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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 ~~November 1, 2017,~~October 31, 2023, the registrant had ~~23,637,115~~70,256,926 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.


	September 30,			December 31,			September 30,			December 31,
	2017			2016			2023			2022
	(In thousands, except share and per share data)						(In thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents	$	7,305		$	18,086		$	94,643		$	281,335
Accounts receivable, net of allowances of $98 and $93		17,106			17,535
Restricted cash								320			1,226
Accounts receivable, net of allowances of $184 and $255								54,413			57,350
Inventories		13,992			12,868			34,421			22,538
Prepaid expenses and other current assets		1,478			1,697			16,568			7,236
Total current assets		39,881			50,186			200,365			369,685
Property, plant and equipment, net		78,073			84,394			385,026			259,223
Operating lease right-of-use assets								17,400			11,990
Other long-term assets		84			89			2,355			2,518
Total assets	$	118,038		$	134,669		$	605,146		$	643,416
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,886		$	13,065		$	37,115		$	54,728
Accrued expenses		4,685			3,987			16,694			16,003
Deferred revenue		1,608			1,043			5,463			5,846
Capital leases, current portion		4			35
Operating lease liabilities								1,986			2,368
Total current liabilities		15,183			18,130			61,258			78,945
Capital leases, excluding current portion		—			4
Deferred rent		1,332			971
Convertible note - related party								112,088			103,580
Operating lease liabilities long-term								21,987			13,456
Total liabilities		16,515			19,105			195,333			195,981
Commitments and contingencies (Note 6)
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.00001 par value; 125,000,000 shares authorized, 23,637,115 and 23,369,838 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		—			—
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2023 and December 31, 2022								—			—
Common stock, $0.00001 par value; 250,000,000 shares authorized, 70,226,633 and 69,994,963 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively								—			—
Additional paid-in capital		536,985			533,088			1,082,896			1,075,226
Accumulated deficit		(435,462	)		(417,524	)		(673,083	)		(627,791	)
Total stockholders’ equity		101,523			115,564			409,813			447,435
Total liabilities and stockholders’ equity	$	118,038		$	134,669		$	605,146		$	643,416

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In thousands, except
share and per share data)

Revenue:

Product

$
26,812

$
28,877

$
73,700

$
88,286

Research services

386

683

1,569

1,813

Total revenue

27,198

29,560

75,269

90,099

Cost of revenue:

Product

22,115

22,790

63,706

69,505

Research services

135

368

700

1,012

Gross profit

4,948

6,402

10,863

19,582

Operating expenses:

Research and development

1,468

1,328

4,753

3,924

Sales and marketing

2,745

3,056

9,271

8,939

General and administrative

3,765

4,422

14,354

12,229

Total operating expenses

7,978

8,806

28,378

25,092

Loss from operations

(3,030
)

(2,404
)

(17,515
)

(5,510
)
Other expense, net

Interest expense, net

(58
)

(37
)

(123
)

(115
)
Postponed financing costs

—

(656
)

—

(656
)
Total other expense, net

(58
)

(693
)

(123
)

(771
)
Net loss

$
(3,088
)

$
(3,097
)

$
(17,638
)

$
(6,281
)
Net loss per share:

Basic and diluted

$
(0.13
)

$
(0.13
)

$
(0.76
)

$
(0.27
)
Weighted-average common shares outstanding:

Basic and diluted

23,442,241

23,168,251

23,356,997

23,114,280

Nine Months Ended

September 30,

2017

2016

(In thousands)

Cash flows from operating activities:

Net loss

$
(17,638
)

$
(6,281
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

8,032

7,298

Stock-compensation expense

3,982

4,277

Lease incentives

(80
)

—

Postponed financing costs

—

656

Other

(1
)

—

Changes in operating assets and liabilities:

Accounts receivable

944

999

Inventories

(1,124
)

(6,370
)
Prepaid expenses and other assets

224

189

Accounts payable

(478
)

(17
)
Accrued expenses

752

(2,189
)
Deferred revenue

565

72

Deferred rent

(128
)

—

Net cash used in operating activities

(4,950
)

(1,366
)
Cash flows from investing activities:

Capital expenditures

(5,423
)

(9,994
)
Net cash used in investing activities

(5,423
)

(9,994
)
Cash flows from financing activities:

Proceeds from borrowings under line of credit

6,000

—

Repayment of borrowings under line of credit

(6,000
)

—

Repayment of obligations under capital lease

(23
)

(55
)
Payments made for employee restricted stock tax withholdings

(385
)

(196
)
Payment of deferred financing costs

—

(64
)
Net cash used in financing activities

(408
)

(315
)
Net decrease in cash

(10,781
)

(11,675
)
Cash at beginning of period

18,086

32,804

Cash at end of period

$
7,305

$
21,129

Supplemental disclosures of cash flow information:

Interest paid

$
151

$
153

Income taxes paid

$
—

$
—

Supplemental disclosures of non-cash activities:

Changes in accrued capital expenditures

$
(3,701
)

$
602

Changes in building lease incentives

$
—

$
268

Unpaid financing costs

$
—

$
(592
)
Settlement of asset retirement obligation

$
—

$
241

(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 ~~infrastructure~~industrial and ~~building~~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 ~~conducts research and development related to~~developing applications for its aerogel technology ~~supported by funding from several agencies of the U.S. government and other institutions~~ in the ~~form~~battery materials and a number of ~~research and development contracts.~~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.

Liquidity

During the nine months ended September 30, 2023, the Company incurred a net loss of $45.3 million, used $39.8 million of cash in operations and used $147.7 million of cash for capital expenditures. The Company had unrestricted cash and cash equivalents of $94.6 million as of September 30, 2023.

On November 28, 2022, the Company entered into a loan agreement with (the GM Loan Agreement) 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. On September 28, 2023, the Company amended the GM Loan Agreement to 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 (the Plant) and ending on March 31, 2024 (or any later date approved in writing by GM at its sole discretion); extend the maturity date of the GM Loan from March 31, 2025 to September 30, 2025; and add financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter.

The revised GM Loan Agreement also amended the conditions precedent to funding to require the Company to provide evidence that cash proceeds of one or more equity and/or debt financing arrangements of not less than $500.0 million in the aggregate have been contributed to and disbursed by the Company in the manner prescribed in a pre-determined project budget (subject to a permitted variance) to fund the construction of and equipment for the first phase of the Plant and require that 70% of the total cost in connection with the construction and operation of the Plant has been fully funded prior to such applicable borrowing under the GM Loan Agreement.

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 automated thermal barrier fabrication operation, enhance research and development laboratory facilities and equipment, and construct a battery materials facility, among other efforts.

The Company expects its existing cash balance will be sufficient to support current operating requirements, current research and development activities and the 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 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, ~~2016~~2022 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March ~~2, 2017.~~16, 2023.

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 September 30, ~~2017,~~2023 and the results of its operations and stockholders’ equity for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 and the cash flows for the ~~nine month~~nine-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 nine months ended September 30, ~~2017~~2023 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017~~2023 or any other period.

(2) Significant Accounting Policies

Principles of Consolidation

The accompanying condensed consolidated financial statements ~~which have been prepared in accordance with U.S. GAAP,~~of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company ~~and its wholly owned subsidiaries.~~or a variable interest entity (VIE) where the Company is the primary beneficiary. All significant intercompany ~~balances~~accounts and transactions have been eliminated in consolidation.

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's financial statements as of and for the nine months ended September 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 ~~the~~ current economic ~~environment,~~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.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

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~~Cash and cash equivalents are maintained primarily 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 September 30, 2023, the Company had $0.3 million of restricted cash to support its outstanding letters of credit to secure obligations under certain commercial contracts and other obligations.

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 the nine months ended September 30, 2023, the Company recorded a reduction for estimated customer uncollectible accounts receivable of less than $0.1 million. During the nine months ended September 30, 2022, the Company recorded a reduction for estimated customer uncollectible accounts receivable of less than $0.1 million.

For the nine months ended September 30, 2023 and 2022, two customers represented 50% and 44% of total revenue, respectively.

At September 30, 2023, the Company had one customer which accounted for 61% of accounts receivable. At December 31, 2022, the Company had two customers which accounted for 44% and 10% of accounts receivable, 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.

Leases

The Company accounts for its leases in accordance with Accounting Standards Update (ASU) 2016-02 (Topic 842). See note 10 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 ~~sale~~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 ~~products~~stock options, restricted stock and ~~performance~~restricted stock units (RSUs), are recognized in the statement of ~~research and development services. Revenue is recognized when all~~operations based on their fair value as of the ~~following criteria are met: persuasive evidence~~date of ~~an arrangement exists, the price to the buyer is fixed or determinable, delivery has occurred or services have been provided, and collectability is reasonably assured.~~

~~Product Revenue~~

~~Product revenue is recognized upon transfer of title and risk of loss, which is upon shipment or delivery. The Company’s customary shipping terms are free on board (FOB) shipping point.~~

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 products being delivered.

~~Research Services Revenue~~

The Company performs research services under contracts with various government agencies and other institutions. The Company records revenue earned on research services contracts using the percentage-of-completion method in two ways: (1) for firm-fixed-price contracts, the Company accrues that portion of the total contract price that is allocable, on the basis of the Company’s estimates of costs incurred to date to total contract costs; and (2) for cost-plus-fixed-fee contracts, the Company records revenue that is equal to total payroll cost incurred times a stated factor plus reimbursable expenses, to a stated upper limit. The primary cost under the Company’s research service contracts is the labor effort expended in completing the research, and the only deliverable, other than the labor hours expended, is reporting of research results to the customer. Because the input measure of labor hours expended is also reflective of the output measure, it is a reliable means to measure the extent of progress towards completion. Revisions in cost estimates and fees during the course of the contract are reflected in the accounting period in which the facts that require the revisions become known. Contract costs and rates used to allocate overhead to contracts are subject to audit by the respective contracting government agency. Adjustments to revenue as a result of audit are recorded in the period they become known. To date, adjustments to revenue as a result of audit have been insignificant.

~~Stock-based Compensation~~

~~Stock-based compensation expense is measured at the grant date based on the fair value of the award.~~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, which~~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 ~~restricted stock unit (RSU) grants~~RSUs is determined using the closing ~~trading~~ 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 ~~awards containing~~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 ~~conditions is determined using a Monte Carlo~~condition, the Company uses the Monte-Carlo simulation option-pricing model ~~based upon~~to determine the ~~terms~~fair value of the ~~conditions,~~awards. In addition to the ~~expected volatility of~~input assumptions used in the ~~underlying security, and other relevant factors.~~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 nine months ended September 30, ~~2017,~~2023, the Company granted ~~86,023~~511,241 restricted common stock units (RSUs) with an aggregate grant date fair value of $4.5 million and non-qualified stock options (NSOs) to purchase 1,956,464 shares of common stock with an aggregate grant date fair value of $9.6 million to employees under its equity incentive plans. The RSUs and NSOs granted to employees will typically vest over a three-year period. During the nine months ended September 30, 2023, the Company also granted 44,928 shares of restricted common stock with a grant date fair value of $0.3 million and ~~non-qualified options (NSOs)~~NSOs to purchase ~~119,133~~46,272 shares of common stock with a grant date fair value of ~~$0.4~~$0.2 million ~~and $0.2 million, respectively, vesting over a period of one year~~ to its non-employee directors under the 2014 Employee, Director and Consultant Equity Incentive Plan (the 2014 Equity Plan). During the nine months ended September 30, 2017, the Company also granted 481,373 RSUs and NSOs to purchase 320,571 shares of common stock with a grant date fair value of $1.3 million and $0.7 million, respectively, to employees under the 20142023 Equity Plan. The ~~RSUs~~restricted common stock and NSOs granted to ~~employees will~~non-employee directors vest ~~over a three year period.~~

~~On August 2, 2017,~~upon the ~~Company reduced the performance target for the year ending December 31, 2020 with respect to 78,125 shares~~earlier of restricted stock held by its chief executive officer. In addition, the Company modified the vesting conditions of NSOs held by its chief executive officer to purchase 131,578 and 122,324 shares of common stock to extend the time period to achieve certain common stock price targets by an additional year to four and five years from the date that is the one-year anniversary of the grant ~~respectively.~~

~~The Company accounted for~~date or the ~~change~~day prior to the ~~restricted stock performance target as a modification~~Company’s annual meeting of ~~the award in determining the stock-based compensation expense~~stockholders to be recognized over the remaining service period. The fair value of the award as a result of the modification was $0.4 million. The Company recognized expense of $0.1 million related to this award during the period ended September 30, 2017.

~~The Company accounted for the extension of the time periods for the achievement of the common stock price target vesting conditions of the NSOs as modifications~~held in determining the stock-based compensation expense to be recognized over the remaining service period. The total incremental compensation expense resulting from the modification was $0.1 million. The incremental compensation expense associated with these awards will be recognized over the remaining service period of the awards.2024.

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


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2023		2022		2023		2022
	(In thousands)								(In thousands)				(In thousands)
Cost of product revenue	$	201	$	241	$	641	$	632	$	93	$	270	$	420	$	656
Research and development expenses		151		184		449		472		255		306		510		843
Sales and marketing expenses		294		314		865		852		378		548		1,110		1,328
General and administrative expenses		718		735		2,027		2,321		2,063		1,466		5,726		3,886
Total stock-based compensation	$	1,364	$	1,474	$	3,982	$	4,277	$	2,789	$	2,590	$	7,766	$	6,713

Effective January 1, 2017, the Company adopted the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (ASU 2016-09) related to the timing of accounting for the forfeitures of share based awards using a modified retrospective transition method. Under these provisions, the Company will record the impact of forfeitures of service based awardsThe 2023 Equity Plan was approved by stockholders at the ~~time an award is forfeited. Adoption~~Company’s annual meeting of stockholders on June 1, 2023 as the ~~provisions resulted in a cumulative-effect adjustment~~successor to ~~equity as of January 1, 2017 of $0.3 million.~~

~~Pursuant to the “evergreen” provisions of~~ the 2014 Equity Plan, ~~the number of shares of common stock authorized for issuance~~and no further awards may be made under the ~~plan automatically increased by 467,396 shares to 6,536,597 shares effective January 1, 2017.~~

2014 Equity Plan after that date. As of September 30, ~~2017, 3,219,510~~2023, 6,030,483 shares of common stock were reserved for issuance upon the exercise or vesting ~~as appropriate,~~ 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. In addition, as of September 30, 2017, 92,178 shares of common stock were reserved for issuance upon~~Plan or the ~~exercise of outstanding stock options granted under the Company’s~~ 2001 Equity Incentive Plan, as amended (the 2001 Equity Plan)~~. Any cancellations or forfeitures of the options outstanding under the 2001 Equity Plan~~ will result in the shares reserved for issuance ~~upon exercise of~~pursuant to such ~~options~~awards becoming available for grant under the ~~2014~~2023 Equity Plan. As of September 30, ~~2017,~~2023, the Company has either reserved in connection with statutory tax withholdings or issued a total of 4,956,866 shares under the Company’s equity incentive plans. As of September 30, 2023, there were ~~2,358,632~~2,134,645 shares of common stock available for future grant under the ~~2014~~2023 Equity Plan.

~~Earnings~~8

Net Loss per Share

The Company calculates net loss per share of common ~~share~~stock based on the weighted-average number of shares of common ~~shares~~stock outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of shares of common ~~shares~~stock included in the computation of diluted net ~~income (loss)~~loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options ~~RSUs~~ and ~~warrants.~~RSUs. Common equivalent shares are excluded from the computation of diluted net ~~income (loss)~~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 each of nine months ended September 30, 2023 and 2022.

Employee Retention Credits

In March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law, providing numerous tax provisions and other stimulus measures, including the Employee Retention Credit: a refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the Employee Retention Credits. We qualified for the Employee Retention Credits in the third and fourth quarters of 2020 and the first quarter of 2021. In September 2023, we submitted filings for CARES Employee Retention Credits totaling $2.2 million that are reported in the accompanying condensed consolidated balance sheet within prepaid expenses and other current assets as of September 30, 2023, and in the accompanying statement of operations for the three and nine months ended September 30, 2023.

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

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

Standards to be Implemented

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 and did not enter into any contracts during the nine months ended September 30, 2023 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.

Energy Industrial

The Company generally enters into contracts containing one type of performance obligation. For a majority of the contracts, the Company recognizes revenue at a point in time when transfer of control of the products is 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 million at both September 30, 2023 and December 31, 2022.

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. Although thermal barrier products are customized with no alternative use to the Company, the Company does not always have an enforceable right to payment. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of the control of the products is passed to the customer according to the terms of the contract. The timing of revenue recognition is assessed on a contract-by-contract basis.

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.

Disaggregation of Revenue

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


	Three Months Ended September 30,
	2023						2022
	U.S.		International		Total		U.S.		International		Total
	(In thousands)
Geographical region
Asia	$	—	$	5,801	$	5,801	$	—	$	7,296	$	7,296
Canada		—		633		633		—		928		928
Europe		—		11,361		11,361		—		4,281		4,281
Latin America		—		1,176		1,176		—		84		84
U.S.		41,784		—		41,784		24,117		—		24,117
Total revenue	$	41,784	$	18,971	$	60,755	$	24,117	$	12,589	$	36,706

Source of revenue
Energy industrial	$	12,249	$	15,663	$	27,912	$	13,510	$	11,242	$	24,752
Thermal barrier		29,535		3,308		32,843		10,607		1,347		11,954
Total revenue	$	41,784	$	18,971	$	60,755	$	24,117	$	12,589	$	36,706


	Nine Months Ended September 30,
	2023						2022
	U.S.		International		Total		U.S.		International		Total
	(In thousands)
Geographical region
Asia	$	—	$	27,522	$	27,522	$	—	$	26,271	$	26,271
Canada		—		1,519		1,519		—		3,240		3,240
Europe		—		26,735		26,735		—		14,352		14,352
Latin America		—		5,065		5,065		—		2,985		2,985
U.S.		93,658		—		93,658		73,905		—		73,905
Total revenue	$	93,658	$	60,841	$	154,499	$	73,905	$	46,848	$	120,753

Source of revenue
Energy industrial	$	43,994	$	53,317	$	97,311	$	47,989	$	42,415	$	90,404
Thermal barrier		49,664		7,524		57,188		25,916		4,433		30,349
Total revenue	$	93,658	$	60,841	$	154,499	$	73,905	$	46,848	$	120,753

~~Segments~~Contract Balances

The following table presents changes in the Company’s contract assets and contract liabilities during the nine months ended September 30, 2023:


	Balance at December 31, 2022		Additions		Deductions			Balance at September 30, 2023
	(In thousands)
Contract assets
Thermal barrier	$	143	$	—	$	(143	)	$	—
Total contract assets	$	143	$	—	$	(143	)	$	—
Contract liabilities
Deferred revenue
Energy industrial	$	5,846	$	14,308	$	(14,691	)	$	5,463
Total contract liabilities	$	5,846	$	14,308	$	(14,691	)	$	5,463

During the nine months ended September 30, 2023, the Company recognized $5.7 million of revenue that was included in deferred revenue as of December 31, 2022.

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:


	September 30,		December 31,
	2023		2022
	(In thousands)
Raw materials	$	22,361	$	19,876
Work in process		11,015		2,204
Finished goods		1,045		458
Total	$	34,421	$	22,538

(5) Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:


	September 30,			December 31,			Useful
	2023			2022			life
	(In thousands)
Construction in progress	$	299,942		$	209,056			—
Buildings		24,016			24,016		30 years
Machinery and equipment		166,060			136,607		3-10 years
Computer equipment and software		10,890			10,239		3 years
Leasehold improvements		23,171			9,226		Shorter of useful life or lease term
Total		524,079			389,144
Accumulated depreciation		(139,053	)		(129,921	)
Property, plant and equipment, net	$	385,026		$	259,223

Depreciation expense was $10.8 million and $6.7 million for the nine months ended September 30, 2023 and 2022, respectively.

Construction in progress totaled $299.9 million and $209.1 million at September 30, 2023 and December 31, 2022, respectively. The balance at September 30, 2023 and December 31, 2022 included engineering designs and construction costs totaling $255.2 million and $164.5 million, respectively, for a planned aerogel manufacturing facility in Bulloch County, Georgia. Capitalized interest totaled $8.8 million and $2.7 million at September 30, 2023 and December 31, 2022, respectively.

(6) Accrued Expenses

Accrued expenses consist of the following:


	September 30,		December 31,
	2023		2022
	(In thousands)
Employee compensation	$	14,001	$	12,467
Other accrued expenses		2,693		3,536
Total	$	16,694	$	16,003

(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). Refer to note 8 for more information.

During the nine months ended September 30, 2023, the Company incurred $7.8 million of interest from the 2022 Convertible Note, and capitalized $6.1 million as part of the construction in progress for the planned manufacturing facility in Bulloch County, Georgia.

Other

During the nine months ended September 30, 2023, the Company recorded costs of $8.6 million as a component of construction in progress, in connection with the planned aerogel manufacturing facility in Bulloch County, Georgia in fees from an entity affiliated with Koch Disruptive Technologies, LLC for project management service. The Company had $2.8 million in accounts payable as of September 30, 2023 due to the entity affiliated with Koch Disruptive Technologies, LLC.

(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:


	September 30,
	2023
	(In thousands)
Convertible note, principal	$	100,000
Payment in-kind		12,952
Accrued interest		2,683
Discount on convertible note, net of accumulated amortization		(3,422	)
Debt issuance costs, net of accumulated amortization		(125	)
Convertible note	$	112,088

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 $97.5 million as of September 30, 2023. However, as the Company has not elected to utilize the fair value option, it is carried at amortized cost of $112.1 million.

Contractual Interest Rates

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 and June 30, 2023 in-kind as an increase to the principal amount of $2.9 million, $4.9 million, and $5.1 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 issuance costs, net of accumulated amortization is $0.1 million as of September 30, 2023. The effective interest rate approximated the contract interest rate for the nine months ended September 30, 2023. The Company amortized $0.7 million of the $4.1 million discount on the convertible note as of September 30, 2023 utilizing an effective interest rate of 10.7%.

Conversion Rights

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 September 30, 2023, 3,862,221 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.

Optional Redemption

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.

Contingent Redemption

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.

Embedded Derivatives

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 September 30, 2023.

(10) Leases

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 September 30, 2023 are as follows:


Year	Operating Leases
	(In thousands)
2023 (excluding the nine months ended September 30, 2023)	$	1,254
2024		4,431
2025		4,271
2026		3,958
2027		3,683
Thereafter		23,018
Total lease payments		40,615
Less imputed interest		(16,642	)
Total lease liabilities	$	23,973

The Company incurred operating lease costs of $4.2 million and $2.9 million during the nine months ended September 30, 2023 and 2022, respectively. Cash payments related to operating lease liabilities were $3.6 million and $2.6 million during the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the weighted average remaining lease term for operating leases was 9.3 years. As of September 30, 2023, the weighted average discount rate for operating leases was 11.9%.

As of September 30, 2023, the Company had no additional operating real estate or equipment leases that would commence during 2023.

(11) Net Loss Per Share

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


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
	(In thousands, except share and per share data)
Numerator:
Net loss	$	(13,073	)	$	(29,595	)	$	(45,292	)	$	(73,129	)
Denominator:
Weighted average shares outstanding, basic and diluted		69,317,805			39,533,695			69,243,843			36,047,879
Net loss per share, basic and diluted	$	(0.19	)	$	(0.75	)	$	(0.65	)	$	(2.03	)

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 Nine Months Ended
	September 30,
	2023		2022
Common stock options		5,462,015		3,989,342
Restricted common stock units		568,469		259,766
Restricted common stock awards		889,366		856,435
Convertible note, if converted		3,862,221		3,016,319
Total		10,782,071		8,121,862

As the Company incurred a net loss for the three and nine months ended September 30, 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) 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.

(13) 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 ~~views its operations~~reports two segments: Energy Industrial and ~~manages its business as one operating segment.~~

~~Information about the Company’s total revenues,~~Thermal Barrier. We evaluate segment performance based on ~~shipment destination or services location,~~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)
	Three Months Ended				Three Months Ended						Nine Months Ended				Nine Months Ended
	September 30,				September 30,						September 30,				September 30,
	2023		2022		2023			2022			2023		2022		2023			2022
	(In thousands)										(In thousands)
Energy industrial	$	27,912	$	24,752	$	5,825		$	2,063		$	97,311	$	90,404	$	24,246		$	11,044
Thermal barrier		32,843		11,954		7,985			(8,422	)		57,188		30,349		3,057			(20,402	)
Total	$	60,755	$	36,706	$	13,810		$	(6,359	)	$	154,499	$	120,753	$	27,303		$	(9,358	)
Corporate expenses						28,444			21,950							77,889			60,221
Operating loss						(14,634	)		(28,309	)						(50,586	)		(69,579	)
Other income (expense), net						1,561			(1,286	)						5,294			(3,550	)
Net loss					$	(13,073	)	$	(29,595	)					$	(45,292	)	$	(73,129	)


	Total Assets
	September 30,		December 31,
	2023		2022
	(In thousands)
Energy industrial	$	88,940	$	94,415
Thermal barrier		91,860		39,320
Total assets of reportable segments		180,800		133,735
Construction in progress		299,943		209,050
All other corporate assets		124,403		300,631
	$	605,146	$	643,416

(14) Other Current Assets

The CARES Act provides an employee retention credit (CARES Employee Retention Credit), which is ~~presented~~a refundable tax credit against certain employment taxes of up to $5,000 per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10,000 of qualified wages per employee through December 31, 2020. Additional relief provisions were passed by the United States government, which extend and slightly expand the qualified wage caps on these credits through December 31, 2021. Based on these additional provisions, the tax credit is now equal to 70% of qualified wages paid to employees during a quarter, and the limit on qualified wages per employee has been increased to $10,000 of qualified wages per quarter. The Company qualified for the tax credit under the CARES Act for qualified wages for the years ended December 31, 2020 and 2021. In September 2023, the Company submitted filings for CARES Employee Retention Credits totaling $2.2 million that are reported in the ~~following table:~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(In thousands)

Revenue:

U.S.

$
13,555

$
6,850

$
32,816

$
28,471

International

13,643

22,710

42,453

61,628

Total

$
27,198

$
29,560

$
75,269

$
90,099

~~Warranty Costs~~

~~The Company provides warranties for its products~~accompanying condensed consolidated balance sheet within prepaid expenses and ~~records the estimated cost~~other current assets as of ~~such warranties within cost of sales~~September 30, 2023, and in the ~~period that the related revenue is recorded. The Company’s standard warranty period extends to one year from the date~~accompanying statement 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~~operations for the ~~product.~~

~~The Company’s products may be utilized in systems that may involve new technical demands~~three and new configurations. As such, the Company regularly reviews and assesses whether warranty reserves shall be recorded in the period the related revenue is recorded. For an initial shipment of product in a system with new technical demands or configurations and where the Company is unsure of meeting the customer’s specifications, the Company will defer the recognition of product revenue and related costs until written customer acceptance is obtained.

~~During the~~ nine months ended September 30, 2017 and 2016, the Company recorded warranty expense of $0.9 million and $0.5 million, respectively. These specific warranty charges were related to product claims for two separate product application issues~~. These claims are outside the Company’s typical experience.~~2023.

(15) Subsequent Events

~~Recently Issued Accounting Standards~~

From time to time, new accounting pronouncements are issued by the FASB 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, 2016~~

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), which, for entities that do not measure inventory using the last-in, first-out (LIFO) or retail inventory method, changes the measurement principle for inventory from the lower of cost or market to lower of cost and net realizable value. The ASU also eliminates the requirement for these entities to consider replacement cost or net realizable value less an approximately normal profit margin when measuring inventory. Public entities are required to apply the standard for fiscal years beginning after December 15, 2016, including interim periods within those fiscal periods. The Company ~~adopted this standard effective January 1, 2017. Application~~has evaluated subsequent events through November 2, 2023, the date of issuance of the ~~standard has not resulted in any material impact to the Company’s~~ consolidated financial statements ~~or other disclosures.~~

In March 2016, the FASB issued ASU 2016-09. The amendment simplifies several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. For public entities, the amendments in ASU 2016-09 are effective for interim and annual reporting periods beginning after December 15, 2016. The Company has adopted this standard effective January 1, 2017. The provisions of ASU 2016-09 related to the timing of accounting for the ~~forfeitures of share based awards was adopted using a modified retrospective~~

~~method by means of a cumulative-effect adjustment to equity as of January 1, 2017 of $0.3 million. The other provisions of ASU 2016-09 have been adopted prospectively.~~

~~Standards to be Implemented~~

~~In August 2015, the FASB issued a deferral of ASU 2014-09, Revenue from Contracts with Customers. The standard will eliminate the transaction-~~three and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. As a result of the deferral, public entities are required to apply the revised revenue recognition standard for the annual reporting period beginning on or after December 15, 2017, including interim periods within that annual reporting period. Early application is permitted only as of annual and interim periods in fiscal years beginning after December 15, 2016. The Company expects to adopt the modified retrospective method. The Company is in the process of reviewing its current accounting policies and practices to identify potential differences that would result from applying the requirements of the new standard to its revenue contracts. The Company will continue to evaluate the impact on the financial statements and the related disclosures during the fourth quarter of 2017. In addition, during the fourth quarter of 2017, the Company plans to identify and implement, if necessary, appropriate changes to its business processes, systems and controls to support recognition and disclosure under the new standard. The Company will adopt the new standard on January 1, 2018.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). FASB ASU 2016-02 modifies the accounting for leases and requires that all leases be recorded on the consolidated balance sheets as assets and liabilities. This update is effective for fiscal years beginning after December 15, 2018. Early application is permitted. The Company has not yet selected a transition method and is evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures. The Company currently expects that most of its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon the adoption of ASU 2016-02, which will increase the total assets and total liabilities that it reports relative to such amounts prior to adoption.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (ASU 2016-15). This amendment addresses eight classification issues related to the statement of cash flows. For public business entities, the amendments in ASU 2016-15 are effective for public business entities for annual and interim periods in fiscal years beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. The Company has completed its assessment of the amendment and has determined that adoption will have no significant impact to the Company’s consolidated financial statements or other disclosures. The Company will adopt the provisions of the amendment effective January 1, 2018.

~~(3) Inventories~~

~~Inventories consist of the following:~~

September 30,

December 31,

2017

2016

(In thousands)

Raw materials

$
3,031

$
3,511

Finished goods

10,961

9,357

Total

$
13,992

$
12,868

~~(4) Property, Plant and Equipment, Net~~

~~Property, plant and equipment consist of the following:~~

September 30,

December 31,

Useful

2017

2016

life

(In thousands)

Construction in progress

$
7,821

$
11,139

—

Buildings

23,928

23,901

30 years

Machinery and equipment

118,278

113,659

3-10 years

Computer equipment and software

7,960

7,679

3 years

Total

157,987

156,378

Accumulated depreciation

(79,914
)

(71,984
)

Property, plant and equipment, net

$
78,073

$
84,394

~~Depreciation expense was $8.0 million and $7.3 million for the~~ nine months ended September 30, ~~2017~~2023.

Item 2. Management’s Discussion and ~~2016, respectively.~~Analysis of Financial Condition and Results of Operations.

Construction in progress totaled $7.8 million and $11.1 million at September 30, 2017 and December 31, 2016, respectively, which included engineering designs and other pre-construction costs for the planned manufacturing facility in Statesboro, Georgia of $7.2 million at September 30, 2017 and December 31, 2016.

The Company anticipates that the impact of constrained capital investment and low activity levels in the global energy markets will continue into 2018. With this view of the market, the Company delayed the board approved project to construct the Statesboro, Georgia manufacturing facility and its related financing to better align the capacity expansion with the Company’s assessment of future demand.

During 2016, the Company entered into a supply agreement and a side agreement (together, the Supply Agreement) and a joint development agreement (the JDA) with BASF SE (BASF). Pursuant to the Supply Agreement, the Company agreed to sell exclusively to BASF the Company’s Spaceloft ^® A2 product at annual volumes specified by BASF, subject to certain volume limits. The Supply Agreement will terminate on December 31, 2027. Upon expiration of the Supply Agreement, the Company will be subject to a post-termination supply commitment for an additional two years. The JDA is designed to facilitate the collaboration between the parties on the development and commercialization of new products.

In addition, under the terms of the Supply Agreement, BASF will make a non-interest bearing prepayment to the Company in the aggregate amount of $22 million during the construction of the Company’s planned manufacturing facility in Statesboro, Georgia (Plant Two), subject to the Company’s prior satisfaction of certain preconditions, including securing a debt commitment from a third party lender for at least $30 million. BASF is obligated to pay the prepayment to the Company in eight equal consecutive quarterly installments commencing on the first day of the calendar quarter following the date on which the preconditions are met. Once commenced, BASF’s obligation to make such quarterly payments shall be subject to postponement in the event of delays of three months or more in the projected date of completion of Plant Two by a commensurate number of months.

~~After October 1, 2018, the Company will, at BASF’s instruction, credit up to 25.3% of any amounts invoiced by the Company for Spaceloft~~ ^® A2 product sold to BASF against the prepayment balance. However, BASF has no obligation to purchase products under the Supply Agreement. If any of the prepayment remains uncredited against amounts invoiced by the Company as of September

30, 2023, BASF may request that the Company repay the uncredited amount to BASF in four equal quarterly installments beginning on December 31, 2023. The repayment obligation will be secured by a security interest in real estate, plant and equipment at the Company’s Rhode Island and Georgia manufacturing facilities.

The Company anticipates that the impact of constrained capital investment and low activity levels in the global energy markets will continue into 2018. With this view of the market, the Company delayed the board approved Plant Two project and its related financing to better align the capacity expansion with the Company’s assessment of future demand. As a result, the Company has yet to fulfill the prepayment preconditions and commencement of the quarterly prepayments from BASF will be delayed until the preconditions are satisfied.

The Company entered into an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (Loan Agreement), on August 31, 2014, which has been subsequently amended from time to time. On January 27, 2017, the Loan Agreement was amended to extend the maturity date of the revolving credit facility to January 28, 2018. On September 27, 2017, the Loan Agreement was further amended to modify required minimum Adjusted EBITDA. Under the Loan Agreement, the Company may borrow up to $20 million subject to compliance with certain covenants and borrowing base limitations. At the Company’s election, the interest rate applicable to borrowings may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, the Company is required to pay a monthly unused line fee of 0.5% per annum of the average unused portion of the facility. The Company’s obligations under the Loan Agreement are secured by a first priority security interest in all assets of the Company, including those at the East Providence facility, except for certain exclusions.

During the nine months ended September 30, 2017, the Company borrowed and repaid $6.0 million under the line of credit. At September 30, 2017 and December 31, 2016, the Company had no amounts drawn on the revolving credit facility. Under the Loan Agreement, the Company is required to comply with both non-financial and financial covenants, including minimum Adjusted EBITDA and minimum Adjusted Quick Ratio, as defined. At September 30, 2017, the Company was in compliance with all such financial covenants.

The Company previously provided its landlord for its Northborough, Massachusetts facility with letters of credit securing certain obligations. As of January 31, 2017, these obligations were released by the landlord. In addition, the Company has been required to provide certain customers with letters of credit securing obligations under commercial contracts. The Company had outstanding letters of credit backed by the revolving credit facility of $2.4 million and $2.7 million at September 30, 2017 and December 31, 2016, respectively, which reduce the funds otherwise available to the Company under the facility. Based on the available borrowing base, the effective amount available to the Company under the revolving credit facility at September 30, 2017 was $11.3 million after consideration of the $2.4 million of outstanding letters of credit.

The Company is, from time to time, a party to litigation that arises in the normal course of its business operations. See Part II, Item 1 (“Legal Proceedings”) of this Quarterly Report on Form 10-Q for a description of certain of the Company’s current legal proceedings. The Company is not presently a party to any litigation for which it believes a loss is probable requiring an amount to be accrued or a possible loss contingency requiring disclosure.

~~The Company leases office and warehouse space in Northborough, Massachusetts and East Providence, Rhode Island.~~

For leases that contain fixed increases in the minimum annual lease payment during the original term of the lease, the Company recognizes rental expense on a straight-line basis over the lease term, and records the difference between rent expense and the amount currently payable as deferred rent.

Lease incentives for allowances for qualified leasehold improvements received from the landlord are amortized on a straight-line basis over the lease term. These improvements and the funding received from the landlord are recorded as fixed asset additions and a deferred rent liability on the consolidated balance sheet. The deferred rent liability is being amortized as a reduction to rent expense over the life of the lease.

Cash flows from the landlord for the reimbursement of improvements have been reported within cash from operating activities, while cash flows remitted for the acquisition of leasehold improvements are classified within investing activity cash flows. As of

~~September 30, 2017, deferred rent included $1.1 million in deferred lease incentives and $0.4 million of straight-line rental obligations.~~

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

~~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:~~

In the table above, anti-dilutive shares consist of those common stock equivalents that have (i) an exercise price above the average stock price for the period or (ii) related average unrecognized stock compensation expense sufficient to buy back the entire amount of shares. 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.

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, ~~2016,~~2022, filed with the U.S. Securities and Exchange Commission (SEC) on March ~~2, 2017,~~16, 2023, 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.~~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.~~Report and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2023 and June 30, 2023.

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.

~~Overview~~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 ~~infrastructure~~industrial and ~~building~~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-use~~end-user customers select our products where thermal performance is critical and to save money, ~~reduce energy use,~~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 ~~infrastructure.~~industrial. 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 ~~product~~ revenue from ~~the building materials and~~a number of other end markets. Customers in these markets use our products for applications as diverse as ~~wall systems,~~ 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 ~~sale~~global insulation market, the electric vehicle market and in a number of ~~our line of aerogel blankets.~~ 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-use~~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 3050 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 market. We have developed and are commercializing our proprietary line of PyroThin aerogel thermal barriers for use in battery packs in electric vehicles. Our ~~salespeople also work~~PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to ~~educate insulation contractors about~~impede the ~~technical~~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 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.

The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the electric vehicle market is significant. Accordingly, we are hiring additional personnel, incurring additional operating ~~cost advantages of~~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 ~~aerogel blankets.~~battery material research facilities, among other items.

We ~~also perform research services under~~have entered into production contracts with ~~various agencies~~certain major OEMs, including General Motors LLC ("General Motors"), to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. Pursuant to the contracts with General Motors, 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 ~~U.S. government,~~agreements, which expire at various times from 2026 through 2034. While General Motors 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, General Motors may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with General Motors's standard purchase terms, including quality and warranty provisions customary in the Department of Defense and the Department of Energy, and other institutions. Research performed under contract with government agencies and other institutions enables us to develop and leverage technologies into broader commercial applications.automotive industry.

We manufacture our products using our proprietary technology at our facility in East Providence, Rhode Island. We ~~completed the construction and start-up of a third production line in~~have operated the East Providence facility ~~during 2015, which~~since 2008 and have increased our ~~annual nameplate~~ capacity in phases to approximately 50$250.0 million ~~square feet~~in annual revenue. To meet expected growth in demand for our aerogel products in the electric vehicle market, we have been in the process of expanding our aerogel ~~blankets. During the first quarter of 2016, we announced the planned construction of~~blanket capacity by constructing a second manufacturing ~~facility~~plant in ~~Statesboro, Georgia~~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 supply of our energy industrial products from one or more contract manufacturers in China beginning in 2024 will permit us to achieve a ~~package~~target revenue capacity of ~~incentives~~approximately $550.0 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 in China will provide us with adequate manufacturing capacity or supply for that expected demand. Furthermore, when we ramp up construction on the ~~State~~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 for completion of the second plant.

On September 28, 2023 (the “First Amendment Effective Date”), Aspen Aerogels Georgia, ~~and local governmental authorities. We have elected to delay construction of this facility to better align the capacity expansion with~~LLC, a Georgia limited liability company (the “Borrower”), our ~~assessment of future demand.~~

~~During 2016, we~~wholly-owned subsidiary, entered into a ~~strategic partnership~~first amendment (the “First Amendment”) to amend that certain loan agreement, dated as of November 28, 2022 (the “Loan Agreement”), by and among (i) the Borrower, (ii) us, as a guarantor and (iii) Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company (“Aspen RI” and, together with ~~BASF SE~~the Borrower and us, each, a “Loan Party” and collectively, the “Loan Parties”), as a guarantor, and (iv) General Motors Holdings LLC (“GM”), as lender.

Pursuant to ~~develop~~the First Amendment, the Loan Parties and ~~commercialize products~~GM agreed to, among other things, (i) extend the draw period for the ~~building materials~~delayed draw senior secured term loans (the “Loan”), from beginning on January 1, 2023 and ~~other markets.~~ ~~The strategic partnership included~~ending on September 30, 2023, to instead a ~~supply agreement governing~~period beginning on the ~~sale~~date that is twelve (12) months prior to the date agreed upon by Borrower and GM for the start of production at an aerogel manufacturing facility in Bulloch County, Georgia (the “Plant”) under the applicable GM Purchase Contracts (as defined therein) 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 Loan Agreement from March 31, 2025 to September 30, 2025; and (iii) add the following financial covenants measured starting from the fiscal quarter ending December 31, 2024 and at the end of each fiscal quarter thereafter (each such fiscal quarter end, a “Test Date”): (A) a covenant requiring that the Total Leverage Ratio (as defined therein) shall not exceed 5.00:1.00 as of the applicable Test Date and (B) a covenant requiring that the ratio of our ~~Spaceloft A2 product~~total indebtedness and our subsidiaries (with certain exceptions) to ~~BASF and~~our consolidated equity shall not be greater than 1.20x as of the applicable Test Date, in each case, with compliance demonstrated through the submission of a ~~joint development agreement targeting innovative products and technologies. Subject~~certain compliance certificate (the “Financial Covenants”), subject to ~~certain preconditions, BASF~~customary equity cure rights with respect to the Financial Covenants.

The First Amendment also ~~agreed~~amended the conditions precedent to ~~make a series~~funding to (i) require the Borrower to provide evidence that cash proceeds of ~~prepayments to us~~one or more equity and/or debt financing arrangements of not less than $500.0 million in the aggregate (inclusive of ~~$22 million during~~all equity investments contributed to the Borrower for use in connection with the Plant prior to the First Amendment Effective Date) have been contributed to and disbursed by the Borrower in the manner prescribed in a pre-determined project budget (subject to a permitted variance) to fund the construction of ~~our planned manufacturing facility in Statesboro, Georgia. The prepayments will be either credited against amounts invoiced to BASF~~and equipment for ~~Spaceloft A2 or repaid by us to BASF after December 31, 2023. As a result of our decision to delay construction~~the first phase of the ~~Statesboro facility, we have yet to fulfill the preconditions,~~Plant and ~~commencement~~(ii) require that 70% of the ~~prepayments from BASF will be delayed until~~total cost in connection with the ~~preconditions are satisfied.~~construction and operation of the Plant has been fully funded prior to such applicable borrowing under the Loan Agreement.

In July 2017, we announced the launch of a new product, Pyrogel® HPS, a high-temperature aerogel blanket engineered to provide thermal conductivity and economic performance at service temperatures of up to 650°C (1200°F).Financial Summary

Our revenue for the nine months ended September 30, ~~2017~~2023 was ~~$75.3~~$154.5 million, which represented ~~a decrease~~an increase of ~~$14.8~~$33.7 million, or 28%, from $120.8 million for the nine months ended September 30, ~~2016.~~2022. Net loss for the nine months ended September 30, ~~2017~~2023 was ~~$17.6~~$45.3 million and net loss per ~~diluted~~ share was ~~$0.76.~~$0.65. Net loss for the nine months ended September 30, ~~2016~~2022 was ~~$6.3~~ $73.1million and net loss per ~~diluted~~ share was ~~$0.27.~~$2.03.

We regularly review a number of metrics, including the following key metrics, 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 ~~product~~ shipments in square feet. ~~We estimate our annual nameplate capacity was approximately 50 million square feet of aerogel blankets at September 30, 2017.~~ 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, ~~in square feet~~including revenue recognized over time, 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, ~~which occur~~ from time to time, ~~that~~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 ~~costs,~~expenses, the costs associated with ~~and timing of~~capacity expansions and start-up of additional production capacity, and the amount and timing of operating expenses, including patent enforcement costs. As we build out our manufacturing capacity in the longer term, we expect increased manufacturing expenses will periodically have a negative impact on net income (loss), earnings per share and Adjusted EBITDA, but will set the framework for improved performance in the long term.expenses. Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to ~~period,~~period.

We expect to maintain strong revenue growth during 2023 driven by a continued post-COVID recovery in ~~particular when we expand~~the energy industrial market, accelerating demand in the electric vehicle 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 ~~capacity.~~

capabilities and address any potential supply chain issues to meet this expected demand. As a result, of the conclusion of a multiyear petrochemical project with a major Asian energy company, which comprised 25% of our product revenue during 2016, in combination with the impact of constrained capital investment and low activity levels in the global energy infrastructure market, we expect to experience a decrease in ~~revenue, an increase in~~both net loss and ~~loss per share and a decrease in~~ Adjusted EBITDA during the year ending December 31, 2017 versus the comparable period in 2016. Given fixed cost structures and lag times for implementing reductions of certain variable costs, in combination with a planned decrease in manufacturing output, the percentage increase in net loss and loss per share and the percentage decrease in Adjusted EBITDA could be significantly greater than any percentage decrease in revenue during the year.2023.

We recognize ~~product~~ revenue from the sale of our ~~line of~~energy industrial aerogel products and ~~research services revenue from the provision of services under contracts with various agencies of the U.S. government and other institutions. Product revenue~~thermal barriers. Revenue is recognized upon ~~transfer~~the satisfaction of ~~title and risk of loss, which is upon shipment or delivery.~~contractual performance obligations.

We record deferred revenue for ~~product~~ 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 ~~products being delivered.~~the completion of required performance obligations.

We ~~anticipate that constrained capital investment and low activity levels~~project revenue growth during 2023 due to accelerating demand in the ~~global energy~~electric vehicle market ~~will continue into 2018, particularly~~and continued market share gains in the ~~global downstream~~sustainable insulation materials market. As a result of this constrained capital investment and low activity levels in the global energy market, as well as the conclusion of the multiyear petrochemical project with a major Asian energy company, which comprised 25% of our product revenue during 2016, we expect to continue to experience a decrease in revenue during the year ending December 31, 2017.

Cost of product revenue consists primarily of materials and manufacturing ~~expense, including labor, utilities, maintenance expense and depreciation on manufacturing assets.~~expense. Cost of product revenue is recorded when the related product revenue is recognized. ~~Cost~~

Material is our most significant component of cost of product revenue ~~also~~and includes ~~stock-based compensation of manufacturing employees~~fibrous batting, silica materials and ~~shipping costs.~~

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 ~~sales~~revenue in the period that the related revenue is ~~recorded.~~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 ~~longer term, we expect~~cost of our raw materials, 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 ~~the aggregate~~absolute dollars during 2023 due to ~~decline~~projected growth in product shipments, but decrease as a percentage of revenue ~~as we seek~~due to ~~achieve higher~~projected increases in average selling prices, ~~material sourcing improvements, quality improvements~~improved manufacturing, and ~~manufacturing yield enhancements for our aerogel products.~~fabrication yields and a favorable mix of products sold.

Manufacturing expense is also a significant component of cost of revenue. ~~As we increase~~Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing ~~capacity through our planned construction~~assets. Manufacturing expense also includes stock-based compensation of manufacturing employees and ~~operation of a second manufacturing facility and, over time, potentially expand the production lines at the second facility, we~~shipping costs. We expect that manufacturing expense ~~as a percentage of product revenue~~ will increase ~~following each expansion but will decrease~~ in ~~the long-term with increased revenues supported by the effect of completed capacity expansions.~~

As a result of the conclusion of the multiyear petrochemical project with a major Asian energy company, which comprised 25% of our product revenue during 2016, in combination with the impact of constrained capital investmentabsolute dollars and ~~low activity levels in the global energy infrastructure market, we expect to continue to experience a decrease in revenue and associated~~ increase ~~in manufacturing expense~~ as a percentage of revenue during ~~2017.~~

~~Cost~~2023 due to increased staffing and spending levels in support of ~~research services revenue consists~~our thermal barrier business, including the start-up and operation of ~~direct labor costs~~an automated fabrication facility in Monterrey, Mexico. We are also continuing to monitor the impact of ~~research personnel engaged~~engaging one or more contract manufacturers in China to supply our aerogel products for the ~~contract research, third-party consulting~~energy industrial market beginning in 2024 on our manufacturing expense and ~~associated direct material costs. This~~ cost of product revenue.

In total, we expect that cost of product revenue ~~also includes overhead expenses associated with~~

~~project resources, development tools~~will increase in absolute dollars during 2023 versus 2022 and ~~supplies. Cost~~decrease as a percentage of ~~research services~~ revenue ~~is recorded when~~versus 2022 driven by the ~~related research services~~costs to support our expected higher run-rate revenue ~~is recognized.~~in future periods.

Our gross profit as a percentage of revenue is affected by a number of factors, including the volume of ~~aerogel~~ products produced and sold, the mix of ~~aerogel~~ 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 ~~to vary significantly~~ from period to period. ~~As we build out our manufacturing capacity,~~

During 2023, we expect ~~increased manufacturing expenses will periodically have a significant negative impact on~~ gross profit to increase in ~~the periods following any such expansion.~~

~~As a result of the conclusion of the multiyear petrochemical project with a major Asian energy company, which comprised~~ ~~25%~~ ~~of our product revenue during 2016, in combination with the impact of constrained capital investment~~both absolute dollars and ~~low activity levels in the global energy infrastructure market, we expect to continue to experience a decrease in revenue and an associated decrease in gross profit and gross profit~~ as a percentage of total revenue ~~during 2017. Given fixed cost structures and lag times for implementing reductions~~ due to the combination of ~~certain variable~~a projected increase in total revenue combined with projected reduction in material costs as a percentage of total revenue, offset, in ~~combination with~~part, by a ~~planned decrease~~projected increase in manufacturing ~~output, the~~expense as a percentage ~~decrease in gross profit could be significantly greater than any percentage decrease in~~of revenue.~~However, in~~

In the longer term, we expect gross profit to improve in absolute dollars and as a percentage of revenue due to expected increases in ~~manufacturing productivity and~~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 ~~expected capacity expansions, improvements in manufacturing yields~~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.~~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 ~~that~~ our research and development expenses will increase in absolute dollars, ~~but decrease~~while decreasing as a percentage of revenue in 2023 and in the longer ~~term, we expect such expenses will continue to increase as a percentage of revenue during 2017.~~term.

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities related costs. We ~~plan to expand~~expect our ~~sales force and sales consultants globally to drive anticipated growth in customers and demand for our products. While we expect that~~ sales and marketing expenses will increase in absolute dollars, ~~but decrease~~while decreasing as a percentage of revenue in 2023 and in the ~~longer-term, we expect such expenses to continue to increase as a percentage of revenue during 2017.~~longer term.

General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit and tax consulting costs, and expenses for our executive, finance, legal, human resources and information technology organizations. General and administrative expenses have increased as we have incurred additional costs related to operating as a publicly-traded company, which include costs offees, compliance with securities, corporate governance and related laws and regulations, investor relations expenses ~~increased~~and insurance premiums, including director and officer ~~insurance, and increased audit and legal fees. In addition, we~~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 and continued expansion of our manufacturing operations.~~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. ~~During 2017, we~~We expect ~~general and administrative expense will continue to increase both in absolute dollars and as a percentage of revenue. In the longer term, we expect~~ that our general and administrative expenses will increase in absolute dollars but 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.

~~For~~Interest expense, convertible note - related party is net of the ~~nine months ended September 30, 2017, other~~capitalized interest related to the $100.0 million in aggregate initial principal amount of our 2022 Convertible Note and $13.0 million relating to payment in-kind.

Interest expense, net ~~consisted primarily~~consists of ~~fees~~interest expense related to our revolving credit ~~facility. For~~facility and interest earned on the ~~nine months ended September 30, 2016,~~cash balances invested in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government.

Employee retention credit consists of other ~~expense, net consisted primarily of postponed financing costs, as well as costs~~income related to our ~~revolving credit facility.~~submitted filings for CARES Employee Retention Credits.

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.

Three months ended September 30, ~~2017~~2023 compared to the three months ended September 30, ~~2016~~2022

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

~~The following chart sets forth product shipments in square feet for the periods presented:~~

Total revenue ~~decreased by $2.4~~increased $24.0 million, or 8%66%, to ~~$27.2~~$60.7 million for the three months ended September 30, ~~2017~~2023 from ~~$29.6~~$36.7 million in the comparable period in ~~2016 primarily as a~~2022. The increase in total revenue was the result of ~~a decrease~~an increase in both thermal barrier and energy industrial revenue.

~~Product~~shipments in square feet associated with recognized revenue, ~~decreased~~including revenue recognized over time, for the periods presented:

Energy industrial revenue increased by ~~$2.1~~$3.1 million, or 7%13%, to ~~$26.8~~$27.9 million for the three months ended September 30, ~~2017~~2023 from ~~$28.9~~$24.8 million in the comparable period in ~~2016.~~2022. This ~~decrease~~increase was ~~principally the result of a decrease in sales~~driven by project-based demand in the ~~Asian~~subsea market ~~led by~~and a more favorable mix of product shipments in the ~~conclusion of the multiyear~~global petrochemical ~~project with a major Asian energy company,~~and refinery markets in Latin America, offset, in part, by ~~an increase in revenue~~a decrease in the ~~U.S., South American and European markets and growth~~volume of shipments in the ~~subsea market during the three months ended September 30, 2017.~~global petrochemical and refinery markets of Asia, North America and Europe.

~~Product~~Energy industrial revenue for the three months ended September 30, ~~2017~~2023 included $5.0 million in sales to a subsea contractor, $4.0 million and $3.2 million in sales to two North American distributors, respectively, and $3.0 million in sales to a South American contractor. Product revenue for the three months ended September 30, 2016 included $9.3$8.0 million to a ~~major Asian energy company and $3.8~~North American distributor, in comparison to $10.5 million ~~to an Asian distributor.~~for the comparable period of 2022.

The average selling price per square foot of our energy industrial products increased by ~~$0.66,~~$1.03, or ~~27%~~28%, to ~~$3.10~~$4.72 per square foot for the three months ended September 30, ~~2017~~2023 from ~~$2.44~~$3.69 per square foot for the three months ended September 30, ~~2016. This~~2022. The increase in average selling price reflected the impact of price increases enacted in 2023 and a ~~year-over-year increase~~change in the mix of ~~high-priced subsea~~ products ~~and the impact of price increases~~

~~enacted~~sold, as we strive to maximize capacity in ~~early 2017.~~our aerogel manufacturing facility. This increase in average selling price had the effect of increasing product revenue by ~~$5.7~~$6.1 million for the three months ended September 30, ~~2017~~2023 from the comparable period in ~~2016.~~2022.

~~Product~~In volume terms, energy industrial product shipments decreased by ~~3.2~~0.8 million square feet, or ~~27%~~12%, to ~~8.6 million square feet of aerogel products for the three months ended September 30, 2017, as compared to 11.8~~5.9 million square feet for the three months ended September 30, ~~2016. This~~2023, as compared to 6.7 million square feet for the three months ended September 30, 2022. The decrease in ~~product shipments~~volume had the effect of decreasing product revenue by ~~$7.8~~$3.0 million for the three months ended September 30, ~~2017~~2023 from the comparable period in ~~2016.~~2022.

~~Research services~~Thermal barrier revenue ~~decreased by $0.3 million, or 43%, to $0.4~~was $32.8 million for the three months ended September 30, ~~2017 from $0.7 million in the comparable period in 2016. The decrease was primarily due~~2023 as compared to ~~the timing and amount of funding available under existing research contracts during the three months ended September 30, 2017 from the comparable period in 2016.~~

Product revenue was 99% and 98% of total revenue for the three months ended September 30, 2017 and 2016, respectively. Research services revenue was 1% and 2% of total revenue for the three months ended September 30, 2017 and 2016, respectively.

Three Months Ended September 30,

2017

2016

Change

Percentage
of Related

Percentage
of Total

Percentage
of Related

Percentage
of Total

Amount

Revenue

Revenue

Amount

Revenue

Revenue

Amount

Percentage

($ in thousands)

Cost of revenue:

Product

$
22,115

82
%

81
%

$
22,790

79
%

77
%

$
(675
)

(3
)%
Research services

135

35
%

1
%

368

54
%

1
%

(233
)

(63
)%
Total cost of revenue

$
22,250

82
%

82
%

$
23,158

78
%

78
%

$
(908
)

(4
)%

~~Total cost of revenue decreased by $0.9 million, or 4%, to $22.3~~$11.9 million for the three months ended September 30, ~~2017~~2022. During the three months ended September 30, 2023 and 2022, thermal barrier revenue included $29.5 million and $9.2 million, respectively, to a major U.S. automotive OEM.

Total cost of revenue increased $3.9 million, or 9%, to $47.0 million for the three months ended September 30, 2023 from ~~$23.2 million~~$43.1 in the comparable period in ~~2016.~~2022. The ~~decrease~~increase in total cost of revenue was the result of ~~both~~an increase in thermal barrier cost of revenue, offset by a decrease in ~~product~~energy industrial cost of revenue.

Energy industrial cost of revenue ~~and a decrease in research services cost of revenue.~~

~~Cost of product revenue~~ decreased ~~by $0.7~~$0.6 million, or 3%, to $22.1 million for the three months ended September 30, ~~2017~~2023 from ~~$22.8~~$22.7 million in the comparable period in ~~2016. This $0.7~~2022. The $0.6 million decrease was the result of a ~~decrease in manufacturing expense of $0.8~~$0.2 million ~~offset, in part, by a $0.1 million increase in material costs. The percentage~~ decrease in material costs ~~was lower than the decrease in product revenue~~ due to ~~a shift~~change in the product mix ~~toward higher cost products~~ and a $0.4 million decrease in manufacturing ~~output.~~and other operating costs from the comparable period in 2022. The decrease in manufacturing ~~expense~~costs was ~~the result~~driven by decrease in compensation and related costs of ~~decreases in utilities expense~~$0.7 million, depreciation and facility related expenses of $0.4 million ~~maintenance expense of $0.2 million, compensation expense of $0.2 million~~ and other ~~expense~~manufacturing and operating costs of $0.2 million, offset ~~in part,~~ by an increase in ~~depreciation expense~~utilities expenses of ~~$0.2~~$0.9 million.

~~The~~Thermal barrier cost of ~~product revenue as a percentage of product~~ revenue increased $4.5 million to 82% during the three months ended September 30, 2017 from 79% during the three months ended September 30, 2016. This increase was principally the result of a shift in mix to higher cost products and a decrease in manufacturing output during the three months ended September 30, 2017 versus the comparable period in 2016.

~~The cost of research services revenue decreased by $0.2 million, or 63% to $0.1~~$24.9 million for the three months ended September 30, ~~2017 from $0.3 million in the comparable period in 2016. Cost of research service revenue~~2023 as ~~a percentage of research services revenue decreased~~compared to ~~35% during the three months ended September 30, 2017 from 54% in the comparable period in 2016 due to a reduction in outside services utilized to support the contracted research.~~

~~Gross profit decreased by $1.5 million, or 23%, to $4.9~~$20.4 million for the three months ended September 30, ~~2017~~2022. The $4.5 million increase was the result of a $1.3 million increase in material costs and a $3.2 million increase in manufacturing costs. The increase in manufacturing costs was driven by a $1.9 million increase in depreciation and facility costs, $1.0 million increase in utilities expenses and other manufacturing and operating costs of $0.6 million, offset by a decrease in compensation and related costs of $0.3 million.

Gross profit increased by $20.1 million, or 317%, to $13.8 million for the three months ended September 30, 2023 from ~~$6.4~~$6.3 million of gross loss in the comparable period in ~~2016.~~2022. The ~~decrease~~increase in gross profit was the result of the ~~$2.4~~$24.0 million ~~decrease~~increase in total revenue, offset by the $3.9 million increase in total cost of revenue. The increase in gross profit reflects the increase in revenue, offset, in part by, ~~the $0.9 million decrease in total cost of revenue.~~ ~~The decrease in revenue was principally~~ ~~due~~additional resources to ~~the decrease in sales to a major Asian energy company associated with the conclusion of a multiyear petrochemical project, offset, in part, by an increase in~~support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products from the ~~U.S.~~comparable period in 2022.

Research and ~~project related revenue in South America and the subsea market during~~development expenses decreased by $0.5 million, or 10%, to $4.2 million for the three months ended September 30, ~~2017~~.2023 from $4.7 million in the comparable period in 2022. The ~~decrease in total cost of revenue was a result of the $0.8~~$0.5 million decrease reflects decreases in ~~manufacturing costs~~professional fees of $0.6 million, compensation and ~~the $0.2 million decrease in research services costs,~~ ~~offset, in part, by a~~related expenses of $0.1 million and other research and development expenses of $0.1 million, offset by an increase in ~~material costs~~ ~~during the~~ ~~three months ended September 30, 2017~~.facility related expenditures of $0.3 million.

~~Gross profit~~Research and development expenses as a percentage of total revenue decreased to ~~18%~~7% of total revenue for the three months ended September 30, ~~2017~~2023 from ~~22%~~13% in the comparable period in ~~2016 due principally to a shift in mix to higher cost products.~~ For the year ending December 31, 2017, we expect gross profit as a percentage of total revenue will decrease versus the comparable period 2016. This projected decrease in gross profit reflects our expectation that the percentage reduction in cost of total revenue will not fully offset the expected percentage reduction in total revenue during 2017 due to the high proportion of fixed costs in our manufacturing facility2022.

~~Research and development~~marketing expenses increased by ~~$0.1~~$1.1 million, or ~~11%~~15%, to ~~$1.5~~$8.4 million for the three months ended September 30, ~~2017~~2023 from ~~$1.3~~$7.3 million in the comparable period in ~~2016.~~2022. The ~~$0.1~~$1.1 million increase was ~~primarily due to~~principally the result of increases in depreciation and facility related expenses of $0.9 million and an increase ~~of $0.1 million~~ in compensation and related ~~expenses.~~

~~Research and development~~ expenses ~~as a percentage~~ of total revenue increased to 5% for the three months ended September 30, 2017 from 4% in the comparable period in 2016 due to both the increase in research and development expenses and the decrease in total revenue for the three months ended September 30, 2017.

We expect that our research and development expenses during 2017 will increase from 2016 expense levels in support of new product development, improved manufacturing technology and the operation of our full scale pilot line. Due to the expected growth in research and development expenses and the projected decline in total revenue, we expect research and development expenses as a percentage of total revenue to increase in 2017. In the long term, we expect to continue to increase investment in research, development and engineering personnel, projects and infrastructure in support of efforts to expand and deepen our aerogel technology platform, develop new products, technologies and markets. However, we expect that research and development expenses will decline as a percentage of total revenue in the long-term due to projected growth in product revenue.

~~Sales and marketing expenses decreased by $0.3~~$0.4 million, ~~or 10%, to $2.8 million for the three months ended September 30, 2017 from $3.1 million in the comparable period in 2016. The $0.3 million decrease was driven~~offset by a decrease in ~~outside consulting expense~~professional fees of ~~$0.3~~$0.2 million.

Sales and marketing expenses as a percentage of total revenue ~~remained flat at 10%~~decreased to 14% of total revenue for the three months ended September 30, ~~2017~~2023 from 20% in the comparable period in 2022.

General and administrative expenses increased by $5.8 million, or 59%, to ~~the relatively proportional decrease in sales and marketing expenses and decrease in total revenue during~~$15.8 million for the three months ended September 30, ~~2017 versus the comparable period in 2016.~~

We expect sales and marketing expenses to increase during 2017 in line with a planned increase in personnel and marketing efforts. Due to the expected growth in sales and marketing expenses and the projected decline in total revenue, we expect sales and marketing expenses as a percentage of total revenue to increase in 2017. In the long term, we expect that sales and marketing expenses will increase in absolute dollars as we continue to increase sales personnel and marketing efforts in support of expected growth in demand for our products. However, we expect that sales and marketing expenses will decrease as a percentage of total revenue in the long-term due to projected growth in product revenue.

~~General and administrative expenses decreased by $0.7 million, or 15% to $3.8 million during the three months ended September 30, 2017~~2023 from ~~$4.4~~$10.0 million in the comparable period in ~~2016.~~2022. The ~~$0.7~~$5.8 million ~~decrease~~increase was ~~primarily~~ the result of ~~a decrease~~additional staffing combined with increases in ~~patent enforcement~~compensation and related costs of ~~$1.1~~$5.2 million ~~offset, in part, by an increase in compensation related~~and professional services expenses of ~~$0.2~~$1.0 million, and ~~an increase in~~ other general and administrative expenses of ~~$0.2~~$0.1 million, partially offset by a decrease in facility related expenditures of $0.5 million.

General and administrative expenses as a percentage of total revenue decreased to ~~14%~~26% for the three months ended September 30, ~~2017~~2023 from ~~15%~~27% in the comparable period in ~~2016. This decrease resulted from the fact that the percentage decline in general and administrative costs exceeded the percentage decline in total revenue during~~2022.

Other income (expense), net increased by $2.8 million to $1.5 million of other income for the three months ended September 30, ~~2017.~~

We expect general and administrative expenses to increase during 2017 given that we expect to pay incentive based compensation related to 2017 performance that we did not pay related to 2016 performance. Due to the expected increase in general and administrative expenses and the projected decline in total revenue, we expect general and administrative expenses as a percentage2023 from $1.3 million of ~~total revenue to increase in 2017.~~ We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part II, Item 1, of this Quarterly Report on Form 10-Q, if protracted, and similar actions could result in significant, on-going legalother expense in ~~future years.~~ In the ~~long term,~~ ~~we expect~~comparable period in 2022. The $2.8 million increase was the result of $2.2 million of Employee Retention Credits, $0.8 million of interest income and a $0.2 million net impact of capitalized interest relating to ~~continue to increase general and administrative personnel and expense levels to support the anticipated growth of~~ our ~~business and continued expansion of our manufacturing operations. As a result,~~Convertible Note in the ~~long term, we expect that general and administrative expenses will increase~~comparable period in ~~absolute dollars but decrease as a percentage~~2022.

Other expense, net, comprised primarily of costs related to our revolving credit facility, was less than $0.1 million during the three months ended September 30, 2017. During the three months ended September 30, 2016, other expense, net of $0.7 million consisted of a $0.7 million charge relating to postponed financing costs and less than $0.1 million of costs related to our revolving credit facility.

Nine months ended September 30, ~~2017~~2023 compared to the nine months ended September 30, ~~2016~~2022

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

~~The following chart sets forth product shipments in square feet for the periods presented:~~

Total revenue ~~decreased by $14.8~~increased $33.7 million, or ~~16%~~28%, to ~~$75.3~~$154.5 million for the nine months ended September 30, ~~2017~~2023 from ~~$90.1~~$120.8 million in the comparable period in ~~2016 primarily as a~~2022. The increase in total revenue was the result of ~~a decrease~~an increase in both thermal barrier and energy industrial revenue.

~~Product~~shipments in square feet associated with recognized revenue, ~~decreased~~including revenue recognized over time, for the periods presented:

Energy industrial revenue increased by ~~$14.6~~$6.9 million, or ~~17%~~8%, to ~~$73.7~~$97.3 million for the nine months ended September 30, ~~2017~~2023 from ~~$88.3~~$90.4 million in the comparable period in ~~2016.~~2022. This ~~decrease~~increase was ~~principally the result of a decrease in sales~~driven by project-based demand in the ~~Asian~~subsea market ~~led by~~and a more favorable mix of product shipments in the ~~conclusion of the multiyear~~global petrochemical ~~project with a major Asian energy company,~~and refinery markets in Latin America and Asia, offset, in part, by ~~an increase in revenue~~a decrease in the ~~U.S. market, including growth~~volume of shipments in the ~~LNG~~global petrochemical and ~~district energy~~refinery markets of North America and ~~by growth in South American, European and subsea markets. Product~~Europe.

Energy industrial revenue for the nine months ended September 30, ~~2017~~2023 included ~~$11.0~~$27.6 million ~~in sales~~ to a North American distributor, ~~and $7.5~~in comparison to $30.7 million ~~in sales to an Asian distributor. Product revenue~~ for the ~~nine months ended September 30, 2016 included $17.8 million to a major Asian energy company and $12.6 million to a North American distributor.~~comparable period of 2022.

The average selling price per square foot of our energy industrial products increased by ~~$0.25,~~$0.60, or ~~10%~~16%, to ~~$2.88~~$4.36 per square foot for the nine months ended September 30, ~~2017~~2023 from ~~$2.63~~$3.76 per square foot for the nine months ended September 30, ~~2016.~~2022. The increase in average selling price reflected ~~an increase in the mix of high-priced subsea products, a decrease in the mix of products sold to the major Asian energy company with lower, project-based pricing, and, to a lesser extent,~~ the impact of price increases enacted in ~~early 2017.~~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 ~~$6.4~~$13.4 million for the nine months ended September 30, ~~2017~~2023 from the comparable period in ~~2016.~~2022.

~~Product~~In volume terms, energy industrial product shipments decreased by ~~8.0~~1.7 million square feet, or ~~24%~~7%, to ~~25.6 million square feet of aerogel products for the nine months ended September 30, 2017 from 33.6~~22.3 million square feet for the nine months ended September 30, ~~2016. This~~2023, as compared to 24.0 million square feet for the nine months ended September 30, 2022. The decrease in ~~product shipments~~volume had the effect of decreasing product revenue by ~~$21.0~~$6.5 million the nine months ended September 30, 2023 from the comparable period in 2022.

Thermal barrier revenue was $57.2 million for the nine months ended September 30, ~~2017 from the comparable period in 2016.~~

~~Research services revenue decreased by $0.2 million, or 13%,~~2023 as compared to ~~$1.6~~$30.3 million for the nine months ended September 30, ~~2017 from $1.8 million in the comparable period in 2016. The decrease was primarily due to the timing and amount of funding available under existing research contracts during~~2022. During the nine months ended September 30, ~~2017 from the comparable period in 2016.~~2023 and 2022, thermal barrier revenue included $49.0 million and $22.8 million to a major U.S. automotive OEM, respectively.

Product revenue was 98% of total revenue for both the nine months ended September 30, 2017 and 2016. Research services revenue was 2% of total revenue for both the nine months ended September 30, 2017 and 2016.


	Nine Months Ended September 30,																						Nine Months Ended September 30,
	2017								2016								Change						2023			2022			Change
			Percentage of Related			Percentage of Total					Percentage of Related			Percentage of Total											Percentage of Related			Percentage of Related
	Amount		Revenue			Revenue			Amount		Revenue			Revenue			Amount			Percentage			Amount		Revenue	Amount		Revenue	Amount			Percentage
	($ in thousands)																						($ in thousands)
Cost of revenue:
Product	$	63,706		86	%		85	%	$	69,505		79	%		77	%	$	(5,799	)		(8	)%
Research services		700		45	%		1	%		1,012		56	%		1	%		(312	)		(31	)%
Energy industrial																							$	73,065	75%	$	79,360	88%	$	(6,295	)	(8)%
Thermal barrier																								54,131	95%		50,751	167%		3,380		7%
Total cost of revenue	$	64,406		86	%		86	%	$	70,517		78	%		78	%	$	(6,111	)		(9	)%	$	127,196	82%	$	130,111	108%	$	(2,915	)	(2)%

Total cost of revenue decreased ~~by $6.1~~$2.9 million, or 9%2%, to ~~$64.4~~$127.2 million for the nine months ended September 30, ~~2017~~2023 from ~~$70.5 million~~$130.1 in the comparable period in ~~2016.~~2022. The decrease in total cost of revenue was ~~primarily~~ the result of a decrease in ~~product~~energy industrial cost of ~~revenue.~~

~~The~~revenue, offset by an increase in thermal barrier cost of ~~product~~revenue.

Energy industrial cost of revenue decreased ~~by $5.8~~$6.3 million, or 8%, to ~~$63.7~~$73.1 million for the nine months ended September 30, ~~2017~~2023 from ~~$69.5~~$79.4 million in the comparable period in ~~2016.~~2022. The ~~$5.8~~$6.3 million decrease was the result of a ~~reduction~~$6.9 million decrease in material costs ~~of $3.6~~due to change in the product mix, offset by a $0.6 million ~~associated with the decline~~increase in ~~product revenue and a reduction in~~ manufacturing expense of $2.2 million during the nine months ended September 30, 2017. The decrease in manufacturing expense was the result of decreases in utilities expense of $1.1 million, compensation expense of $0.8 million and other operating ~~expense~~costs from the comparable period in 2022. The increase in manufacturing costs was driven by an increase in utilities expenses of $0.7 million, offset ~~in part,~~ by ~~an increase in depreciation expense of $0.4 million.~~

The cost of product revenue as a percentage of product revenue increased to 86% during the nine months ended September 30, 2017 from 79% during the nine months ended September 30, 2016. This increase resulted from the fact that the percentage decline in cost of product revenue was less than the percentage decline in total revenue during the three months ended September 30, 2017 due to the high proportion of fixed expenses in our manufacturing operations and a shift in mix to higher cost products and a decrease in ~~manufacturing output.~~compensation and related costs of $0.1 million.

~~The~~Thermal barrier cost of ~~research services~~ revenue ~~decreased by $0.3~~increased $3.4 million ~~or 31%,~~ to ~~$0.7~~$54.1 million for the nine months ended September 30, ~~2017 from $1.0 million in the comparable period in 2016. The cost of research service revenue~~2023 as ~~a percentage of research services revenue decreased~~compared to 45% during the nine months ended September 30, 2017 from 56% in the comparable period in 2016 due to an increase in the mix of internal labor versus outside services required to support the contracted research.

~~Gross profit decreased by $8.7 million, or 45%, to $10.9~~$50.7 million for the nine months ended September 30, ~~2017~~2022. The $3.4 million increase was the result of a $6.3 million increase in manufacturing costs, offset by a $2.9 million decrease in material costs. The increase in manufacturing costs was driven by increases in depreciation and facility costs of $5.3 million and utilities expenses of $2.6 million and other manufacturing and operating costs of $1.0 million, offset by a decrease in compensation and related costs of $2.6 million.

Gross profit increased by $36.6 million, or 392%, to $27.3 million for the nine months ended September 30, 2023 from ~~$19.6~~$9.3 million of gross loss in the comparable period in ~~2016.~~2022. The ~~decrease~~increase in gross profit was primarily the result of the ~~$14.8~~$33.7 million ~~decrease~~

increase in total revenue ~~offset, in part, by~~and the ~~$6.1~~$2.9 million decrease in total cost of revenue. The ~~decrease~~increase in ~~revenue was principally associated with~~ gross profit reflects the decrease in ~~sales~~costs, offset, in part by, additional resources to ~~a major Asian energy company associated with the conclusion of a multiyear petrochemical project and the broad based decline in~~support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products from the ~~global downstream energy market~~.comparable period in 2022.

Research and development expenses decreased by $0.4 million, or 4%, to $12.3 million for the nine months ended September 30, 2023 from $12.7 million in the comparable period in 2022. The $0.4 million decrease reflects a decrease in ~~total cost~~professional fees of ~~revenue was driven principally~~$1.4 million, compensation and related costs of $0.2 million and other research and development expenses of $0.4 million, offset by ~~reduced material costs~~an increase in depreciation and ~~decreased manufacturing~~facility related expenses ~~associated with the 17% decline in product revenue.~~of $1.6 million.

~~Gross profit~~Research and development expenses as a percentage of total revenue decreased to ~~14%~~8% of total revenue for the nine months ended September 30, ~~2017~~2023 from ~~22%~~11% in the comparable period in ~~2016.~~ In 2017, we expect gross profit as a percentage of total revenue will decrease versus 2016. The expected decrease in gross profit reflects our expectation that the percentage reduction in cost of total revenue will not fully offset the expected percentage reduction in total revenue in 2017 due to a planned decrease in manufacturing output2022.

Sales and ~~the high proportion of fixed costs in our manufacturing facility.~~Marketing Expenses

~~Research and development~~marketing expenses increased by ~~$0.8~~$3.3 million, or ~~21%~~16%, to ~~$4.8~~$24.2 million for the nine months ended September 30, ~~2017~~2023 from ~~$3.9~~$20.9 million in the comparable period in ~~2016.~~2022. The ~~$0.8~~$3.3 million increase was ~~due to an increase~~principally the result of ~~$0.4 million~~increases in compensation and related ~~expenses, an increase~~costs of ~~$0.3~~$1.9 million, ~~in depreciation expense~~facility related expenditures of $1.2 million and ~~an increase of $0.1 million in~~ other ~~research expense.~~

Research and development expenses as a percentage of total revenue increased to 6% for the nine months ended September 30, 2017 from 4% in the comparable period in 2016 due to both the increase in research and development expenses and the decrease in total revenue for the nine months ended September 30, 2017.

~~We expect that our research and development expenses during 2017 will increase from 2016 expense levels in support of new product~~ ~~development~~, improved manufacturing technology and the operation of our full scale pilot line. Due to the expected growth in research and development expenses and the projected decline in total revenue, we expect research and development expenses as a percentage of total revenue to increase in 2017. In the long term, we expect to continue to increase investment in research, development and engineering personnel, projects and infrastructure in support of efforts to expand and deepen our aerogel technology platform, develop new products, technologies and markets. However, we expect that research and development expenses will decline as a percentage of total revenue in the long-term due to projected growth in product revenue.

~~Sales~~sales and marketing expenses increased by $0.3 million, or 4%, to $9.3 million for the nine months ended September 30, 2017 from $8.9 million in the comparable period in 2016. The $0.3 million increase was due to an increase in compensation related costs of $0.9 million, offset, in part, by a reduction in consulting and professional fees of $0.4 million and a reduction in marketing expense of $0.2 million.

Sales and marketing expenses as a percentage of total revenue ~~increased~~decreased to ~~12%~~16% for the nine months ended September 30, ~~2017~~2023 from ~~10%~~17% in the comparable period in ~~2016 due both~~2022.

General and administrative expenses increased by $14.8 million, or 56%, to ~~the increase in sales and marketing expenses and the decline in total revenue during~~$41.3 million for the nine months ended September 30, ~~2017.~~

We expect sales and marketing expenses to increase during 2017 in line with a planned increase in sales personnel and marketing efforts. Due to the expected growth in sales and marketing expenses and the projected decline in total revenue, we expect sales and marketing expenses as a percentage of total revenue to increase in 2017. In the long term, we expect that sales and marketing expenses will increase in absolute dollars as we continue to increase sales personnel and marketing efforts in support of expected growth in demand for our products. However, we expect that sales and marketing expenses will decrease as a percentage of total revenue in the long-term due to projected growth in product revenue.

~~General and administrative expenses increased by $2.1 million, or 17% to $14.4 million during the nine months ended September 30, 2017~~2023 from ~~$12.2~~$26.5 million in the comparable period in ~~2016.~~2022. The ~~$2.1~~$14.8 million increase was ~~primarily~~ the result of

additional staffing combined with increases in ~~patent enforcement costs of $1.2 million,~~ compensation and related costs of $12.6 million and professional services expenses of $2.7 million, offset by a $0.5 million ~~and~~decrease in other general and administrative ~~expenses of $0.4 million.~~expenses.

General and administrative expenses as a percentage of total revenue increased to ~~19%~~27% for the nine months ended September 30, ~~2017~~2023 from ~~14%~~22% in the comparable period in ~~2016, which was due both~~2022.

Other income (expense), net increased by $8.8 million to ~~the increase in general and administrative expenses and the decline in total revenue during~~$5.3 million of other income for the nine months ended September 30, ~~2017.~~

We expect general and administrative expenses to increase during 2017 given that we expect to pay incentive based compensation related to 2017 performance that we did not pay related to 2016 performance. Due to the expected growth in general and administrative expenses and the projected decline in total revenue, we expect general and administrative expenses as a percentage2023 from $3.5 million of ~~total revenue to increase in 2017.~~ We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part II, Item 1, of this Quarterly Report on Form 10-Q, and similar actions, could result in significant, on-going legalother expense ~~in future years.~~ ~~In the long term,~~ we expect to continue to increase general and administrative personnel and expense levels to support the anticipated growth of our business and continued expansion of our manufacturing operations. As a result, in the long term, we expect that general and administrative expenses will increase in absolute dollars but decrease as a percentage of revenue due to projected growth in product revenue.

~~Other expense, net, decreased by $0.7 million to $0.1 million during the nine months ended September 30, 2017 from $0.8 million~~ in the comparable period in ~~2016.~~2022. The ~~$0.7~~$8.8 million ~~decrease~~increase was ~~primarily~~ the result of ~~the $0.7~~$5.0 million ~~charge in 2016~~of interest income, $2.2 million of Employee Retention Credits and a $1.6 million net impact of capitalized interest relating to ~~postponed financing costs. Interest expense, net, of $0.1 million during~~our Convertible Note in the ~~nine months ended September 30, 2017 and 2016 consisted primarily of costs related to our revolving credit facility.~~comparable period in 2022.

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.

~~Through 2015, we experienced revenue growth and gained share in our target markets. Despite a decline in revenue in 2016 and an expected decline in revenue in 2017, our~~Our long-term financial projections anticipate ~~long-term~~ revenue growth, ~~with~~ 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 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 ~~incur significant~~be able to substantially reduce our planned capital expenditures ~~related~~for 2023 and 2024. At the same time, we believe that productivity improvements in our existing Rhode Island facility combined with supply of our energy industrial products from one or more contract manufacturers in China beginning in 2024 will permit us to achieve a target revenue capacity of approximately $550.0 million in 2024 and prior to the ~~expansion~~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 in China will provide us with adequate manufacturing capacity ~~which, while currently delayed,~~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 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, we will continue to develop aerogel products and technologies for the electric vehicle market. We believe ~~will be needed~~the commercial potential for our technology in the electric vehicle market is significant. To meet the anticipated revenue growth and take advantage of this market opportunity, we are adding personnel, incurring additional operating expenses, and planning to ~~support this expected long term growth~~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 ~~demand.~~aggregate principal amount of our 2022 Convertible Note. 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 ~~existing~~September 30, 2023 cash and cash equivalents balance ~~and available credit~~of $94.6 million will be sufficient to ~~fund a portion of~~support current operating requirements, current research and development activities and the ~~construction of our second manufacturing facility. We expect~~initial capital expenditures required to support the evolving commercial opportunities in the electric vehicle market and other strategic business opportunities.

However, we plan to supplement our cash balance ~~and available credit~~ with ~~anticipated cash flows from operations, local government grants,~~equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments, or government grant and ~~equity financings, if necessary,~~loan programs to provide the additional capital ~~required~~necessary to purchase the capital equipment, construct the new facilities, establish the operations and complete the ~~first production line in our second manufacturing facility.~~

We anticipate that constrained capital investment and low activity levels in the global energy markets, in particular in the downstream global markets, will continue into 2018. With this view of the market, we elected to delay the board approved project to construct the second manufacturing facility and its related financing to better align theaerogel capacity ~~expansion with our assessment of future demand. In addition, we are managing capital expenditures and working capital balances to maintain the cash resources~~expansions required to support ~~current~~our evolving commercial opportunities and strategic business initiatives. We also intend to enter into a new revolving credit facility. We believe that the consummation of equity financings 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 ~~requirements~~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 ~~long term capacity plan.~~financial condition and results of operations.

Our principal sources of liquidity are currently our cash and cash ~~equivalents and our revolving credit facility with Silicon Valley Bank.~~equivalents. Cash and cash equivalents consist primarily of cash, ~~and~~ money market accounts, and sweep accounts on deposit with banks. As of September 30, ~~2017,~~2023, we had ~~$7.3~~$94.6 million of unrestricted cash and cash equivalents.

~~At September 30, 2017,~~In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our only debt obligations were less than $0.1 million related to capital lease obligations. At September 30, 2017, we also had $2.4 million of outstanding letters of credit secured by the revolving credit facility with Silicon Valley Bank.

We have maintained the revolving credit facility, as amended from time to time, with Silicon Valley Bank since March 2011. Under our revolving credit facility, we are permitted to borrow a maximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. At our election, the interest rate applicable to borrowings under the amended revolving credit facility may be based on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum.2022 Convertible Note. In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we ~~are required~~sold to ~~pay~~an affiliate of Koch 1,791,986 shares of our common stock, at a ~~monthly unused revolving line facility fee~~price of ~~0.5%~~$27.902 per ~~annum~~share, for net proceeds of ~~the average unused portion of the revolving credit facility. The revolving credit facility matures on January 28, 2018. We intend to extend or replace the facility prior to its maturity.~~

~~Due to the borrowing base limitations of the revolving credit facility, the effective amount available to us under the facility at September 30, 2017 was $11.3~~$49.9 million after ~~giving effect to the $2.4 million~~deducting fees and offering expenses of ~~letters~~$0.1 million.

Analysis of ~~credit outstanding. As of September 30, 2017, we had no outstanding balances drawn on the revolving credit facility.~~ Cash Flow

During the nine months ended September 30, ~~2017, we borrowed and repaid $6.0 million under the line of credit.~~

~~During the nine months ended September 30, 2017,~~2023, we used ~~$5.0~~$39.8 million in net cash ~~for~~in operating activities, as compared to the use of ~~$1.4~~$70.3 million in net cash during the comparable period in ~~2016,~~2022, a decrease in the use of cash of $30.5 million. This decrease in use of cash was the result of lower net loss adjusted for non-cash items of $31.4 million offset by net cash used by changes in operating assets and liabilities of $0.9 million.

During the nine months ended September 30, 2022, we used $70.3 million in net cash in operating activities, as compared to the use of $6.6 million in net cash during the comparable period in 2021, an increase in the use of cash of ~~$3.6~~$63.7 million. This increase in use of cash was the result of ~~the increase~~increases in net loss adjusted for non-cash items of ~~$11.7~~$40.6 million ~~offset, by an increase~~and in net cash ~~provided~~used by changes in operating assets and liabilities of ~~$8.1~~$23.1 million.

Net cash used in investing activities is ~~related to~~for capital expenditures for machinery and equipment principally to ~~maintain~~improve the throughput, efficiency and capacity of our ~~equipment~~East Providence facility and ~~facilities~~engineering designs and ~~to support our growth.~~construction costs for the planned aerogel manufacturing facility in Bulloch County, Georgia. Net cash used in investing activities for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 was ~~$5.4~~$147.7 million and ~~$10.0~~$119.3 million, respectively, for capital expenditures for the engineering and design and other pre-construction costs related to our planned manufacturing facility in Statesboro, Georgia, for machinery and equipment in support of the manufacture of new products and to improve the throughput and efficiency of our East Providence facility.respectively.

Net cash used in financing activities for the nine months ended September 30, ~~2017~~2023 totaled ~~$0.4~~$0.1 million and consisted of ~~$6.0~~$0.4 million ~~of repayments under our line of credit, $0.4 million~~in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units and ~~less than~~ $0.1 million ~~for repayments~~issuance costs from private placement of ~~obligations under capital leases,~~common stock, offset, in part, by ~~$6.0~~$0.4 million in ~~borrowing under our line of credit.~~proceeds from employee stock option exercises.

Net cash ~~used in~~provided by financing activities for the nine months ended September 30, ~~2016~~2022 totaled ~~$0.3~~$215.5 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, $72.7 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 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, and a total of $0.1 million related to postponed financing costs and for repayments of obligations under capital leases.~~units.

~~Since our inception, we have not engaged in any off balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.~~

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 ~~Part I,~~ 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 ~~filed with the Securities and Exchange Commission (SEC),~~ 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;~~financing to operate our ~~expectations about revenue, expenses, Adjusted EBITDA, GAAP EPS, cash balances, cash flows~~business and ~~related variations or trends; beliefs about the general strength or health of Aspen Aerogels’ business;~~for capital expenditures and to fund our planned strategic business initiatives; the performance of our aerogel blankets; ~~growth~~our expectation that we will be successful in ~~demand for~~obtaining, enforcing and defending our ~~products~~patents against competitors and that such patents are valid and enforceable; our expectations regarding the investment to ~~support expansion of manufacturing capacity, our plans to construct~~open a second manufacturing facility in ~~Statesboro, Georgia;~~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; our estimates of annual production capacity; beliefs about ~~our strategic partnership with BASF and~~ the ~~potential benefits of such a relationship, including the~~commercial potential for itour technology in the electric vehicle market; beliefs about our ability to ~~create new product~~produce and deliver products to electric vehicle customers; beliefs about Aspen’s contracts with the major automotive manufacturers; our expectations about the size and timing of awarded business in the electric vehicle market, ~~opportunities;~~future revenues and profit margins, arising from our supply ~~agreement~~relationship and contract with ~~BASF,~~automotive OEMs and our ~~exclusive supply~~ability to ~~BASF of its Spaceloft~~^® ~~A2 product,~~win more business and increase revenue in the potential for future cash advances from BASF under the supply agreement (payment of which are subject to certain conditions) to provide a source of financing for some portion of the cost of the planned construction of our proposed manufacturing plant expected to be located in Statesboro, Georgia, and the potential for BASF to become a significant customer for our products; our joint development agreement with BASF, and the potential for it to support the development of new aerogel products and technologies; ourelectric vehicle market; beliefs about the ~~usefulness~~performance of our thermal barrier products in the ~~square foot operating metric;~~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 beliefs about the usefulness of our presentation of Adjusted EBITDA;~~ 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 ~~future~~potential litigation or their respective timing, including expected legal expense in connection with ~~the~~ our patent enforcement actions; our beliefs about the validity of our patents; our expectations about hiring additional personnel; our plans to devote substantial resources to the development of new aerogel technology; our expectations about product mix; our expectations about future material costs and manufacturing expenses as a percentage of ~~revenue;~~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; ~~our expectations about incurring significant capital expenditures in the future; our expectations about the expansion of our workforce~~ and resources and its effect on sales and marketing, general and administrative, and related expenses; our expectations about future product revenue and demand for our products; our expectations about the effect of stock based compensation on various costs and expenses; our expectations about potential sources of future financing; our beliefs about the further extension of our revolving credit facility; our beliefs about the impact of accounting policies on our financial statements; our beliefs about the effect of interest rates, inflation and foreign currency fluctuations on our results of operations and financial condition; and our beliefs about the expansion of our international operations.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 ~~Part II, Item 1A of~~ this Quarterly Report on Form 10-Q and under the heading “Risk Factors” contained in Item 1A of our Annual ~~Report on Form 10-K for the year ended December 31, 2016.~~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 ~~line of credit under our revolving credit facility as well as~~ 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. AtAs of September 30, ~~2017,~~2023, we had unrestricted cash and cash equivalents of ~~$7.3~~$94.6 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit ~~and~~accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts primarily at a major financial ~~institution~~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 September 30, ~~2017,~~2023, we ~~have no debt~~had a convertible note outstanding ~~other than capital lease obligations~~with principal balance of ~~approximately $0.1 million with fixed~~$113.0 million. Our convertible note bears interest ~~rates. At~~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 September 30, ~~2017,~~2023, we ~~also~~ had ~~$2.4~~$0.3 million of restricted cash to support our outstanding letters of credit ~~supported by the credit facility.~~

~~Under~~to secure obligations under certain commercial contracts and other obligations. We terminated our revolving credit facility we are permitted to borrow a maximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. At our election, the interest rate applicable to borrowings under the revolving credit facility may be basedagreement on the prime rate or LIBOR. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 1.75% per annum, while LIBOR-based rates vary from LIBOR plus 3.75% per annum to LIBOR plus 4.25% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.5% per annum of the average unused portion of the revolving credit facility. The maturity date of our revolving credit facility is JanuaryNovember 28, ~~2018.~~2022.

Due to the borrowing base limitations, the effective amount available to us under the revolving credit facility at September 30, 2017 was $11.3 million after giving effect to the $2.4 million of letters of credit outstanding. As of September 30, 2017, we had no outstanding balances drawn on the revolving credit facility.

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 of our revenue, receivables, purchases and debts are denominated in U.S. dollars.

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 ~~and~~ Exchange Act of 1934, as amended ~~or the~~(the Exchange ~~Act,~~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 September 30, ~~2017,~~2023, 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 September 30, ~~2017,~~2023, 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 nine months ended September 30, ~~2017,~~2023, 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 ~~complaint for~~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.

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. ~~(“Nano”)~~ and ~~Guangdong Alison Hi-Tech.~~sold by AMA.

Our patent infringement proceedings in Korea against Beerenberg Services AS, Beerenberg Korea Ltd., and Bronx (China) Co., Ltd. ~~(“Alison”~~(collectively, “Beerenberg”) at the Seoul District Court and ~~together with Nano, the “Respondents”) in the United States International~~Korea Trade Commission ~~(the “ITC” or~~(KTC) are ongoing. Beerenberg Korea Ltd. and Bronx (China) Co., Ltd. have confirmed in their answers to the ~~“Commission”). The ITC complaint alleges~~KTC investigation that ~~these two China-based companies have engaged~~the accused infringing products are manufactured in China by Bronx (China) Co., Ltd. and ~~are engaging in unfair trade practices~~imported into Korea by ~~importing aerogel products in~~Beerenberg Korea Ltd.

In August and September 2023, LG Chem Ltd. filed oppositions at the ~~United States that infringe several~~Korean Intellectual Property Trial and Appeal Board and at the Japanese Patent Office against one of the ~~Company’s~~Korean patents we are asserting against Beerenberg in ~~violation of Section 337~~Korea and a Japanese counterpart of the ~~Tariff Act. In the ITC complaint, we are seeking exclusion orders directing United States Customs and Border Protection~~Korean patents. We intend to stop the importation of these infringing products. On June 2, 2016, the ITC instituted an investigation based on our complaint. On September 29, 2017, the Administrative Law Judge (“ALJ”) presiding over the ITC investigation issued an Initial Determination finding that Alison and Nano have infringed our patents relating to aerogel insulation. As part of the Initial Determination, the ALJ found that all asserted patent claims across the three asserted patents were not proven invalid and that Alison and Nano infringed all those claims. The ALJ also recommended a limited exclusion order with certification provision as a remedy to prevent the importation of infringing aerogel products into the United States. Respondents have petitioned the Commission for a review of the ALJ’s Initial Determination and have filed statements concerning whether an exclusion order serves the public interest. A final determination on the violation and remedy is expected from the full ITC commission by January 29, 2018, which final determination will determine whether or not a limited exclusion order will be issued. In the event that a limited exclusion order is issued, the order is subject to a 60-day presidential review period. Upon a request by a party, the final determination may be appealed to the United States Court of Appeals for the Federal Circuit. In addition to Respondents’ contention at the ITC that the asserted patents were invalid, Alison has also filed petitions with United States Patent and Trademark Office (“USPTO”) requesting Inter-Partes Review to cancel certain claims in three of the asserted manufacturing process patents and a product patent. The USPTO has denied all of Alison’s petitions to institute Inter-Partes Review challengingvigorously defend the validity of ~~Aspen~~these patents. ~~Alison has also filed similar requests~~

In October 2022, we were served with ~~the Chinese Patent Office~~a summons from Aerogels Poland Nanotechnology LLC (“~~SIPO”~~APN”) ~~seeking to invalidate two~~, a former distributor of our ~~Chinese manufacturing process patents~~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 ~~two~~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, 2023, we filed a motion for an order to compel arbitration, seeking dismissal of certain claims, and for attorney’s fees. We intend to vigorously defend this matter.

The ownership of our ~~Chinese product patents. After~~common stock involves a number of risks and uncertainties. When evaluating the ~~conclusion of~~Company and our business before making an investment decision regarding our securities, potential investors should carefully consider the ~~oral proceedings~~risk factors and ~~before any decision issued by the SIPO, Alison withdrew all of its requests for invalidation~~uncertainties described in Part 1, Item 1A. “Risk Factors” of our ~~Chinese patents.~~

~~On April 11, 2016, we also filed a patent infringement suit at~~Annual Report on Form 10-K. Since the ~~District Court in Mannheim, Germany against the Respondents and two European resellers asserting their infringement of one~~filing of our German patents. We subsequently asserted infringement of another three patents against Nano and a European reseller of Alison’s products at the Mannheim court. We have since settled with the other European reseller in exchange for a commitment not to procure infringing products and cooperation with our case. The litigation against the other defendants is ongoing. Nano has also initiated a nullity action in German Federal Patent Court against one of our asserted German manufacturing process patents. Alison likewise filed an opposition to one of the asserted patents at the European Patent Office (“EPO”) and also initiated nullity action against two other patents. Nano also filed an opposition against the same patent at the EPO.

Due to their nature, it is difficult to predict the outcome or the costs involved in any litigation. Furthermore, the Respondents may have significant resources and interest to litigate and therefore, these litigation matters could be protracted and may ultimately involve significant legal expenses. In addition to the foregoing, we have been and may be from time to time party to other legal proceedings that arise in the ordinary course of business and to other patent enforcement actions to assert our patent rights.

~~There~~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 ~~risk~~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 ~~included~~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 ~~Annual Report on Form 10-K~~intellectual property as a result of engaging contract manufacturers in China for the ~~fiscal year ended December 31, 2016, except~~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 ~~follows.~~

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 ~~able~~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 ~~successfully develop~~enforce and ~~introduce new products~~determine the scope of our proprietary rights in ~~a timely manner at competitive prices, which would limit our ability~~China, and failure to ~~grow and~~obtain or maintain ~~our competitive position and~~trade secret protection could adversely affect our ~~financial conditions, results of operations and cash flow.~~

~~Our growth depends, in part, on continued sales of existing products, including by improving~~competitive business position. In the ~~performance of existing products, as well as~~event that the successful development and introduction of new products, which face the uncertainty of customer acceptance and reaction from competitors. New product development requires considerable resources and attention that may shift our focus from and may disrupt our current operations, especially for an organization like ours which has fewer resources than manythird-party contract manufacturer of our ~~competitors. We may not be able to sustainably manufacture new products with attractive margins and we may experience higher yield losses than expected. Any delay in the development or launch of a new~~proprietary aerogel product ~~could result in~~misappropriates our ~~not being the first to market, which could compromise~~intellectual property, our competitive position. Even if we manage to develop and introduce new products, such products may not address market needs or otherwise compete with third party products. Even if our new products are adopted by the market, we may not achieve the growth in revenue that we expect from such new products and our investment in these efforts may not be proportional to our expected or actual

~~revenue growth. If we are unable to develop and introduce new products in a cost-effective manner or otherwise manage effectively the operations related to new products, our results of operations~~business, prospects and financial condition could be materially and adversely ~~impacted.~~affected.

Item 2. Unregistered Sales of Equity Securities~~. Not applicable.~~ and Use of Proceeds.

We registered shares of our common stock in connection with our initial public offering pursuant to a registration statement on Form S-1 (File No. 333-195523), which was declared effective by the SEC on June 12, 2014, and a registration statement on Form S-1 (File No. 333-196719) filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, or the Securities Act.Not applicable.

~~We received aggregate net proceeds from the offering of approximately $74.7 million, after deducting $4.3 million of underwriting discounts and approximately $3.5 million of offering expenses.~~

As of September 30, 2017, we have used $19.8 million of the net proceeds of the offering to repay all amounts outstanding under our subordinated notes and our revolving credit facility; $31.0 million of the net proceeds of the offering for capital expenditures related to our third production line; $7.2 million of the net proceeds of the offering for our planned manufacturing facility in Statesboro, Georgia; and $9.4 million of the net proceeds of the offering for general corporate purposes. The remainder of the net proceeds is held in a deposit account and money market account with a major financial institution in North America. We have broad discretion in the use of the net proceeds from our initial public offering and could spend the proceeds in ways that do not improve our results of operations or enhance the value of our stock. There has been no material change in our planned use of the balance of the net proceeds from the offering as described in our final prospectus dated June 12, 2014, filed with the SEC on June 16, 2014.

We did not repurchase any of our equity securities during the quarter ended September 30, ~~2017.~~2023.

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


Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☐
		Emerging growth company	☒☐


		Page
	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (unaudited) as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022	1

	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022	2

	Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2023 and 2022	3

	Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022	34

	Notes to Consolidated Financial Statements (unaudited)	45

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1219

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2735

Item 4.	Controls and Procedures	2735

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	2937

Item 1A.	Risk Factors	2937

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3039

Item 3.	Defaults Upon Senior Securities	3039

Item 4.	Mine Safety Disclosures	3039

Item 5.	Other Information	3039

Item 6.	Exhibits	3040

SIGNATURES		3241


	Nine Months Ended
	September 30,
	2023			2022
	(In thousands)
Cash flows from operating activities:
Net loss	$	(45,292	)	$	(73,129	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		10,757			6,692
Accretion of interest on convertible note - related party		1,721			4,103
Amortization of convertible note issuance costs		28			23
Amortization of debt discount due to modification of convertible note – related party		675			—
Provision for bad debt		(89	)		42
Stock-compensation expense		7,766			6,713
Reduction in the carrying amount of operating lease right-of-use assets		2,186			1,925
Changes in operating assets and liabilities:
Accounts receivable		3,026			(6,733	)
Inventories		(11,883	)		(8,613	)
Prepaid expenses and other assets		(6,771	)		(3,055	)
Accounts payable		(420	)		481
Accrued expenses		691			1,918
Deferred revenue		(383	)		1,035
Operating lease liabilities		(1,845	)		(1,721	)
Net cash used in operating activities		(39,833	)		(70,319	)
Cash flows from investing activities:
Capital expenditures		(147,669	)		(119,348	)
Net cash used in investing activities		(147,669	)		(119,348	)
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		445			174
Payments made for employee restricted stock tax withholdings		(402	)		(2,340	)
Proceeds from at-the-market offering, net of commissions of $2,269		—			73,348
Fees and issuance costs from at-the-market offering		—			(631	)
Proceeds from private placement of common stock		—			50,000
Fees and issuance costs from private placement of common stock		(139	)		(137	)
Repayment of prepayment liability		—			(4,728	)
Net cash provided by (used in) financing activities		(96	)		215,501
Net (decrease) increase in cash, cash equivalents and restricted cash		(187,598	)		25,834
Cash, cash equivalents and restricted cash at beginning of period		282,561			76,564
Cash, cash equivalents and restricted cash at end of period	$	94,963		$	102,398
Supplemental disclosures of cash flow information:
Interest paid	$	1		$	130
Income taxes paid	$	—		$	—
Supplemental disclosures of non-cash activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	9,994		$	5,857
Capitalized interest	$	6,084		$	1,277
Changes in accrued capital expenditures	$	(17,193	)	$	40,402


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


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


	Preferred Stock				Common Stock				Additional Paid-in Capital			Accumulated Deficit			Total Stockholders' Equity
	Shares		Value		Shares		Value
Balance at December 31, 2022		—	$	—		69,994,963	$	—	$	1,075,226		$	(627,791	)	$	447,435
Net loss		—		—		—		—		—			(16,796	)		(16,796	)
Stock compensation expense		—		—		—		—		2,267			—			2,267
Vesting of restricted stock units		—		—		71,643		—		(385	)		—			(385	)
Proceeds from employee stock option exercises		—		—		2,554		—		21			—			21
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
Net loss		—		—		—		—		—			(13,073	)		(13,073	)
Stock compensation expense		—		—		—		—		2,789			—			2,789
Vesting of restricted stock units		—		—		2,662		—		(9	)		—			(9	)
Proceeds from employee stock option exercises		—		—		65,828		—		274			—			274
Issuance costs from underwritten public offering		—		—		—		—		(139	)		—			(139	)
Balance at September 30, 2023		—	$	—		70,226,633	$	—	$	1,082,896		$	(673,083	)	$	409,813

~~10.1~~		~~Fifth Amendment to the Amended and Restated Loan and Security Agreement,~~Employment Offer Letter, dated ~~September 27, 2017,~~August 23, 2023, by and between the Company and ~~Silicon Valley Bank.~~Santhosh Daniel.

~~31.1~~10.2		First Amendment, dated September 28, 2023, to the Loan Agreement, dated November 28, 2022, by and among the Company, Aspen Aerogels Georgia, LLC, Aspen Aerogels Rhode Island, LLC and General Motors Holdings LLC.

10.3+		Aspen Aerogels, Inc. Bonus Plan (Amended and Restated Effective as of January 1, 2024).

10.4+		Executive Employment Agreement, dated September 5, 2023, by and between the Company and Stephanie Pittman.

10.5+		Separation Agreement, dated September 5, 2023, by and between the Company and Kelley Conte.

10.6+		Consulting Agreement, dated September 5, 2023, by and between the Company and Kelley Conte.

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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	ASPEN AEROGELS, INC.

Date: November 2, ~~2017~~2023	By:	/s/ Donald R. Young
		Donald R. Young
		President and Chief Executive Officer (principal executive officer)

Date: November 2, ~~2017~~2023	By:	/s/ ~~John F. Fairbanks~~Ricardo C. Rodriguez
		~~John F. Fairbanks~~Ricardo C. Rodriguez
		~~Vice President,~~ Chief Financial Officer and Treasurer (principal financial ~~officer and principal accounting~~ officer)