-03-310001779020us-gaap:SellingGeneralAndAdministrativeExpensesMember2020-01-012020-03-310001779020dnmr:NMTCNotesMember2020-12-310001779020srt:MaximumMemberus-gaap:MeasurementInputExercisePriceMember2021-03-310001779020us-gaap:MeasurementInputPriceVolatilityMember2021-03-310001779020srt:MaximumMemberus-gaap:FurnitureAndFixturesMember2021-01-012021-03-3100017790202019-12-310001779020us-gaap:EmployeeStockOptionMember2021-01-012021-03-310001779020dnmr:PaycheckProtectionProgramLoanMember2020-12-310001779020us-gaap:ProductMember2020-01-012020-03-310001779020us-gaap:LondonInterbankOfferedRateLIBORMembersrt:MaximumMemberdnmr:TwentyNineteenTermLoanMember2020-07-012020-07-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMember2019-03-012019-03-310001779020us-gaap:MeasurementInputSharePriceMembersrt:MinimumMember2021-03-310001779020dnmr:TwentyNineteenTermLoanMember2020-12-310001779020dnmr:TwentyNineteenTermLoanMember2019-03-310001779020us-gaap:BuildingMember2021-03-310001779020dnmr:TwentyNineteenTermLoanMember2021-01-290001779020us-gaap:VehiclesMember2020-12-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMember2019-03-3100017790202021-03-100001779020us-gaap:ConstructionInProgressMember2020-12-310001779020us-gaap:FurnitureAndFixturesMember2020-12-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMemberus-gaap:PrimeRateMember2019-03-012019-03-310001779020us-gaap:MachineryAndEquipmentMember2021-03-310001779020srt:MaximumMemberus-gaap:PatentsMember2021-01-012021-03-310001779020us-gaap:FurnitureAndFixturesMember2021-03-310001779020dnmr:PrivateWarrantsMember2020-01-012020-03-310001779020us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:PatentsMember2020-01-012020-03-310001779020dnmr:PublicWarrantsMember2020-01-012020-03-310001779020us-gaap:MeasurementInputSharePriceMember2020-12-310001779020us-gaap:LeaseholdImprovementsMember2020-12-310001779020us-gaap:CommonStockMember2020-01-012020-03-310001779020us-gaap:LondonInterbankOfferedRateLIBORMemberdnmr:TwentyNineteenTermLoanMembersrt:MinimumMember2020-07-012020-07-310001779020dnmr:PublicWarrantsMember2021-01-012021-03-310001779020us-gaap:EmployeeStockOptionMember2020-01-012020-03-310001779020srt:MaximumMemberus-gaap:OfficeEquipmentMember2021-01-012021-03-310001779020us-gaap:MeasurementInputSharePriceMember2021-03-310001779020us-gaap:MeasurementInputExercisePriceMember2020-12-310001779020us-gaap:ServiceMember2021-01-012021-03-310001779020us-gaap:MeasurementInputSharePriceMembersrt:MaximumMember2021-03-310001779020us-gaap:RestrictedStockMember2021-01-012021-03-310001779020us-gaap:RetainedEarningsMember2020-03-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMember2021-03-310001779020us-gaap:CommonStockMember2020-03-310001779020dnmr:LegacyDanimerOptionsMember2020-01-012020-03-310001779020us-gaap:MachineryAndEquipmentMember2020-12-310001779020us-gaap:ResearchAndDevelopmentExpenseMemberus-gaap:PatentsMember2021-01-012021-03-310001779020us-gaap:OfficeEquipmentMember2020-12-310001779020us-gaap:PatentsMember2021-03-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMember2020-01-012020-12-310001779020srt:MinimumMemberus-gaap:BuildingMember2021-01-012021-03-310001779020us-gaap:MeasurementInputExpectedTermMember2020-12-310001779020dnmr:TermLoanTwoMemberdnmr:TwoThousandNineteenSubordinatedTermLoanMember2019-03-310001779020us-gaap:CommonStockMember2021-03-310001779020dnmr:TermLoanOneMemberdnmr:TwoThousandNineteenSubordinatedTermLoanMember2019-03-3100017790202021-05-120001779020us-gaap:LeaseholdImprovementsMember2021-01-012021-03-310001779020us-gaap:RetainedEarningsMember2021-03-310001779020dnmr:LegacyDanimerWarrantsMember2021-01-012021-03-310001779020us-gaap:AdditionalPaidInCapitalMember2021-03-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMember2021-01-012021-03-3100017790202020-12-290001779020us-gaap:LandAndLandImprovementsMember2021-03-310001779020us-gaap:RetainedEarningsMember2019-12-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMemberus-gaap:PrimeRateMember2021-03-182021-03-180001779020us-gaap:PatentsMember2020-12-310001779020srt:MinimumMemberus-gaap:FurnitureAndFixturesMember2021-01-012021-03-310001779020dnmr:TwoThousandTwentyEmployeeStockPurchasePlanMember2021-01-012021-03-310001779020us-gaap:ConstructionInProgressMember2021-03-3100017790202021-03-310001779020dnmr:PublicWarrantsMember2020-12-310001779020dnmr:TwentyNineteenTermLoanMember2020-07-012020-07-310001779020us-gaap:MeasurementInputExercisePriceMember2021-03-310001779020us-gaap:LeaseholdImprovementsMember2021-03-310001779020us-gaap:VehiclesMember2021-03-310001779020srt:MinimumMemberus-gaap:PatentsMember2021-01-012021-03-310001779020us-gaap:CommonStockMember2019-12-310001779020us-gaap:LandAndLandImprovementsMember2020-12-310001779020us-gaap:AdditionalPaidInCapitalMember2019-12-310001779020srt:MinimumMemberus-gaap:MachineryAndEquipmentMember2021-01-012021-03-310001779020us-gaap:MeasurementInputExpectedDividendRateMember2021-03-310001779020dnmr:LegacyDanimerWarrantsMember2020-01-012020-03-310001779020us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001779020us-gaap:BuildingMember2020-12-310001779020dnmr:AssetBackedLendingArrangementMemberus-gaap:SubsequentEventMemberdnmr:TruistBankMember2021-04-290001779020srt:MinimumMemberus-gaap:OfficeEquipmentMember2021-01-012021-03-310001779020dnmr:TwoThousandNineteenSubordinatedTermLoanMember2020-12-310001779020us-gaap:MeasurementInputPriceVolatilityMember2020-12-310001779020us-gaap:SubsequentEventMemberdnmr:TruistBankMember2021-04-292021-04-290001779020srt:MaximumMemberus-gaap:MeasurementInputExpectedTermMember2021-03-310001779020dnmr:VehicleAndEquipmentNotesMember2020-12-310001779020us-gaap:LandAndLandImprovementsMember2021-01-012021-03-310001779020us-gaap:CostOfSalesMember2021-01-012021-03-31xbrli:pureiso4217:USDxbrli:sharesxbrli:sharesiso4217:USD

 

 

 

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 March 31, 2021

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

Warrants to purchase one share of Common Stock

 

DNMR WS

 

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 May 12, 2021, the registrant had 85,536,515 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholders' Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

21

Item 4.

Controls and Procedures

21

 

 

 

PART II.

OTHER INFORMATION

22

 

 

 

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

23

Item 6.

Exhibits

24

Signatures

25

 

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 (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, the Company’s 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.

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Danimer Scientific, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

 

(in thousands, except share and per share data)

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

312,910

 

 

$

377,581

 

Accounts receivable, net

 

 

10,114

 

 

 

6,605

 

Inventories

 

 

16,846

 

 

 

13,642

 

Prepaid expenses and other current assets

 

 

4,565

 

 

 

3,089

 

Contract assets

 

 

1,397

 

 

 

1,466

 

Total current assets

 

 

345,832

 

 

 

402,383

 

 

 

 

 

 

 

 

Property, plant and equipment, net

 

 

129,577

 

 

 

106,795

 

Patents, net

 

 

1,764

 

 

 

1,801

 

Right-of-use assets

 

 

19,329

 

 

 

19,387

 

Leverage loans receivable

 

 

13,408

 

 

 

13,408

 

Restricted cash

 

 

2,320

 

 

 

2,316

 

Other assets

 

 

73

 

 

 

111

 

Total assets

 

$

512,303

 

 

$

546,201

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

10,797

 

 

$

10,610

 

Accrued liabilities

 

 

7,652

 

 

 

9,220

 

Unearned revenue and contract liabilities

 

 

2,336

 

 

 

2,455

 

Current portion of lease liability

 

 

3,058

 

 

 

3,000

 

Current portion of long-term debt, net

 

 

345

 

 

 

25,201

 

Total current liabilities

 

 

24,188

 

 

 

50,486

 

 

 

 

 

 

 

 

Private warrants liability

 

 

149,635

 

 

 

82,860

 

Long-term lease liability, net

 

 

23,952

 

 

 

24,175

 

Long-term debt, net

 

 

31,316

 

 

 

31,386

 

Other long-term liabilities

 

 

938

 

 

 

1,250

 

Total liabilities

 

 

230,029

 

 

 

190,157

 

 

 

 

 

 

 

 

Commitments and Contingencies (Note 14)

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 shares authorized: 85,339,145 and 84,535,640 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

9

 

 

 

8

 

Additional paid-in-capital

 

 

435,782

 

 

 

414,819

 

Accumulated deficit

 

 

(153,517

)

 

 

(58,783

)

Total stockholders’ equity

 

 

282,274

 

 

 

356,044

 

Total liabilities and stockholders’ equity

 

$

512,303

 

 

$

546,201

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

 

1


 

 

Danimer Scientific, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

 

(in thousands, except share and per share data)

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

Products

 

$

11,024

 

 

$

9,179

 

Services

 

 

2,157

 

 

 

1,419

 

Total revenue

 

 

13,181

 

 

 

10,598

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

Cost of revenue

 

 

11,725

 

 

 

7,429

 

 Selling, general and administrative

 

 

10,120

 

 

 

2,980

 

 Research and development

 

 

2,619

 

 

 

1,247

 

Total costs and expenses

 

 

24,464

 

 

 

11,656

 

Loss from operations

 

 

(11,283

)

 

 

(1,058

)

 

 

 

 

 

 

 

Nonoperating income (expense):

 

 

 

 

 

 

Loss on remeasurement of private warrants

 

 

(80,697

)

 

 

-

 

Interest expense, net

 

 

(200

)

 

 

(713

)

Loss on debt extinguishment

 

 

(2,604

)

 

 

-

 

Other income, net

 

 

50

 

 

 

90

 

Total nonoperating expenses

 

 

(83,451

)

 

 

(623

)

Loss before income taxes

 

 

(94,734

)

 

 

(1,681

)

Income tax expense

 

 

-

 

 

 

-

 

Net loss

 

$

(94,734

)

 

$

(1,681

)

 

 

 

 

 

 

 

Net loss per share:

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(1.12

)

 

$

(0.06

)

 

 

 

 

 

 

 

Weighted average number of shares used to compute basic and diluted net loss per share (March 31, 2020 balance as retroactively restated for Business Combination):

 

 

84,708,137

 

 

 

27,761,717

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

2


 

Danimer Scientific, Inc.

Condensed Consolidated Statements of Stockholders' Equity (Unaudited)

 

 

 

Three Months Ended

 

(in thousands, except share data)

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

Shares

 

 

Amount

 

 

Shares (1)

 

 

Amount

 

Common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

84,535,640

 

 

$

8

 

 

 

25,371,186

 

 

$

3

 

Issuance of common stock

 

 

803,505

 

 

 

1

 

 

 

3,634,123

 

 

 

-

 

Balance, end of period

 

 

85,339,145

 

 

 

9

 

 

 

29,005,309

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

 

 

 

414,819

 

 

 

 

 

 

66,503

 

Fair value of Private Warrants converted to Public Warrants

 

 

 

 

 

13,922

 

 

 

 

 

 

-

 

Stock-based compensation

 

 

 

 

 

6,665

 

 

 

 

 

 

147

 

Stock issued under stock compensation plan

 

 

 

 

 

1,191

 

 

 

 

 

 

-

 

Share proceeds receivable

 

 

 

 

 

-

 

 

 

 

 

 

91

 

Debt discount beneficial conversion feature

 

 

 

 

 

-

 

 

 

 

 

 

93

 

Stock issued, net of capital issuance costs

 

 

 

 

 

(815

)

 

 

 

 

 

24,916

 

Balance, end of period

 

 

 

 

 

435,782

 

 

 

 

 

 

91,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

 

 

 

 

(58,783

)

 

 

 

 

 

(49,930

)

Net loss

 

 

 

 

 

(94,734

)

 

 

 

 

 

(1,681

)

Balance, end of period

 

 

 

 

 

(153,517

)

 

 

 

 

 

(51,611

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity

 

 

 

 

$

282,274

 

 

 

 

 

$

40,142

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Retroactively restated for Business Combination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

3


 

Danimer Scientific, Inc.

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(94,734

)

 

$

(1,681

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Loss on remeasurement of private warrants

 

 

80,697

 

 

 

-

 

Stock-based compensation

 

 

6,665

 

 

 

147

 

Depreciation and amortization

 

 

2,100

 

 

 

870

 

Loss on writeoff of deferred loan costs

 

 

1,900

 

 

 

-

 

Amortization of debt issuance costs and debt discounts

 

 

82

 

 

 

233

 

Amortization of right-of-use assets and lease liability

 

 

41

 

 

 

128

 

Other

 

 

38

 

 

 

90

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(3,509

)

 

 

(1,736

)

Inventories

 

 

(3,204

)

 

 

(3,133

)

Prepaid expenses and other current assets

 

 

(1,498

)

 

 

(42

)

Other assets

 

 

125

 

 

 

(191

)

Accounts payable

 

 

(669

)

 

 

268

 

Accrued and other long-term liabilities

 

 

(2,123

)

 

 

(156

)

Unearned revenue and contract liabilities

 

 

(119

)

 

 

(412

)

Net cash used in operating activities

 

 

(14,208

)

 

 

(5,615

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(23,893

)

 

 

(15,340

)

Net cash used in investing activities

 

 

(23,893

)

 

 

(15,340

)

Cash flows from financing activities:

 

 

 

 

 

 

Principal payments on long-term debt

 

 

(27,037

)

 

 

(404

)

Proceeds from exercise of stock options

 

 

1,191

 

 

 

-

 

Proceeds from long-term debt

 

 

120

 

 

 

2,435

 

Payments for debt issuance costs

 

 

(25

)

 

 

(27

)

Proceeds from NMTC financing

 

 

-

 

 

 

91

 

Proceeds from issuance of common stock, net of issuance costs

 

 

(815

)

 

 

24,916

 

Net cash (used in) provided by financing activities

 

 

(26,566

)

 

 

27,011

 

Net (decrease) increase in cash and cash equivalents and restricted cash

 

 

(64,667

)

 

 

6,056

 

Cash and cash equivalents and restricted cash-beginning of period

 

 

379,897

 

 

 

6,261

 

Cash and cash equivalents and restricted cash-end of period

 

$

315,230

 

 

$

12,317

 

 

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

 

4


 

Danimer Scientific, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Basis of Presentation

Description of Business

Danimer Scientific, Inc. (“Danimer”) together with its subsidiaries (collectively referred to as the “Company”) is a performance polymer company specializing in bioplastic replacements for traditional petroleum-based plastics. The Company’s common stock and public warrants are listed on the New York Stock Exchange under the symbols “DNMR” and “DNMR WS”, respectively.

We have prepared our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and the rules and regulations of the United States Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying Condensed Consolidated Financial Statements reflect all adjustments, which are of a normal recurring nature, necessary to present fairly our financial position, results of operations, stockholders’ equity, and cash flows at the dates and for the periods presented. These Condensed Consolidated Financial Statements should be read in conjunction with our audited Consolidated Financial Statements and the notes thereto included in our Amended Annual Report on Form 10-K/A for the year ended December 31, 2020.  Results for interim periods are not necessarily indicative of the results for the year.  

We cannot predict the ongoing impact of the COVID-19 pandemic on the increased volatility in global economic and political environments, uncertain market demand for its products, supply chain disruptions, possible workforce unavailability, exchange rate and commodity price volatility and availability of financing, and their impact to our total revenue, production volumes, costs and overall financial condition and available funding. In preparing these Condensed Consolidated Financial Statements in conformity with U.S. GAAP, we have considered and, where appropriate, reflected the effects of the COVID-19 pandemic on our operations. The pandemic continues to provide significant challenges to the U.S. and global economies.

Recently Issued or Adopted Accounting Pronouncements

There have been no new accounting pronouncements not yet effective or adopted in the current year that we believe have a significant impact, or potential significant impact, to our Condensed Consolidated Financial Statements. 

Note 2. Business Combination

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”) with Meredian Holdings Group, Inc. (“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 December 29, 2020, we consummated a business combination with Legacy Danimer pursuant to the Merger Agreement. Pursuant to ASC 805, for financial accounting and reporting purposes, Legacy Danimer was deemed the accounting acquirer, we were treated as the accounting acquiree, and the Business Combination was accounted for as a reverse recapitalization. Effectively, the Business Combination was treated as the equivalent of Legacy Danimer issuing stock for the net assets of Live Oak, accompanied by a recapitalization. Under this method of accounting, the historical financial statements of Legacy Danimer are our historical financial statements. The net assets of Live Oak are stated at historical costs, with no goodwill or other intangible assets recorded in accordance with U.S. GAAP and are consolidated with Legacy Danimer’s financial statements on the Closing Date.

Note 3. Inventories

Inventories consisted of the following: 

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

Raw materials

 

$

7,956

 

 

$

6,825

 

Work in progress

 

 

56

 

 

 

133

 

Finished goods and related items

 

 

8,834

 

 

 

6,684

 

Total inventories

 

$

16,846

 

 

$

13,642

 

 

 

5


 

Note 4. Property, Plant and Equipment

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

 

 

Estimated

 

 

 

 

 

 

 

 

Useful Life

 

March 31,

 

 

December 31,

 

(in thousands)

 

(Years)

 

2021

 

 

2020

 

Land and improvements

 

20

 

$

92

 

 

$

92

 

Leasehold improvements

 

Shorter of useful
life or lease term

 

 

20,932

 

 

 

20,932

 

Buildings

 

15-40

 

 

2,089

 

 

 

2,089

 

Machinery and equipment

 

5-20

 

 

66,881

 

 

 

64,164

 

Motor vehicles

 

7-10

 

 

825

 

 

 

693

 

Furniture and fixtures

 

7-10

 

 

226

 

 

 

221

 

Office equipment

 

3-10

 

 

2,100

 

 

 

2,089

 

Construction in progress

 

N/A

 

 

58,037

 

 

 

36,146

 

 

 

 

 

 

151,182

 

 

 

126,426

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and amortization

 

 

 

 

(21,605

)

 

 

(19,631

)

Property, plant and equipment, net

 

 

 

$

129,577

 

 

$

106,795

 

 

We reported depreciation and amortization expense (which includes amortization of patents) within the Condensed Consolidated Statements of Operations as follows:

 

 

Three Months Ended March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cost of revenue

 

$

1,839

 

 

$

683

 

Selling, general and administrative

 

 

96

 

 

 

29

 

Research and development

 

 

165

 

 

 

158

 

Total depreciation and amortization expense

 

$

2,100

 

 

$

870

 

 

Construction in progress consists primarily of the conversion and build-out of our new facility in Winchester, Kentucky. Property, plant and equipment includes capitalized interest of $5.3 million and $5.1 million as of March 31, 2021 and December 31, 2020, respectively. For the three months ended March 31, 2021 and 2020, interest costs of $0.2 million and $0.8 million, respectively, were capitalized to property, plant and equipment. At March 31, 2021 and December 31, 2020, prepaid expenses and other current assets included $0.8 million of equipment that we have classified as held for sale. This equipment was sold in April 2021 for its carrying value.

Note 5. Patents

The majority of the patents were purchased from another commercial corporation, but we also capitalize patent defense and application costs. Patent costs are amortized on a straight-line basis over the estimated remaining useful lives at acquisition of the applicable patents which range from 13 to 16 years. At March 31, 2021 and December 31, 2020, the gross carrying value of patents subject to amortization was approximately $7.8 million and $7.8 million, respectively. Accumulated amortization was approximately $6.6 million and $6.5 million at March 31, 2021 and December 31, 2020, respectively. Amortization expense was $0.1 million for each of the quarters ended March 31, 2021 and 2020 and is included in research and development costs in the Condensed Consolidated Statements of Operations. At March 31, 2021 and December 31, 2020, capitalized patent acquisition and defense costs not yet subject to amortization were $0.6 million and $0.5 million, respectively.

 

 

6


 

Note 6. Accrued Liabilities

The components of accrued liabilities were as follows:

 

 

March 31,

 

 

December 31,

 

(in thousands)

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Compensation and related expenses

 

$

4,303

 

 

$

5,395

 

Legal settlement

 

 

1,250

 

 

 

1,250

 

Transaction costs and other legal fees

 

 

755

 

 

 

1,293

 

Construction in progress expenditures

 

 

551

 

 

 

531

 

Other

 

 

793

 

 

 

751

 

Total accrued liabilities

 

$

7,652

 

 

$

9,220

 

 

Note 7. Income Taxes

Our effective income tax rate was zero for the periods ended March 31, 2021 and March 31, 2020 because we reported net losses in each period and we continued to provide a full valuation allowance against our net deferred tax assets. In assessing the realizability of deferred income tax assets, we consider whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods at which time those temporary differences become deductible. In making valuation allowance determinations, we consider all available evidence, positive and negative, affecting specific deferred tax assets, including the scheduled reversal of deferred income tax liabilities, projected future taxable income, the length of carry-back and carry-forward periods, and tax planning strategies in making this assessment.

Note 8. Operating Leases

We reported operating lease costs within the Condensed Consolidated Statements of Operations as follows:

 

 

Three Months Ended March 31,

 

(in thousands)

 

2021

 

 

2020

 

Cost of revenue

 

$

530

 

 

$

216

 

Selling, general and administrative

 

 

51

 

 

 

455

 

Research and development

 

 

144

 

 

 

115

 

Total operating lease cost

 

$

725

 

 

$

786

 

 

Note 9. Private Warrants

At March 31, 2021 and December 31, 2020, there were 5,481,153 and 6,000,000 outstanding warrants, respectively 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 warrants are exercisable at any time after May 7, 2021, and we do not have any right to compel the exercise or redemption of the Private Warrants. If the Private Warrants are transferred, assigned, or sold to anyone other than the Sponsor or its permitted transferee, they become Public Warrants (as defined in Note 11). On December 28, 2025, any remaining outstanding Private Warrants will expire.

During the quarter ended March 31, 2021, holders of 518,847 Private Warrants sold them, and those Private Warrants became Public Warrants. We valued these Private Warrants on each sale date using the Black Scholes model and reclassified the fair value of each Private Warrant to additional paid in capital.

These warrants meet the definition of a derivative instrument and are reported as liabilities in the Condensed Consolidated Balance Sheet at March 31, 2021 and December 31, 2020, with changes in the fair value of the Private Warrants recorded in earnings. The Private Warrants are Level 3 financial instruments. A rollforward of the private warrants liability is below.

(in thousands)

 

 

 

 

 

Balance at December 31, 2020

 

 

 

$

(82,860

)

Loss on remeasurement of private warrants

 

 

 

 

(80,697

)

Fair value of Private Warrants sold

 

 

 

 

13,922

 

Balance at March 31, 2021

 

 

 

$

(149,635

)

 

The table below sets forth the inputs to our Black-Scholes models and the fair values of the Private Warrants we calculated.

 

7


 

 

 

As Of

 

 

Three months ended

 

 

As Of

 

 

 

March 31, 2021

 

 

March 31, 2021

 

 

December 31, 2020

 

Share price of our common stock

 

$

37.75

 

 

$

34.15

 

-

$

44.26

 

 

$

23.51

 

Expected annual dividend yield (1)

 

 

0

%

 

 

 

 

 

0

%

 

 

0

%

Expected volatility (2)

 

 

40

%

 

 

 

 

 

40

%

 

 

40.0

%

Risk-free rate of return (3)

 

 

0.85

%

 

 

 

 

 

0.85

%

 

 

0.36

%

Expected warrant term (years) (4)

 

 

4.74

 

 

 

4.74

 

-

 

4.77

 

 

 

4.99

 

Fair value determined per warrant

 

$

27.30

 

 

$

23.83

 

 -

$

33.65

 

 

$

13.81

 

 

(1)

We have not paid and do not currently anticipate paying a cash dividend on our common stock.

(2)

We estimated expected volatilities using stock data for select peer public companies over a timeframe similar to the expected term. We selected peer companies using our judgement and as such, expected volatility is a Level 3 input.

(3)

We estimated risk-free rates based on the expected terms using the U.S. Treasury yield curve in effect as of the valuation dates.

(4)

 The expected option terms are equal to the remaining contractual life of the Private Warrants at each measurement date.

 

Note 10. Debt

The components of long-term debt were as follows:

(in thousands)

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

2019 Term loan

 

$

 

 

$

27,000

 

Subordinated term loan

 

 

10,205

 

 

 

10,171

 

NMTC notes

 

 

21,000

 

 

 

21,000

 

Paycheck Protection Program loan

 

 

1,776

 

 

 

1,776

 

Vehicle and equipment notes

 

 

418

 

 

 

329

 

Mortgage notes

 

 

260

 

 

 

266

 

Total

 

$

33,659

 

 

$

60,542

 

Less: Total unamortized debt issuance costs

 

 

(1,998

)

 

 

(3,955

)

Less: Current cash maturities of $27,140, net of current portion of debt issuance costs at December 31, 2020

 

 

(345

)

 

 

(25,201

)

Total long-term debt

 

$

31,316

 

 

$

31,386

 

  

2019 Term Loan

In March 2019, we entered into a credit agreement (“2019 Term Loan”) for a $30 million term loan maturing on October 13, 2023. Principal payments were due in quarterly payments of $375,000 beginning April 1, 2019 with the outstanding principal balance due at maturity. The 2019 Term Loan was secured by all real and personal property of Danimer Scientific Holdings, LLC (“DSH”) and its subsidiaries. The 2019 Term Loan provided for financial covenants including a maximum capital expenditures limit, leverage ratio and fixed charge coverage ratio, each of which became more restrictive over time.  

In July 2020, we modified the 2019 Term Loan such that the applicable margin in the interest rate formula (formerly calculated as the greater of (a) 2.25% or (b) Three month LIBOR, plus 4.5%) changed from 4.5% to a five-level tiered amount ranging from 4.5% if the consolidated senior leverage ratio, as defined in the Term Loan, was less than 1.5, to as high as 6.35% if the consolidated senior leverage ratio was greater than 2.25.  When the amendment was executed, the applicable margin was 6.35%.

On January 29, 2021, we voluntarily paid off and terminated our 2019 Term Loan. All related liens and security interests in our assets and guarantees were terminated and released. We settled the 2019 Term Loan for $27.7 million including the outstanding principal amount of $27.0 million, a prepayment fee of $0.5 million and $0.2 million in accrued unpaid interest. We recognized a loss of $2.6 million upon extinguishment due to the prepayment and related fees and the write off of unamortized debt issuance costs.

Subordinated Term Loan

In March 2019, we, through a subsidiary (DSH), entered into a subordinated second credit agreement (“Subordinated Term Loan”) for $10 million in term loans consisting of two loans in the amounts of $5.5 million and $4.5 million with essentially the same terms. The term loans mature on February 13, 2024 and require monthly interest only payments, with the outstanding principal balance due at

 

8


 

maturity. The base interest rate is the “Prime Rate” as quoted by the Wall Street Journal (adjusted each calendar quarter; 3.25% and 3.25% at March 31, 2021 and December 31, 2020, respectively) plus 2.75%. We have the option to pay up to two percent (2%) in any interest payable in any fiscal quarter by adding such interest payment to the principal balance of the related note (“PIK Interest”). During the year ended December 31, 2020, we used the PIK Interest option and an additional $0.2 million was included in the principal balance at December 31, 2020. The Subordinated Term Loan provided for financial covenants including a maximum capital expenditures limit, leverage ratio, fixed charge coverage ratio and adjusted EBITDA, certain of which became more restrictive over time.

On March 18, 2021, we amended the Subordinated Term Loan to, among other things, change the base rate from the prime rate to LIBOR, lower the applicable margin to 2% from 2.75%, remove certain prepayment requirements, convert the financial covenants to "springing" covenants that do not apply as long as DSH has at least $10 million of unrestricted cash on deposit, increase the capital expenditure covenant, and restrict our ability to prepay the loan until after July 1, 2022.

The Subordinated Term Loan remains secured by all real and personal property of DSH and its subsidiaries but is subordinated to all other existing lenders. At March 31, 2021, we were in compliance with all financial covenants.

Paycheck Protection Program Loan

In April 2020, we received $1.8 million under the Paycheck Protection Program (the “PPP Loan”). The PPP Loan had a two-year term and bore interest at a rate of 1.0% per annum. Monthly principal and interest payments were deferred for six months after the date of disbursement. The promissory note issued in connection with the PPP Loan contained events of default and other provisions customary for a loan of this type. On December 11, 2020, we submitted an application for forgiveness of the PPP loan.

In connection with the Business Combination, we entered into an Escrow Agreement with the PPP lender and on the Closing Date deposited $1.8 million in escrow representing the principal, accrued interest, and escrow fee to pay the loan in full. We have classified the amounts in escrow as restricted cash in the Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

On April 12, 2021, we received notice that our PPP Loan has been forgiven. We expect that $1.8 million, representing principal and interest earned on the balance in escrow, and net of associated fees, will be released to us from escrow during the quarter ending June 30, 2021.

Asset-based Lending Arrangement

On April 29, 2021, we entered into a credit facility with Truist Bank that includes a $20.0 million variable interest rate asset-based lending arrangement and a $1.0 million capital expenditure line of credit with customary terms and conditions.  These arrangements mature on April 29, 2026.

Note 11. Equity

During the quarter ended March 31, 2021, we completed a Registration Form on Form S-8 and incurred $0.8 million in associated costs, which were charged against additional paid in capital.

Public Warrants

At December 31, 2020, there were 10,000,000 outstanding publicly traded warrants to purchase shares of our common stock that were issued by Live Oak, prior to the Business Combination, with an exercise price of $11.50 per share, subject to adjustments (“Public Warrants”). The Public Warrants are exercisable at any time after May 7, 2021.  Once the Public Warrants become exercisable, we may redeem them at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption, if and only if the last sale price of our common stock equals or exceeds $18.00 per share for any 20-trading days within a 30-trading day period ending three business days before we send the notice of redemption to the warrant holders. The Public Warrants will expire on December 28, 2025 or earlier upon redemption or liquidation. The Public Warrants qualify as equity instruments and we have included them in additional paid-in capital in the Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020.

During the quarter ended March 31, 2021, holders of 518,847 Private Warrants sold them, and those Private Warrants became Public Warrants.

On May 14, 2021, we notified holders of the Public Warrants of our intent to redeem them on June 16, 2021.

Non-Plan Legacy Danimer Options and Warrants

Prior to 2017, Legacy Danimer had issued 208,183 stock options that were not a part of either the 2016 Executive Plan or the 2016 Omnibus Plan. These options had a weighted average exercise price of $30 per share. On December 29, 2020, the then-remaining 30,493 of these options were converted to options to purchase 279,253 shares of our common stock with a weighted average exercise price of $3.28 per share, which remain outstanding at March 31, 2021.

 

9


 

As of December 29, 2020, Legacy Danimer had 55,139 warrants outstanding with an exercise price of $30 per share. In connection with the Business Combination, these options were converted to options to purchase 506,611 shares of our common stock with an exercise price of $3.28 per share, and were exercised during the quarter ended March 31, 2021 on a cashless basis by issuing 435,961 shares.

Anti-dilutive Instruments

The following instruments were excluded from the calculation of diluted shares outstanding because the effect of including them would have been anti-dilutive.

 



Three Months Ended March 31,

 





2021

 



2020

 

Employee stock options

 

 

10,682,969

 

 

 

11,108,755

 

Public Warrants



 

10,518,847

 

 

 

-

 

Private Warrants



 

5,481,153

 

 

 

-

 

Restricted Shares

 

 

3,035,676

 

 

 

-

 

Legacy Danimer options



 

279,253

 

 

 

1,906,540

 

Legacy Danimer warrants



 

-

 

 

 

506,611

 

Total excluded instruments

 

 

29,997,898

 

 

 

13,521,906

 

 

Note 12. Revenue

We recognize revenue from product sales and services in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). We derive our revenues primarily from: 1) product sales of developed compostable resins based on polylactic acid (“PLA”), polyhydroxyalkanoates (“PHA”), and other renewable materials; and 2) research and development (“R&D”) services related to developing customized formulations of biodegradable resins based on PHA.

We generally produce and sell finished products, for which we recognize revenue upon shipment. Due to the highly specialized nature of our products, returns are infrequent, and therefore we do not estimate amounts for sales returns and allowances. There are no forms of variable consideration such as discounts, rebates, or volume discounts that we estimate to reduce our transaction price.

We defer certain contract fulfillment costs. These costs are amortized to cost of revenue on a per-pound basis as we sell the related product. During the quarter ended March 31, 2021, we charged $0.2 million of fulfillment costs to cost of revenue. At March 31, 2021 and December 31, 2020 we had $1.4 million and $1.5 million, respectively, of contract assets recorded related to these fulfillment costs.

R&D service revenues generally involve milestone-based contracts under which we work with a customer to develop a PHA-based specific solution designed to the customer’s specifications, which may involve a single or multiple performance obligations. At the inception of our R&D services contracts, customers generally pay consideration at the commencement of the agreement and at milestones as outlined in the contracts. We recognize contract liabilities for such consideration initially, and then reduce each contract liability by recognizing revenue for our R&D services over time by measuring progress with an input method based on personnel hours incurred to date as a percentage of total estimated personnel hours for each performance obligation identified within each contract. The following table shows the significant changes in the contract liability balance for the quarters ended March 31, 2021 and 2020:

 

 

Three Months Ended March 31,

 

(in thousands)

 

2021

 

 

2020

 

Beginning balance

 

$

2,455

 

 

$

4,580

 

Revenue recognized

 

 

(1,737

)

 

 

(411

)

   Unearned consideration received

 

 

1,618

 

 

 

-

 

Ending balance

 

$

2,336

 

 

$

4,169

 

 

Note 13. Stock-Based Compensation

2020 Equity Incentive Plans

In connection with the Business Combination, on December 29, 2020, our stockholders approved the 2020 Incentive Plan and the 2020 Employee Stock Purchase Plan (the “2020 ESPP Plan”).

The 2020 Incentive Plan provides for the grant of stock options, stock appreciation rights, and full value awards. Full value awards include restricted stock, restricted stock units, deferred stock units, performance stock and performance stock units. Up to 3,093,984 shares of our common stock were authorized to be issued with respect to awards under the 2020 Incentive Plan. This limit is subject to adjustment in the event of a stock split, stock dividend or other changes in our capitalization.

 

10


 

The 2020 ESPP Plan provides for the sale of our common stock to our employees through payroll withholding at a discount of 15% from the lower of the closing price of our common stock on the first or last day of each biannual offering period. Up to 2,571,737 shares of our common stock were authorized to be issued under this plan. The first offering period under the 2020 ESPP Plan commenced on April 1, 2021.

Restricted Shares

On March 10, 2021, we completed a Registration Form on Form S-8 to register the shares under the 2020 Equity Incentive Plan and the 2020 ESPP Plan. On this date, a grant of 3,035,676 shares of restricted stock was effective. The restrictions on half of these shares lapse ratably on the first, second, and third anniversaries of the grant date. The fair value of these shares on the date of grant was $37.09 and we are recognizing the compensation expense for these shares on a straight-line basis from the grant date through December 29, 2023. The restrictions on the other half of these shares lapse as follows:

 

1.

On the first date the volume-weighted average price per share of our common stock equals or exceeds $24.20 for any 20 trading dates within a 30-day trading period beginning on December 29, 2021.

 

 

2.

On the first date the volume-weighted average price per share of our common stock equals or exceeds $24.20 for any 20 trading dates within a 30-day trading period beginning on December 29, 2022.

 

 

3.

On the first date the volume-weighted average price per share of our common stock equals or exceeds $24.20 for any 20 trading dates within a 30-day trading period beginning on December 29, 2023.

 

To reflect the effect of this market condition on the vesting of these restricted shares, we valued them 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. A fair value is determined for each potential outcome. The grant date fair value of these restricted shares is the average of the fair values calculated for each potential outcome, or $36.57. We are recognizing the compensation expense for these shares on a straight-line basis from the grant date through December 29, 2023.

No other grants of restricted shares have been made.

Stock Options

A summary of stock option activity under our equity plans for the quarter ended March 31, 2021 follows: 





Number of Shares

 



Weighted Average Exercise Price

 



Weighted Average Remaining Contractual Term (Years)

 



Aggregate Intrinsic Value

 

Balance, December 31, 2020



 

11,008,533

 



$

13.94

 



 

8.4

 



$

105,341,482

 

Granted



 

37,500

 

 

 

45.41

 



 

 



 

 

Exercised



 

(363,064

)

 

 

3.28

 



 

 



 

15,744,316

 

Balance, March 31, 2021



 

10,682,969

 



$

14.41

 



 

8.0

 



$

249,345,242

 





 

 



 

 



 

 



 

 

March 31, 2021:



 

 



 

 



 

 



 

 

Exercisable



 

4,791,353

 



$

4.67

 



5.9

 



$

180,873,576

 

Vested and expected to vest



 

10,682,969

 



$

14.41

 



 

8.0

 



$

249,345,242

 

 

The aggregate intrinsic values are calculated as the difference between the exercise price of the indicated stock options and the fair value of our common stock on the respective exercise dates or on March 31, 2021, as applicable.

 

11


 

The weighted average grant-date fair values of options granted during the quarter ended March 31, 2021 was $18.52 per option. We have estimated the fair values of our option awards on the date of grant using the Black-Scholes option pricing model with the following assumptions:





Three months ended March 31, 2021

 

Expected annual dividend yield (1)



0.00%

 

Expected volatility (2)



41.50%

 

Risk-free rate (3)



1.05%

 

Expected option term (years) (4)



 

6.00

 

 

(1)