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, a 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.

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 3, 2023,~~May 1, 2024, the registrant had ~~70,207,439~~76,161,210 shares of common stock outstanding.

We own or have rights to use “Aspen Aerogels,” “Cryogel,” “Pyrogel,” “Spaceloft,” “PyroThin,” the Aspen Aerogels logo and other trademarks, service marks and trade names of Aspen Aerogels, Inc. appearing in this Quarterly Report on Form 10-Q. Solely for convenience, the trademarks, service marks and trade names referred to in this report are presented without the ® and TM symbols, but such references are not intended to indicate, in any way, that the owner thereof will not assert, to the fullest extent under applicable law, such owner’s rights to these trademarks, service marks and trade names. This report contains additional trademarks, service marks and trade names of other companies, which, to our knowledge, are the property of their respective owners.


	June 30,			December 31,			March 31,			December 31,
	2023			2022			2024			2023
	(In thousands, except share and per share data)						(In thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	134,298		$	281,335		$	101,461		$	139,723
Restricted cash		320			1,226			157			248
Accounts receivable, net of allowances of $179 and $255		44,167			57,350
Accounts receivable, net of allowances of $217 and $230								84,029			69,995
Inventories		33,289			22,538			45,750			39,189
Prepaid expenses and other current assets		15,962			7,236			23,708			17,176
Total current assets		228,036			369,685			255,105			266,331
Property, plant and equipment, net		368,270			259,223			422,736			417,227
Operating lease right-of-use assets		18,380			11,990			16,824			17,212
Other long-term assets		2,388			2,518			3,324			2,278
Total assets	$	617,074		$	643,416		$	697,989		$	703,048
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	48,063		$	54,728		$	44,713		$	51,094
Accrued expenses		10,672			16,003			12,762			22,811
Deferred revenue		4,634			5,846			3,130			2,316
Finance obligation for sale and leaseback transactions								1,206			—
Operating lease liabilities		2,256			2,368			1,769			1,874
Total current liabilities		65,625			78,945			63,580			78,095
Convertible note - related party		109,189			103,580			118,030			114,992
Finance obligation for sale and leaseback transactions long-term								3,556			—
Operating lease liabilities long-term		22,289			13,456			21,620			21,906
Total liabilities		197,103			195,981			206,786			214,993
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2023 and December 31, 2022		—			—
Common stock, $0.00001 par value; 125,000,000 shares authorized, 70,158,143 and 69,994,963 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		—			—
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2024 and December 31, 2023								—			—
Common stock, $0.00001 par value; 250,000,000 shares authorized, 76,077,929 and 76,503,151 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively								—			—
Additional paid-in capital		1,079,981			1,075,226			1,166,640			1,161,657
Accumulated deficit		(660,010	)		(627,791	)		(675,437	)		(673,602	)
Total stockholders’ equity		419,971			447,435			491,203			488,055
Total liabilities and stockholders’ equity	$	617,074		$	643,416		$	697,989		$	703,048


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
	(In thousands, except share and per share data)						(In thousands, except share and per share data)						(In thousands, except share and per share data)
Revenue	$	48,158		$	45,640		$	93,744		$	84,047		$	94,501		$	45,586
Cost of revenue		39,751			46,851			80,251			87,046			59,358			40,500
Gross profit (loss)		8,407			(1,211	)		13,493			(2,999	)
Gross profit														35,143			5,086
Operating expenses:
Research and development		3,964			4,447			8,063			8,039			4,489			4,099
Sales and marketing		8,127			7,633			15,840			13,651			8,303			7,713
General and administrative		13,360			9,355			25,542			16,581			17,213			12,182
Impairment of equipment under development														2,702			—
Total operating expenses		25,451			21,435			49,445			38,271			32,707			23,994
Loss from operations		(17,044	)		(22,646	)		(35,952	)		(41,270	)
Income (loss) from operations														2,436			(18,908	)
Other income (expense)
Interest expense, convertible note - related party		(211	)		(1,550	)		(486	)		(2,369	)		(3,038	)		(275	)
Interest income (expense), net		1,832			146			4,219			105
Total other income (expense), net		1,621			(1,404	)		3,733			(2,264	)
Interest income (expense)														(477	)		2,387
Total other income (expense)														(3,515	)		2,112
Loss before income tax expense														(1,079	)		(16,796	)
Income tax expense														(756	)		—
Net loss	$	(15,423	)	$	(24,050	)	$	(32,219	)	$	(43,534	)	$	(1,835	)	$	(16,796	)
Net loss per share:
Basic and diluted	$	(0.22	)	$	(0.68	)	$	(0.47	)	$	(1.27	)	$	(0.02	)	$	(0.24	)
Weighted-average common shares outstanding:
Basic and diluted		69,249,281			35,207,975			69,206,249			34,276,083			75,762,893			69,162,739


	Preferred Stock $0.00001 Par Value				Common Stock $0.00001 Par Value				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity			Preferred Stock				Common Stock					Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity
	Shares		Value		Shares		Value											Shares		Value		Shares			Value
Balance at December 31, 2022		—	$	—		69,994,963	$	—	$	1,075,226		$	(627,791	)	$	447,435
Balance at December 31, 2023																			—	$	—		76,503,151		$	—	$	1,161,657		$	(673,602	)	$	488,055
Net loss		—		—		—		—		—			(16,796	)		(16,796	)		—		—		—			—		—			(1,835	)		(1,835	)
Stock compensation expense		—		—		—		—		2,267			—			2,267			—		—		—			—		2,532			—			2,532
Issuance costs from private placement of common stock																			—		—		—			—		(28	)		—			(28	)
Vesting of restricted stock units		—		—		71,643		—		(385	)		—			(385	)		—		—		118,289			—		(1,081	)		—			(1,081	)
Cancellation of restricted stock																			—		—		(679,797	)		—		2,174			—			2,174
Proceeds from employee stock option exercises		—		—		2,554		—		21			—			21			—		—		136,286			—		1,386			—			1,386
Balance at March 31, 2023		—	$	—		70,069,160	$	—	$	1,077,129		$	(644,587	)	$	432,542
Net loss		—		—		—		—		—			(15,423	)		(15,423	)
Stock compensation expense		—		—		—		—		2,710			—			2,710
Issuance of restricted stock		—		—		44,928		—		—			—			—
Vesting of restricted stock units		—		—		2,464		—		(8	)		—			(8	)
Proceeds from employee stock option exercises		—		—		41,591		—		150			—			150
Balance at June 30, 2023		—	$	—		70,158,143	$	—	$	1,079,981		$	(660,010	)	$	419,971
Balance at March 31, 2024																			—	$	—		76,077,929		$	—	$	1,166,640		$	(675,437	)	$	491,203


	Preferred Stock $0.00001 Par Value				Common Stock $0.00001 Par Value				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity			Preferred Stock				Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity
	Shares		Value		Shares		Value											Shares		Value		Shares		Value
Balance at December 31, 2021		—	$	—		33,218,115	$	—	$	673,461		$	(545,053	)	$	128,408
Balance at December 31, 2022																			—	$	—		69,994,963	$	—	$	1,075,226		$	(627,791	)	$	447,435
Net loss		—		—		—		—		—			(19,484	)		(19,484	)		—		—		—		—		—			(16,796	)		(16,796	)
Stock compensation expense		—		—		—		—		1,828			—			1,828			—		—		—		—		2,267			—			2,267
Vesting of restricted stock units		—		—		166,211		—		(2,315	)		—			(2,315	)		—		—		71,643		—		(385	)		—			(385	)
Proceeds from employee stock option exercises		—		—		4,681		—		38			—			38			—		—		2,554		—		21			—			21
Proceeds from at-the-market offering, net of commissions of $729 and issuance costs of $318		—		—		737,288		—		23,272			—			23,272
Proceeds from private placement of common stock, net of fees and issuance costs of $136		—		—		1,791,986		—		49,864			—			49,864
Balance at March 31, 2022		—	$	—		35,918,281	$	—	$	746,148		$	(564,537	)	$	181,611
Net loss		—		—		—		—		—			(24,050	)		(24,050	)
Stock compensation expense		—		—		—		—		2,295			—			2,295
Issuance of restricted stock		—		—		391,324		—		—			—			—
Vesting of restricted stock units		—		—		2,569		—		(24	)		—			(24	)
Proceeds from employee stock option exercises		—		—		21,110		—		136			—			136
Proceeds from at-the-market offering, net of commissions of $149 and issuance costs of $28		—		—		145,000		—		4,786			—			4,786
Balance at June 30, 2022		—	$	—		36,478,284	$	—	$	753,341		$	(588,587	)	$	164,754
Balance at March 31, 2023																			—	$	—		70,069,160	$	—	$	1,077,129		$	(644,587	)	$	432,542


	Six Months Ended						Three Months Ended
	June 30,						March 31,
	2023			2022			2024			2023
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net loss	$	(32,219	)	$	(43,534	)	$	(1,835	)	$	(16,796	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		6,207			4,161			5,786			2,704
Accretion of interest on convertible note - related party		—			2,369			2,810			—
Amortization of convertible note issuance costs		18			13			9			9
Amortization of debt discount due to modification of convertible note – related party		469			—			219			266
Deferred financing costs written off								1,709			—
Provision for bad debt		(72	)		(1	)		—			99
Stock-compensation expense		4,977			4,123			4,706			2,267
Impairment of property, plant and equipment								6,039			—
Reduction in the carrying amount of operating lease right-of-use assets		1,405			1,219			574			632
Changes in operating assets and liabilities:
Accounts receivable		13,255			(9,054	)		(14,034	)		9,971
Inventories		(10,751	)		(5,013	)		(6,561	)		(4,469	)
Prepaid expenses and other assets		(6,512	)		(2,500	)		(9,359	)		(5,097	)
Accounts payable		(1,407	)		15,980			2,148			(5,516	)
Accrued expenses		(5,331	)		154			(10,289	)		(6,240	)
Deferred revenue		(1,212	)		295			814			(1,872	)
Operating lease liabilities		(1,158	)		(1,076	)		(485	)		(609	)
Net cash used in operating activities		(32,331	)		(32,864	)		(17,749	)		(24,651	)
Cash flows from investing activities:
Capital expenditures		(115,390	)		(52,359	)		(25,863	)		(49,378	)
Net cash used in investing activities		(115,390	)		(52,359	)		(25,863	)		(49,378	)
Cash flows from financing activities:
Proceeds from issuance of convertible note related party		—			100,000
Issuance costs from convertible note		—			(185	)
Proceeds from employee stock option exercises		171			174			1,386			21
Proceeds from sale and leaseback transactions								4,982			—
Payments made for employee restricted stock tax withholdings		(393	)		(2,339	)		(1,081	)		(385	)
Proceeds from at-the-market offering, net of commissions of $879		—			28,404
Fees and issuance costs from at-the-market offering		—			(346	)
Proceeds from private placement of common stock		—			50,000
Fees and issuance costs from private placement of common stock		—			(136	)		(28	)		—
Repayment of prepayment liability		—			(4,728	)
Net cash provided by financing activities		(222	)		170,844
Net cash provided by (used in) financing activities								5,259			(364	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(147,943	)		85,621			(38,353	)		(74,393	)
Cash, cash equivalents and restricted cash at beginning of period		282,561			76,564			139,971			282,561
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	134,618		$	162,185
Cash, cash equivalents and restricted cash at end of period							$	101,618		$	208,168
Supplemental disclosures of cash flow information:
Interest paid	$	1		$	95		$	187		$	0
Income taxes paid	$	—		$	—		$	—		$	—
Supplemental disclosures of non-cash activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	9,879		$	5,582		$	94		$	—
Capitalized interest	$	5,122		$	524		$	—		$	2,561
Changes in accrued capital expenditures	$	(5,258	)	$	17,706		$	(8,529	)	$	3,610

(1) Description of Business and Basis of Presentation

Nature of Business

Aspen Aerogels, Inc. (the Company) is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in the energy industrial and sustainable insulation materials markets. In addition, the Company has introduced a line of aerogel thermal barriers for use in battery packs in the electric vehicle market. The Company is also developing applications for its aerogel technology in the battery materials and a number of other high-potential markets.

The Company maintains its corporate offices in Northborough, Massachusetts. The Company has three wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC, Aspen Aerogels Germany, GmbH and Aspen Aerogels Georgia, LLC. Additionally, we engaged Prodensa Servicios de Consultora to establish OPE Manufacturer Mexico S de RL de CV, a maquiladora located in Mexico, (“OPE”) which manufactures thermal barrier PyroThin products and operates an automated fabrication facility for PyroThin. OPE is currently owned by Prodensa, which charges a management fee. There is an option for OPE to be purchased by the Company after a period of 18 months. During the period between inception and the exercise of the purchase option, OPE operations are consolidated within the Company financial statements.

Liquidity

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company incurred a net loss of $~~32.2~~1.8 million, used $~~32.3~~17.7 million of cash in operations and used $~~115.4~~25.9 million of cash for capital expenditures. The Company had unrestricted cash and cash equivalents of $~~134.3~~101.5 million as of ~~June~~March 31, 2024.

In November 2022, the Company entered into a loan agreement (the GM Loan Agreement) with General Motors Holdings LLC (GM), an entity affiliated with General Motors LLC, which provides for a multi-draw senior secured term loan (the GM Loan) in an aggregate principal amount of up to $100.0 million, available to the Company on a delayed draw basis beginning January 1, 2023 to September 30, ~~2023.~~2023, subject to certain conditions precedent to funding. In September 2023, the Company amended the GM Loan Agreement to (i) extend the draw period for the GM Loan to a period beginning on the date that is twelve months prior to the date agreed upon by the Company and GM for the start of production at an aerogel manufacturing facility in Bulloch County, Georgia (the Plant) and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); (ii) extend the maturity date of the GM Loan from March 31, 2025 to September 30, 2025; and (iii) add financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter. As of March 31, 2024, the Company has not drawn, and no longer has the ability to draw on the GM Loan. The associated unamortized deferred financing costs of $1.7 million were written off to interest expense upon the expiration of the draw period.

The Company is increasing investment in the research and development of next-generation aerogel products and manufacturing process technologies. In addition, the Company has developed a number of promising aerogel products and technologies for the electric vehicle market. The Company believes that the commercial potential for the Company’s products and technology in the electric vehicle market is significant. Accordingly, the Company is hiring additional personnel, incurring additional operating expenses, ~~and~~ incurring significant capital expenditures to expand ~~silica~~ aerogel manufacturing capacity ~~build an~~and automated thermal barrier fabrication ~~operation, enhance~~operations, and enhancing research and development ~~laboratory facilities and equipment, and construct a battery materials facility,~~resources, among other ~~efforts.~~items.

The Company expects its existing cash balance will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunity in the electric vehicle market and other strategic business initiatives. However, the Company plans to supplement its cash balance with equity financings, debt financings, equipment leasing, ~~sale-leaseback~~sale and leaseback transactions, customer prepayments, or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities, establish the

operations and complete the aerogel capacity expansions required to support these evolving commercial opportunities and strategic business initiatives.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March ~~16, 2023.~~7, 2024.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of ~~June 30, 2023~~March 31, 2024 and the results of its operations and stockholders’ equity for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ and the cash flows for the ~~six-month~~three-month periods then ended. The Company has evaluated subsequent events through the date of this filing.

The Company’s results of operations for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2023~~2024 or any other period.

(2) Significant Accounting Policies

~~Principles~~Please refer to "Note 2. Summary of ~~Consolidation~~

~~The accompanying condensed~~Basis of Presentation and Significant Accounting Policies," to the Company's consolidated financial statements from the Annual Report for the discussion of the ~~Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity (“VIE”) where the Company is the primary beneficiary. All~~Company's significant ~~intercompany accounts and transactions have been eliminated in consolidation.~~accounting policies.

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE in accordance with ASC 810, Consolidation ("ASC 810") when it is the primary beneficiary of such VIE. As primary beneficiary, the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE and a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

The Company evaluates the initial consolidation of each Consolidated VIE, which includes a determination of whether the VIE constitutes the definition of a business in accordance with ASC 805, Business Combinations ("ASC 805"), by considering if substantially all of the fair value of the gross assets within the VIE are concentrated in either a single identifiable asset or group of single identifiable assets. Upon consolidation, the Company recognizes the assets acquired, the liabilities assumed, and any third-party ownership of membership interests as non-controlling interest as of the consolidation or acquisition date, measured at their relative fair values.

In April 2022, the Company engaged Prodensa Servicios de Consultora to establish OPE Manufacturer Mexico S de RL de CV, a maquiladora located in Mexico with the express purposes of manufacturing thermal barrier PyroThin products and ultimately constructing an automated fabrication facility for PyroThin. OPE is currently owned by Prodensa, which charges a management fee though there is an option for OPE to be purchased by the Company after a period of ~~18 months. During the period between inception and the purchase option, OPE operations are consolidated within the Company financial statements as of and for the six months ended June 30, 2023.~~

Use of Estimates

The preparation of the consolidated financial statements requires the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, sales returns and allowances, product warranty costs, inventory valuation, the carrying amount of property and equipment, right-of-use assets, lease liabilities, stock-based compensation, and deferred income taxes. The Company evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including current economic conditions, which are believed to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances warrant. Illiquid credit markets, volatile equity markets and declines in business investment can increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

~~Cash and Cash Equivalents~~

Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts and high-quality debt securities issued by the U.S. government via cash sweep and investment accounts. All cash and cash equivalents are maintained with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.

~~In light of the failure of Silicon Valley Bank and other regional banks, the Company continues to establish commercial banking relationships with additional large financial institutions.~~

Restricted Cash

As of ~~June 30, 2023,~~March 31, 2024, the Company had $~~0.3~~0.2 million of restricted cash to support its outstanding letters of ~~credit to secure obligations under certain commercial contracts and other obligations.~~credit.

Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of accounts receivable. The Company’s customers are primarily insulation distributors, insulation contractors, insulation fabricators and select energy and automotive end-users located throughout the world. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During both the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, the Company recorded ~~a reduction~~an increase for estimated customer uncollectible accounts receivable of less than $0.1 million. ~~During~~

For the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2024 and 2023, two customers represented 64% and 45% of total revenue, respectively.

At March 31, 2024, the Company ~~recorded a reduction~~had one customer which accounted for ~~estimated customer uncollectible~~64% of accounts receivable. At December 31, 2023, the Company had two customers which accounted for 60% and 6% of accounts receivable, ~~of less than $0.1~~ ~~million.~~respectively.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606). See note 3 for further details.

~~Stock-based Compensation~~

The Company grants share-based awards to its employees and non-employee directors under its equity incentive plans: the 2023 Equity Incentive Plan (the 2023 Equity Plan) and its predecessor, the 2014 Employee, Director, and Consultant Equity Incentive Plan (the 2014 Equity Plan). All share-based awards granted, including grants of stock options, restricted stock and restricted stock units (RSUs), are recognized in the statement of operations based on their fair value as of the date of grant. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved, and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards. The Black-Scholes model requires the use of a number of complex and subjective assumptions including fair value of the underlying security, the expected volatility of the underlying security, a risk-free interest rate and the expected term of the option.

The fair value of restricted stock and RSUs is determined using the closing price of the Company’s common stock on the date of grant. All shares of restricted stock are not transferable until vested. Restricted stock is typically issued to non-employee directors and typically vests over a ~~one-year~~ ~~period from the date of issuance. RSUs are issued to employees and typically vest over a~~ ~~three-year~~ period from the date of issuance. The fair value of restricted stock and RSUs upon which vesting is solely service-based is expensed ratably over the vesting period. If the service condition for shares of restricted stock is not met for any reason, the shares of unvested restricted stock will be forfeited and returned to the Company.

For stock options that contain a market condition, the Company uses the Monte-Carlo simulation option-pricing model to determine the fair value of the awards. In addition to the input assumptions used in the Black-Scholes model, the Monte-Carlo simulation option-pricing model factors the probability that the specific market condition may or may not be satisfied into the valuation. Stock-based compensation expense for awards with a market condition is recognized on a straight-line basis over the requisite service period for each such award.

~~During the six months ended June 30, 2023, the Company granted~~ ~~477,094~~ ~~restricted common stock units (RSUs) with an aggregate grant date fair value of $4.3~~ ~~million and non-qualified stock options (NSOs) to purchase~~ ~~1,176,730~~ ~~shares of common stock with an aggregate grant date fair value of $6.2~~ ~~million to employees under its equity incentive plans. The RSUs and NSOs granted to employees will vest over a~~ ~~three-year~~ ~~period. During the six months ended June 30, 2023, the Company also granted~~ ~~44,928~~ ~~shares of restricted common stock with a grant date fair value of $0.3~~ ~~million and NSOs to purchase~~ ~~46,272~~ ~~shares of common stock with a grant date fair value of $0.2~~ ~~million to its non-employee directors under the 2023 Equity Plan. The restricted common stock and NSOs granted to non-employee directors vest upon the earlier of the date that is the~~ ~~one-year~~ ~~anniversary of the grant date or the day prior to the Company’s annual meeting of stockholders to be held in 2024.~~

~~Stock-based compensation is included in cost of revenue or operating expenses, as applicable, and consists of the following:~~

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

(In thousands)

(In thousands)

Cost of product revenue

$
193

$
230

$
327

$
386

Research and development expenses

225

313

255

537

Sales and marketing expenses

418

456

732

780

General and administrative expenses

1,874

1,296

3,663

2,420

Total stock-based compensation

$
2,710

$
2,295

$
4,977

$
4,123

The 2023 Equity Plan was approved by stockholders at the Company’s annual meeting of stockholders on June 1, 2023 as the successor to the 2014 Equity Plan, and no further awards may be made under the 2014 Equity Plan after that date. As of June 30, 2023, ~~5,491,416~~ shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the Company’s equity incentive plans. Any cancellations or forfeitures of awards outstanding under the 2023 Equity Plan, the 2014 Equity Plan or the 2001 Equity Incentive Plan, as amended (the 2001 Equity Plan) will result in the shares reserved for issuance pursuant to such awards becoming available for grant under the 2023 Equity Plan. As of June 30, 2023, the Company has either reserved in connection with statutory tax withholdings or issued a total of ~~4,887,223~~ ~~shares under the Company’s equity incentive plans. As of June 30, 2023, there were~~ ~~2,743,355~~ ~~shares of common stock available for future grant under the 2023 Equity Plan.~~

~~Net Loss per Share~~

The Company calculates net loss per share of common stock based on the weighted-average number of shares of common stock outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of shares of common stock included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options and RSUs. Common equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive.

Warranty

The Company provides warranties for its products and records the estimated cost within cost of revenue in the period that the related revenue is recorded.

The Company’s standard warranty period for energy industrial products extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product.

The Company’s thermal barrier products provide quality and warranty provisions customary in the automotive industry.

The Company recorded warranty expense related to its thermal barrier products of $0.2 million during the three months ended March 31, 2024 and less than $0.1 million during ~~each of six~~the three months ended ~~June 30, 2023~~March 31, 2023.

Sale and ~~2022.~~Leaseback Accounting

The Company has entered into sale and leaseback transactions for certain equipment within its plants. Due to the Company not meeting criteria to account for the transfer of the assets as a sale, sale accounting is precluded. Accordingly, the Company uses the financing method to account for these transactions.

Under the financing method of accounting for a sale and leaseback, the Company does not derecognize the assets and does not recognize as revenue any of the sale proceeds received from the lessor that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are accounted for as finance obligations and leaseback payments made by the Company are allocated between interest expense and a reduction to the finance obligation. Interest on the finance obligation is calculated using the Company’s incremental borrowing rate at the inception of the arrangement on the outstanding finance obligation.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, the Company evaluates the pronouncements to determine the potential effects of adoption to its consolidated financial statements.

Standards Implemented Since December 31, ~~2022~~2023

The Company has not implemented any accounting standards that had a material impact on its consolidated financial statements during the ~~six~~three months ended ~~June 30, 2023.~~

March 31, 2024.

Standards to be Implemented

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07 Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures to enhance disclosures about significant segment expenses. This ASU is effective for the Company’s fiscal year 2024 and interim periods in fiscal year 2025. Early adoption is permitted. The Company is currently evaluating segment expense disclosures related to its annual report for fiscal year 2024.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures that requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate

reconciliation, and modifies other income tax-related disclosures. This ASU is effective for the Company’s fiscal year 2025. Early adoption is permitted. The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025. Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its Consolidated Financial Statements.

The Company believes that the impact of recently issued accounting standards that are not yet effective will not have a material impact on its consolidated financial statements.

(3) Revenue from Contracts with Customers

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the separate performance obligations in the contract; and (v) recognition of the revenue associated with performance obligations as they are satisfied. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone-selling prices of the promised products or services underlying each performance obligation. The Company determines standalone-selling prices based on the price at which the performance obligation is sold separately. If the standalone-selling price is not observable through past transactions, the Company estimates the standalone-selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. The Company did not have any contracts outstanding at December 31, ~~2022~~2023 and did not enter into any contracts during the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 that contained a significant financing component.

The Company records deferred revenue for product sales when (i) the Company has delivered products, but other revenue recognition criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.

~~Shipping and Handling Costs~~

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in the cost of product revenue. The associated amount of revenue recognized includes the consideration to which the Company expects to be entitled to receive in exchange for incurring these shipping and handling costs.

Energy Industrial

The Company generally enters into contracts containing one type of performance obligation. ~~The~~For a majority of the contracts, the Company recognizes revenue at a point in time when transfer of control of the ~~performance obligation~~products is ~~satisfied,~~passed to the customer, which is generally upon delivery according to contractual shipping terms within customer purchase orders. For a limited number of customer arrangements for customized products with no alternative use to the Company and an enforceable right to payment for progress completed to date, the Company recognizes revenue over time using units of production to measure progress toward satisfying the performance obligations. Units of production represent work performed as we do not generate significant work in process and thereby best depicts the transfer of control to the customer. Customer invoicing terms for contracts for which revenue is recognized under the over time methodology are typically based on certain milestones within the production and delivery schedule. The timing of revenue recognition is assessed on a contract-by-contract basis.

The Company also enters into rebate agreements with certain customers. These agreements may be considered an additional performance obligation of the Company or variable consideration within a contract. Rebates are recorded as a reduction of revenue in the period the related revenue is recognized. A corresponding liability is recorded as a component of deferred revenue on the consolidated balance sheets. These arrangements are primarily based on the customer attaining contractually specified sales volumes.

The Company estimates the amount of its sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related revenue is recognized. The Company currently estimates return liabilities using historical rates of return, current quarter credit sales, and specific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $~~0.1~~0.2 million ~~at both June 30, 2023~~as of March 31, 2024 and December 31, ~~2022.~~

The Company manufactures and sells subsea products that are designed for pipe-in-pipe applications in offshore oil production and are typically customized to meet customer specifications. Subsea products typically have no alternative use and contain an enforceable right to payment. Customer invoicing terms for subsea products are typically based on certain milestones within the production and delivery schedule. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of control of the products is passed to the customer, or over time utilizing the input method. The timing of revenue recognition is assessed on a contract-by-contract basis.2023.

Thermal Barriers

The Company supplies fabricated, multi-part thermal barriers for use in battery packs in the electric vehicle market. These thermal barriers are customized to meet customer specifications. ~~Thermal~~Although thermal barrier products ~~typically have~~are customized with no alternative use ~~and may contain~~to the Company, the Company does not always have an enforceable right to payment. Under the provisions of ASC 606, the Company ~~may recognize~~recognizes revenue at a point in time when transfer of the control of the products is passed to the customer ~~or over time utilizing~~according to the ~~input method.~~terms of the contract, including under bill and hold arrangements. The timing of revenue recognition is assessed on a contract-by-contract basis.

Shipping and Handling Costs

Disaggregation of Revenue

In the following tables, revenue is disaggregated by primary geographical region and source of revenue:

Three Months Ended June 30,

2023

2022

U.S.

International

Total

U.S.

International

Total

(In thousands)

Geographical region

Asia

$
—

$
9,937

$
9,937

$
—

$
11,651

$
11,651

Canada

—

562

562

—

1,452

1,452

Europe

—

9,962

9,962

—

6,160

6,160

Latin America

—

2,265

2,265

—

1,295

1,295

U.S.

25,432

—

25,432

25,082

—

25,082

Total revenue

$
25,432

$
22,726

$
48,158

$
25,082

$
20,558

$
45,640

Source of revenue

Energy industrial

$
15,241

$
20,283

$
35,524

$
16,204

$
18,673

$
34,877

Thermal barrier

10,191

2,443

12,634

8,878

1,885

10,763

Total revenue

$
25,432

$
22,726

$
48,158

$
25,082

$
20,558

$
45,640


	Six Months Ended June 30,												Three Months Ended March 31,
	2023						2022						2024						2023
	U.S.		International		Total		U.S.		International		Total		U.S.		International		Total		U.S.		International		Total
	(In thousands)												(In thousands)
Geographical region
Asia	$	—	$	21,721	$	21,721	$	—	$	18,975	$	18,975	$	—	$	7,213	$	7,213	$	—	$	11,784	$	11,784
Canada		—		886		886		—		2,312		2,312		—		1,868		1,868		—		324		324
Europe		—		15,374		15,374		—		10,071		10,071		—		9,361		9,361		—		5,412		5,412
Latin America		—		3,889		3,889		—		2,901		2,901		—		15,371		15,371		—		1,624		1,624
U.S.		51,874		—		51,874		49,788		—		49,788		60,688		—		60,688		26,442		—		26,442
Total revenue	$	51,874	$	41,870	$	93,744	$	49,788	$	34,259	$	84,047	$	60,688	$	33,813	$	94,501	$	26,442	$	19,144	$	45,586

Source of revenue
Energy industrial	$	31,745	$	37,654	$	69,399	$	34,479	$	31,173	$	65,652	$	14,033	$	15,049	$	29,082	$	16,504	$	17,371	$	33,875
Thermal barrier		20,129		4,216		24,345		15,309		3,086		18,395		46,655		18,764		65,419		9,938		1,773		11,711
Total revenue	$	51,874	$	41,870	$	93,744	$	49,788	$	34,259	$	84,047	$	60,688	$	33,813	$	94,501	$	26,442	$	19,144	$	45,586

Contract Balances

The following table presents changes in the Company’s contract ~~assets and contract~~ liabilities during the ~~six~~three months ended ~~June 30, 2023:~~March 31, 2024:


	Balance at December 31, 2022		Additions		Deductions			Balance at June 30, 2023		Balance at December 31, 2023		Additions		Deductions			Balance at March 31, 2024
	(In thousands)									(In thousands)
Contract assets
Thermal barrier	$	143	$	—	$	(143	)	$	—
Total contract assets	$	143	$	—	$	(143	)	$	—
Contract liabilities
Deferred revenue
Energy industrial	$	5,846	$	7,923	$	(9,135	)	$	4,634	$	2,316	$	2,941	$	(2,127	)	$	3,130
Total contract liabilities	$	5,846	$	7,923	$	(9,135	)	$	4,634	$	2,316	$	2,941	$	(2,127	)	$	3,130

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company recognized $~~4.9~~1.2 million of revenue that was included in deferred revenue as of December 31, ~~2022.~~2023.

A contract asset is recorded when the Company satisfies a performance obligation by transferring a promised good or service and has earned the right to consideration from its customer. These assets may represent a conditional right to consideration and are included within accounts receivable and other current assets on the consolidated balance sheets.

A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services under the terms of the contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met.

(4) Inventories

Inventories consist of the following:


	June 30,		December 31,		March 31,		December 31,
	2023		2022		2024		2023
	(In thousands)				(In thousands)
Raw materials	$	22,711	$	19,877	$	19,190	$	24,735
Work in process						13,936		7,936
Finished goods		10,578		2,661		12,624		6,518
Total	$	33,289	$	22,538	$	45,750	$	39,189

(5) Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:


	June 30,			December 31,			Useful		March 31,			December 31,			Useful
	2023			2022			life		2024			2023			life
	(In thousands)								(In thousands)
Construction in progress	$	296,520		$	209,056			—	$	322,030		$	314,695			—
Buildings		24,016			24,016		30 years			25,985			25,473		30 years
Machinery and equipment		150,824			136,607		3-10 years			187,075			185,339		3-10 years
Computer equipment and software		10,827			10,239		3 years			9,631			9,495		3 years
Leasehold improvements		21,618			9,226		Shorter of useful life or lease term			23,472			23,514		Shorter of useful life or lease term
Total		503,805			389,144					568,193			558,516
Accumulated depreciation		(135,535	)		(129,921	)				(145,457	)		(141,289	)
Property, plant and equipment, net	$	368,270		$	259,223				$	422,736		$	417,227

Depreciation expense was $~~6.2~~5.8 million and $~~4.2~~2.7 million for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively.

~~Construction~~The Company recorded impairment charges of approximately $6.0 million during the three months ended March 31, 2024 for equipment that will no longer be needed in manufacturing following customer directed engineering changes to a part it manufactures and for other property, plant and equipment that have become obsolete following development of new and more efficient equipment. The impairment charges of $6.0 million during the three months ended March 31, 2024 consist of $3.3 million impairment included in cost of revenue and $2.7 million included in impairment of equipment under development on the Company's consolidated statement of operations. There were no impairments of property, plant and equipment during the three months ended March 31, 2023.

The construction in progress ~~totaled $296.5~~ ~~million and $209.1~~ ~~million~~balance at ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022, respectively. The balance at June 30,~~ 2023 ~~and December 31, 2022~~ included engineering designs and construction costs, and capitalized interest totaling $~~244.9~~296.7 million and $~~164.5~~288.5 million, respectively, for a planned aerogel manufacturing facility in Bulloch County, Georgia. ~~Capitalized~~The Company incurred $8.8 million in capitalized interest ~~totaled~~for the construction in progress in Bulloch County, Georgia. The Company incurred $~~7.8~~0.0 million and $~~2.7~~2.6 million ~~at June 30,~~in capitalized interest for the three months ended March 31, 2024 and 2023, ~~and December 31, 2022,~~ respectively.

(6) Accrued Expenses

Accrued expenses consist of the following:


	June 30,		December 31,		March 31,		December 31,
	2023		2022		2024		2023
	(In thousands)				(In thousands)
Employee compensation	$	7,797	$	12,467	$	5,710	$	16,876
Other accrued expenses		2,875		3,536		7,052		5,935
Total	$	10,672	$	16,003	$	12,762	$	22,811

(7) Related Party Transactions

Convertible Note

During the year ended December 31, 2022, the Company issued a $100.0 million aggregate principal amount convertible note to Wood River Capital, LLC, an entity affiliated with Koch Disruptive Technologies, LLC (the 2022 Convertible Note)., for the planned manufacturing facility in Bulloch County, Georgia. Refer to note 8 for more information.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, the Company incurred $~~5.1~~2.8 million of interest from the 2022 Convertible ~~Note, and capitalized $5.1~~ ~~million as part of the construction in progress for the planned manufacturing facility in Bulloch County, Georgia.~~

On November 28, 2022, the Company entered into an amendment to the 2022 Convertible Note, or the Convertible Note Amendment, to reduce the initial Conversion Price (as defined in the 2022 Convertible Note) by $~~5.00~~ ~~per share from $34.936625~~ ~~per share to $29.936625~~ ~~per share, by increasing the initial Conversion Rate (as defined in the 2022 Convertible Note) from~~ ~~28.623257~~ ~~shares per $1,000~~ ~~of Capitalized Principal Amount (as defined in the 2022 Convertible Note) to~~ ~~33.400100~~ ~~shares per $1,000~~ ~~of Capitalized Principal Amount under the 2022 Convertible Note, subject to customary anti-dilution and other adjustments (as described in the Indenture, which governs the 2022 Convertible Note).~~

Note.

Other

~~During the six months ended June 30, 2023, the~~The Company ~~recorded costs of~~had $~~6.9~~2.8 million in accounts payable as ~~a component~~ of ~~construction in progress in connection with the planned aerogel manufacturing facility in Bulloch County, Georgia in fees from Koch Project Solutions, LLC,~~December 31, 2023, due to an entity ~~that was~~ affiliated with Koch Disruptive Technologies, LLC (Koch) for project management service. On March 27, 2024, we entered into a Settlement and Release Agreement with the affiliate of Koch to settle the accounts payable for $1.2 million, which was outstanding as of March 31, 2024.

(8) Convertible Note – Related Party

2022 Convertible Note

On February 15, 2022, the Company entered into a note purchase agreement (the Note Purchase Agreement) with Wood River Capital LLC, an entity affiliated with Koch, ~~Disruptive Technologies, LLC (Koch),~~ relating to the issuance and sale to Koch of the 2022 Convertible Note in the aggregate principal amount of $100.0 million. The transactions contemplated by the Note Purchase Agreement closed on February 18, 2022 (the Issue Date). The maturity date of the 2022 Convertible Note is February 18, 2027, subject to earlier conversion, redemption, or repurchase.

The 2022 Convertible Note is a senior unsecured obligation of the Company and ranks equal in right of payment to all senior unsecured indebtedness of the Company and will rank senior in right of payment to any indebtedness that is contractually subordinated to the 2022 Convertible Note.

In accordance with ASU 2020-06, the 2022 Convertible Note is accounted for as a single unit of account and consists of the following:

June 30,

2023

(In thousands)

Convertible note, principal

$
100,000

Payment in-kind

12,952

Accrued interest

-

Discount on convertible note, net of accumulated amortization

(3,628
)
Debt issuance costs, net of accumulated amortization

(135
)
Convertible note

$
109,189


	March 31,			December 31,
	2024			2023
	(In thousands)
Convertible note, principal	$	100,000		$	100,000
Payment in-kind		18,318			18,318
Accrued interest		2,810			-
Discount on convertible note, net of accumulated amortization		(2,990	)		(3,209	)
Debt issuance costs, net of accumulated amortization		(108	)		(117	)
Convertible note	$	118,030		$	114,992

The 2022 Convertible Note does not have current observable inputs such as recent trading prices (Level 1) and is measured at fair value using a combination of option pricing and discounted cash flow models and incorporate management’s assumptions for stock price, volatility and risk rate. In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices for similar instruments in active markets, interest rates and yield curves. Fair values

determined by Level 3 inputs utilize unobservable data points in which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability. The 2022 Convertible Note does not have current observable inputs such as recent trading prices (Level 3) and is measured at fair value using a combination of option pricing and discounted cash flow models and incorporate management’s assumptions for stock price, volatility and risk rate.

The Company estimated the fair value of the 2022 Convertible Notes is approximately $~~96.7~~118.7 million as of ~~June 30, 2023.~~March 31, 2024. However, as the Company has not elected to utilize the fair value option, it is carried at amortized cost of $~~109.2~~118.0 million.

The 2022 Convertible Note was issued at par and bears interest at the Secured Overnight Financing Rate (SOFR) plus 5.50% per annum if interest is paid in cash, or, if interest is paid in-kind as an increase in the principal amount of the outstanding note, at the SOFR plus 6.50% per annum. Under the terms of the 2022 Convertible Note, SOFR has a floor of 1% and a cap of 3%. Interest on the 2022 Convertible Note is payable semi-annually in arrears on June 30 and December 30. The Company, at its option, is permitted to settle each semi-annual interest payment in cash, in-kind, or any combination thereof. It is expected that the Notes will mature on February 18, 2027, subject to earlier conversion, redemption or repurchase.

The Company elected to repay the contractual interest due on June 30, 2022, December 30, 2022, June 30, 2023, and ~~June~~December 30, 2023 in-kind as an increase to the principal amount of $2.9 million, $4.9 million, $5.1 million, and $~~5.1~~5.4 million, respectively. The contractual interest attributable to the 2022 Convertible Note was recorded as an addition to the convertible note – related party balance on the condensed consolidated balance sheets.

~~Debt~~million as of March 31, 2024, of which debt issuance costs, net of accumulated amortization is $0.1 ~~million as of June 30, 2023.~~million. The effective interest rate approximated the contract interest rate for the ~~six~~three months ended ~~June 30, 2023.~~March 31, 2024. The Company amortized $~~0.5~~1.1 million of the $4.1 million discount on the convertible note as of ~~June 30, 2023~~March 31, 2024 utilizing an effective interest rate of 10.7%.

On November 28, 2022, the Company entered into an amendment to the 2022 Convertible Note to reduce the initial Conversion Price by $5.00 per share from $34.936625 per share to $29.936625 per share, by increasing the initial Conversion Rate from 28.623257 shares per $1,000 of Capitalized Principal Amount to 33.400100 shares per $1,000 of Capitalized Principal Amount under the Convertible Note. Accordingly, the 2022 Convertible Note is convertible at the option of the holder at any time prior to the business day immediately preceding the maturity date at an initial conversion rate of 33.400100 shares of the Company’s common stock per $1,000 of capitalized principal. The effective conversion price is approximately $29.936625 per share (the Conversion Price). The Conversion Price is subject to adjustment upon the occurrence of certain dilutive events such as stock splits and combinations, stock dividends, mergers and spin-off. As of ~~June 30, 2023,~~March 31, 2024, ~~3,772,608~~4,045,687 shares of the Company’s common stock were issuable upon conversion of the 2022 Convertible Note. The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof. If the closing price per share of the Company’s common stock on the New York Stock Exchange is at least 130% of the Conversion Price for 20 consecutive trading days, the Company may elect to convert the principal and accrued interest owing under the Notes, plus a make-whole amount equal to the sum of the present values of the remaining interest payments that would have otherwise been payable from the date of such conversion, redemption or repurchase, as applicable, through maturity (the Make-Whole Amount), into the Company’s common stock at the Conversion Price.

The 2022 Convertible Note is redeemable at the Company’s option at any time and in the event that the volume weighted average price of the Company’s common stock for the 10 trading days immediately preceding the date on which the Company provides the redemption notice has been at least 130% of the Conversion Price then in effect at a redemption price of 100% of the principal amount, plus accrued and unpaid interest (excluding the redemption date), plus the Make-Whole Amount.

Upon the occurrence of certain fundamental changes described in the Indenture (each, a Fundamental Change), the Holder of the Note may require that the Company repurchase all or part of the principal amount of the Note at a purchase price of 100% of the principal amount of such Note, plus accrued and unpaid interest to, but excluding, the Fundamental Change repurchase date, plus the Make-Whole Amount. The Indenture includes customary “events of default,” which may result in the acceleration of the maturity of the Note.

The Company determined that the Make-Whole feature of the 2022 Convertible Note requires bifurcation in accordance with Accounting Standards Codification 815, Derivatives and Hedging (ASC 815). Accordingly, the Company must separately account for the feature at fair value with changes in fair value reported in current period earnings. The fair value of the Make-Whole was determined to be immaterial as of February 18, 2022 and ~~June 30, 2023.~~March 31, 2024.

(10) Leases and sale and leaseback

The Company leases office, laboratory, warehouse and fabrication space in Massachusetts, Rhode Island and Monterrey, Mexico under operating leases. Under these agreements, the Company is obligated to pay annual rent, real estate taxes, and certain other operating expenses. The Company also leases equipment under operating leases. The Company’s operating leases expire at various dates through 2034.

The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s payment obligations under the lease. Operating lease ROU assets and liabilities are recognized based on the present value of lease payments over the lease term. To measure its lease liabilities, the Company uses its incremental borrowing rate or the rate implicit in the lease, if available. The Company calculates its incremental borrowing rate using a synthetic credit rating analysis based on Moody’s Building Materials Industry Rating Methodology. ROU assets also include any direct costs and prepaid lease payments but exclude any lease incentives received. The

Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company elected the short-term lease recognition exemption for all leases that qualify. For leases that qualify for this exemption, the Company does not recognize ROU assets or lease liabilities. For lease agreements with lease and non-lease components, the Company accounts for each component separately. However, in the case of equipment leases, the Company accounts for lease and non-lease components as a single component.

Maturities of operating lease liabilities as of ~~June 30, 2023~~March 31, 2024 are as follows:


Year	Operating Leases			Operating Leases
	(In thousands)			(In thousands)
2023 (excluding the six months ended June 30, 2023)	$	2,616
2024		4,395
2024 (excluding the three months ended March 31, 2024)				$	3,303
2025		4,235			4,424
2026		3,922			4,077
2027		3,659			3,793
2028					3,946
Thereafter		23,018			19,174
Total lease payments		41,845			38,717
Less imputed interest		(17,300	)		(15,328	)
Total lease liabilities	$	24,545		$	23,389

The Company incurred operating lease costs of $~~2.6~~1.4 million and $~~1.8~~1.1 million during the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively. Cash payments related to operating lease liabilities were $~~2.3~~1.3 million and $~~1.6~~1.0 million during the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ respectively.

As of ~~June 30, 2023,~~March 31, 2024, the weighted average remaining lease term for operating leases was ~~9.4~~8.8 years. As of ~~June 30, 2023,~~March 31, 2024, the weighted average discount rate for operating leases was ~~11.9~~12.0%.

As of ~~June 30, 2023,~~March 31, 2024, the Company ~~had~~ nohas additional operating real estate ~~or equipment~~ leases that ~~would~~will commence during ~~2023.~~2024 with total lease payments of $3.2 million and a weighted average lease term of 5.0 years.

Sale and leaseback transaction

In January 2024, the Company entered into a sale and leaseback arrangement, pursuant to which the Company sold certain equipment to an equipment leasing company for a one-time cash payment of $5.0 million and leased back such equipment from the leasing company. The transaction was considered as a failed sale and leaseback transaction and accordingly, was accounted as a financing transaction. The Company did not recognize a gain on any of the proceeds received from the lessor that contractually constitute payments to acquire the assets subject to these arrangements. Instead, the sale proceeds received were accounted for as finance obligations. The outstanding finance obligation balance as of March 31, 2024 was $4.8 million. The monthly lease rents will be paid over the term of three years and will be allocated between interest expense and principal repayment of the financial liability.

(11) Stock based compensation

During the three months ended March 31, 2024, the Company granted 238,986 restricted common stock units (RSUs) with an aggregate grant date fair value of $3.9 million and non-qualified stock options (NSOs) to purchase 564,535 shares of common stock with an aggregate grant date fair value of $6.3 million to employees under its equity incentive plans. The RSUs and NSOs granted to employees will typically vest over a three-year period.

Stock-based compensation is included in cost of revenue or operating expenses, as applicable, and consists of the following:


	Three Months Ended
	March 31,
	2024		2023
	(In thousands)
Cost of product revenue	$	161	$	134
Research and development expenses		424		30
Sales and marketing expenses		322		314
General and administrative expenses		3,799		1,789
Total stock-based compensation	$	4,706	$	2,267

The 2023 Equity Plan was approved by stockholders at the Company’s annual meeting of stockholders on June 1, 2023 as the successor to the Company’s 2014 Employee, Director and Consultant Equity Incentive Plan (the 2014 Equity Plan), and no further awards may be made under the 2014 Equity Plan after that date. As of March 31, 2024, 5,533,077 shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the Company’s equity incentive plans. Any cancellations or forfeitures of awards outstanding under the 2023 Equity Plan, the 2014 Equity Plan or the 2001 Equity Incentive Plan, as amended (the 2001 Equity Plan) will result in the shares reserved for issuance pursuant to such awards becoming available for grant under the 2023 Equity Plan. As of March 31, 2024, the Company has either reserved in connection with statutory tax withholdings or issued a total of 5,491,916 shares under the Company’s equity incentive plans. As of March 31, 2024, there were 2,097,001 shares of common stock available for future grant under the 2023 Equity Plan.

On March 5, 2024, the Compensation and Leadership Development Committee (the Committee) of the Board of Directors of the Company approved the cancellation of the outstanding, unearned portion of the performance-based restricted shares granted to certain employees pursuant to the 2014 Equity Plan on June 29, 2021 (to Donald R. Young) and June 2, 2022 (to certain other employees). The Committee determined that based on current market conditions, the likelihood of achievement of any of the remaining performance hurdles applicable to the unearned restricted shares is remote, and that the unearned restricted shares therefore had ceased to have incentive value for the grantees. On March 6, 2024, the Company entered into cancellation agreements, pursuant to which the applicable employees agreed to such cancellation.

The cancelled unearned restricted shares were added to the number of shares available for awards under the Company’s 2023 Equity Incentive Plan. For financial accounting purposes, the cancellation of the unearned restricted shares resulted in the immediate charge of approximately $2.2 million of unamortized stock compensation costs of which $2.0 million is included in the general and administrative expenses and $0.2 million is included in research and development expenses in the accompanying consolidated statement of operations.

(12) Net Loss Per Share

The computation of basic and diluted net loss per share consists of the following:


	Three Months Ended						Six Months Ended						Three Months Ended
	June 30,						June 30,						March 31,
	2023			2022			2023			2022			2024			2023
	(In thousands, except share and per share data)												(In thousands, except share and per share data)
Numerator:
Net loss	$	(15,423	)	$	(24,050	)	$	(32,219	)	$	(43,534	)	$	(1,835	)	$	(16,796	)
Denominator:
Weighted average shares outstanding, basic and diluted		69,249,281			35,207,975			69,206,249			34,276,083			75,762,893			69,162,739
Net loss per share, basic and diluted	$	(0.22	)	$	(0.68	)	$	(0.47	)	$	(1.27	)	$	(0.02	)	$	(0.24	)

Potentially dilutive common shares that were excluded from the computation of diluted net loss per share because they were anti-dilutive consist of the following:


	Three and Six Months Ended				Three Months Ended
	June 30,				March 31,
	2023		2022		2024		2023
Common stock options		4,910,478		3,979,424		5,604,256		4,330,797
Restricted common stock units		580,939		255,139		604,220		458,262
Restricted common stock awards		889,366		852,940		201,878		857,933
Convertible note, if converted		3,772,608		2,945,133		4,045,687		3,687,070
Total		10,153,391		8,032,636		10,456,041		9,334,062

As the Company incurred a net loss for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ the potential dilutive shares from common stock options, restricted common stock units, restricted common stock awards, and the convertible note were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. The Company excludes the shares issued in connection with restricted stock awards from the calculation of basic weighted average common shares outstanding until the restrictions lapse.

~~(12)~~(13) Income Taxes

The Company incurred net operating losses and recorded a full valuation allowance against net deferred tax assets for all periods presented. Accordingly, the Company has not recorded a provision for federal or state income taxes. The Company has provided $0.8 million of income tax expense related to its Mexican maquiladora operations for the quarter ended March 31, 2024.

~~(13)~~(14) Segment Information

Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company reports two segments: Energy Industrial and Thermal Barrier. We evaluate segment performance based on the segment profit (loss) before corporate expenses.

Summarized below are the Revenue and Segment Operating Profit for each reporting segment:


	Revenue				Segment Operating Profit (Loss)						Revenue				Segment Operating Profit (Loss)						Revenue				Segment Operating Profit (Loss)
	Three Months Ended				Three Months Ended						Six Months Ended				Six Months Ended						Three Months Ended				Three Months Ended
	June 30				June 30						June 30				June 30						March 31,				March 31,
	2023		2022		2023			2022			2023		2022		2023			2022			2024		2023		2024			2023
	(In thousands)										(In thousands)										(In thousands)
Energy industrial	$	35,524	$	34,877	$	9,540		$	5,984		$	69,399	$	65,652	$	18,421		$	8,981		$	29,082	$	33,875	$	11,562		$	8,881
Thermal barrier		12,634		10,763		(1,133	)		(7,195	)		24,345		18,395		(4,928	)		(11,980	)		65,419		11,711		23,581			(3,795	)
Total	$	48,158	$	45,640	$	8,407		$	(1,211	)	$	93,744	$	84,047	$	13,493		$	(2,999	)	$	94,501	$	45,586	$	35,143		$	5,086
Corporate expenses						25,451			21,435							49,445			38,271							32,707			23,994
Operating loss						(17,044	)		(22,646	)						(35,952	)		(41,270	)
Other income (expense), net						1,621			(1,404	)						3,733			(2,264	)
Operating gain (loss)																										2,436			(18,908	)
Other (expense) income, net																										(3,515	)		2,112
Income tax expense																										(756	)		-
Net loss					$	(15,423	)	$	(24,050	)					$	(32,219	)	$	(43,534	)					$	(1,835	)	$	(16,796	)


	Total Assets				Total Assets
	June 30,		December 31,		March 31,		December 31,
	2023		2022		2024		2023
	(In thousands)				(In thousands)
Energy industrial	$	98,339	$	94,415	$	103,304	$	93,168
Thermal barrier		58,143		39,320		127,199		118,565
Total assets of reportable segments		156,482		133,735		230,503		211,733
Construction in progress		296,523		209,050		322,012		314,678
All other corporate assets		164,069		300,631		145,474		176,637
	$	617,074	$	643,416	$	697,989	$	703,048

~~(14)~~(15) Subsequent Events

The Company has evaluated subsequent events through ~~August 3, 2023,~~May 2, 2024, the date of issuance of the consolidated financial statements for the three ~~and six~~ months ended ~~June 30, 2023.~~March 31, 2024.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, filed with the U.S. Securities and Exchange Commission (SEC) on March ~~16, 2023,~~7, 2024, which we refer to as the Annual Report.

Certain matters discussed in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. In this Quarterly Report on Form 10-Q, words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and similar expressions (as well as other words or expressions referencing future events, conditions or circumstances) are intended to identify forward-looking statements.

Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q and under “Risk Factors” in Item 1A of the Annual ~~Report and the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.~~Report.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

You should read the following discussion and analysis of financial condition and results of operations together with Part I Item 1 “Financial Statements,” which includes our financial statements and related notes, elsewhere in this Quarterly Report on Form 10-Q.

Investors and others should note that we routinely use the Investors section of our website to announce material information to investors and the marketplace. While not all of the information that we post on the Investors section of our website is of a material nature, some information could be deemed to be material. Accordingly, we encourage investors, the media, and others interested in us to review the information that we share on the Investors section of our website, https://www.aerogel.com.

Our core businesses are organized into two reportable segments: Energy Industrial and Thermal Barrier. The following describes our key product offerings and new product innovations by reportable segment.

We design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy industrial and sustainable insulation materials markets. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-user customers select our products where thermal performance is critical and to save money, improve resource efficiency, enhance sustainability, preserve operating assets and protect workers. Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, ~~liquefied natural gas~~LNG facilities, power generating assets and other energy ~~industrial.~~industrial companies. Our Pyrogel® and Cryogel® product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. Our Spaceloft sustainable insulation materials are increasingly used by building owners to improve the energy efficiency and to enhance fire protection in buildings ranging from historic brownstones to modern high rises.

We also derive revenue from a number of other end markets. Customers in these markets use our products for applications as diverse as military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. As we continue to enhance

our Aerogel Technology Platform, we believe we will have additional opportunities to address high-value applications in the global

insulation ~~market, the electric vehicle~~ market, and in a number of new, high-value markets, including hydrogen energy, filtration, water purification, and gas sorption.

We market and sell our products primarily through a sales force based in North America, Europe and Asia. The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service.

Our salespeople work directly with end-user customers and engineering firms to promote the qualification, specification and acceptance of our aerogel and thermal barrier products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 50 countries around the world to ensure rapid delivery of our aerogel products and strong end-user support.

We are also actively developing a number of promising aerogel products and technologies for the electric vehicle ("EV") market. We have developed and are commercializing our proprietary line of PyroThin® aerogel thermal barriers for use in battery packs in ~~electric vehicles.~~EVs. Our PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to impede the propagation of thermal runaway across multiple lithium-ion battery system architectures. Our thermal barrier technology is designed to offer a unique combination of thermal management, mechanical performance and fire protection properties. These properties enable ~~electric vehicle~~EV manufacturers to achieve critical battery performance and safety goals. In addition, we are seeking to leverage our patented carbon aerogel technology to develop industry-leading battery materials for use in lithium-ion battery cells.

These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of ~~electric vehicles.~~EVs.

The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the ~~electric vehicle~~EV market is significant. Accordingly, we are hiring additional personnel, incurring additional operating expenses, incurring significant capital expenditures to expand aerogel manufacturing capacity, establishing an automated thermal barrier fabrication operation, enhancing research and development resources and expanding our battery material research facilities, among other items.

We have entered into production contracts with certain major OEMs, including General Motors LLC ~~or GM,~~(“GM”), to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation ~~electric vehicles.~~EVs. Pursuant to the contracts with GM, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreements, which expire at various times from 2026 through 2034. While GM has agreed to purchase its requirement for the barriers from us at locations to be designated from time to time, it has no obligation to purchase any minimum quantity of barriers under the contracts. In addition, GM may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with GM’s standard purchase terms, including quality and warranty provisions customary in the automotive industry. We have also entered into production contracts with Toyota, Scania, Audi, a luxury brand of the Volkswagen Group, and ACC, a battery cell joint venture between Stellantis N.V, Saft-TotalEnergies and Mercedes-Benz.

We manufacture our products using our proprietary technology at our facility in East Providence, Rhode Island. We have operated the East Providence facility since 2008 and have increased our capacity in ~~phases to approximately $250.0 million in annual revenue.~~phases. To meet expected growth in demand for our aerogel products in the ~~electric vehicle~~EV market, we have been in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia. However, in order to manage the development of the second plant so that its increased capacity comes online in a manner that aligns with our current expectations as to demand from our EV customers, we are extending the timeframe for construction and commissioning of the second plant until such time as its capacity is supported by increased demand. In the meantime, and until we ramp up construction, we expect to be able to substantially reduce our planned capital expenditures for ~~2023 and~~ 2024. At the same time, we believe that productivity improvements in our existing Rhode Island facility combined with the supplemental supply of our energy industrial products from one or more ~~contract manufacturers~~external manufacturing facilities in China ~~beginning in 2024~~ will permit us to achieve a target revenue capacity of approximately ~~$550.0~~$650 million in 2024 and prior to the completion and start-up of the second plant. Nonetheless, there can be no assurance as to when we will ramp up construction on the second plant. There can also be no assurance that our contract manufacturing strategy of meeting the demand of our energy industrial customers with supply from one or more ~~contract manufacturers~~external manufacturing facilities in China will provide us with adequate manufacturing capacity or supply for that expected demand. Furthermore, when we ramp up construction on the second plant, further cost inflation and/or supply chain disruptions, as well as potential changes in the scope of the facilities, could lead to increases to our prior ~~estimates~~estimated costs for completion of the second plant. In 2023, we opened our 59,000-square-foot engineering and rapid prototyping facility in Marlborough, MA. Our Advanced Thermal Barrier Center (ATBC) is designed to be the engineering hub of PyroThin cell-to-cell barriers, which help manufacturers optimize the safety and performance of battery packs for eMobility and energy storage system (ESS) markets.

We announced that the U.S. Department of Energy ("DOE") Loan Programs Office invited us into the formal due diligence and term sheet negotiation stage of the process, which is one in several steps remaining in the due diligence process prior to the DOE making a decision on whether to issue a Conditional Commitment for a loan. This loan application is in connection with the construction of our planned second manufacturing plant in Bulloch County, Georgia. The DOE's continued evaluation of the application is not an assurance that the terms and conditions of a term sheet will be consistent with terms proposed by the applicant. The foregoing matters are wholly dependent on the results of DOE review and evaluation, and DOE's determination whether to proceed. While the DOE's invitation to the formal due diligence stage is not an assurance that the DOE will issue a loan, we remain deeply engaged with the Loan Programs Office and its advisors and continue to believe that we are a strong candidate to partner with the DOE Loan Programs Office in this program.

Our revenue for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 was ~~$93.7~~$94.5 million, which represented an increase of ~~$9.7~~$48.9 million, or ~~12%~~107%, from ~~$84.0~~$45.6 million for the ~~six~~three months ended ~~June 30, 2022.~~March 31, 2023. Net loss for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 was ~~$32.2~~$1.8 million and net loss per share was ~~$0.47.~~$0.02. Net loss for the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 was ~~$43.5~~$16.8 million and net loss per share was ~~$1.27.~~$0.24.

We regularly review a number of metrics, including the following key ~~metrics,~~metric, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.

We price our energy industrial product and measure our shipments in square feet. We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and energy industrial product shipments on a uniform and consistent basis. The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time utilizing the input method, for the periods presented:

We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, from time to time, which we do not believe are indicative of our core operating performance. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance with U.S. GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with U.S. GAAP. In addition, our definition and presentation of Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies.

We also believe that the presentation of Adjusted EBITDA provides useful information to investors with respect to our results of operations and in assessing the performance and value of our business. Various measures of EBITDA are widely used by investors to measure a company’s operating performance without regard to items that can vary substantially from company to company depending upon financing and accounting methods, book values of assets, capital structures and the methods by which assets were acquired.

Although measures similar to Adjusted EBITDA are frequently used by investors and securities analysts in their evaluation of companies, we understand that Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for net income (loss), income (loss) from operations, net cash provided by (used in) operating activities or an analysis of our results of operations as reported under U.S. GAAP. Some of these limitations are:

Because of these limitations, our Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations.

To properly and prudently evaluate our business, we encourage you to review the U.S. GAAP financial statements included elsewhere in this Quarterly Report on Form 10-Q, and not to rely on any single financial measure to evaluate our business.

The following table presents a reconciliation of net loss, the most directly comparable U.S. GAAP measure, to Adjusted EBITDA for the periods presented:

Our financial performance, including such measures as net income (loss), earnings per share and Adjusted EBITDA, are affected by a number of factors including volume and mix of aerogel products sold, average selling prices, our material costs and manufacturing expenses, the costs associated with capacity expansions and start-up of additional production capacity, and the amount and timing of operating expenses. Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to period.

We expect to maintain strong revenue growth during ~~2023~~2024 driven by ~~a continued post-COVID recovery in the energy industrial market,~~ accelerating demand in the ~~electric vehicle~~EV market and continued market share gains in the sustainable insulation materials market. Our expectation to maintain strong revenue growth is based, in part, on our OEM customers’ production volume forecasts and targets as well as our expectation to successfully scale our manufacturing capabilities and address any potential supply chain issues to meet this expected demand. As a result, we expect to experience a decrease in both net loss and negative Adjusted EBITDA during ~~2023.~~2024.

We recognize revenue from the sale of our energy industrial aerogel products and thermal barriers. Revenue is recognized upon the satisfaction of contractual performance obligations.

We record deferred revenue for sales when (i) we have delivered products, but other revenue recognition criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.

We project revenue growth during ~~2023~~2024 due to accelerating demand in the ~~electric vehicle~~EV market and continued market share gains in the sustainable insulation materials market.

Cost of product revenue consists primarily of materials and manufacturing expense. Cost of product revenue is recorded when the related product revenue is recognized.

Material is ~~our most~~a significant component of cost of product revenue and includes fibrous batting, silica materials and additives. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, product thicknesses, and manufacturing yields. In addition, we provide warranties for our products and record the estimated cost within cost of revenue in the period that the related revenue is recorded or when we become aware that a potential warranty claim is probable and can be reasonably estimated. As a result of these factors, material costs as a percentage of product revenue will vary from period to period due to changes in the mix of aerogel products sold, the costs of our raw materials or the estimated cost of warranties. In addition, global supply chain disturbances, increased reliance on foreign materials procurement, industrial gas supply constraints, increases in the cost of our raw materials, engineering changes, higher prototype sales and other factors may significantly impact our material costs and have a material impact on our operations. We expect that material costs will increase in absolute dollars during ~~2023~~2024 due to projected growth in product shipments and contracts but ~~decrease~~remain stable as a percentage of revenue due to ~~projected increases in average selling prices,~~ improved manufacturing, and fabrication yields and a favorable mix of products sold.

Manufacturing expense is also a significant component of cost of revenue. Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing assets. Manufacturing expense also includes stock-based compensation of manufacturing employees and shipping costs. We expect that manufacturing expense will increase in absolute dollars and ~~increase~~decrease as a percentage of revenue during ~~2023~~2024 due to increased staffing and spending levels in support of our thermal barrier business, including the ~~start-up and~~ operation of an automated fabrication facility in Monterrey, Mexico. We are also continuing to monitor the impact of engaging one or more ~~contract manufacturers~~external manufacturing facilities in China to supply our aerogel products for the energy industrial market beginning in 2024 on our manufacturing expense and cost of product revenue.

~~In total,~~During 2024, we expect that cost of product revenue will increase in absolute dollars ~~during 2023 versus 2022~~due to projected volume growth and a planned increase in staffing and spending levels, but decrease as a percentage of product revenue ~~versus 2022 driven by the costs~~due to ~~support our expected higher run-rate revenue~~projected increases in ~~future periods.~~average selling prices, improved manufacturing and fabrication yields and a favorable mix of products sold.

Our gross profit as a percentage of revenue is affected by a number of factors, including the volume of products produced and sold, the mix of products sold, average selling prices, our material and manufacturing costs, realized capacity utilization and the costs associated with expansions and start-up of production capacity. Accordingly, we expect our gross profit to vary significantly in absolute dollars and as a percentage of revenue from period to period.

During ~~2023,~~2024, we expect gross profit to increase in both absolute dollars and as a percentage of total revenue due to the combination of a projected increase in total revenue combined with projected reduction in material costs ~~as a percentage of total revenue, offset, in part, by a projected increase in~~and manufacturing expense as a percentage of total revenue.

In the longer term, we expect gross profit to improve in absolute dollars and as a percentage of revenue due to expected increases in total revenue, production volumes and manufacturing productivity. In addition, we expect the gross profit improvement derived from the increases in revenue, volume and productivity will be supported by the continued implementation of lower cost product formulations and realization of material purchasing efficiencies.

Operating expenses consist of research and development, sales and marketing, and general and administrative expenses. Operating expenses include personnel costs, legal fees, professional fees, service fees, insurance premiums, travel expense, facilities related costs and other costs, expenses and fees. The largest component of our operating expenses is personnel costs, consisting of salaries, benefits, incentive compensation and stock-based compensation. In any particular period, the timing and extent of personnel additions or reductions, legal activities, including patent enforcement actions, marketing programs, research efforts and a range of similar activities or actions could materially affect our operating expenses, both in absolute dollars and as a percentage of revenue.

During 2023, we expect to continue to hire additional personnel and incur additional operating expenses to support the anticipated multi-year growth in our PyroThin thermal barrier business. As a result, we expect that operating expenses will increase in absolute dollars, and remain consistent as a percentage of revenue during the year. In the longer term, we expect that operating expenses will increase in absolute dollars, but decrease as a percentage of revenue.

Research and development expenses consist primarily of expenses for personnel engaged in the development of next generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses,

consulting services, trial formulations for new products, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technologies, including our carbon aerogel battery materials. We believe that these investments are necessary to maintain and improve our competitive position. We also expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts. ~~While we~~We expect our research and development expenses will increase in absolute dollars ~~but~~and decrease as a percentage of revenue in 2024 and the longer ~~term, in 2023 we expect these expenses will increase in both absolute dollars and as a percentage of revenue.~~term.

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, costs of new product and process introductions, travel and related costs, consulting expenses and facilities related costs. We expect that sales and marketing expenses will increase in absolute dollars and remain consistent as a percentage of revenue during 2023 principally due to an increase in compensation associated with the addition of personnel in support of our ~~PyroThin thermal barrier business. In the longer term, we expect that~~ sales and marketing expenses will increase in absolute dollars but decrease as a percentage of ~~revenue.~~revenue in 2024 and in the longer term.

General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit fees, compliance with securities, corporate governance and related laws and regulations, investor relations ~~expenses~~ and insurance premiums, including director and officer insurance.

We expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part I, Item 3 of our Annual Report ~~on Form 10-K for the year ended December 31, 2022~~ and “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q, if protracted, could result in significant legal expense over the medium to long-term. We expect that our general and administrative expenses will increase in absolute dollars ~~but~~and decrease ~~as a percentage of revenue in the longer term. In 2023, we expect such expenses will increase in both absolute dollars and~~ as a percentage of revenue.

Interest expense, convertible note - related party is net of the capitalized interest related to the $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle ~~Notes.~~Notes due 2027, which we sold and issued to Wood River Capital, LLC, an entity affiliated with Koch Disruptive Technologies, LLC.

Interest expense ~~net~~ consists of interest expense and amortization or write-off of deferred financing costs related to our ~~revolving credit facility~~other financing arrangements including a failed sale and ~~included~~leaseback arrangement accounted as a financing transaction and interest earned on the cash balances invested in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government.

We have incurred net losses since inception and have not recorded benefit provisions for U.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards. We record tax expenses in connection with our Mexican maquiladora operations.

Three months ended ~~June 30, 2023~~March 31, 2024 compared to the three months ended ~~June 30, 2022~~March 31, 2023

The following tables set forth a comparison of the components of our results of operations for the periods presented:

Total revenue increased ~~$2.6~~$48.9 million, or 6%107%, to ~~$48.2~~$94.5 million for the three months ended ~~June 30, 2023~~March 31, 2024 from $45.6 million in the comparable period in ~~2022.~~2023. The increase in total revenue was the result of an increase in ~~both~~ thermal barrier ~~and~~revenue, offset by a decrease energy industrial revenue.

The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time utilizing the input method, for the periods presented:

Energy industrial revenue ~~increased~~decreased by ~~$0.6~~$4.8 million, or 2%14%, to ~~$35.5~~$29.1 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$34.9~~$33.9 million in the comparable period in ~~2022.~~2023. This ~~increase~~decrease was driven by a decrease in the volume of shipments in the global petrochemical and refinery markets of Asia, North America, and Latin America, offset in part by an increase in project-based demand in the subsea market and a more favorable mix of product shipments in the global petrochemical and refinery markets in ~~Latin America, offset, in part, by a decrease in the volume of shipments in the global petrochemical and refinery markets of Europe, Asia and North America.~~Europe.

Energy industrial revenue for the three months ended ~~June 30, 2023~~March 31, 2024 included ~~$8.6~~$7.5 million to a North American distributor, ~~and $8.0~~in comparison to $10.9 million ~~to a subsea contractor. Energy industrial revenue~~ for the ~~three months ended June 30, 2022 included $9.3 million to a North American distributor.~~comparable period of 2023.

The average selling price per square foot of our energy industrial products increased by ~~$0.52, or 14%, to $4.31 per square foot~~16% for the three months ended ~~June 30, 2023 from $3.79 per square foot for~~March 31, 2024, compared to the three months ended ~~June 30, 2022.~~March 31, 2023. The increase in average selling price ~~principally~~ reflected the impact of price increases enacted in 2023 and a change in the mix of products sold, as we strive to maximize capacity in our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by ~~$4.2~~$4.1 million for the three months ended ~~June 30, 2023~~March 31, 2024 from the comparable period in ~~2022.~~2023.

In volume terms, energy industrial product shipments decreased by ~~1.0 million~~26% as measured by square feet ~~or 10%, to 8.2 million square feet~~of our energy industrial products shipped for the three months ended ~~June 30, 2023, as~~March 31, 2024, compared to ~~9.2 million square feet for~~ the three months ended ~~June 30, 2022.~~March 31, 2023. The decrease in volume had the effect of decreasing product revenue by ~~$3.6~~$8.8 million for the three months ended ~~June 30, 2023~~March 31, 2024 from the comparable period in ~~2022.~~2023.

Thermal barrier revenue was ~~$12.6~~$65.4 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$10.8~~$11.7 million for the three months ended ~~June 30, 2022.~~March 31, 2023. During the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022,~~ thermal barrier revenue included ~~$9.8~~$60.6 million and ~~$7.4~~$9.7 million, respectively, to a major U.S. automotive OEM.

Total cost of revenue ~~decreased $7.1~~increased $18.8 million, or ~~15%~~47%, to ~~$39.8~~$59.3 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$46.9~~$40.5 in the comparable period in ~~2022.~~2023. The ~~decrease~~increase in total cost of revenue was the result of ~~decreases~~an increase in ~~both~~ thermal barrier ~~and~~cost of revenue, offset by a decrease in energy industrial cost of revenue.

Energy industrial cost of revenue decreased ~~$2.9~~$7.5 million, or ~~10%~~30%, to ~~$26.0~~$17.5 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$28.9~~$25.0 million in the comparable period in ~~2022.~~2023. The ~~$2.9~~$7.5 million decrease was the result of a ~~$5.5~~$4.8 million decrease in material costs due to change in the product mix ~~offset by~~and a ~~$2.6~~$2.7 million ~~increase~~decrease in manufacturing and other operating costs from the comparable period in 2022. The increase in manufacturing costs was driven by increases in compensation and related costs of $1.2 million, depreciation and facility related expenses of $0.6 million, utilities expenses of $0.4 million and other manufacturing and operating costs of $0.4 million.2023.

Thermal barrier cost of revenue ~~decreased $4.2~~increased $26.3 million to ~~$13.8~~$41.8 million for the three months ended ~~June 30, 2023~~March 31, 2024 as compared to ~~$18.0~~$15.5 million for the three months ended ~~June 30, 2022.~~March 31, 2023. The ~~$4.2~~$26.3 million ~~decrease~~increase was the result of a ~~$3.2~~$14.3 million ~~decrease~~increase in material costs and a ~~$1.0~~$12.0 million ~~decrease in manufacturing costs. The decrease~~increase in manufacturing costs, ~~was~~primarily driven by ~~decreases~~an increase in ~~compensation and~~volume. Thermal barrier cost of revenue included $6.8 million for estimated costs related ~~costs of $3.2 million, offset~~to impact from an engineering change notified by a ~~$1.5 million increase in depreciation~~customer to a part that we manufacture for that customer to enable incremental productivity and ~~facility costs, $0.5 million increase in utilities expenses~~support a set of broader system level changes that could drive higher demand for its products. The Company has submitted a preliminary claim to the customer for reimbursement for estimated inventory and ~~other manufacturing~~equipment losses incurred by the Company and ~~operating costs~~its vendors due to potential obsolescence. The customer’s ordinary course process is to audit the claim to determine the proposed reimbursable amount. The Company expects the matter to be concluded by the second quarter of ~~$0.2 million.~~2024.

Gross profit increased by ~~$9.6~~$30.1 million, or ~~794%~~591%, to ~~$8.4~~$35.1 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$1.2~~$5.0 million of gross ~~loss~~profit in the comparable period in ~~2022.~~2023. The increase in gross profit was the result of the ~~$2.6~~$48.9 million increase in total revenue, ~~and~~offset by the ~~$7.1~~$18.8 million ~~decrease~~increase in total cost of revenue. The increase in gross profit reflects the decrease in costs, offset, in part by, additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products from the comparable period in 2022.

Research and development expenses ~~decreased~~increased by ~~$0.5~~$0.4 million, or ~~11%~~10%, to ~~$4.0~~$4.5 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$4.5~~$4.1 million in the comparable period in ~~2022.~~2023. The ~~$0.5~~$0.4 million ~~decrease~~increase reflects ~~decreases~~increases in ~~professional fees~~operating expenditures of ~~$0.5~~$0.2 million and ~~other research~~depreciation and ~~development~~facility related expenses of ~~$0.3 million, offset by an increase in facility related expenditures of $0.3~~$0.2 million.

Research and development expenses as a percentage of total revenue decreased to 8%5% of total revenue for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~10%~~9% in the comparable period in ~~2022.~~2023.

Sales and marketing expenses increased by ~~$0.5~~$0.6 million, or 6%8%, to ~~$8.1~~$8.3 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$7.6~~$7.7 million in the comparable period in ~~2022.~~2023. The ~~$0.5~~$0.6 million increase was principally the result of increases in ~~compensation~~depreciation and facility related ~~costs~~expenses of ~~$0.4~~$0.5 million, and other general sales and marketing expenses of $0.1 million.

Sales and marketing expenses as a percentage of total revenue ~~were 17%~~decreased to 9% of total revenue for ~~both~~ the three months ended ~~June 30, 2023 and 2022.~~March 31, 2024 from 17% in the comparable period in 2023.

General and administrative expenses increased by ~~$4.0~~$5.0 million, or ~~43%~~41%, to ~~$13.4~~$17.2 million for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$9.4~~$12.2 million in the comparable period in ~~2022.~~2023. The ~~$4.0~~$5.0 million increase was the result of additional staffing combined with increases in compensation and related costs of ~~$3.7~~$3.5 million, ~~and~~operating expenditures of $0.6 million, utilities expenditures of $0.5 million, professional services expenses of ~~$0.5~~$0.2 million, and ~~other general~~depreciation and ~~administrative~~facility related expenses of ~~$0.1~~$0.2 million. Compensation and related costs include $2.0 million ~~partially offset by a decrease in facility related expenditures~~ of ~~$0.3 million.~~charge from the cancellation of the unearned performance-based restricted shares.

General and administrative expenses as a percentage of total revenue ~~increased~~decreased to ~~28%~~18% for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~20%~~27% in the comparable period in ~~2022.~~2023.

The $2.7 million impairment of equipment under development was the result of a charge for impairment of assets due to obsolescence following development of new and more efficient equipment.

~~Interest~~Other income (expense), net ~~increased~~decreased by ~~$3.0~~$5.6 million to ~~$1.6~~$3.5 million of ~~interest income~~other expense for the three months ended ~~June 30, 2023~~March 31, 2024 from ~~$1.4~~$2.1 million of ~~interest expense~~other income in the comparable period in ~~2022.~~2023. The ~~$3.0~~$5.6 million ~~increase~~decrease was the result of ~~$1.7 million of interest income and~~ a ~~$1.3~~$2.7 million net impact of capitalized interest relating to our Convertible Note in the comparable period in ~~2022.~~

~~Six months ended June 30, 2023 compared~~deferred financing costs related to the ~~six months ended June 30, 2022~~

~~The following tables set forth~~GM Loan Agreement for which the draw down date has expired, a ~~comparison of the components of our results of operations for the periods presented:~~

~~Total revenue increased $9.7~~$1.0 million or 12%, to $93.7 million for the six months ended June 30, 2023 from $84.0 million in the comparable period in 2022. The increase in total revenue was the result of an increase in both thermal barrier and energy industrial revenue.

Energy industrial revenue increased by $3.7 million, or 6%, to $69.4 million for the six months ended June 30, 2023 from $65.7 million in the comparable period in 2022. This increase was driven by project-based demand in the subsea market and a more favorable mix of product shipments in the global petrochemical and refinery markets in Asia, offset, in part, by a decrease ~~in the volume of shipments in the global petrochemical and refinery markets of North America and Europe.~~

Energy industrial revenue for the six months ended June 30, 2023 included $19.5 million to a North American distributor. Energy industrial revenue for the six months ended June 30, 2022 included $20.2 million to a North American distributor.

The average selling price per square foot of our energy industrial products increased by $0.44, or 12%, to $4.22 per square foot for the six months ended June 30, 2023 from $3.78 per square foot for the six months ended June 30, 2022. The increase in average selling price principally reflected the impact of a change in the mix of products sold, as we strive to maximize capacity in our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by $7.2 million for the six months ended June 30, 2023 from the comparable period in 2022.

In volume terms, energy industrial product shipments decreased by 1.0 million square feet, or 5%, to 16.4 million square feet for the six months ended June 30, 2023, as compared to 17.4 million square feet for the six months ended June 30, 2022. The decrease in volume had the effect of decreasing product revenue by $3.5 million the six months ended June 30, 2023 from the comparable period in 2022.

Thermal barrier revenue was $24.3 million for the six months ended June 30, 2023 as compared to $18.4 million for the six months ended June 30, 2022. During the six months ended June 30, 2023 and 2022, thermal barrier revenue included $19.5 million and $13.6 million to a major U.S. automotive OEM, respectively.

Total cost of revenue decreased $6.7 million, or 8%, to $80.3 million for the six months ended June 30, 2023 from $87.0 in the comparable period in 2022. The decrease in total cost of revenue was the result of decreases in both thermal barrier and energy industrial cost of revenue.

Energy industrial cost of revenue decreased $5.7 million, or 10%, to $51.0 million for the six months ended June 30, 2023 from $56.7 million in the comparable period in 2022. The $5.7 million decrease was the result of a $6.8 million decrease in material costs due to change in the product mix, offset by a $1.1 million increase in manufacturing and other operating costs from the comparable period in 2022. The increase in manufacturing costs was driven by increases in general operating expenses of $0.6 million and compensation and related costs of $0.5 million.

Thermal barrier cost of revenue decreased $1.1 million to $29.3 million for the six months ended June 30, 2023 as compared to $30.4 million for the six months ended June 30, 2022. The $1.1 million decrease was the result of a $4.3 million decrease in material costs, offset by a $3.2 million increase in manufacturing costs. The increase in manufacturing costs was driven by increases in depreciation and facility costs of $3.3 million, offset by a decrease in other manufacturing and operating costs of $0.1 million.

Gross profit increased by $16.5 million, or 550%, to $13.5 million for the six months ended June 30, 2023 from $3.0 million of gross loss in the comparable period in 2022. The increase in gross profit was primarily the result of the $9.7 million increase in total revenue and the $6.7 million decrease in total cost of revenue. The increase in gross profit reflects the decrease in costs, offset, in part by, additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products from the comparable period in 2022.

Research and development expenses increased by less than $0.1 million, or 0%, to $8.1 million for the six months ended June 30, 2023 from $8.0 million in the comparable period in 2022. The $0.1 million increase reflects an increase in compensation and related costs of $0.1 million.

~~Research and development expenses as a percentage of total revenue decreased to 9% of total revenue for the six months ended June 30, 2023 from 10% in the comparable period in 2022.~~

Sales and marketing expenses increased by $2.2 million, or 16%, to $15.9 million for the six months ended June 30, 2023 from $13.7 million in the comparable period in 2022. The $2.2 million increase was principally the result of increases in compensation and related costs of $1.4 million, facility related expenditures of $0.7 million and other sales and marketing expenses of $0.1 million.

Sales and marketing expenses as a percentage of total revenue increased to 17% for the six months ended June 30, 2023 from 16% in the comparable period in 2022, due principally to the increase in compensation and related expenses associated with an increase in sales and business development personnel.

General and administrative expenses increased by $9.0 million, or 54%, to $25.6 million for the six months ended June 30, 2023 from $16.6 million in the comparable period in 2022. The $9.0 million increase was the result of additional staffing combined with increases in compensation and related costs of $7.4 million and professional services expenses of $1.6 million.

~~General and administrative expenses as a percentage of total revenue increased to 27% for the six months ended June 30, 2023 from 20% in the comparable period in 2022.~~

Interest income (expense), net increased by $6.0 million to $3.7 million of interest income for the six months ended June 30, 2023 from $2.3 million of interest expense in the comparable period in 2022. The $6.0 million increase was the result of $4.1 million of interest income, and a ~~$1.8~~$0.2 million ~~net impact~~increase of ~~capitalized~~ interest ~~relating to our Convertible Note in the comparable period in 2022.~~expense.

We have experienced significant losses and invested substantial resources since our inception to develop, commercialize and protect our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures, and investment in working capital balances.

Our long-term financial projections anticipate revenue growth, increasing levels of gross profit, and improved cash flows from operations. To meet expected growth in demand for our aerogel products in the ~~electric vehicle~~EV market, we have been in the process of expanding

~~expanding~~ our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia. However, in order to manage the development of the second plant so that its increased capacity comes online in a manner that aligns with our current expectations ~~as to~~of demand from our EV customers, we are extending the timeframe for construction and commissioning of the second plant until such time as its capacity is supported by increased demand. In the meantime, and until we ramp up construction, we expect to be able to substantially reduce our planned capital expenditures for ~~2023 and~~ 2024. At the same time, we believe that productivity improvements in our existing Rhode Island facility combined with the supplemental supply of our energy industrial products from one or more ~~contract manufacturers~~external manufacturing facilities in China ~~beginning in 2024~~ will permit us to achieve a target revenue capacity of approximately ~~$550.0~~$650 million in 2024 and prior to the completion and start-up of the second plant. Nonetheless, there can be no assurance as to when we will ramp up construction on the second plant. There can also be no assurance that our contract manufacturing strategy of meeting the demand of our energy industrial customers with supply from one or more ~~contract manufacturers~~external manufacturing facilities in China will provide us with adequate manufacturing capacity or supply for that expected demand. Furthermore, when we ramp up construction on the second plant, further cost inflation and/or supply chain disruptions, as well as potential changes in the scope of the facilities, could lead to increases to our prior ~~estimates~~estimated costs for completion of the second plant.

We are also increasing our investment in the research and development of next-generation aerogel products and technologies. During ~~2023,~~2024, we will continue to develop aerogel products and technologies for the ~~electric vehicle~~EV market. We believe the commercial potential for our technology in the ~~electric vehicle~~EV market is significant. To meet the anticipated revenue growth and take advantage of this market opportunity, we are adding personnel and incurring additional operating expenses, ~~and planning to construct a carbon aerogel battery materials facility,~~ among other items.

In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes. In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock, at a price of $27.902 per share, for net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million.

We believe that our ~~June 30, 2023~~March 31, 2024 cash and cash equivalents balance of ~~$134.3~~$101.5 million will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunities in the ~~electric vehicle~~EV market and other strategic business opportunities.

~~However,~~In December 2023, we entered into a securities purchase agreement with certain institutional investors named therein, pursuant to which we issued and sold, in a registered direct offering directly to the Investors an aggregate of 6,060,607 shares of our common stock at an offering price of $12.38 per share. We received net proceeds of $74.4 million, after deducting offering expenses of approximately $0.6 million.

In November 2022, we entered into a loan agreement (the GM Loan Agreement) with General Motors Holdings LLC (GM), an entity affiliated with General Motors LLC, which provides for a multi-draw senior secured term loan (the GM Loan) in an aggregate principal amount of up to $100.0 million, available to the Company on a delayed draw basis beginning January 1, 2023 to September 30, 2023, subject to certain conditions precedent to funding. In September 2023, we amended the GM Loan Agreement to (i) extend the draw period for the delayed GM Loan to a period beginning on the date that is twelve months prior to the date agreed upon by the Company and GM for the start of production at an aerogel manufacturing facility in Bulloch County, Georgia and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); (ii) extend the maturity date of the GM Loan from March 31, 2025 to September 30, 2025; and (iii) add financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter. As of March 31, 2024, we have not drawn, and no longer have the ability to draw on, the GM Loan.

In January 2024, we entered into a sale and leaseback arrangement, pursuant to which we sold certain equipment to an equipment leasing company for a one-time cash payment of $5.0 million and leased back such equipment from the leasing company. The associated monthly lease rents will be paid over the term of three years.

We plan to supplement our cash balance and available credit with equity financings, debt financings, equipment leasing, ~~sale-leaseback~~sale and leaseback transactions, customer prepayments or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities ~~establish the operations~~ and complete the aerogel capacity expansions required to support our evolving commercial opportunities and strategic business initiatives. We also intend to enter into a new revolving credit facility. Furthermore, we have certain assets that are currently owned, which we are evaluating for potential sale and lease back arrangements. This type of arrangement would provide us with one-time cash payments in the near term, in exchange for future lease payments. We believe that ~~the~~ consummation of equity ~~financings~~financing could potentially result in an ownership change under Section 382 of the Internal Revenue Code. Such an ownership change would lead to the use of our net operating loss carryforwards being restricted. Our inability to use a substantial portion of our net operating loss carryforwards would result in a higher effective tax rate and adversely affect our financial condition and results of operations.

Our principal sources of liquidity are currently our cash and cash equivalents. Cash and cash equivalents consist primarily of cash, money market accounts, and sweep accounts on deposit with banks. As of ~~June 30, 2023,~~March 31, 2024, we had ~~$134.3~~$101.5 million of unrestricted cash and cash equivalents.

In ~~February 2022,~~December 2023, we ~~sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes. In addition, in March 2022, pursuant to~~entered into a securities purchase agreement ~~dated February 15, 2022,~~with certain institutional investors named therein, pursuant to which we issued and sold, in a registered direct offering directly to the Investors an ~~affiliate~~aggregate of ~~Koch 1,791,986~~6,060,607 shares of our common stock at aan offering price of ~~$27.902~~$12.38 per ~~share, for~~share. We received net proceeds of ~~$49.9~~$74.4 million, after deducting ~~fees and~~ offering expenses of ~~$0.1~~approximately $0.6 million.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we used ~~$32.3~~$17.7 million in net cash in operating activities, as compared to the use of ~~$32.9~~$24.7 million in net cash during the comparable period in 2023, a decrease in the use of cash of $7.0 million. This decrease in use of cash was the result of lower net loss adjusted for non-cash items of $30.8 million offset by net cash used by changes in operating assets and liabilities of $23.8 million.

During the three months ended March 31, 2023, we used $24.7 million in net cash in operating activities, as compared to the use of $22.8 million in net cash during the comparable period in 2022, ~~a decrease~~an increase in the use of cash of ~~$0.6~~$1.9 million. This ~~decrease~~increase in use of cash was the result of cash provided by net loss adjusted for non-cash items of ~~$12.4~~$3.3 million and in net cash used by changes in operating assets and liabilities of ~~$11.8~~$5.2 million.

During the six months ended June 30, 2022, we used $32.9 million in net cash in operating activities, as compared to the use of $0.5 million in net cash during the comparable period in 2021, an increase in the use of cash of $32.4 million. This increase in use of cash was the result of increases in net loss adjusted for non-cash items of $25.9 million and in net cash used by changes in operating assets and liabilities of $6.3 million.

Net cash used in investing activities is for capital expenditures for machinery and equipment principally to improve the throughput, efficiency and capacity of our East Providence facility and engineering designs and construction costs for the planned aerogel manufacturing facility in Bulloch County, Georgia. Net cash used in investing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~ was ~~$115.4~~$25.9 million and ~~$52.4~~$49.4 million, respectively.

Net cash provided by financing activities for the three months ended March 31, 2024 totaled $5.3 million and consisted of $5.0 million in proceeds from a sales leaseback and $1.4 million in proceeds from employee stock option exercises, offset by $1.1 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units

Net cash used in financing activities for the ~~six~~three months ended ~~June 30,~~March 31, 2023 totaled ~~$0.2~~$0.4 million and consisted of $0.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units, offset, in part, by ~~$0.2~~less than $0.1 million in proceeds from employee stock option exercises.

Net cash provided by financing activities for the six months ended June 30, 2022 totaled $170.8 million and consisted of $99.8 million in net proceeds from the issuance of convertible debt, $49.9 million in net proceeds from the private placement of our common stock, $28.1 million in net proceeds from the ATM offering program, and less than $0.2 million in proceeds from employee stock option exercises, offset, in part, by $4.7 million in cash used for payments made for repayments of a prepayment liability and $2.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units.

There have been no material changes to our contractual obligations and commitments as reported in our Annual Report.

Information regarding new accounting pronouncements is included in note 2 to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue,

costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our Annual Report and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: the expected future growth of the market for our aerogel products and our continued gain in market share, in particular in the electric vehicle market, the energy infrastructure insulation market, the lithium-ion battery thermal barrier markets, and other markets we target; our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, revenue capacity, future profits,

uses of cash, available credit, capital requirements, and the need for additional financing to operate our business ~~including to complete the planned construction~~ and ~~development of our second manufacturing facility in Bulloch County, Georgia, or fabrication operations in Monterrey, Mexico,~~for capital expenditures and to fund our planned strategic business initiatives; the performance of our aerogel blankets; our expectation that we will be successful in obtaining, enforcing and defending our patents against competitors and that such patents are valid and enforceable; our expectations regarding the investment to open a second manufacturing facility in Georgia, the extended construction and commissioning timeframe for the planned second manufacturing facility, our efforts to manage the construction of the second plant to align with our expectations of demand from EV ~~customers, and our ability to complete the second plant; the anticipated capacity expansion as a result of the planned second manufacturing facility in Georgia, if it were to be completed;~~customers; our estimates of annual production capacity; beliefs about the commercial potential for our technology in the electric vehicle market; beliefs about our ability to produce and deliver products to electric vehicle customers; beliefs about Aspen’s contracts with the major ~~U.S.~~ automotive manufacturers; our expectations about the size and timing of awarded business in the electric vehicle market, future revenues and profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the electric vehicle market; beliefs about the performance of our thermal barrier products in the battery systems of electric vehicles; the current or future trends in the energy, energy infrastructure, chemical and refinery, LNG, sustainable building materials, electric vehicle thermal barrier, electric vehicle battery materials or other markets and the impact of these trends on our business; our investments in the electric vehicle market and aerogel technology platform; our beliefs about the financial metrics that are indicative of our core performance; our expectations about the effect of manufacturing capacity on financial metrics such as Adjusted EBITDA; our expectations about future revenues, expenses, gross profit, net loss, loss per share and Adjusted EBITDA, sources and uses of cash, capital requirements and the sufficiency of our existing cash balance and available credit; our beliefs about the outcome, effects or estimated costs of current or potential litigation or their respective timing, including expected legal expense in connection with our patent enforcement actions; our expectations about future material costs and manufacturing expenses as a percentage of revenue, including the impact of engaging one or more contract manufacturers in China for supply of our energy industrial products; our expectation about the ability of the Chinese contract manufacturers that we engage to consistently supply the aerogel product that we order in a timely manner; our expectations of future gross profit and the effect of manufacturing expenses, manufacturing capacity and productivity on gross profit; our expectations about our resources and other investments in new technology and related research and development activities and associated expenses; our expectations about short and long term (a) research and development (b) general and administrative and (c) sales and marketing expenses; our expectations of revenue growth, increased gross profit, and improving cash flows over the long term; our intentions about managing capital expenditures and working capital balances; and our expectations about potential sources of future financing.

Words such as “may,” “will,” “anticipate,” “estimate,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those described in the forward-looking statements. These risks include, but are not limited to, those set forth in this Quarterly Report on Form 10-Q and under the heading “Risk Factors” contained in Item 1A of our Annual Report.

In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements contained in this Quarterly Report on Form 10-Q might not occur. Stockholders and other readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. All subsequent forward-looking statements attributable to Aspen Aerogels, Inc. or to any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure results primarily from fluctuations in interest rates, as well as from inflation. In the normal course of business, we are exposed to market risks, including changes in interest rates which affect our cash flows. We may also face additional exchange rate risk in the future as we expand our business internationally.

We are exposed to changes in interest rates in the normal course of our business. As of ~~June 30, 2023,~~March 31, 2024, we had unrestricted cash and cash equivalents of ~~$134.3~~$101.5 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts primarily at major financial institutions in North America. Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material.

As of ~~June 30, 2023,~~March 31, 2024, we had a convertible note outstanding with principal balance of ~~$113.0~~$118.3 million. Our convertible note bears interest at the Secured Overnight Financing Rate (SOFR) plus 5.50% per annum if interest is paid in cash, or, if interest is paid in-kind as an increase in the principal amount of the outstanding note, at the SOFR plus 6.50% per annum. Under the terms of the investment, SOFR has a floor of 1% and a cap of 3%. Interest is paid semi-annually in arrears on June 30 and December 30. We, at our option, are permitted to settle each semi-annual interest payment in cash, in-kind, or any combination thereof.

As of ~~June 30, 2023,~~March 31, 2024, we had ~~$0.3~~$0.2 million of restricted cash to support our outstanding letters of credit to secure obligations under certain commercial contracts and other obligations. We terminated our revolving credit facility agreement on November 28, 2022.

Although we expect that our operating results will be influenced by general economic conditions, we do not believe that inflation has had a material effect on our results of operations during the periods presented in this report. However, our business may be affected by inflation in the future.

We are subject to inherent risks attributed to operating in a global economy. ~~Principally all~~We do not consider the exposure to foreign currency risk from our international operations to be material. A majority of our revenue, receivables, purchases and debts are denominated in U.S. dollars. Certain transactions of the Company and its subsidiaries are denominated in currencies other than the functional currency. Foreign currency transaction losses were $0.7 million and $0.0 million for the three months ended March 31, 2024, and 2023, respectively, and were recorded within operating expenses on the consolidated statements of operations.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of ~~June 30, 2023,~~March 31, 2024, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of ~~June 30, 2023,~~March 31, 2024, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and

reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are involved in various legal claims and proceedings in the normal course of operations. We believe the outcome of these matters will not have a material adverse effect on our consolidated financial position, results of operations or liquidity, except as described in Part 1, Item 3. “Legal Proceedings” of our Annual Report on Form 10-K. Since the filing of our Form 10-K, there have been no material changes in our legal proceedings from those disclosed therein, other than as noted below.

~~On April 18,~~Our patent infringement proceedings in Italy against of AMA S.p.A. and AMA Composites S.r.l. (collectively, AMA) are ongoing. In July 2023, the technical experts appointed by the judge issued a report finding key claims of our process patents valid and infringed by the aerogel products manufactured by Nano Tech Co., Ltd. and sold by AMA. In November 2023, we ~~filed~~appealed our motion for preliminary injunction to a panel of the Court of Genoa. In February 2024, the Court issued an order dismissing our appeal. As of March 31, 2024, the main patent infringement ~~complaint at the Seoul Central District Court and a petition for investigation of unfair trade practices~~proceedings are ongoing.

Our patent infringement proceedings in ~~the~~ Korea ~~Trade Commission (KTC). The complaint and petition allege that~~against Beerenberg Services AS, Beerenberg Korea Ltd., ~~Bronx Holdings Pte. Ltd.,~~ and Bronx (China) Co., Ltd. ~~(collectively, “Beerenberg”~~, are ongoing. In April 2024, the Korea Trade Commission (“KTC”) have infringed several of our Korean patents in connection with the import and sale of certain aerogel products in Korea. The asserted patents include (a) Korean patents related to high performance reinforced aerogel compositions and (b) Korean counterparts of the patents previously successfully asserted against Nano Tech Co., Ltd. (“Nano”) and Guangdong Alison Hi Tech., Ltd. (“Alison”) in Germany and the US. We are seeking injunctive relief and monetary damages against the defendants. On May 30, 2023, we learned of a decisionconcluded its investigation into unfair international trade practices by ~~the KTC to institute an investigation against~~ Beerenberg Korea Ltd. and Bronx (China) Co., Ltd. on, with a decision that our asserted composition patent claims were invalid and our asserted process patent claims were not infringed. We disagree with the ~~basis~~KTC decision, which is subject to appeal in the Seoul Administrative Court. We continue to vigorously defend the validity of ~~our petition.~~these patents in the related oppositions filed by Beerenberg Korea Ltd. and Bronx (China) Co. Ltd., at the Korean Intellectual Property Trial and Appeal Board (“IPTAB”). Our patent infringement case against Beerenberg Services AS and Beerenberg Korea Ltd. at the Seoul District Court remains stayed pending the outcome of the IPTAB proceedings.

The oppositions filed in August and September 2023 by, LG Chem Ltd. against one of the Korean patents we are asserting against Beerenberg in Korea and a Japanese counterpart of the Korean patents are ongoing. We are vigorously defending the validity of these patents.

In October 2022, we were served with a summons from Aerogels Poland Nanotechnology LLC (“APN”), a former distributor of our products in Poland with whom we previously terminated our distribution agreements because of APN’s failure to pay amounts due to us. The summons asserts causes of action for declaratory judgment, breach of contract, breach of implied contract, equitable estoppel and fraud, and states that plaintiffs will seek declaratory judgment, actual and liquidated damages in the sum of $20 million, in addition to attorneys’ fees. We were not served with any complaint at the time the summons was served. In December 2022, we filed a notice of appearance in New York County Supreme Court and a demand upon plaintiffs to file and serve a complaint. In March 2023, plaintiffs filed a complaint asserting various causes of action consistent with those set forth in the October 2022 summons, and a demand for monetary damages and other relief in excess of $16 million. ~~On June 30,~~In July 2023, we filed a motion ~~for an order~~ to compel arbitration, ~~seeking dismissal of certain~~and in February 2024, the Court granted our motion and stayed the litigation pending arbitration. To the extent APN seeks to pursue claims ~~and for attorney’s fees. We intend~~in an arbitration proceeding, Aspen intends to continue to vigorously defend this ~~matter.~~matter, including seeking its legal costs.

The ownership of our common stock involves a number of risks and uncertainties. When evaluating the Company and our business before making an investment decision regarding our securities, potential investors should carefully consider the risk factors and uncertainties described in Part 1, Item 1A. “Risk Factors” of our Annual Report on Form 10-K. Since the filing of our Form 10-K, there have been no material changes in our risk factors from those disclosed ~~therein, other than as provided below.~~

We are engaging third-party contract manufacturers in China to supply our energy industrial products beginning in 2024. If such contract manufacturers are unable to manufacture and deliver a sufficient quantity of high-quality products on a timely and cost-efficient basis, our net revenue and business operations may be harmed and our reputation may suffer.

We are engaging one or more contract manufacturers in China for supply of our energy industrial products beginning in 2024, which we believe will enable us to achieve a target revenue capacity of approximately $550.0 million in 2024 and prior to the completion and start-up of our planned second manufacturing plant. If our contract manufacturers are unable to deliver the required aerogel product on a timely basis, we may experience delays in delivering our finished aerogel product to customers in the energy industrial market. In addition, because our third party contract manufacturers have manufacturing facilities in China, their ability to provide us with adequate supplies of high-quality products on a timely and cost-efficient basis is subject to a number of additional risks and uncertainties, including political, social and economic instability and other factors that could impact the shipment of supplies. If our manufacturers are unable to provide us with adequate supplies of high-quality aerogel products on a timely and cost-efficient basis, our operations could be disrupted and our revenue and business operations may suffer. Moreover, if our third-party contract manufacturers cannot consistently produce high-quality products that are free of defects, we may experience a loss of customers, which may also reduce our revenues and may harm our reputation and brand. Furthermore, our third-party contract manufacturers may become subject to various supply chain disruptions, including but not limited as a result of COVID-19, other pandemics or public health crises, and geopolitical disputes and conflicts, any of which could slow or halt the delivery of products to us and increase the price of certain materials due to resulting increases in costs of raw materials and shipping costs.

Our potential inability to adequately protect our intellectual property as a result of engaging contract manufacturers in China for the supply of our aerogel products for our customers in the energy industrial market could negatively impact our performance.

In connection with our engagement of contract manufacturers in China, we expect to implement customary manufacturer safeguards onsite, such as the use of confidentiality agreements with employees, to protect our proprietary information and technologies during the manufacturing process of our aerogel products for the energy industrial market. However, these safeguards may not effectively prevent unauthorized use of such information and technical know-how, or prevent the contract manufacturer from retaining them. Although the courts in China are increasing and broadening their protection of intellectual property rights, the legal regime governing intellectual property rights in China is relatively immature and it is often difficult to create and enforce intellectual property rights or protect trade secrets there. We face risks that our proprietary information may not be afforded the same protection in China as it is in countries with well-developed intellectual property laws, and local laws may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights in China, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. In the event that the third-party contract manufacturer of our proprietary aerogel product misappropriates our intellectual property, our business, prospects and financial condition could be materially and adversely affected.therein.

We did not repurchase any of our equity securities during the quarter ended ~~June 30, 2023.~~March 31, 2024.

~~During~~On February 26, 2024, Donald R. Young, our President, Chief Executive Officer, and member of our board of directors, adopted a trading plan intended to satisfy the ~~fiscal quarter ended June 30, 2023,~~affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act. The plan provides for the sale of up to 691,124 shares at specific market prices, subject to specified limitations, during pre-determined sale periods. The plan was established for the purposes of facilitating the exercise and subsequent sale of stock options with a ten-year contractual life that are due to expire between September 2024 and December 2025 (the “Options”), by facilitating the sale of shares solely to raise sufficient proceeds to cover the exercise cost and taxes associated with the exercise of the Options. The plan expires on the earlier of (i) the date all of the shares under the plan have been sold and (ii) December 11, 2025.

Except as disclosed above, none of our directors or executive officers adopted, modified or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading ~~arrangement.”~~arrangement” as such term is defined in Item 408(a) of Regulation S-K, during the fiscal quarter ended March 31, 2024.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware		04-3559972
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

30 Forbes Road, Building B Northborough, Massachusetts		01532
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, par value $0.00001 per share	ASPN	The New York Stock Exchange


		Page
	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (unaudited) as of ~~June 30, 2023~~March 31, 2024 and December 31, ~~2022~~2023	1

	Consolidated Statements of Operations (unaudited) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~	2

	Consolidated Statements of Stockholders’ Equity (unaudited) for the three ~~and six~~ months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~	3

	Consolidated Statements of Cash Flows (unaudited) for the ~~six~~three months ended ~~June 30,~~March 31, 2024 and 2023 ~~and 2022~~	4

	Notes to Consolidated Financial Statements (unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1918

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3430

Item 4.	Controls and Procedures	3430

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	3632

Item 1A.	Risk Factors	3632

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3833

Item 3.	Defaults Upon Senior Securities	3833

Item 4.	Mine Safety Disclosures	3833

Item 5.	Other Information	3833

Item 6.	Exhibits	3934

SIGNATURES		4035


	June 30,			December 31,			March 31,			December 31,
	2023			2022			2024			2023
	(In thousands)						(In thousands)
Cloud computing costs included in other current assets	$	420		$	420		$	420		$	420
Cloud computing costs included in other assets		1,590			1,590			1,957			1,590
Amortization of cloud computing costs		(450	)		(242	)		(767	)		(662	)
Total capitalized cloud computing costs	$	1,560		$	1,768		$	1,610		$	1,348



~~3.1~~		Certificate of Amendment to Restated Certificate of Incorporation of Aspen Aerogels, Inc., dated June 1, 2023 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 1, 2023, File No. 001-36481).

10.1+		~~Aspen Aerogels 2023 Equity Incentive Plan~~SEIG Award Cancellation Agreement, dated March 6, 2024 (Donald R. Young) (incorporated by reference to Exhibit 10.1 toof the ~~Company’s Current Report on~~Registrant’s Form 8-K, filed on ~~June 1, 2023, File No. 001-36481)~~March 7, 2024).

10.2+		Form of ~~Stock Option~~SEIG Award Cancellation Agreement, ~~under the Aspen Aerogels 2023 Equity Incentive Plan~~dated March 6, 2024 (other employees) (incorporated by reference to Exhibit 10.2 toof the ~~Company’s Current Report on~~Registrant’s Form 8-K, filed on ~~June 1, 2023, File No. 001-36481).~~

~~10.3+~~		Form of Restricted Stock Unit Agreement for Executive Officers under the Aspen Aerogels 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on June 1, 2023, File No. 001-36481).

~~10.4+~~		Form of Restricted Stock Agreement for Directors under the Aspen Aerogels 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed on June 1, 2023, File No. 001-36481).

~~10.5+~~		Form of Director Stock Option Agreement under the Aspen Aerogels 2023 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed on June 1, 2023, File No. 001-36481)March 7, 2024).

31.1		Certification of principal executive officer under Section 302(a) of the Sarbanes-Oxley Act of 2002.

31.2		Certification of principal financial officer under Section 302(a) of the Sarbanes-Oxley Act of 2002.

32		Certifications of the principal executive officer and the principal financial officer under Section 906 of the Sarbanes-Oxley Act of 2002.

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


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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	Three Months Ended June 30,
	2023						2022
	U.S.		International		Total		U.S.		International		Total
	(In thousands)
Geographical region
Asia	$	—	$	9,937	$	9,937	$	—	$	11,651	$	11,651
Canada		—		562		562		—		1,452		1,452
Europe		—		9,962		9,962		—		6,160		6,160
Latin America		—		2,265		2,265		—		1,295		1,295
U.S.		25,432		—		25,432		25,082		—		25,082
Total revenue	$	25,432	$	22,726	$	48,158	$	25,082	$	20,558	$	45,640

Source of revenue
Energy industrial	$	15,241	$	20,283	$	35,524	$	16,204	$	18,673	$	34,877
Thermal barrier		10,191		2,443		12,634		8,878		1,885		10,763
Total revenue	$	25,432	$	22,726	$	48,158	$	25,082	$	20,558	$	45,640


	Three Months Ended June 30,				Change
	2023		2022		Amount			Percentage
Product shipments in square feet (in thousands)		8,246		9,200		(954	)		(10	)%


	ASPEN AEROGELS, INC.

Date: ~~August 3, 2023~~May 2, 2024	By:	/s/ Donald R. Young
		Donald R. Young
		President and Chief Executive Officer (principal executive officer)

Date: ~~August 3, 2023~~May 2, 2024	By:	/s/ Ricardo C. Rodriguez
		Ricardo C. Rodriguez
		Chief Financial Officer and Treasurer (principal financial ~~officer and principal accounting~~ officer)