f

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 20172021

OR

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

For the transition period from              to             

Commission file number: 001-36481

 

ASPEN AEROGELS, INC.

(Exact name of registrant as specified in its charter)

 

 

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)

 

Registrant’s telephone number, including area code: (508) 691-1111

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

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

 

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.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of November 1, 2017,4, 2021, the registrant had 23,637,11533,079,299 shares of common stock outstanding.

 

 


ASPEN AEROGELS, INC.

INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

PART I FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (unaudited) as of September 30, 20172021 and December 31, 20162020

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 20172021 and 20162020

 

2

 

 

 

 

 

 

 

Consolidated Statements of Cash FlowsStockholders’ Equity (unaudited) for the three and nine months ended September 30, 20172021 and 20162020

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2021 and 2020

4

Notes to Consolidated Financial Statements (unaudited)

 

45

 

 

 

 

 

Item 2.

 

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

 

1218

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

2735

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

2736

 

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

2937

 

 

 

 

 

Item 1A.

 

Risk Factors

 

2938

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

3038

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

3039

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

3039

 

 

 

 

 

Item 5.

 

Other Information

 

3039

 

 

 

 

 

Item 6.

 

Exhibits

 

3040

 

 

 

 

 

SIGNATURES

 

3241

 

Trademarks, Trade Names and Service Marks

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.

 

 

 


 

PART I — FINANCIALFINANCIAL INFORMATION

Item 1.

Financial Statements.

ASPEN AEROGELS, INC.

Consolidated Balance Sheets

(Unaudited)

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(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

 

 

$

95,531

 

 

$

16,496

 

Accounts receivable, net of allowances of $98 and $93

 

 

17,106

 

 

 

17,535

 

Accounts receivable, net of allowances of $141 and $442

 

 

18,723

 

 

 

15,698

 

Inventories

 

 

13,992

 

 

 

12,868

 

 

 

9,712

 

 

 

13,099

 

Prepaid expenses and other current assets

 

 

1,478

 

 

 

1,697

 

 

 

3,167

 

 

 

1,830

 

Total current assets

 

 

39,881

 

 

 

50,186

 

 

 

127,133

 

 

 

47,123

 

Property, plant and equipment, net

 

 

78,073

 

 

 

84,394

 

 

 

46,706

 

 

 

46,739

 

Operating lease right-of-use assets

 

 

12,522

 

 

 

3,478

 

Other long-term assets

 

 

84

 

 

 

89

 

 

 

1,311

 

 

 

84

 

Total assets

 

$

118,038

 

 

$

134,669

 

 

$

187,672

 

 

$

97,424

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

8,886

 

 

$

13,065

 

 

$

9,820

 

 

$

5,351

 

Accrued expenses

 

 

4,685

 

 

 

3,987

 

 

 

9,791

 

 

 

3,884

 

Current portion of long-term debt

 

 

 

 

 

1,609

 

Current portion of prepayment liability

 

 

4,615

 

 

 

 

Deferred revenue

 

 

1,608

 

 

 

1,043

 

 

 

1,722

 

 

 

2,037

 

Capital leases, current portion

 

 

4

 

 

 

35

 

Operating lease liabilities

 

 

2,324

 

 

 

1,046

 

Total current liabilities

 

 

15,183

 

 

 

18,130

 

 

 

28,272

 

 

 

13,927

 

Capital leases, excluding current portion

 

 

 

 

 

4

 

Deferred rent

 

 

1,332

 

 

 

971

 

Prepayment liability

 

 

5,000

 

 

 

9,555

 

Long-term debt

 

 

 

 

 

2,059

 

Operating lease liabilities long-term

 

 

11,508

 

 

 

3,597

 

Other long-term liabilities

 

 

434

 

 

 

434

 

Total liabilities

 

 

16,515

 

 

 

19,105

 

 

 

45,214

 

 

 

29,572

 

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, 0 shares issued and

outstanding at September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.00001 par value; 125,000,000 shares authorized, 33,077,894 and

27,821,685 shares issued and outstanding at September 30, 2021 and December 31,

2020, respectively

 

 

 

 

 

0

 

Additional paid-in capital

 

 

536,985

 

 

 

533,088

 

 

 

671,158

 

 

 

575,811

 

Accumulated deficit

 

 

(435,462

)

 

 

(417,524

)

 

 

(528,700

)

 

 

(507,959

)

Total stockholders’ equity

 

 

101,523

 

 

 

115,564

 

 

 

142,458

 

 

 

67,852

 

Total liabilities and stockholders’ equity

 

$

118,038

 

 

$

134,669

 

 

$

187,672

 

 

$

97,424

 

 

See accompanying notes to unaudited consolidated financial statements.


ASPEN AEROGELS, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands, except

share and per share data)

 

 

(In thousands, except

share and per share data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

26,812

 

 

$

28,877

 

 

$

73,700

 

 

$

88,286

 

 

$

30,263

 

 

$

23,939

 

 

$

89,809

 

 

$

76,772

 

Research services

 

 

386

 

 

 

683

 

 

 

1,569

 

 

 

1,813

 

 

 

117

 

 

 

256

 

 

 

338

 

 

 

483

 

Total revenue

 

 

27,198

 

 

 

29,560

 

 

 

75,269

 

 

 

90,099

 

 

 

30,380

 

 

 

24,195

 

 

 

90,147

 

 

 

77,255

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

22,115

 

 

 

22,790

 

 

 

63,706

 

 

 

69,505

 

 

 

27,279

 

 

 

22,243

 

 

 

78,459

 

 

 

66,403

 

Research services

 

 

135

 

 

 

368

 

 

 

700

 

 

 

1,012

 

 

 

34

 

 

 

52

 

 

 

85

 

 

 

121

 

Gross profit

 

 

4,948

 

 

 

6,402

 

 

 

10,863

 

 

 

19,582

 

 

 

3,067

 

 

 

1,900

 

 

 

11,603

 

 

 

10,731

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,468

 

 

 

1,328

 

 

 

4,753

 

 

 

3,924

 

 

 

3,077

 

 

 

2,088

 

 

 

8,128

 

 

 

6,436

 

Sales and marketing

 

 

2,745

 

 

 

3,056

 

 

 

9,271

 

 

 

8,939

 

 

 

4,915

 

 

 

2,755

 

 

 

11,784

 

 

 

9,051

 

General and administrative

 

 

3,765

 

 

 

4,422

 

 

 

14,354

 

 

 

12,229

 

 

 

6,573

 

 

 

3,761

 

 

 

15,978

 

 

 

10,682

 

Total operating expenses

 

 

7,978

 

 

 

8,806

 

 

 

28,378

 

 

 

25,092

 

 

 

14,565

 

 

 

8,604

 

 

 

35,890

 

 

 

26,169

 

Loss from operations

 

 

(3,030

)

 

 

(2,404

)

 

 

(17,515

)

 

 

(5,510

)

 

 

(11,498

)

 

 

(6,704

)

 

 

(24,287

)

 

 

(15,438

)

Other expense, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(58

)

 

 

(37

)

 

 

(123

)

 

 

(115

)

 

 

(58

)

 

 

(49

)

 

 

(188

)

 

 

(182

)

Postponed financing costs

 

 

 

 

 

(656

)

 

 

 

 

 

(656

)

Total other expense, net

 

 

(58

)

 

 

(693

)

 

 

(123

)

 

 

(771

)

Gain on extinguishment of debt

 

 

3,734

 

 

 

 

 

 

3,734

 

 

 

 

Total other income (expense)

 

 

3,676

 

 

 

(49

)

 

 

3,546

 

 

 

(182

)

Net loss

 

$

(3,088

)

 

$

(3,097

)

 

$

(17,638

)

 

$

(6,281

)

 

$

(7,822

)

 

$

(6,753

)

 

$

(20,741

)

 

$

(15,620

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.13

)

 

$

(0.13

)

 

$

(0.76

)

 

$

(0.27

)

 

$

(0.24

)

 

$

(0.25

)

 

$

(0.70

)

 

$

(0.60

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

23,442,241

 

 

 

23,168,251

 

 

 

23,356,997

 

 

 

23,114,280

 

 

 

32,523,405

 

 

 

26,728,205

 

 

 

29,685,936

 

 

 

26,150,236

 

See accompanying notes to unaudited consolidated financial statements.


ASPEN AEROGELS, INC.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

Preferred Stock

$0.00001 Par

Value

 

 

Common Stock

$0.00001 Par

Value

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total Stockholders' Equity

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

 

 

$

 

 

 

27,821,685

 

 

$

 

 

$

575,811

 

 

$

(507,959

)

 

$

67,852

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,250

)

 

 

(6,250

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

976

 

 

 

 

 

 

976

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

246,737

 

 

 

 

 

 

(2,613

)

 

 

 

 

 

(2,613

)

Proceeds from employee stock option exercises

 

 

 

 

 

 

 

 

48,056

 

 

 

 

 

 

 

463

 

 

 

 

 

 

463

 

Proceeds from at-the-market offering, net of commissions and fees of $193 and issuance costs of $17

 

 

 

 

 

 

 

 

305,182

 

 

 

 

 

 

6,215

 

 

 

 

 

 

6,215

 

Forfeiture of performance-based restricted stock

 

 

 

 

 

 

 

 

(78,125

)

 

 

 

 

 

 

 

 

 

 

 

 

Balance at March 31, 2021

 

 

 

 

$

 

 

 

28,343,535

 

 

$

 

 

$

580,852

 

 

$

(514,209

)

 

$

66,643

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,669

)

 

 

(6,669

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,070

 

 

 

 

 

 

1,070

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

476,550

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

6,207

 

 

 

 

 

 

(64

)

 

 

 

 

 

(64

)

Proceeds from employee stock option exercises

 

 

 

 

 

 

 

 

23,886

 

 

 

 

 

 

230

 

 

 

 

 

 

230

 

Proceeds from at-the-market offering, net of commissions and fees of $383 and issuance costs of $27

 

 

 

 

 

 

 

 

594,799

 

 

 

 

 

 

12,352

 

 

 

 

 

 

12,352

 

Proceeds from private placement of common stock , net of fees and issuance costs of $1,414

 

 

 

 

 

 

 

 

3,462,124

 

 

 

 

 

 

73,586

 

 

 

 

 

 

73,586

 

Balance at June 30, 2021

 

 

 

 

$

 

 

 

32,907,101

 

 

$

 

 

$

668,026

 

 

$

(520,878

)

 

$

147,148

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,822

)

 

 

(7,822

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,554

 

 

 

 

 

 

1,554

 

Proceeds from employee stock option exercises

 

 

 

 

 

 

 

 

140,793

 

 

 

 

 

 

836

 

 

 

 

 

 

836

 

Proceeds from at-the-market offering, net of commissions and fees of $25

 

 

 

 

 

 

 

 

30,000

 

 

 

 

 

 

810

 

 

 

 

 

 

810

 

Registration fees for private placement of common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(68

)

 

 

 

 

 

(68

)

Balance at September 30, 2021

 

 

 

 

$

 

 

 

33,077,894

 

 

$

 

 

$

671,158

 

 

$

(528,700

)

 

$

142,458

 

 

 

Preferred Stock

$0.00001 Par

Value

 

 

Common Stock

$0.00001 Par

Value

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total Stockholders' Equity

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

 

 

$

 

 

 

24,302,504

 

 

$

 

 

$

545,140

 

 

$

(486,150

)

 

$

58,990

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,169

)

 

 

(3,169

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

992

 

 

 

 

 

 

992

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

336,951

 

 

 

 

 

 

(1,195

)

 

 

 

 

 

(1,195

)

Proceeds from underwritten public offering, net of underwriting discounts and commissions of $1,093 and issuance costs of $285

 

 

 

 

 

 

 

 

1,955,000

 

 

 

 

 

 

14,751

 

 

 

 

 

 

14,751

 

Balance at March 31, 2020

 

 

 

 

$

 

 

 

26,594,455

 

 

$

 

 

$

559,688

 

 

$

(489,319

)

 

$

70,369

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,698

)

 

 

(5,698

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,007

 

 

 

 

 

 

1,007

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

45,066

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

5,629

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Proceeds from employee stock option exercises

 

 

 

 

 

 

 

 

200,159

 

 

 

 

 

 

869

 

 

 

 

 

 

869

 

Balance at June 30, 2020

 

 

 

 

$

 

 

 

26,845,309

 

 

$

 

 

$

561,548

 

 

$

(495,017

)

 

$

66,531

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,753

)

 

 

(6,753

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

991

 

 

 

 

 

 

991

 

Proceeds from employee stock option exercises

 

 

 

 

 

 

 

 

20,000

 

 

 

 

 

 

118

 

 

 

 

 

 

118

 

Balance at September 30, 2020

 

 

 

 

$

 

 

 

26,865,309

 

 

$

 

 

$

562,657

 

 

$

(501,770

)

 

$

60,887

 

 

See accompanying notes to unaudited consolidated financial statements.


ASPEN AEROGELS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

Nine Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(17,638

)

 

$

(6,281

)

 

$

(20,741

)

 

$

(15,620

)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

8,032

 

 

 

7,298

 

Depreciation

 

 

6,856

 

 

 

7,670

 

Gain on extinguishment of debt

 

 

(3,734

)

 

 

 

Amortization of debt issuance costs

 

 

18

 

 

 

6

 

Provision for bad debt

 

 

(97

)

 

 

171

 

Stock-compensation expense

 

 

3,982

 

 

 

4,277

 

 

 

3,600

 

 

 

2,990

 

Lease incentives

 

 

(80

)

 

 

 

Postponed financing costs

 

 

 

 

 

656

 

Other

 

 

(1

)

 

 

 

Reduction in the carrying amount of operating lease right-of-use assets

 

 

1,057

 

 

 

719

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

944

 

 

 

999

 

 

 

(2,928

)

 

 

12,011

 

Inventories

 

 

(1,124

)

 

 

(6,370

)

 

 

3,387

 

 

 

(659

)

Prepaid expenses and other assets

 

 

224

 

 

 

189

 

 

 

(2,545

)

 

 

(485

)

Accounts payable

 

 

(478

)

 

 

(17

)

 

 

3,770

 

 

 

(3,794

)

Accrued expenses

 

 

752

 

 

 

(2,189

)

 

 

5,955

 

 

 

(3,976

)

Deferred revenue

 

 

565

 

 

 

72

 

 

 

(255

)

 

 

(3,563

)

Deferred rent

 

 

(128

)

 

 

 

Operating lease liabilities

 

 

(922

)

 

 

(818

)

Other liabilities

 

 

 

 

 

566

 

Net cash used in operating activities

 

 

(4,950

)

 

 

(1,366

)

 

 

(6,579

)

 

 

(4,782

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(5,423

)

 

 

(9,994

)

 

 

(6,133

)

 

 

(2,600

)

Net cash used in investing activities

 

 

(5,423

)

 

 

(9,994

)

 

 

(6,133

)

 

 

(2,600

)

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

)

Proceeds from underwritten public offering, net of underwriting discounts and commissions of $1,093

 

 

 

 

 

15,036

 

Issuance costs from underwritten public offering

 

 

 

 

 

(285

)

Proceeds from issuance of long-term debt

 

 

 

 

 

3,686

 

Issuance costs from long-term debt

 

 

 

 

 

(27

)

Repayments of borrowings under line of credit, net

 

 

 

 

 

(3,123

)

Proceeds from employee stock option exercises

 

 

1,529

 

 

 

987

 

Payments made for employee restricted stock tax withholdings

 

 

(385

)

 

 

(196

)

 

 

(2,677

)

 

 

(1,211

)

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

 

Proceeds from at-the-market offering, net of commissions and fees of $601

 

 

19,420

 

 

 

 

Issuance costs from at-the-market offering

 

 

(43

)

 

 

 

Proceeds from private placement of common stock

 

 

75,000

 

 

 

 

Fees and issuance costs from private placement of common stock

 

 

(1,482

)

 

 

 

Net cash provided by financing activities

 

 

91,747

 

 

 

15,063

 

Net increase in cash

 

 

79,035

 

 

 

7,681

 

Cash and cash equivalents at beginning of period

 

 

16,496

 

 

 

3,633

 

Cash and cash equivalents at end of period

 

$

95,531

 

 

$

11,314

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest paid

 

$

151

 

 

$

153

 

 

$

168

 

 

$

168

 

Income taxes paid

 

$

 

 

$

 

 

$

0

 

 

$

0

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Right-of-use assets obtained in exchange for new operating lease liabilities

 

$

10,111

 

 

$

389

 

Changes in accrued capital expenditures

 

$

(3,701

)

 

$

602

 

 

$

690

 

 

$

(448

)

Changes in building lease incentives

 

$

 

 

$

268

 

Unpaid financing costs

 

$

 

 

$

(592

)

Settlement of asset retirement obligation

 

$

 

 

$

241

 

See accompanying notes to unaudited consolidated financial statements.


ASPEN AEROGELS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(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 and building 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 conductsdeveloping applications for its aerogel technology in the battery materials and a number of other high-potential markets.

The Company has also conducted research and development related to aerogel technology supported by funding from several agencies of the U.S. government and other institutions in the form of research contracts. The Company has decided to cease efforts to secure additional funded research contracts and development contracts.to wind down existing contract research activities.

The Company maintains its corporate offices in Northborough, Massachusetts. The Company has three3 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, 2021, the Company incurred a net loss of $20.7 million, used $6.6 million of cash in operations, used $6.1 million of cash for capital expenditures, received net proceeds of $19.4 million through an at-the-market (ATM) offering of the Company’s common stock and received net proceeds of $73.5 million through a private placement of the Company’s common stock. As of September 30, 2021, the Company had cash and cash equivalents of $95.5 million, a $4.6 million current prepayment liability (see note 9) and 0 outstanding borrowings under its revolving line of credit (see note 7). After giving effect to $1.3 million of outstanding letters of credit, the amount available to the Company as of September 30, 2021 under the revolving line of credit was $9.5 million. The existing revolving line of credit matures on April 28, 2022.

On May 1, 2020, Aspen Aerogels Rhode Island, LLC (Borrower) executed a promissory note (Note) in favor of Northeast Bank to receive an unsecured loan in the principal amount of $3.7 million (the PPP Loan) pursuant to the Paycheck Protection Program (PPP) established by the CARES Act, as amended by the Paycheck Protection Program Flexibility Act (Flexibility Act), and administered by the Small Business Administration (SBA). The PPP Loan was subsequently sold by Northeast Bank to The Loan Source, Inc. (PPP Investor), a secondary market investor.

On August 24, 2021, the SBA remitted $3.7 million in principal and less than $0.1 million in accrued interest to the PPP Investor after approving the Borrower’s application for forgiveness of the PPP Loan under the provisions of the CARES Act. Accordingly, the Company recorded a total gain on the extinguishment of debt of $3.7 million during the quarter ended September 30, 2021.

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 technology in the electric vehicle market is significant. Accordingly, the Company is currently 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 and the amount anticipated to be available under the existing revolving line of credit will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunity in the electric vehicle market and other strategic business initiatives.However, the Company plans to supplement its cash balance and available credit with equity financings, debt financings, customer prepayments, or technology licensing fees to provide the additional capital to purchase the capital equipment, construct the new facilities or 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, 20162020 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 2, 2017.12, 2021.

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, 2017,2021 and the results of its operations and stockholders’ equity for the three and nine months ended September 30, 20172021 and 20162020 and the cash flows for the 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, 20172021 are not necessarily indicative of the results to be expected for the year ending December 31, 20172021 or any other period. In addition, the Company is uncertain of the continued duration and severity of the COVID-19 pandemic and the impact it will have on the Company’s results of operations for the year ending December 31, 2021 or any other period.

(2) Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements, which have been prepared in accordance with U.S. GAAP, include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

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.


Cash and Cash Equivalents

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

Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of 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, 2021, the Company recorded a reduction for estimated customer uncollectible accounts receivable of $0.1 million and had collections of $0.2 million of previously reserved customer accounts receivables. During the nine months ended September 30, 2020, the Company recorded a charge for uncollectible accounts receivable of $0.2 million.


Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from the sale of products and performance of research and development services. Revenue is recognized when all of the following criteria are met: persuasive evidence 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.Contracts with Customers (ASC 606). See note 3 for further details.

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.Leases

The Company records deferred revenueaccounts for product sales when (i) the Company has delivered products but other revenue recognition criteria have not been satisfied or (ii) payments have been receivedits leases in advance of products being delivered.

Research Services Revenue

The Company performs research services under contractsaccordance 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)Accounting Standards Update (ASU) 2016-02 (Topic 842). See note 10 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.further details.

Stock-based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the award. 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 requires a number of complex and subjective assumptions including the 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 is determined using the closing trading price of the Company’s common stock on the date of grant. The fair value of awards containing market conditions is determined using a Monte CarloMonte-Carlo simulation model based upon the termsnature of the conditions, the expected volatility of the underlying security, and other relevant factors.


During the nine months ended September 30, 2017,2021, the Company granted 86,023 shares of63,947 restricted common stock units (RSUs) with a grant date fair value of $1.6 million and non-qualified stock options (NSOs) to purchase 119,133203,962 shares of common stock with a grant date fair value of $0.4$2.7 million and $0.2 million, respectively, vesting over a period of one year to its non-employee directorsemployees under the 2014 Employee, Director, and Consultant Equity Incentive Plan (the 2014 Equity Plan). The RSUs and NSOs granted to employees will vest over a three-year period. During the nine months ended September 30, 2017,2021, the Company also granted 481,373 RSUs14,934 shares of restricted common stock with a grant date fair value of $0.3 million and NSOs to purchase 320,57118,528 shares of common stock with a grant date fair value of $1.3$0.2 million and $0.7 million, respectively, to employeesits non-employee directors under the 2014 Equity Plan. The RSUsrestricted common stock and NSOs granted to employees willnon-employee directors vest over a three year period.upon the earlier of the date that is the one-year anniversary of the grant or the day prior to the Company’s annual meeting of stockholders to be held in 2022.

On August 2, 2017,June 29, 2021, the Company reduced the performance target for the year ending December 31, 2020 with respect to 78,125also awarded 461,616 shares 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 periodits Chief Executive Officer. The shares will vest subject to achieveachievement of certain volume weighted average common stock price targets, by an additional year to four and five years from the date of grant, respectively.

over a three-to-five-year period. The Company accounted forused a Monte-Carlo simulation model to estimate the change to the restricted stock performance target as a modification of the award in determining the stock-based compensation expense to be recognized over the remaining service period. Thegrant date fair value of the award. The award as a resulthad an aggregate grant date fair value of the modification was $0.4$6.5 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 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.

Stock-based compensation is included in cost of salesrevenue 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

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Cost of product revenue

 

$

201

 

 

$

241

 

 

$

641

 

 

$

632

 

 

$

132

 

 

$

98

 

 

$

373

 

 

$

544

 

Research and development expenses

 

 

151

 

 

 

184

 

 

 

449

 

 

 

472

 

 

 

186

 

 

 

169

 

 

 

564

 

 

 

482

 

Sales and marketing expenses

 

 

294

 

 

 

314

 

 

 

865

 

 

 

852

 

 

 

213

 

 

 

179

 

 

 

587

 

 

 

524

 

General and administrative expenses

 

 

718

 

 

 

735

 

 

 

2,027

 

 

 

2,321

 

 

 

1,023

 

 

 

545

 

 

 

2,076

 

 

 

1,440

 

Total stock-based compensation

 

$

1,364

 

 

$

1,474

 

 

$

3,982

 

 

$

4,277

 

 

$

1,554

 

 

$

991

 

 

$

3,600

 

 

$

2,990

 

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 awards at the time an award is forfeited. Adoption of the provisions resulted in a cumulative-effect adjustment 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 under the plan automatically increased by 467,396556,433 shares to 6,536,5978,531,413 shares effective January 1, 2017.2021.

As of September 30, 2017, 3,219,5102021, 3,963,342 shares of common stock were reserved for issuance upon the exercise or vesting as appropriate, of outstanding stock-based awards granted under the 2014 Equity Plan. In addition, as of September 30, 2017, 92,1782021, 79,960 shares of common


stock were reserved for issuance upon 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 such options becoming available for grant under the 2014 Equity Plan. As of September 30, 2017,2021, the Company has either reserved in connection with statutory tax withholdings or issued a total of 3,773,717 shares under the 2014 Equity Plan. As of September 30, 2021, there were 2,358,632714,394 shares of common stock available for future grant under the 2014 Equity Plan.

EarningsNet Loss per Share

The Company calculates net loss per share of common sharestock based on the weighted-average number of shares of common sharesstock outstanding during each period. Potential common stock equivalents are determined using the treasury stock method. The weighted-average number of shares of common sharesstock 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.


Segments

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 presently views its operations and manages its business as one1 operating segment.

Information about the Company’s total revenues, based on shipment destination or services location, is presented in the following table:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

13,555

 

 

$

6,850

 

 

$

32,816

 

 

$

28,471

 

 

$

16,734

 

 

$

9,736

 

$

45,033

 

 

$

31,501

 

International

 

 

13,643

 

 

 

22,710

 

 

 

42,453

 

 

 

61,628

 

 

 

13,646

 

 

 

14,459

 

 

45,114

 

 

 

45,754

 

Total

 

$

27,198

 

 

$

29,560

 

 

$

75,269

 

 

$

90,099

 

 

$

30,380

 

 

$

24,195

 

$

90,147

 

 

$

77,255

 

Warranty Costs

The Company provides warranties for its products and records the estimated cost of such warranties within cost of salesrevenue in the period that the related revenue is recorded. The Company’s standard warranty period 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 products may be utilized in systems that may involve new technical demands and new configurations. As such,Accordingly, the Company regularly reviews and assesses whether warranty reserves shallshould 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

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.

Duringdid 0t record any warranty expense during the nine months ended September 30, 20172021 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.2020.

Recently Issued Accounting Standards

From time to time, new accounting pronouncements are issued by the FASBFinancial Accounting Standards Board (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, 20162020

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 of the standard has not resulted inimplemented any accounting standards that had a material impact to the Company’son its consolidated financial statements or other disclosures.

In March 2016,during 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.nine months ended September 30, 2021.

Standards to be Implemented

In August 2015,The Company believes that the FASBimpact of recently issued accounting standards that are not yet effective will not have a deferral of ASU 2014-09,material impact on its consolidated financial statements.

(3) Revenue from Contracts with Customers. The standard will eliminateCustomers

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the transaction- and industry-specificconsideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition guidance under current U.S. GAAP and replace itfor arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a principle based approach for determining revenue recognition. As a resultcustomer; (ii) identification of the deferral, public entitiesperformance 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 requiredsatisfied. The Company applies the five-step model to applycontracts when it is probable that the revisedCompany 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, 2020 and did not enter into any contracts during the nine months ended September 30, 2021 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 standardcriteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.

Shipping and Handling Costs

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment costs and are included in the annual reporting period beginning on or after December 15, 2017, including interim periods within that annual reporting period. Early application is permitted only ascost of annual and interim periods in fiscal years beginning after December 15, 2016.product revenue. The associated amount of revenue recognized includes the consideration to which the Company expects to adopt the modified retrospective method. be entitled to receive in exchange for incurring these shipping and handling costs.

Product Revenue

The Company generally enters into contracts containing 1 type of performance obligation. The Company recognizes product revenue when the performance obligation is satisfied, which is generally upon delivery according to contractual shipping terms within customer purchase orders.


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 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 andperiod the related disclosures during the fourth quarterproduct revenue is recognized. A corresponding liability is recorded as a component 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 recordeddeferred revenue 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. sheets. These arrangements are primarily based on the customer attaining contractually specified sales volumes.

The Company has not yet selectedestimates the amount of its product sales that may be returned by its customers and records this estimate as a transition method andreduction of revenue in the period the related product revenue is evaluating the effect the updated standard will have on its consolidated financial statements and related disclosures.recognized. The Company currently expects that mostestimates product return liabilities using historical rates of its operating lease commitments will be subject to the new standardreturn, current quarter credit sales, and recognized as right-of-use assetsspecific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $0.1 million at both September 30, 2021 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.December 31, 2020.

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. Subsea Projects

The Company has completed its assessment of the amendmentmanufactures and has determinedsells subsea products that adoption willare used in pipe-in-pipe applications in subsea oil production and are typically customized to meet customer specifications. Subsea products typically have no significant impactalternative use and contain an enforceable right to payment. Customer invoicing terms for subsea products are typically based on certain milestones within the Company’s consolidated financial statements or other disclosures. The Company will adoptproduction and delivery schedule. Under the provisions of ASC 606, the amendment effective JanuaryCompany recognizes revenue at a point in time when transfer of control of the products is passed to the customer, or over time utilizing the input method. The timing of revenue recognition is assessed on a contract-by-contract basis. During the nine months ended September 30, 2021 and 2020, the Company recognized revenue of $3.7 million and $8.3 million, respectively, in connection with subsea projects.

Research Services

The Company performs research services under contracts with various government agencies and other institutions. These contracts generally have 1 2018.type of performance obligation associated with the provision of research services including certain licenses to any resulting intellectual property. The Company records revenue 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. Typically, the only deliverable, other than the labor hours expended, is reporting research results to the customer or delivery of research grade aerogel products. 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 toward 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 within the period they become known. To date, adjustments to revenue as a result of contracting agency audits have been insignificant.


Disaggregation of Revenue

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

 

 

Three Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total

 

 

 

(In thousands)

 

Geographical region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

 

 

$

5,283

 

 

$

5,283

 

 

$

 

 

$

9,617

 

 

$

9,617

 

Canada

 

 

 

 

 

256

 

 

 

256

 

 

 

 

 

 

25

 

 

 

25

 

Europe

 

 

 

 

 

7,553

 

 

 

7,553

 

 

 

 

 

 

4,635

 

 

 

4,635

 

Latin America

 

 

 

 

 

554

 

 

 

554

 

 

 

 

 

 

182

 

 

 

182

 

U.S.

 

 

16,734

 

 

 

 

 

 

16,734

 

 

 

9,736

 

 

 

 

 

 

9,736

 

Total revenue

 

$

16,734

 

 

$

13,646

 

 

$

30,380

 

 

$

9,736

 

 

$

14,459

 

 

$

24,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

16,617

 

 

$

11,033

 

 

$

27,650

 

 

$

8,612

 

 

$

12,307

 

 

$

20,919

 

Subsea projects

 

 

 

 

 

2,613

 

 

 

2,613

 

 

 

868

 

 

 

2,152

 

 

 

3,020

 

Research services

 

 

117

 

 

 

 

 

 

117

 

 

 

256

 

 

 

 

 

 

256

 

Total revenue

 

$

16,734

 

 

$

13,646

 

 

$

30,380

 

 

$

9,736

 

 

$

14,459

 

 

$

24,195

 

 

(3)

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total

 

 

 

(In thousands)

 

Geographical region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

 

 

$

15,424

 

 

$

15,424

 

 

$

 

 

$

33,373

 

 

$

33,373

 

Canada

 

 

 

 

 

2,211

 

 

 

2,211

 

 

 

 

 

 

715

 

 

 

715

 

Europe

 

 

 

 

 

24,234

 

 

 

24,234

 

 

 

 

 

 

9,590

 

 

 

9,590

 

Latin America

 

 

 

 

 

3,245

 

 

 

3,245

 

 

 

 

 

 

2,076

 

 

 

2,076

 

U.S.

 

 

45,033

 

 

 

 

 

 

45,033

 

 

 

31,501

 

 

 

 

 

 

31,501

 

Total revenue

 

$

45,033

 

 

$

45,114

 

 

$

90,147

 

 

$

31,501

 

 

$

45,754

 

 

$

77,255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

44,695

 

 

$

41,427

 

 

$

86,122

 

 

$

29,039

 

 

$

39,394

 

 

$

68,433

 

Subsea projects

 

 

 

 

 

3,687

 

 

 

3,687

 

 

 

1,979

 

 

 

6,360

 

 

 

8,339

 

Research services

 

 

338

 

 

 

 

 

 

338

 

 

 

483

 

 

 

 

 

 

483

 

Total revenue

 

$

45,033

 

 

$

45,114

 

 

$

90,147

 

 

$

31,501

 

 

$

45,754

 

 

$

77,255

 


Contract Balances

The following table presents changes in the Company’s contract assets and contract liabilities during the nine months ended September 30, 2021:

 

 

Balance at

December 31,

2020

 

 

Additions

 

 

Deductions

 

 

Balance at

September 30,

2021

 

 

 

(In thousands)

 

Contract assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsea projects

 

$

1,370

 

 

$

3,661

 

 

$

(2,753

)

 

$

2,278

 

Product revenue

 

 

 

 

 

111

 

 

 

(30

)

 

 

81

 

Research services

 

 

67

 

 

 

338

 

 

 

(349

)

 

 

56

 

Total contract assets

 

$

1,437

 

 

$

4,110

 

 

$

(3,132

)

 

$

2,415

 

Contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

1,859

 

 

$

3,347

 

 

$

(3,636

)

 

$

1,570

 

Subsea projects

 

 

178

 

 

$

1,626

 

 

$

(1,652

)

 

 

152

 

Prepayment liability

 

 

9,555

 

 

 

 

 

 

60

 

 

 

9,615

 

Total contract liabilities

 

$

11,592

 

 

$

4,973

 

 

$

(5,228

)

 

$

11,337

 

During the nine months ended September 30, 2021, the Company recognized $1.7 million of revenue that was included in deferred revenue as of December 31, 2020.

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 or unconditional 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,

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Raw materials

 

$

3,031

 

 

$

3,511

 

 

$

5,724

 

 

$

4,068

 

Finished goods

 

 

10,961

 

 

 

9,357

 

 

 

3,988

 

 

 

9,031

 

Total

 

$

13,992

 

 

$

12,868

 

 

$

9,712

 

 

$

13,099

 

 


(4)

(5) Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:

 

 

September 30,

 

 

December 31,

 

 

Useful

 

 

September 30,

 

 

December 31,

 

 

Useful

 

 

2017

 

 

2016

 

 

life

 

 

2021

 

 

2020

 

 

life

 

 

(In thousands)

 

 

 

 

 

 

(In thousands)

 

 

 

 

 

Construction in progress

 

$

7,821

 

 

$

11,139

 

 

 

 

 

$

3,699

 

 

$

1,906

 

 

 

 

Buildings

 

 

23,928

 

 

 

23,901

 

 

30 years

 

 

 

24,016

 

 

 

24,016

 

 

30 years

 

Machinery and equipment

 

 

118,278

 

 

 

113,659

 

 

3-10 years

 

 

 

128,771

 

 

 

124,807

 

 

3-10 years

 

Computer equipment and software

 

 

7,960

 

 

 

7,679

 

 

3 years

 

 

 

9,387

 

 

 

8,850

 

 

3 years

 

Total

 

 

157,987

 

 

 

156,378

 

 

 

 

 

 

 

165,873

 

 

 

159,579

 

 

 

 

 

Accumulated depreciation

 

 

(79,914

)

 

 

(71,984

)

 

 

 

 

 

 

(119,167

)

 

 

(112,840

)

 

 

 

 

Property, plant and equipment, net

 

$

78,073

 

 

$

84,394

 

 

 

 

 

 

$

46,706

 

 

$

46,739

 

 

 

 

 

 

Depreciation expense was $8.0$6.9 million and $7.3$7.7 million for the nine months ended September 30, 20172021 and 2016,2020, respectively.

Construction in progress totaled $7.8$3.7 million and $11.1$1.9 million at September 30, 20172021 and December 31, 2016,2020, 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 constrainedprincipally associated with capital investment and low activity levelsprojects 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, GeorgiaCompany’s East Providence, Rhode Island manufacturing facility and its related financing to better align the capacity expansion with the Company’s assessment of future demand.facility.

(5)(6) Accrued Expenses

Accrued expenses consist of the following:

 

 

September 30,

 

 

December 31,

 

 

September 30,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Employee compensation

 

$

3,165

 

 

$

2,796

 

 

$

8,227

 

 

$

2,587

 

Other accrued expenses

 

 

1,520

 

 

 

1,191

 

 

 

1,564

 

 

 

1,297

 

Total

 

$

4,685

 

 

$

3,987

 

 

$

9,791

 

 

$

3,884

 

 

(6)(7) Revolving Line of Credit

The Company is party to an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (Loan Agreement). On March 12, 2021, the Loan Agreement was amended and restated to extend the maturity date of the revolving credit facility to April 28, 2022 and to establish financial covenants on certain minimum Adjusted EBITDA levels and minimum Adjusted Quick Ratio covenants, each as defined in the Loan Agreement. On September 29, 2021, the Company entered into an amendment to the Loan Agreement to revise certain financial covenants, among other things.

Under the revolving credit facility, the Company is permitted to borrow a maximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, subject to a minimum rate of 4.00% per annum. The rates applicable to borrowings vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, the Company is required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility.

Under the Loan Agreement, the Company is required to comply with both non-financial and financial covenants, including a minimum Adjusted EBITDA covenant and a minimum Adjusted Quick Ratio covenant. As of September 30, 2021, the Company was in compliance with all such covenants. Obligations under the Loan Agreement are secured by a security interest in all assets of the Company, including those at the East Providence facility, except for certain exclusions. The Company intends to extend or replace the facility prior to its maturity.

As of September 30, 2021 and December 31, 2020, the Company had 0 amounts drawn from the revolving credit facility.

The Company has provided letters of credit to secure obligations under certain commercial contracts and other obligations. The Company had outstanding letters of credit backed by the revolving credit facility of $1.3 million and $1.4 million at September 30, 2021 and December 31, 2020, respectively, which reduce the funds otherwise available to the Company under the facility.


As of September 30, 2021, the amount available to the Company under the revolving credit facility was $9.5 million after giving effect to the $1.3 million of outstanding letters of credit.

(8) Debt

On May 1, 2020, Aspen Aerogels Rhode Island, LLC (Borrower) executed a promissory note (Note) in favor of Northeast Bank to receive an unsecured loan in the principal amount of $3.7 million (the PPP Loan) pursuant to the Paycheck Protection Program (PPP) established by the CARES Act, as amended by the Paycheck Protection Program Flexibility Act (Flexibility Act), and administered by the Small Business Administration (SBA). The PPP Loan was subsequently sold by Northeast Bank to The Loan Source, Inc. (PPP Investor), a secondary market investor.

On August 24, 2021, the SBA remitted $3.7 million in principal and less than $0.1 million in accrued interest to the PPP Investor after approving the Borrower’s application for forgiveness of the PPP Loan under the provisions of the CARES Act. Accordingly, the Company recorded a total gain on the extinguishment of debt of $3.7 million during the quarter ended September 30, 2021.

As of September 30, 2021, the Company has 0 required principal or interest payments remaining related to the PPP Loan.

As of December 31, 2020, long-term debt consisted of the following:

 

 

December 31,

 

 

 

2020

 

 

 

 

 

 

Long-term debt, principal

 

$

3,686

 

Current portion of long-term debt

 

 

(1,609

)

Debt issuance costs, net of accumulated amortization

 

 

(18

)

Long-term debt

 

$

2,059

 

(9) Commitments and Contingencies

CustomerCloud Computing Agreement

The Company is party to a cloud computing agreement that is a service contract for enterprise resource planning software. The agreement has a three-year term beginning on January 15, 2021. During the nine months ended September 30, 2021, the Company capitalized $0.7 million of costs related to implementation of the agreement that will begin to amortize during 2022. The capitalized implementation costs are included within other long-term assets on the consolidated balance sheets.

Thermal Barrier Contracts

The Company is party to production contracts with a major U.S. automotive original equipment manufacturer (OEM) to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation electric vehicles (Contracts). Pursuant to the Contracts, the Company is obligated to supply Barriers at fixed annual prices and at volumes to be specified by the OEM up to a daily maximum quantity through the respective terms of the agreements, which expire at various times from 2026 through 2034. While the OEM has agreed to purchase its requirement for Barriers from the Company for locations to be designated from time to time by the OEM, it has no obligation to purchase any minimum quantity of Barriers under the Contracts. In addition, the OEM may terminate the Contracts at any time and for any or no reason. All other terms of the Contracts are generally consistent with the OEM’s standard purchase terms, including quality and warranty provisions customary in automotive industry.

BASF Supply Agreement

During 2016, theThe Company entered intois party to a supply agreement, and a side agreement (together, theas amended, with BASF Polyurethanes GmbH (BASF) (the Supply Agreement) and a joint development agreement (the JDA) with BASF SE (BASF)(the JDA). Pursuant to the Supply Agreement, the Company agreed towill sell exclusively to BASF certain of the Company’s Spaceloft ® A2 productproducts at annual volumes to be specified by BASF, subject to certain volume limits. However, BASF has no obligation to purchase products under the Supply Agreement. The Supply Agreement will terminate on December 31, 2027.2027 with respect to the Company’s Spaceloft A2 product and December 31, 2028 with respect to a new product developed under the JDA. Upon the expiration of the Supply Agreement with respect to each product, the Company will be subject to a post-termination supply commitment for an additional two years. The JDA is designed to facilitate the collaboration betweenby the parties on the development and commercialization of new products.


In addition, under the terms of the Supply Agreement, BASF, willin its sole discretion, may make a non-interest bearing prepaymentprepayments to the Company in the aggregate amount of $22up to $22.0 million during the constructionterm 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 theThese 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 beobligations are secured by a security interest in real estate, plant and equipment at the Company’s Rhode Island facility and Georgia manufacturing facilities.a license to certain intellectual property. BASF made a prepayment in the amount of $5.0 million to the Company in 2018 (the 2018 Prepayment). As of January 1, 2019, 25.3% of any amounts that the Company invoices for Spaceloft A2 sold to BASF are credited against the outstanding balance of the 2018 prepayment. If any of the 2018 Prepayment remains uncredited as of December 31, 2021, BASF may require that the Company repay the uncredited amount to BASF beginning in 2022.

Pursuant to the first addendum to the Supply Agreement, on January 30, 2019, BASF made an additional prepayment in the amount of $5.0 million to the Company (the 2019 Prepayment). As of January 1, 2020, 50.0% of any amounts that the Company invoices for the newly developed product sold to BASF are credited against the outstanding balance of the 2019 Prepayment. After December 31, 2022, BASF may require that the Company credit an additional 24.7% of any amounts invoiced by the Company for Spaceloft A2 product sold to BASF against the outstanding balance of the 2019 Prepayment, if any, or may require that the Company repay the uncredited amount of the 2019 Prepayment to BASF in full.

As of September 30, 2021, the Company had received $10.0 million in prepayments from BASF and applied approximately $0.3 million of credits against amounts invoiced.

The prepayment liability consists of the following:

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Prepayment liability

 

$

9,733

 

 

$

9,845

 

Current portion of prepayment liability

 

 

(4,615

)

 

 

 

Prepayment liability included within deferred revenue

 

 

(118

)

 

 

(290

)

Prepayment liability, long-term

 

$

5,000

 

 

$

9,555

 

The amounts and terms of additional prepayment installments, if any, are subject to negotiation between the Company and BASF.

Federal, State and Local Environmental Regulations

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.

Revolving Line of Credit

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 millionis subject to compliance with certain covenantsfederal, state and borrowing base limitations. Atlocal laws and regulations relating to the Company’s election,environment. These laws generally provide for control of pollutants released into the interest rate applicableenvironment and require responsible parties to borrowingsundertake remediation. Penalties 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, exceptimposed 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.noncompliance.

Litigation

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“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.


(7) Deferred Rent(10) Leases

The Company leases office, laboratory, warehouse and warehousefabrication space in Northborough, Massachusetts and East Providence, Rhode Island.Island 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 2031.

For leases that contain fixed increasesThe Company determines if an arrangement is a lease at inception. 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 minimum annual lease, payment during the original term ofif 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 recognizes rentalwill 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, 2021 are as follows:

Year

 

Operating

Leases

 

 

 

(In thousands)

 

2021 (excluding the nine months ended September 30, 2021)

 

$

778

 

2022

 

 

3,086

 

2023

 

 

2,639

 

2024

 

 

2,048

 

2025

 

 

1,813

 

Thereafter

 

 

6,856

 

Total lease payments

 

 

17,220

 

Less imputed interest

 

 

(3,388

)

Total lease liabilities

 

$

13,832

 

The Company incurred operating lease costs of $1.5 million and $1.1 million during the nine months ended September 30, 2021 and 2020, respectively. Cash payments related to operating lease liabilities were $1.3 million and $1.1 million during the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, the weighted average remaining lease term for operating leases was 7.5 years. As of September 30, 2021, the weighted average discount rate for operating leases was 6.1%.

As of September 30, 2021, the Company has an additional operating equipment lease that will commence during 2021 with total lease payments of less than $0.1 million and recordsa lease term of 4.0 years.

(11) CARES Act Payroll Tax Deferral

The Company elected to defer approximately $0.9 million of its employer payroll tax obligation for the difference between rent expenseperiod from March 27, 2020 to December 31, 2020 pursuant to the provisions of the CARES Act. The Company is required to remit 50 percent of the deferred tax balance on or before December 31, 2021 and the amount currently payable as deferred rent.remaining 50 percent on or before December 31, 2022.

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.

Deferred rent consistsOther long-term liabilities consist of the following:

 

 

 

September 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

��

 

(In thousands)

 

Deferred rent

 

$

1,539

 

 

$

1,125

 

Current maturities of deferred rent

 

 

(207

)

 

 

(154

)

Deferred rent, less current maturities

 

$

1,332

 

 

$

971

 


 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Deferred employer payroll tax obligation

 

$

870

 

 

$

870

 

Current portion of deferred payroll tax obligation

 

 

(436

)

 

 

(436

)

Other long-term liabilities

 

$

434

 

 

$

434

 

 

(8)(12) Net Loss Per Share

The computation of basic and diluted net loss per share 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

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands, except

share and per share data)

 

 

(In thousands, except

share and per share data)

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(3,088

)

 

$

(3,097

)

 

$

(17,638

)

 

$

(6,281

)

 

$

(7,822

)

 

$

(6,753

)

 

$

(20,741

)

 

$

(15,620

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

23,442,241

 

 

 

23,168,251

 

 

 

23,356,997

 

 

 

23,114,280

 

 

 

32,523,405

 

 

 

26,728,205

 

 

 

29,685,936

 

 

 

26,150,236

 

Net loss per share, basic and diluted

 

$

(0.13

)

 

$

(0.13

)

 

$

(0.76

)

 

$

(0.27

)

 

$

(0.24

)

 

$

(0.25

)

 

$

(0.70

)

 

$

(0.60

)

 

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 Months Ended

 

 

Nine Months Ended

 

 

Three and Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Common stock options

 

 

2,476,829

 

 

 

2,044,840

 

 

 

2,476,829

 

 

 

2,044,840

 

 

 

3,694,679

 

 

 

3,918,669

 

Restricted common stock units

 

 

834,859

 

 

 

677,001

 

 

 

834,859

 

 

 

677,001

 

 

 

348,624

 

 

 

699,559

 

Common stock warrants

 

 

120

 

 

 

120

 

 

 

120

 

 

 

120

 

Restricted common stock awards

 

 

151,859

 

 

 

153,277

 

 

 

151,859

 

 

 

153,277

 

 

 

476,550

 

 

 

123,191

 

Total

 

 

3,463,667

 

 

 

2,875,238

 

 

 

3,463,667

 

 

 

2,875,238

 

 

 

4,519,853

 

 

 

4,741,419

 

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.

(9)(13) Income Taxes

The Company incurred net operating losses and recorded a full valuation allowance against net deferred tax assets for all periods presented. Accordingly, the Company has not recorded a provision for federal or state income taxes.

(14) Subsequent Events

The Company has evaluated subsequent events through November 4, 2021, the date of issuance of the consolidated financial statements for the three and nine months ended September 30, 2021. 


Item 2.

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

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2016,2020, filed with the U.S. Securities and Exchange Commission (SEC) on March 2, 2017,12, 2021, 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.

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

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

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

Overview

We design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy infrastructure and sustainable building 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 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. Our Pyrogel and Cryogel product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption.

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 thermal barriers for use in battery packs in electric vehicles. Our PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to impede the propagation of thermal runaway across multiple lithium-ion battery system architectures. Our thermal barrier technology is designed to offer a unique combination of thermal management, mechanical performance and fire protection properties that 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 expenses, incurring significant capital expenditures to expand manufacturing capacity, build an automated thermal barrier fabrication operation, enhance research and development resources and construct a battery materials facility, among other items.

We also derive product revenue from a number of other end markets, including the sustainable building materials and other end markets.market. 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 global insulation market, the electric vehicle market and in a number of new, high-value markets.

We generate product revenue through the sale of our line of aerogel blankets.blankets and thermal barriers. 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 customers and engineering firms to promote the qualification, specification and acceptance of our 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 products and strong end-user support. Our salespeople also work to educate insulation contractors about the technical and operating cost advantages of our aerogel blankets.


We also perform research services under contracts with various agencies of the U.S. government, including the Department of Defense and the Department of Energy, and other institutions. Research performed underWe have decided to cease efforts to secure additional funded research contracts and to wind down our existing contract with government agenciesresearch activities. This decision reflected our desire to focus our research and other institutions enables usdevelopment resources on initiatives to improve the profitability of our existing business and on efforts to develop new products and leveragenext-generation technologies into broader commercial applications.with application in new, potentially high-value markets.

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 inhave operated the East Providence facility during 2015, whichsince 2008 and have increased our annual nameplate capacity in phases to approximately 5055 million square feet of aerogel blankets. DuringTo meet expected growth in demand for our aerogel products in the first quarter of 2016,energy, sustainable building and electric vehicle markets, we announced the planned construction ofare planning to expand our aerogel blanket capacity by constructing a second manufacturing facilityplant at a site in Statesboro, Georgia supported bythe southeastern U.S. Subject to board approval, finalization of zoning approvals and other arrangements, we expect to have the second aerogel plant operational during the second half of 2023. In addition, we are planning to construct a package of incentives fromstate-of-the-art, automated thermal barrier fabrication operation and to hire dedicated thermal barrier fabrication employees in Mexico in order to keep pace with the State of Georgia and local governmental authorities. significant potential demand for our PyroThin thermal barriers.

We have electedentered into production contracts with a major U.S. automotive original equipment manufacturer to delay constructionsupply fabricated, multi-part thermal barriers for use in the battery system of this facilityits next-generation electric vehicles. Pursuant to better align the capacity expansioncontracts, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreements, which expire at various times from 2026 through 2034. While the customer 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, the customer may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with our assessment of future demand.the customer’s standard purchase terms, including quality and warranty provisions customary in the automotive industry.

During 2016, we entered intoWe have been engaged in a strategic partnership with BASF SE to develop and commercialize products for the sustainable building materials and other markets. The strategic partnership includedincludes a supply agreement governing the exclusive sale of our Spaceloft A2 productspecified products to BASF and a joint development agreement targeting innovative products and technologies. SubjectBASF has no obligation to certain preconditions,purchase any products under the supply agreement. Pursuant to the supply agreement, BASF also agreed tomay, in its sole discretion, make a series of prepayments to us in the aggregate amount of $22up to $22.0 million during the constructionterm of our planned manufacturing facilitythe agreement. We may repay the prepayments to BASF at any time in Statesboro, Georgia. The prepayments will be either credited againstwhole or in part for any reason.

BASF made a prepayment to us of $5.0 million during 2018. As of January 1, 2019, 25.3% of any amounts invoiced to BASFthat we invoice for Spaceloft A2 or repaid by ussold to BASF will be credited against the outstanding balance of the 2018 prepayment. If any amount of the 2018 prepayment remains uncredited at December 31, 2021, BASF may require that we repay the uncredited amount following a six-week notice period. In January 2019, BASF made an additional prepayment to us of $5.0 million. As of January 1, 2020, 50% of any


amounts that we invoice for a newly developed product sold to BASF will be credited against the outstanding balance of the 2019 prepayment. After December 31, 2022, BASF may require that we credit 24.7% of any amounts we invoice for Spaceloft A2 sold to BASF against the outstanding balance of the 2019 prepayment or may require that we repay the uncredited amount following a six-week notice period.

In October 2021, we announced with BASF that BASF will discontinue further marketing of Spaceloft A2 effective November 15, 2021. After this date, BASF customers will be able to purchase Spaceloft A2 directly from us. We are currently working with BASF to terminate certain provisions of the supply and joint development agreements other than those governing the prepayments. Subject to finalization, approval and execution of pertinent amendments to the agreements, we expect we will be solely responsible for future development and commercialization of the specified products in the sustainable building materials and other markets. In addition, we expect the uncredited prepayment balances at the time of the execution of the amendments would remain outstanding and subject to repayment upon BASF’s request and following the requisite six-week notice periods after December 31, 2023. As2021 and December 31, 2022, respectively.

On March 12, 2021, we entered into an Amended and Restated Loan and Security Agreement (Loan Agreement) with Silicon Valley Bank to extend the maturity date of the revolving credit facility to April 28, 2022. Pursuant to the Loan Agreement, we are permitted to borrow a resultmaximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, as defined, subject to a minimum rate of 4.00% per annum. The rates applicable to borrowings vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility. The credit facility has also been amended to establish minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants, each as defined in the Loan Agreement. On September 29, 2021, the Company entered into an amendment to the Loan Agreement to revise certain financial covenants, among other things.

On May 1, 2020, our wholly owned subsidiary, Aspen Aerogels Rhode Island, LLC (Borrower), executed a note for an unsecured loan of $3.7 million pursuant to the Paycheck Protection Program (PPP Loan) under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), as amended, and administered by the U.S. Small Business Administration (SBA). The Borrower conferred with representatives of the SBA prior to finalizing the PPP Loan. The loan was unsecured, contained customary events of default, carried an interest rate of 1% per year, and matured on May 1, 2022. The Borrower had the right to repay the loan at any time without penalty. In addition, the Borrower was permitted at any time to submit an application to extend the maturity of the loan to May 1, 2025.

On August 24, 2021, the SBA remitted $3.7 million in principal and less than $0.1 million in accrued interest after approving the Borrower’s application for forgiveness of the PPP Loan under the provisions of the CARES Act. Accordingly, we recorded a total gain on the extinguishment of debt of $3.7 million during the quarter ended September 30, 2021.

On February 3, 2021, we entered into a supply agreement (Supply Agreement) with Silbond Corporation (Silbond), for the purchase of certain silanes (Product). Pursuant to the Supply Agreement, we agreed to purchase, and Silbond agreed to supply, all of our decision to delay constructionrequirements for the Product at our East Providence facility through the term of the Statesboro facility, we have yetSupply Agreement, which term ends on September 30, 2023, unless either party terminates the agreement early pursuant to fulfill the preconditions, and commencementterms of the prepayments from BASF will be delayed untilSupply Agreement.

On June 29, 2021, we entered into a securities purchase agreement (Purchase Agreement) with an affiliate of Koch Strategic Platforms (Purchaser). Pursuant to the preconditions are satisfied.

In July 2017,terms of the Purchase Agreement, we announcedsold to the launchPurchaser an aggregate of 3,462,124 shares of our common stock at a new product, Pyrogel® HPS, a high-temperature aerogel blanket engineeredpurchase price equal to provide thermal conductivity and economic performance at service temperatures$21.663 per share, for aggregate gross proceeds of up to 650°C (1200°F)approximately $75.0 million (the Private Placement).

Our revenue for the nine months ended September 30, 20172021 was $75.3$90.1 million, which represented a decreasean increase of $14.8$12.8 million, or 17%, from $77.3 million for the nine months ended September 30, 2016.2020. Net loss for the nine months ended September 30, 20172021 was $17.6$20.7 million and net loss per diluted share was $0.76.$0.70. Net loss for the nine months ended September 30, 20162020 was $6.3$15.6 million and net loss per diluted share was $0.27.$0.60.

At present, we are not certain of the extent of the impact that the COVID-19 pandemic will continue to have on our business. Our manufacturing facility remains operational and we have not encountered any significant disruption to our supply chain or our ability to deliver to our customers.

In response to the COVID-19 pandemic, we have implemented and are following safe practices recommended by public health authorities and other government entities. We continue to focus on the safety and health of our employees, customers and vendors. In addition, we have implemented various precautionary measures, including remote work arrangements, restricted business travel and procedures for social distancing, face coverings and safe hygiene. We continue to monitor public health guidance as it evolves and


plan to adapt our practices as appropriate. Refer to “Risk Factors” in Item 1A of the Annual Report for more information concerning risks to our business associated with COVID-19.

Key Metrics and Non-GAAP Financial Measures

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.

Square Foot Operating Metric

We price our product and measure our product shipments in square feet. We estimate our annual nameplate capacity was approximately 5055 million square feet of aerogel blankets at September 30, 2017.2021. We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and product shipments on a uniform and consistent basis. The following chart sets forth product shipments in square feet associated with recognized revenue, in square feetincluding revenue recognized over time utilizing the input method, for the periods presented:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

(In thousands)

 

Product shipments in square feet

 

 

8,649

 

 

 

11,843

 

 

 

25,629

 

 

 

33,632

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

Product shipments in square feet

 

 

9,012

 

 

 

6,825

 

 

 

27,526

 

 

 

22,307

 

Adjusted EBITDA

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, thatwhich 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 use Adjusted EBITDA:

as a measure of operating performance because it does not include the impact of items that we do not consider indicative of our core operating performance;

as a measure of operating performance because it does not include the impact of items that we do not consider indicative of our core operating performance;

for planning purposes, including the preparation of our annual operating budget;

for planning purposes, including the preparation of our annual operating budget;

to allocate resources to enhance the financial performance of our business; and

to allocate resources to enhance the financial performance of our business; and

as a performance measure under our bonus plan.

as a performance measure used under our bonus plan.

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:

Adjusted EBITDA does not reflect our historical cash expenditures or future requirements for capital expenditures or other contractual commitments;

Adjusted EBITDA does not reflect our historical cash expenditures or future requirements for capital expenditures or other contractual commitments;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect stock-based compensation expense;

Adjusted EBITDA does not reflect stock-based compensation expense;

Adjusted EBITDA does not reflect our income tax expense or cash requirements to pay our income taxes;

Adjusted EBITDA does not reflect our income tax expense or cash requirements to pay our income taxes;


Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

Although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated, amortized or impaired will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; and

although depreciation, amortization and impairment charges are non-cash charges, the assets being depreciated, amortized or impaired will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for these replacements; and

Other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do, limiting their usefulness as a comparative measure.

other companies in our industry may calculate EBITDA or Adjusted EBITDA differently than we do, limiting their usefulness as a comparative measure.

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:

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

September 30,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

(In thousands)

 

 

(In thousands)

 

Net loss

 

$

(3,088

)

 

$

(3,097

)

 

$

(17,638

)

 

$

(6,281

)

 

$

(7,822

)

 

$

(6,753

)

 

$

(20,741

)

 

$

(15,620

)

Depreciation and amortization

 

 

2,726

 

 

 

2,472

 

 

 

8,032

 

 

 

7,298

 

 

 

2,114

 

 

 

2,545

 

 

 

6,856

 

 

 

7,670

 

Stock-based compensation (1)

 

 

1,364

 

 

 

1,474

 

 

 

3,982

 

 

 

4,277

 

 

 

1,554

 

 

 

991

 

 

 

3,600

 

 

 

2,990

 

Interest expense, net

 

 

58

 

 

 

37

 

 

 

123

 

 

 

115

 

Postponed financing costs

 

 

 

 

 

656

 

 

 

 

 

 

656

 

Gain on extinguishment of debt

 

 

(3,734

)

 

 

 

 

 

(3,734

)

 

 

 

Interest expense

 

 

58

 

 

 

49

 

 

 

188

 

 

 

182

 

Adjusted EBITDA

 

$

1,060

 

 

$

1,542

 

 

$

(5,501

)

 

$

6,065

 

 

$

(7,830

)

 

$

(3,168

)

 

$

(13,831

)

 

$

(4,778

)

 

(1) Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, vesting of restricted stock units and vesting and modification of restricted common stock.


(1)

Represents non-cash stock-based compensation related to vesting and modifications of stock option grants, vesting of restricted stock units and vesting of restricted common stock.

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 ofcapacity 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.

During 2021, we are projecting growth in particular whentotal revenue principally due to an anticipated increase in maintenance-based demand in the refinery and chemical market, growth in the European sustainable building materials market and initial thermal barrier revenue in the electric vehicle market. We have also increased prices to offset an increase in raw material costs during 2021 that will contribute to revenue growth.

However, we expandintend to increase our manufacturing capacity.

investment in the electric vehicle market and our aerogel technology platform in 2021. We will use this investment to accelerate thermal barrier business development, to establish industry-leading thermal barrier fabrication capability, to progress from the development phase to the commercialization phase of our silicon-rich carbon aerogel battery materials, and to identify additional high-value markets for our aerogel technology, among other items. 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,Adjusted EBITDA and an increase in net loss and loss per share and a decrease in Adjusted EBITDA during the year ending December 31, 20172021 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.2020.

Components of Our Results of Operations

Revenue

We recognize product revenue from the sale of our line of 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 and research services revenue is recognized upon transferthe 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 levelsDuring 2021, we are projecting growth in total revenue principally due to an anticipated increase in maintenance-based demand in the global energyrefinery and chemical market, will continue into 2018, particularlygrowth in the global downstream market. As a result of this constrained capital investmentEuropean sustainable building materials market and low activity levelsinitial thermal barrier revenue in the global energy market, as well as the conclusion of the multiyear petrochemical project withelectric vehicle market. We have also announced a major Asian energy company, which comprised 25% of our productprice increase to offset an increase in raw material costs during 2021 that will contribute to revenue during 2016, we expect to continue to experience a decrease in revenue during the year ending December 31, 2017.growth.

Cost of Revenue

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 alsoand includes stock-based compensation of manufacturing employeesfibrous 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 salesrevenue 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 expectcost 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 both in the aggregate to declineabsolute dollars and as a percentage of revenue as we seekduring 2021 due to achieve higher selling prices, material sourcing improvements, quality improvements(i) projected growth in product shipments, (ii) the impact of projected growth in PyroThin thermal barrier revenue, and manufacturing yield enhancements for(iii) recent increases in the costs of our aerogel products.raw materials.

Manufacturing expense is also a significant component of cost of revenue. As we increaseManufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing capacity through our planned constructionassets. Manufacturing expense also includes stock-based compensation for manufacturing employees and operation of a second manufacturing facility and, over time, potentially expand the production lines at the second facility, weshipping 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 2017.2021, principally due to our plan to hire additional personnel and incur additional manufacturing expenses to establish fabrication operations in support of projected growth in PyroThin thermal barrier demand.

In total, we expect that cost of product revenue will increase in absolute dollars during 2021 versus 2020 and as a percentage of revenue versus 2020.

Cost of research services revenue consists of direct labor costs of research personnel engaged in the contract research, third-party consulting and subcontractor expense, and associated direct material costs. This cost of revenue also includes overhead expenses associated with


project resources, development tools and supplies. Cost of research services revenue is recorded when the related research services revenue is recognized. In 2021, we expect cost of research services revenue will continue to decline as we wind down our existing contract research activities.

Gross Profit

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 in absolute dollars and as a percentage of revenue to vary significantly from period to period. As

During 2021, we build out our manufacturing capacity, we expect increased manufacturing expenses will periodically have a significant negative impact onproject that gross profit will grow 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 productabsolute dollars versus 2020 due to projected growth in total revenue, during 2016,offset, in combination with the impact of constrained capital investmentpart, by increases in manufacturing expense and low activity levels in the global energy infrastructure market, wematerial costs. We expect to continue to experience a decrease in revenue and an associated decrease in gross profit andthat gross profit as a percentage of revenuewill decrease modestly during 2017. 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 decrease in gross profit could be significantly greater than any percentage decrease in revenue. However, in the longer term, we expect gross profit to improve as a percentage of revenue2021 due to expected increasesthe projected increase in material costs and manufacturing productivity and production volumes, supported by expected capacity expansions, improvementsexpense in manufacturing yields and realizationsupport of material purchasing efficiencies.projected growth in PyroThin thermal barrier revenue

Operating Expenses

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 2021, we are hiring additional personnel and incurring additional operating expenses to support the anticipated multi-year growth in our PyroThin thermal barrier business.In addition, we have recently encountered worker shortages and experienced increased wages within the labor market for our production personnel. Accordingly, (i) personnel-related expenses may exceed our expectations and (ii) labor shortages may have a material impact on our operations. As a result, we expect that operating expenses will continue to increase in both absolute dollars and 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

Research and development expenses consist primarily of expenses for personnel engaged in the development of next generationnext-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 expect that our research and development expenses will increase in absolute dollars but decrease as a percentage of revenue in the longer term, we expect suchthese expenses will continue to increase in both absolute dollars and as a percentage of revenue during 2017.in 2021.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities related costs.

We planexpect that sales and marketing expenses will increase in absolute dollars and as a percentage of revenue during 2021, principally due to expandan increase in compensation associated with the addition of personnel in support of our sales force and sales consultants globally to drive anticipated growth in customers and demand for our products. WhilePyroThin thermal barrier business. In the longer term, we expect that sales and marketing expenses will increase in absolute dollars, but decrease as a percentage of revenue in the longer-term, we expect such expenses to continue to increase as a percentage of revenue during 2017.revenue.

General and Administrative Expenses

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 of compliance with securities, corporate governance and related laws and regulations, investor relations expenses, increased insurance premiums, including director and officer insurance, and increased audit and legal fees. In addition, we

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 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,While 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.revenue in the longer term, we expect such expenses will increase in both absolute dollars and as a percentage of revenue in 2021.

Other Expense, NetGain on Extinguishment of Debt

ForOn May 1, 2020, our wholly-owned subsidiary, Aspen Aerogels Rhode Island, LLC, executed a note for an unsecured PPP loan of $3.7 million pursuant to the nineCARES Act. On August 24, 2021, the SBA remitted $3.7 million in principal and accrued interest to the noteholder after approving the Borrower’s application for forgiveness of the PPP Loan. Accordingly, we recorded a total gain on the extinguishment of debt of $3.7 million during the three months ended September 30, 2017, other2021.


Interest Expense, Net

Interest expense, net consistedconsists primarily of fees related to our revolving credit facility. For the nine months ended September 30, 2016, otherand interest expense net consisted primarily of postponed financing costs, as well as costs related to our revolving credit facility.

Provision for Income Taxes

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.

Results of Operations

Three months ended September 30, 20172021 compared to the three months ended September 30, 20162020

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

Revenue

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

($ in thousands)

 

 

($ in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

26,812

 

 

 

99

%

 

$

28,877

 

 

 

98

%

 

$

(2,065

)

 

 

(7

)%

 

$

30,263

 

 

 

100

%

 

$

23,939

 

 

 

99

%

 

$

6,324

 

 

 

26

%

Research services

 

 

386

 

 

 

1

%

 

 

683

 

 

 

2

%

 

 

(297

)

 

 

(43

)%

 

 

117

 

 

 

0

%

 

 

256

 

 

 

1

%

 

 

(139

)

 

 

(54

)%

Total revenue

 

$

27,198

 

 

 

100

%

 

$

29,560

 

 

 

100

%

 

$

(2,362

)

 

 

(8

)%

 

$

30,380

 

 

 

100

%

 

$

24,195

 

 

 

100

%

 

$

6,185

 

 

 

26

%

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

 

 

Three Months Ended September 30,

 

 

Change

 

 

 

2017

 

 

2016

 

 

Amount

 

 

Percentage

 

Product shipments in square feet (in thousands)

 

 

8,649

 

 

 

11,843

 

 

 

(3,194

)

 

 

(27

)%

 

 

Three Months Ended September 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

Amount

 

 

Percentage

 

Product shipments in square feet (in thousands)

 

 

9,012

 

 

 

6,825

 

 

 

2,187

 

 

 

32

%

Total revenue decreased by $2.4increased $6.2 million, or 8%26%, to $27.2$30.4 million for the three months ended September 30, 20172021 from $29.6$24.2 million in the comparable period in 2016 primarily as a2020. The increase in total revenue was the result of a decreasean increase in product revenue.

Product revenue decreasedincreased by $2.1$6.4 million, or 7%26%, to $26.8$30.3 million for the three months ended September 30, 20172021 from $28.9$23.9 million in the comparable period in 2016.2020. This decreaseincrease was principally the result of a decrease in salesdriven by growth in the Asian market, led byrefinery and chemical markets, particularly in the conclusion of the multiyear petrochemical project with a major Asian energy company,United States and Europe, offset, in part, by an increasea decrease in revenueproject-based demand in the U.S., South American and European markets and growth in the subsea market during the three months ended September 30, 2017.liquefied natural gas (LNG) market.

Product revenue for the three months ended September 30, 20172021 included $5.0$8.1 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. distributor. Product revenue for the three months ended September 30, 20162020 included $9.3 million to a major Asian energy company and $3.8$5.2 million to an Asian distributor.LNG project contractor, $4.2 million to a North American distributor and $3.0 million to a subsea contractor.

The average selling price per square foot of our products increaseddecreased by $0.66,$0.15, or 27%4%, to $3.10$3.36 per square foot for the three months ended September 30, 20172021 from $2.44$3.51 per square foot for the three months ended September 30, 2016. This increase2020. The decrease in average selling price principally reflected the impact of a year-over-year increasechange in the mix of high-priced subsea products and the impact of price increases


enacted in early 2017.sold. This increasedecrease in average selling price had the effect of increasingdecreasing product revenue by $5.7$1.3 million for the three months ended September 30, 20172021 from the comparable period in 2016.2020.

ProductIn volume terms, product shipments decreasedincreased by 3.22.2 million square feet, or 27%32%, to 8.69.0 million square feet of aerogel products for the three months ended September 30, 2017,2021, as compared to 11.86.8 million square feet for the three months ended September 30, 2016. This decrease2020. The increase in product shipmentsvolume had the effect of decreasingincreasing product revenue by $7.8$7.7 million for the three months ended September 30, 20172021 from the comparable period in 2016.2020.


Research services revenue decreased by $0.3 million, or 43%, to $0.4was $0.1 million for the three months ended September 30, 2017 from $0.72021 and $0.3 million in the comparable period in 2016.2020. The decreasedecline in research services revenue reflected our decision to wind down our existing contract research activities.

Cost of Revenue

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

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

 

$

27,279

 

 

 

90

%

 

 

90

%

 

$

22,243

 

 

 

93

%

 

 

92

%

 

$

5,036

 

 

 

23

%

Research services

 

 

34

 

 

 

29

%

 

 

0

%

 

 

52

 

 

 

20

%

 

 

0

%

 

 

(18

)

 

 

(35

)%

Total cost of revenue

 

$

27,313

 

 

 

90

%

 

 

90

%

 

$

22,295

 

 

 

92

%

 

 

92

%

 

$

5,018

 

 

 

23

%

Total cost of revenue increased $5.0 million, or 23%, to $27.3 million for the three months ended September 30, 2021 from $22.3 million in the comparable period in 2020. The increase in total cost of revenue was primarily duethe result of an increase in product cost of revenue.

Product cost of revenue increased by $5.1 million, or 23%, to $27.3 million for the timingthree months ended September 30, 2021 from $22.2 million in the comparable period in 2020. The $5.1 million increase was the result of a $1.9 million increase in material costs and amounta $3.2 million increase in manufacturing expense. The increase in material costs was principally the result of funding available under existing research contractsthe 2.2 million square feet, or 32%, increase in total product shipments. The increase in manufacturing expense was the result of increases in compensation and related expenses of $2.5 million, operating supplies of $0.4 million, professional services of $0.2 million and other manufacturing expenses of $0.1 million.

Product cost of revenue as a percentage of product revenue decreased to 90% during the three months ended September 30, 20172021 from 93% during the three months ended September 30, 2020. This decrease was principally the result of the decrease in material costs as a percentage of revenue during the three months ended September 30, 2021.

Research services cost of revenue was less than $0.1 million for both the three months ended September 30, 2021 and 2020.

Gross Profit

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Gross profit

 

$

3,067

 

 

 

10

%

 

$

1,900

 

 

 

8

%

 

$

1,167

 

 

 

61

%

Gross profit increased by $1.2 million, or 61%, to $3.1 million for the three months ended September 30, 2021 from $1.9 million in the comparable period in 2016.

Product2020. The increase in gross profit was the result of the $6.2 million increase in total revenue, offset, in part, by the $5.0 million increase in total cost of revenue. The increase in revenue was 99%principally driven by growth in the refinery and 98%chemical markets, particularly in the United States and Europe, offset, in part, by a decrease in project-based demand in the LNG market. The increase in total cost of revenue was the result of the $1.9 million increase in material costs associated with the 2.2 million square feet, or 32%, increase in total product shipments and the $3.2 million increase in manufacturing expense during 2021.

Gross profit as a percentage of total revenue increased to 10% of total revenue for the three months ended September 30, 20172021 from 8% in the comparable period in 2020.


Research and 2016, respectively. Development Expenses

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Research and development expenses

 

$

3,077

 

 

 

10

%

 

$

2,088

 

 

 

9

%

 

$

989

 

 

 

47

%

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

Cost of Revenue

 

 

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 decreaseddevelopment expenses increased by $0.9$1.0 million, or 4%47%, to $22.3$3.1 million for the three months ended September 30, 20172021 from $23.2$2.1 million in the comparable period in 2016.2020. The decrease in total cost of revenue was the result of both a decrease in product cost of revenue and a decrease in research services cost of revenue.

Cost of product revenue decreased by $0.7 million, or 3%, to $22.1 million for the three months ended September 30, 2017 from $22.8 million in the comparable period in 2016. This $0.7 million decrease was the result of a decrease in manufacturing expense of $0.8 million, offset, in part, by a $0.1$1.0 million increase reflects an increase in material costs. The percentage decrease in materialcompensation and related costs was lower than the decrease in product revenue due to a shift in mix toward higher cost products and a decrease in manufacturing output. The decrease in manufacturing expense was the result of decreases in utilities expense of $0.4 million, maintenance expense of $0.2 million, compensation expense of $0.2$0.7 million and other expense of $0.2 million, offset, in part, by an increase in depreciation expense of $0.2 million.

The cost of product revenue as a percentage of product revenue increased 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 million for the three months ended September 30, 2017 from $0.3 million in the comparable period in 2016. Cost of research service revenue as a percentage of research services revenue decreased 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

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Gross profit

 

$

4,948

 

 

 

18

%

 

$

6,402

 

 

 

22

%

 

$

(1,454

)

 

 

(23

)%


Gross profit decreased by $1.5 million, or 23%, to $4.9 million for the three months ended September 30, 2017 from $6.4 million in the comparable period in 2016. The decrease in gross profit was the result of the $2.4 million decrease in total revenue, offset, in part, by the $0.9 million decrease in total cost of revenue. The decrease in revenue was principally due 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 revenue in the U.S. and European energy markets and project related revenue in South America and the subsea market during the three months ended September 30, 2017. The decrease in total cost of revenue was a result of the $0.8 million decrease in manufacturing costs and the $0.2 million decrease in research services costs, offset, in part, by a $0.1 million increase in material costs during the three months ended September 30, 2017.

Gross profit as a percentage of total revenue decreased to 18% of total revenue for the three months ended September 30, 2017 from 22% 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 facility and a shift in mix to higher cost products.

Research and Development Expenses

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Research and development expenses

 

$

1,468

 

 

 

5

%

 

$

1,328

 

 

 

4

%

 

$

140

 

 

 

11

%

Research and development expenses increased by $0.1 million, or 11%, to $1.5 million for the three months ended September 30, 2017 from $1.3 million in the comparable period in 2016. The $0.1 million increase was primarily due to an increase of $0.1 million in compensation related expenses.$0.3 million.

Research and development expenses as a percentage of total revenue increased to 5%10% for the three months ended September 30, 20172021 from 4%9% in the comparable period in 20162020 due principally to both the increaseincreases in researchpersonnel and development expenses and the decrease in total revenue for the three months ended September 30, 2017.

We expect thatexpenditures to support 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 ourcarbon 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.battery materials initiative.

Sales and Marketing Expenses

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Sales and marketing expenses

 

$

2,745

 

 

 

10

%

 

$

3,056

 

 

 

10

%

 

$

(311

)

 

 

(10

)%

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Sales and marketing expenses

 

$

4,915

 

 

 

16

%

 

$

2,755

 

 

 

11

%

 

$

2,160

 

 

 

78

%

Sales and marketing expenses decreasedincreased by $0.3$2.1 million, or 10%78%, to $2.8$4.9 million for the three months ended September 30, 20172021 from $3.1$2.8 million in the comparable period in 2016.2020. The $2.1 million increase was principally the result of increases in compensation and related costs of $2.0 million and travel-related and other expenditures of $0.3 million, decrease was drivenoffset, in part, by a decrease in outside consulting expensesales consultant expenses of $0.3$0.2 million.

Sales and marketing expenses as a percentage of total revenue remained flat at 10%increased to 16% for the three months ended September 30, 2017 and 20162021 from 11% in the comparable period in 2020, due principally to the relatively proportional decreaseincrease in compensation and related expenses associated with an increase in sales and marketingbusiness development personnel.

General and Administrative Expenses

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

General and administrative expenses

 

$

6,573

 

 

 

22

%

 

$

3,761

 

 

 

16

%

 

$

2,812

 

 

 

75

%

General and administrative expenses and decrease in total revenue duringincreased by $2.8 million, or 75%, to $6.6 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

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

General and administrative expenses

 

$

3,765

 

 

 

14

%

 

$

4,422

 

 

 

15

%

 

$

(657

)

 

 

(15

)%

General and administrative expenses decreased by $0.7 million, or 15% to2021 from $3.8 million during the three months ended September 30, 2017 from $4.4 million in the comparable period in 2016.2020. The $0.7$2.8 million decreaseincrease was primarily the result of a decreaseincreases in patent enforcementcompensation and related costs of $1.1$1.8 million, recruiting and professional services of $0.6 million, and other general and administrative expenses of $0.6 million, offset, in part, by an increasea decrease in compensation related expenses of $0.2 million and an increase in other general and administrative expensesthe provision for uncollectible accounts of $0.2 million.

General and administrative expenses as a percentage of total revenue decreasedincreased to 14%22% for the three months ended September 30, 20172021 from 15%16% 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 the three months ended September 30, 2017.2020.

Gain on Extinguishment of Debt

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. DueOn May 1, 2020, our wholly-owned subsidiary, Aspen Aerogels Rhode Island, LLC, executed a note for an unsecured PPP loan of $3.7 million pursuant to the expected increaseCARES Act. On August 24, 2021, the SBA remitted $3.7 million in generalprincipal and administrative expenses andaccrued interest to the projected decline innoteholder after approving the Borrower’s application for forgiveness of the PPP Loan. Accordingly, we recorded a total revenue, we expect general and administrative expenses as a percentagegain on the extinguishment 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,debt of this Quarterly Report on Form 10-Q, if protracted, and similar actions could result in significant, on-going legal 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

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

$

(58

)

 

 

(0

)%

 

$

(37

)

 

 

(0

)%

 

$

(21

)

 

 

57

%

Postponed financing costs

 

 

 

 

 

0

%

 

 

(656

)

 

 

(2

)%

 

 

656

 

 

 

(100

)%

Total other expense, net

 

$

(58

)

 

 

(0

)%

 

$

(693

)

 

 

(2

)%

 

$

635

 

 

 

(92

)%

Other expense, net, comprised primarily of costs related to our revolving credit facility, was less than $0.1$3.7 million during the three months ended September 30, 2017. During2021.


Interest Expense, net

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Interest expense, net

 

$

(58

)

 

 

(0

)%

 

$

(49

)

 

 

(0

)%

 

$

(9

)

 

 

18

%

Interest expense, net, consists primarily of fees and interest expense associated with our revolving credit agreement and was less than $0.1 million for both 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 costs2021 and less than $0.1 million of costs related to our revolving credit facility.2020.


Nine months ended September 30, 20172021 compared to the nine months ended September 30, 20162020

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

Revenue

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

Percentage of

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Revenue

 

 

Amount

 

 

Revenue

 

 

Amount

 

 

Percentage

 

 

Amount

 

 

Revenue

 

 

Amount

 

 

Revenue

 

 

Amount

 

 

Percentage

 

 

($ in thousands)

 

 

($ in thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

73,700

 

 

 

98

%

 

$

88,286

 

 

 

98

%

 

$

(14,586

)

 

 

(17

)%

 

$

89,809

 

 

 

100

%

 

$

76,772

 

 

 

99

%

 

$

13,037

 

 

 

17

%

Research services

 

 

1,569

 

 

 

2

%

 

 

1,813

 

 

 

2

%

 

 

(244

)

 

 

(13

)%

 

 

338

 

 

 

0

%

 

 

483

 

 

 

1

%

 

 

(145

)

 

 

(30

)%

Total Revenue

 

$

75,269

 

 

 

100

%

 

$

90,099

 

 

 

100

%

 

$

(14,830

)

 

 

(16

)%

Total revenue

 

$

90,147

 

 

 

100

%

 

$

77,255

 

 

 

100

%

 

$

12,892

 

 

 

17

%

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

 

 

 

Nine Months Ended September 30,

 

 

Change

 

 

 

2017

 

 

2016

 

 

Amount

 

 

Percentage

 

Product shipments in square feet (in thousands)

 

 

25,629

 

 

 

33,632

 

 

 

(8,003

)

 

 

(24

)%

 

 

Nine Months Ended September 30,

 

 

Change

 

 

 

2021

 

 

2020

 

 

Amount

 

 

Percentage

 

Product shipments in square feet (in thousands)

 

 

27,526

 

 

 

22,307

 

 

 

5,219

 

 

 

23

%


 

Total revenue decreased by $14.8increased $12.8 million, or 16%17%, to $75.3$90.1 million for the nine months ended September 30, 20172021 from $90.1$77.3 million in the comparable period in 2016 primarily as a2020. The increase in total revenue was the result of a decreasean increase in product revenue.

Product revenue decreasedincreased by $14.6$13.0 million, or 17%, to $73.7$89.8 million for the nine months ended September 30, 20172021 from $88.3$76.8 million in the comparable period in 2016.2020. This decreaseincrease was principally the result of a decrease in salesdriven by growth in the Asian market, led byglobal refinery and chemical markets, particularly in the conclusion of the multiyear petrochemical project with a major Asian energy company,United States and Europe, offset, in part, by an increasedecreases in project-based revenue in the U.S. market, including growth in the LNG and district energy markets, and by growth in South American, European and subsea markets. market.

Product revenue for the nine months ended September 30, 20172021 included $11.0$25.0 million in sales to a North American distributor and $7.5$9.2 million in sales to an Asian distributor.a European LNG project contractor. Product revenue for the nine months ended September 30, 20162020 included $17.8$15.3 million to a majoran Asian energy companyLNG project contractor and $12.6$13.6 million to a North American distributor.

The average selling price per square foot of our products increaseddecreased by $0.25,$0.18, or 10%5%, to $2.88$3.26 per square foot for the nine months ended September 30, 20172021 from $2.63$3.44 per square foot for the nine months ended September 30, 2016.2020. The increasedecrease in average selling price principally reflected an increase in the miximpact of high-priced subsea products, a decreasechange in the mix of products sold tofor the major Asian energy company with lower, project-based pricing, and, to a lesser extent,nine months ended September 30, 2021 from the impact of price increases enactedcomparable period in early 2017.2020. This increasedecrease in average selling price had the effect of increasingdecreasing product revenue by $6.4$5.0 million for the nine months ended September 30, 20172021 from the comparable period in 2016.2020.

ProductIn volume terms, product shipments decreasedincreased by 8.05.2 million square feet, or 24%23%, to 25.627.5 million square feet of aerogel products for the nine months ended September 30, 2017 from 33.62021, as compared to 22.3 million square feet for the nine months ended September 30, 2016. This decrease2020. The increase in product shipmentsvolume had the effect of decreasingincreasing product revenue by $21.0$18.0 million for the nine months ended September 30, 20172021 from the comparable period in 2016.2020.

Research services revenue decreased by $0.2was $0.3 million or 13%, to $1.6and $0.5 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 timing2021 and amount of funding available under existing research contracts during the nine months ended September 30, 2017 from the comparable period2020, respectively. The decline in 2016.

Product revenue was 98% of total revenue for both the nine months ended September 30, 2017 and 2016. Researchresearch services revenue was 2% of total revenue for both the nine months ended September 30, 2017 and 2016.reflected our decision to wind down our existing contract research activities.


Cost of Revenue

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

Percentage

of Related

 

 

Percentage

of Total

 

 

 

 

 

 

Percentage

of Related

 

 

Percentage

of Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Percentage

of Related

 

 

Percentage

of Total

 

 

 

 

 

 

Percentage

of Related

 

 

Percentage

of Total

 

 

 

 

 

 

 

 

 

 

Amount

 

 

Revenue

 

 

Revenue

 

 

Amount

 

 

Revenue

 

 

Revenue

 

 

Amount

 

 

Percentage

 

 

Amount

 

 

Revenue

 

 

Revenue

 

 

Amount

 

 

Revenue

 

 

Revenue

 

 

Amount

 

 

Percentage

 

 

($ in thousands)

 

 

($ in thousands)

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

63,706

 

 

 

86

%

 

 

85

%

 

$

69,505

 

 

 

79

%

 

 

77

%

 

$

(5,799

)

 

 

(8

)%

 

$

78,459

 

 

 

87

%

 

 

87

%

 

$

66,403

 

 

 

86

%

 

 

86

%

 

$

12,056

 

 

 

18

%

Research services

 

 

700

 

 

 

45

%

 

 

1

%

 

 

1,012

 

 

 

56

%

 

 

1

%

 

 

(312

)

 

 

(31

)%

 

 

85

 

 

 

25

%

 

 

0

%

 

 

121

 

 

 

25

%

 

 

0

%

 

 

(36

)

 

 

(30

)%

Total cost of revenue

 

$

64,406

 

 

 

86

%

 

 

86

%

 

$

70,517

 

 

 

78

%

 

 

78

%

 

$

(6,111

)

 

 

(9

)%

 

$

78,544

 

 

 

87

%

 

 

87

%

 

$

66,524

 

 

 

86

%

 

 

86

%

 

$

12,020

 

 

 

18

%

Total cost of revenue decreased by $6.1increased $12.0 million, or 9%18%, to $64.4$78.5 million for the nine months ended September 30, 20172021 from $70.5$66.5 million in the comparable period in 2016.2020. The decreaseincrease in total cost of revenue was primarilyprincipally the result of a decreasean increase in product cost of revenue.

TheProduct cost of product revenue decreased by $5.8increased $12.1 million, or 8%18%, to $63.7$78.5 million for the nine months ended September 30, 20172021 from $69.5$66.4 million in the comparable period in 2016.2020. The $5.8$12.1 million decreaseincrease was the result of a reduction$6.3 million increase in material costs of $3.6and a $5.8 million associated withincrease in manufacturing expense. The increase in material costs was driven principally by the decline5.2 million square feet, or 23%, increase in product revenue and a reduction in manufacturing expense of $2.2 million during the nine months ended September 30, 2017.shipments. The decreaseincrease in manufacturing expense was the result of decreasesincreases in utilities expensecompensation and related expenses of $1.1$4.0 million, compensation expenseoperating supplies of $0.8$1.0 million, maintenance costs of $0.5 million and other operating expenseexpenses of $0.7 million, offset, in part, by an increase in depreciation expense of $0.4$0.3 million.

TheProduct cost of product revenue as a percentage of product revenue increased to 87% during the nine months ended September 30, 2021 from 86% during the nine months ended September 30, 2017 from 79%2020. This increase was the result of the increase in both material costs and manufacturing expense as a percentage of revenue during the nine months ended September 30, 2016. This increase resulted from the fact that the percentage decline in2021.

Research services cost of product revenue was less thanapproximately $0.1 million for both the percentage decline in total revenue during the threenine months ended September 30, 2017 due to the high proportion of fixed expenses in our manufacturing operations2021 and a shift in mix to higher cost products and a decrease in manufacturing output.2020.


The cost of research services revenue decreased by $0.3Gross Profit

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Gross profit

 

$

11,603

 

 

 

13

%

 

$

10,731

 

 

 

14

%

 

$

872

 

 

 

8

%

Gross profit increased $0.8 million, or 31%8%, to $0.7$11.6 million for the nine months ended September 30, 20172021 from $1.0$10.7 million in the comparable period in 2016.2020. The cost of research service revenue as a percentage of research services revenue decreased 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

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Gross profit

 

$

10,863

 

 

 

14

%

 

$

19,582

 

 

 

22

%

 

$

(8,719

)

 

 

(45

)%

Gross profit decreased by $8.7 million, or 45%, to $10.9 million for the nine months ended September 30, 2017 from $19.6 million in the comparable period in 2016. The decrease in gross profit was the result of the $14.8$12.8 million decreaseincrease in total revenue, offset, in part, by the $6.1$12.0 million decreaseincrease in total cost of revenue. The decreaseincrease in revenue was driven principally associated with by the decrease23% increase in sales to a major Asian energy company associated with the conclusion of a multiyear petrochemical project and the broad based decline in revenue in the global downstream energy market.product shipments. The decreaseincrease in total cost of revenue was driven principally by reducedthe $6.3 million increase in material costs and decreasedthe $5.8 million increase in manufacturing expenses associated with the 17% decline in product revenue.expense.

Gross profit as a percentage of total revenue decreased to 14%13% of total revenue for the nine months ended September 30, 20172021 from 22%14% 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 output and the high proportion of fixed costs in our manufacturing facility.2020.


Research and Development Expenses

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Research and development expenses

 

$

4,753

 

 

 

6

%

 

$

3,924

 

 

 

4

%

 

$

829

 

 

 

21

%

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Research and development expenses

 

$

8,128

 

 

 

9

%

 

$

6,436

 

 

 

8

%

 

$

1,692

 

 

 

26

%

Research and development expenses increased by $0.8$1.7 million, or 21%26%, to $4.8$8.1 million for the nine months ended September 30, 20172021 from $3.9$6.4 million in the comparable period in 2016.2020. The $0.8$1.7 million increase was due to an increasethe result of increases in compensation and related costs of $1.3 million and other research and development expenses of $0.4 million in compensation related expenses, an increase of $0.3 million in depreciation expense and an increase of $0.1 million in other research expense.million.

Research and development expenses as a percentage of total revenue increased to 6%was 9% for the nine months ended September 30, 20172021 from 4%8% 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.2020.

Sales and Marketing Expenses

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Sales and marketing expenses

 

$

9,271

 

 

 

12

%

 

$

8,939

 

 

 

10

%

 

$

332

 

 

 

4

%

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Sales and marketing expenses

 

$

11,784

 

 

 

13

%

 

$

9,051

 

 

 

12

%

 

$

2,733

 

 

 

30

%

Sales and marketing expenses increased by $0.3$2.7 million, or 4%30%, to $9.3$11.8 million for the nine months ended September 30, 20172021 from $8.9$9.1 million in the comparable period in 2016.2020. The $0.3$2.7 million increase was due to an increasethe result of increases in compensation and related costsexpenses of $0.9$3.2 million and other sales related expenses of $0.3 million, offset, in part, by a reductiondecreases in consulting and professional feessales consultant costs of $0.4$0.7 million and a reduction in marketing expensetravel related expenses of $0.2$0.1 million.

Sales and marketing expenses as a percentage of total revenue increased to 12%was 13% for the nine months ended September 30, 2017 from 10%2021 versus 12% in the comparable period in 2016 due both to the increase in sales and marketing expenses and the decline in total revenue during 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.2020.

General and Administrative Expenses

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

General and administrative expenses

 

$

14,354

 

 

 

19

%

 

$

12,229

 

 

 

14

%

 

$

2,125

 

 

 

17

%

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

General and administrative expenses

 

$

15,978

 

 

 

18

%

 

$

10,682

 

 

 

14

%

 

$

5,296

 

 

 

50

%


 

General and administrative expenses increased by $2.1$5.3 million, or 17%50%, to $14.4$16.0 million during the nine months ended September 30, 20172021 from $12.2$10.7 million in the comparable period in 2016.2020. The $2.1$5.3 million increase was primarily the result of


increases an increase in patent enforcement costscompensation and related expenses of $1.2$2.9 million, compensation related costsrecruiting and professional services of $0.5$1.9 million, and other general and administrative expenses of $0.4$1.0 million, offset, in part, by a decrease in the provision for uncollectible accounts of $0.5 million.

General and administrative expenses as a percentage of total revenue increased to 19%18% of total revenue for the nine months ended September 30, 20172021 from 14% induring the comparable period in 2016, which was due both2020.

Gain on Extinguishment of Debt

On May 1, 2020, our wholly owned subsidiary, Aspen Aerogels Rhode Island, LLC, executed a note for an unsecured PPP loan of $3.7 million pursuant to the increaseCARES Act. On August 24, 2021, the SBA remitted $3.7 million in generalprincipal and administrative expenses andaccrued interest after approving the decline inBorrower’s application for forgiveness of the PPP Loan. Accordingly, we recorded a total revenue duringgain on 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 percentageextinguishment 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,debt of this Quarterly Report on Form 10-Q, and similar actions, could result in significant, on-going legal 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

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2017

 

 

2016

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Other expense, net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

$

(123

)

 

 

(0

)%

 

$

(115

)

 

 

(0

)%

 

$

(8

)

 

 

7

%

Postponed financing costs

 

 

 

 

 

0

%

 

 

(656

)

 

 

(1

)%

 

 

656

 

 

 

(100

)%

Other expense, net

 

$

(123

)

 

 

(0

)%

 

$

(771

)

 

 

(1

)%

 

$

648

 

 

 

84

%

Other expense, net, decreased by $0.7 million to $0.1$3.7 million during the nine months ended September 30, 2017 from $0.8 million in the comparable period in 2016. The $0.7 million decrease was primarily the result of the $0.7 million charge in 2016 relating to postponed financing costs. 2021.

Interest Expense, net

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

Change

 

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

Percentage

 

 

 

 

 

 

 

 

 

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

of Revenue

 

 

Amount

 

 

Percentage

 

 

 

($ in thousands)

 

Interest expense, net

 

$

(188

)

 

 

(0

)%

 

$

(182

)

 

 

(0

)%

 

$

(6

)

 

 

3

%

Interest expense, net, consists primarily of $0.1fees and interest expense associated with our revolving credit agreement and was approximately $0.2 million during both the nine months ended September 30, 20172021 and 2016 consisted primarily of costs related to our revolving credit facility.2020.

Liquidity and Capital Resources

Overview

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, 2017 and an expected decline in revenue in 2017, 2018, our financial projections anticipateanticipated long-term revenue growth, with increasing levels of gross profit and improved cash flowsflow from operations. However,To support this growth, we increased the capacity of our East Providence, Rhode Island manufacturing facility in phases to approximately 55 million square feet of aerogel blankets.

To meet expected demand growth for our aerogel products in the energy, sustainable building and electric vehicle markets, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant at a site in the southeastern U.S. Subject to board approval, finalization of zoning approvals and other arrangements, we expect to incurhave the second aerogel plant operational during the second half of 2023. In addition, we are planning to construct a state-of-the-art, automated thermal barrier fabrication operation and to hire dedicated thermal barrier fabrication employees at potential sites in Mexico in order to keep pace with the significant potential demand for our PyroThin thermal barriers.

We are also increasing our investment in the research and development of next-generation aerogel products and technologies. During 2021, we will continue to develop aerogel products and technologies for the electric vehicle market. We believe the commercial potential for our technology in the electric vehicle market is significant. Accordingly, we are hiring additional personnel, incurring additional operating expenses, and plan to construct a carbon aerogel battery materials facility, among other items.

We took several actions during 2020 to increase the financial resources available to support current operating requirements and capital expenditures related to the expansionexpenditures. In February 2020, we completed an underwritten public offering of our manufacturing capacity which, while currently delayed,common stock and received net proceeds of $14.8 million. In March 2020, we believe will be neededextended the maturity of our revolving credit facility with Silicon Valley Bank to support this expected long term growthApril 28, 2021. In May 2020, our wholly owned subsidiary, Aspen Aerogels Rhode Island, LLC, received PPP Loan proceeds of $3.7 million under


the CARES Act. During November and December 2020, we also sold shares of our common stock through our at-the-market offering program and received net proceeds of $9.5 million.

During the nine months ended September 30, 2021, we sold shares of our common stock through our at-the-market offering program and received net proceeds of $19.4 million. In June 2021, we sold 3,462,124 shares to an affiliate of Koch Strategic Platforms in demand.a private placement of our common stock and received net proceeds of $73.5 million. In addition, during September 2021, the SBA remitted $3.7 million in principal and accrued interest after approving Aspen Aerogels Rhode Island, LLC’s application for forgiveness of the PPP Loan under the provisions of the CARES Act.

We believe that our existing cash balance of $95.5 million and funds available under our revolving credit facility will be sufficient to fund a portion ofsupport current operating requirements, current research and development activities and the construction of our second manufacturing facility. We expectinitial 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, customer prepayments and equity financings, if necessary,or technology licensing fees to provide the additional capital requirednecessary to purchase the capital equipment, construct the new facilities 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 the aerogel capacity expansion with our assessment of future demand. In addition, we are managing capital expenditures and working capital balances to maintain the cash resourcesexpansions required to support current operating requirementsour evolving commercial opportunities and strategic business initiatives. We also intend to extend or replace our long term capacity plan.revolving credit facility with Silicon Valley Bank prior to its maturity.


Primary Sources of Liquidity

Our principal sources of liquidity are currently our cash and cash equivalents and our revolving credit facility with Silicon Valley Bank. Cash and cash equivalents consist primarily of cash and money market accounts on deposit with banks. As of September 30, 2017,2021, we had $7.3$95.5 million of cash and cash equivalents.

AtOn February 18, 2020, we completed an underwritten public offering of 1,955,000 shares of our common stock at an offering price of $8.25 per share. We received net proceeds of $14.8 million after deducting underwriting discounts and commissions of $1.1 million and offering expenses of approximately $0.3 million. 

On November 5, 2020, we entered into a sales agreement for an ATM offering program under which we could sell up to $33,871,250 of our common stock through B. Riley Securities as our sales agent. We were not obligated to sell any stock under the sales agreement. We agreed to pay B. Riley Securities a commission of 3.0% of the gross sales proceeds of shares sold under the agreement. During 2020, we sold 714,357 shares of our common stock through the ATM offering program and received net proceeds of $9.5 million. During the nine months ended September 30, 2017,2021, we sold an additional 929,981 shares of our only debt obligations were less than $0.1common stock through the ATM offering program and received net proceeds of $19.4 million.

On June 29, 2021, we sold 3,462,124 shares to an affiliate of Koch Strategic Platforms in a private placement of our common stock and received net proceeds of $73.5 million relatedafter deducting fees and offering expenses of $1.5 million.

On May 1, 2020, our wholly-owned subsidiary, Aspen Aerogels Rhode Island, LLC (Borrower) executed a note for a loan of $3.7 million pursuant to capital lease obligations. At September 30, 2017, we also had $2.4 million of outstanding letters of credit securedthe PPP under the CARES Act, as amended, and administered by the revolving credit facilitySBA. On August 24, 2021, the SBA remitted $3.7 million in principal and accrued interest pursuant to the Borrower’s application for forgiveness of the PPP Loan under the provisions of the CARES Act.

We have a prepayment balance of $9.7 million associated with Silicon Valley Bank.prepayments received pursuant to our supply agreement with BASF.

We have maintained theour revolving credit facility, as amended from time to time, with Silicon Valley Bank since March 2011. On March 12, 2021, we amended and restated our revolving credit facility with Silicon Valley Bank to extend the maturity date of the revolving credit facility to April 28, 2022 and to establish certain minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants. We intend to extend or replace the facility prior to its maturity.

Under our revolving credit facility, we are permitted tomay borrow a maximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. At our election, theThe interest rate applicable to borrowings under the amended revolving credit facility may beis based on the prime rate, or LIBOR. Prime rate-basedas defined, subject to a minimum rate of 4.00% per annum. The rates applicable to borrowings 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%2.00% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.5%0.50% per annum of the average unused portion of the revolving credit facility. The


As of September 30, 2021, we had no outstanding borrowings under our revolving credit facility matures on January 28, 2018. We intend to extend or replaceand $1.3 million of outstanding letters of credit secured by the facility prior to its maturity.revolving credit facility.

Due to the borrowing base limitations ofUnder the revolving credit facility, we are required to comply with both non-financial and financial covenants, including minimum Adjusted EBITDA and Adjusted Quick Ratio covenants, as defined in the effectiveloan agreement. As of September 30, 2021, we were in compliance with all such covenants.

The amount available to us under the revolving credit facility atas of September 30, 20172021 was $11.3$9.5 million after giving effect to the $2.4$1.3 million of letters of credit outstanding. As of September 30, 2017, we had no outstanding balances drawn on the revolving credit facility. During the nine months ended September 30, 2017, we borrowed and repaid $6.0 million under the line of credit.

Analysis of Cash Flow

Net Cash Used in Operating Activities

During the nine months ended September 30, 2017,2021, we used $5.0$6.6 million in net cash forin operating activities, as compared to the use of $1.4$4.8 million in net cash during the comparable period in 2016,2020, an increase in the use of cash of $3.6$1.8 million. This increase in use of cash was the result of thean increase in net loss adjusted for non-cash items of $11.7$9.0 million, offset, in part, by an increase in net cash provided by changes in operating assets and liabilities of $8.1$7.2 million.

Net Cash Used in Investing Activities

Net cash used in investing activities is primarily related to capital expenditures to maintain our equipment and facilities and to support our growth. Net cash used in investing activities for the nine months ended September 30, 20172021 and 20162020 was $5.4$6.1 million and $10.0$2.6 million, respectively, for capital expenditures for the engineering and design and other pre-construction costs related to our planned manufacturing facility in Statesboro, Georgia,primarily for machinery and equipment in support of the manufacture of new products and to improve the capacity, throughput, efficiency and efficiencyreliability of our East Providence manufacturing facility.

Net Cash Used inProvided by Financing Activities

Net cash used inprovided by financing activities for the nine months ended September 30, 20172021 totaled $0.4$91.7 million and consisted of $6.0$73.5 million in net proceeds from the private placement of repayments under our line of credit, $0.4common stock, $19.4 million in net proceeds from the ATM offering program, and $1.5 million in proceeds from employee stock option exercises, offset, in part, by $2.7 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 of obligations under capital leases, offset, in part, by $6.0 million in borrowing under our line of credit.units.

Net cash used inprovided by financing activities for the nine months ended September 30, 20162020 totaled $0.3$15.1 million and consisted of $0.2$19.4 million in borrowings under our line of credit, $14.8 million in net proceeds from an underwritten public offering of our common stock, $3.7 million in net proceeds from the issuance of long-term debt, and $1.0 million in proceeds from employee stock option exercises, offset, in part, by $22.6 million of repayments under our line of credit and $1.2 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.

Off Balance Sheet Arrangements

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

Contractual Obligations and Commitments

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


Recent Accounting Pronouncements

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.


Critical Accounting Policies and Estimates

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.

Certain Factors That May Affect Future Results of Operations

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: our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, 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 flowsbusiness, including to complete the planned capacity expansion of our East Providence manufacturing facility, and related variations or trends; beliefs about the general strength or health of Aspen Aerogels’ business;to fund our planned strategic business initiatives; the performance of our aerogel blankets; growthour expectation that we will be successful in demand forobtaining, enforcing and defending our patents against competitors and that such patents are valid and enforceable; our belief that our products to support expansionpossess strong competitive advantages over traditional insulation materials, including the superior thermal performance and the thin, easy-to-use and durable blanket form of manufacturing capacity,our products; our plans to construct a secondexpand capacity in our East Providence, Rhode Island manufacturing facility in Statesboro, Georgia;facility; our estimates of annual production capacity; our plans regarding the future capacity expansion, including the selection of a manufacturing site and the construction and operation of the facility; our ability to obtain approvals and terms that are acceptable to move forward with the construction of a facility in the southeastern U.S. on a timely basis, or at all; beliefs about the role of our technology and products in the electric vehicle market; beliefs about the commercial potential for our technology in the electric vehicle market; beliefs about our strategic partnershipability to produce and deliver products to electric vehicle customers; beliefs about Aspen’s contracts with BASF and the potential benefits of such a relationship, includingmajor U.S. automotive manufacturer; beliefs about the potential for it to create new product and market opportunities; our supply agreement with BASF, our exclusive supply to BASF of its Spaceloft® A2 product, 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 BASFmajor U.S. automotive manufacturer to become a significant customer for Aspen’s products; beliefs about revenue, costs, expenses, profitability, investments or cash flow associated with the contracts with the major U.S. automotive manufacturer; beliefs about the performance of our products; our joint development agreement with BASF, andthermal barrier products in the battery systems of electric vehicles; beliefs about the potential commercial opportunity for it to support the development of new aerogel products and technologies;Aspen’s thermal barrier products; our beliefs about the usefulness of the square foot operating metric; 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 futurepotential 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; 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.operations; our statements about the impact of major public health concerns, including the COVID-19 pandemic or other pandemics arising globally, and the future, and currently unknown extent of, the impact of the COVID-19 pandemic on our business and operations; and our statements about the sufficiency of our current and future actions to address the impact of the COVID-19 pandemic on our business and operations, including our future revenue, Adjusted EBITDA and other financial metrics.


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.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

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.

Interest Rate Risk

We are exposed to changes in interest rates in the normal course of our business. AtAs of September 30, 2017,2021, we had unrestricted cash and cash equivalents of $7.3$95.5 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit and money market accounts at a major financial institutioninstitutions 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, 2017,2021, we havehad no debtborrowings outstanding other than capital lease obligationson our revolving credit facility. As of approximately $0.1 million with fixed interest rates. At September 30, 2017,2021, we also had $2.4$1.3 million of outstanding letters of credit supported by the revolving credit facility.

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, theThe interest rate applicable to borrowings under the revolving credit facility may beis based on the prime rate, or LIBOR. Prime rate-basedas defined, subject to a minimum rate of 4.00% per annum. The rates applicable to borrowings 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%2.00% per annum. In addition, we are required to pay a monthly unused revolving line of credit 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 JanuaryApril 28, 2018.2022. We intend to extend or replace the facility prior to its maturity.

Due toAs of September 30, 2021, the borrowing base limitations, the effective amount available to us under the revolving credit facility at September 30, 2017 was $11.3$9.5 million after giving effect to the $2.4$1.3 million of letters of credit outstanding. As of September 30, 2017, we had no outstanding balances drawn onunder the revolving credit facility.

Inflation Risk

Although we expect that our operating results will be influenced by general economic conditions, weWe do not believe that inflation has had a material effect on our business, results of operations, during the periods presented in this report. However,or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, may be affected by inflation in the future.results of operations, or financial condition.

Foreign Currency Exchange Risk

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.


Item 4.

Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

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, 2017,2021, 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, 2017,2021, 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. In addition, our principal executive officer and principal financial officer have concluded that the impact of the COVID-19 pandemic did not impact our ability to maintain our internal controls over financial reporting and disclosure controls and procedures.

(b) Changes in Internal Controls

During the nine months ended September 30, 2017,2021, 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.


PART II — OTHEROTHER INFORMATION

Item 1.

OnPatent Enforcement Actions

In May 5, 2016, we filed a complaint for patent infringement against Nano Tech Co., Ltd. (“Nano”)(Nano), and Guangdong Alison Hi-Tech.Hi Tech., Ltd. (“Alison” and, together with Nano, the “Respondents”)(Alison) in the United States International Trade Commission, (the “ITC” or ITC. In February 2018, the “Commission”).ITC issued its final determination that Nano and Alison had infringed asserted Aspen patents and that they have not proven the patents are invalid except with respect to one dependent product claim, which the ITC found was not infringed. The ITC complaint allegesaffirmed that these two China-based companies have engagedAlison and are engaging in unfair trade practices by importing aerogel products in the United States that infringe several of the Company’s patents in violation ofNano each violated Section 337 of the Tariff Act. In the ITC complaint, we are seeking exclusion orders directing United States CustomsAct and Border Protection 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 theprohibiting importation of infringing aerogel insulation products into the United States. Respondents have petitioned the Commission for a review of the ALJ’s Initial Determinationmanufactured by Alison 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 subjectNano. Alison’s appeal with respect to a 60-day presidential review period. Upon a request by a party, the final determination may be appealedproduct patent 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 PatentCircuit (CAFC) was rejected and Trademark Office (“USPTO”) requesting Inter-Partes Review to cancel certain claimsresulted 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 challengingCAFC affirming the validity of Aspen patents.our patent. The exclusion order, which is enforced by the United States Customs and Border Protection, is currently in effect.

Additionally, the USPTO denied Alison’s requests to invalidate the claims of four of our patents in Inter-Partes Review. Alison has also filed multiple similar requests with the Chinese Patent Office (“SIPO”)(SIPO), seeking to invalidate two of our Chinese manufacturing process patents and two of our Chinese product patents. With respect to one of those requests, not withdrawn previously by Alison, the Patent Review Board of SIPO (PRB), issued a decision upholding the validity of Aspen’s issued patent as amended in the proceedings. Alison has appealed the PRB’s decision to the Beijing IP court. On July 25, 2020, the Beijing IP court dismissed Alison’s appeal and upheld the validity of Aspen’s patent, and we received this decision on September 15, 2020. Nano has also filed a request seeking invalidation of a product patent at SIPO. After the conclusion oforal hearing at PRB, Nano withdrew its invalidation request. On September 23, 2019, Alison filed yet another request to invalidate the oral proceedings and before any decision issuedsame patent, whose validity was previously confirmed by the SIPO, Alison withdrew all of its requests forPRB. On January 23, 2020 PRB denied Alison’s latest invalidation of our Chinese patents.request.

OnIn April 11, 2016, we also filed a patent infringement suit at the District Court in Mannheim, Germany (Mannheim court), against the RespondentsNano, Alison and two European resellers asserting their infringement of one of our German patents. We subsequently asserted infringement of another three patents against Nano, Alison and a European reseller of Alison’s products at the Mannheim court. We have since settled with the otherone European reseller in exchange for a commitment not to procure infringing products and cooperation with our case. The litigation

In January 2018, the court issued a series of judgments by acknowledgement (German, Anerkenntnisurteil) finding the second reseller, Hiltex, liable for infringement and also issued injunctions against Hiltex. The judgments resulted from a settlement agreement in which Hiltex agreed not to resell the infringing products in Europe where at least one of the asserted patents are active.

On March 8, 2019, the Mannheim court issued two separate judgments in cases against Nano and Alison, respectively. The Mannheim court determined that both Nano and Alison are infringing on Aspen’s EP1638750 (750 Patent) in connection with their respective products. The court also issued injunctions prohibiting the offer, putting on the market, using, importing or possessing the infringing products. The court found the defendants liable to us for damages since September 22, 2012. The court also ordered the defendants to provide information on the scope of the acts of infringement committed since August 22, 2012, and a recall of infringing products. The court ordered Nano and Alison to bear the costs of the legal proceedings and reimburse statutory attorneys’ costs and expenses to us, that exact amount of which is yet to be determined. Nano and Alison have appealed the judgments of the Mannheim court. Nano subsequently withdrew the appeal while Alison’s appeal is currently pending.

The Mannheim court issued two decisions on December 23, 2019 finding that Alison infringed the 577 Patent and the 950 Patent and also issued injunctions prohibiting Alison from continuing infringement in connection with any aerogel sheets. The December 2019 decisions against Alison have now become final and binding.

The Mannheim court issued two decisions on July 31, 2020 finding that Nano infringed each of the 577 Patent and the 950 Patent. In addition to granting other remedies, the court also issued injunctions prohibiting the offer, putting on the market, using, importing or possessing any aerogel sheets. After the passing of the deadline to file appeals, these decisions have now become final.

Nano and Alison also initiated nullity actions in German Federal Patent Court in Munich against our asserted German patents. On September 25, 2018, the Federal Patent Court in Munich dismissed the challenge to the validity of 750 Patent which has subsequently become final. Nano and Alison also filed an opposition to one of the asserted patents at the EPO. In December


2018, the opposition division of EPO determined the patent, EP2813338 (338 Patent), was invalid on formality grounds and decided to revoke it, which determination is currently under appeal at the EPO Board of appeals.

On March 19 and 20, 2019 the German Federal Patent Court in Munich (FPC) conducted oral proceedings and voided four claims in EP2415577 (577 Patent) and confirmed the validity of challenged claims in EP2422950 (950 Patent) within the scope of silica gels. These FPC judgments are now final and binding on the parties. Nano had filed another nullity action seeking to invalidate the remaining claims in the 577 Patent which action Nano subsequently failed to pursue. On June 17, 2020, Nano also filed an opposition to a recently issued Aspen Patent EP3120983B1, titled “Continuous Sheet of Gel Materials and Continuous sheet of Aerogel.”

On January 28, 2021, a search order was executed and relevant evidence secured at the principal places of business of AMA S.p.A. and AMA Composites S.r.l. (collectively, AMA) in San Martino in Rio and Campogalliano, respectively, based on an ex-parte search order issued by the Court of Genoa, Italy at our request in connection with alleged infringement of the Italian part of our patents previously asserted successfully against Nano and Alison in Germany. The Court of Genoa subsequently held a hearing and confirmed the validity of the search order and its execution. While the search proceedings do not take a position on the infringement issues, we may use any evidence collected during the search proceedings to prove infringement. As a result, on May 3, 2021, we filed an infringement complaint, a writ of summons, as known in Italy, at the Court of Genoa alleging that AMA has infringed the Italian part of three European patents (same patents asserted in the German litigation) and a patent on composition of aerogel-based composites in connection with AMA’s resale of aerogel products supplied by Chinese companies and sale of any products derived therefrom. We are seeking monetary damages and preliminary injunction of AMA’s alleged infringing activities. We expect the Court of Genoa to assess our claims and AMA’s defense through appointment of an expert after the submission of relevant writs and evidence. We issued a press release on May 6, 2021 describing the patent enforcement action of May 3, 2021 (Press Release). On June 7, 2021, AMA served us a copy of a request it previously filed with the Court of Genoa seeking an ex-parte preliminary injunction (PI) against us alleging the Press Release constituted anti-competitive conduct and that it infringed AMA’s trademark rights. The service of the request followed the court’s prior denial of the ex-parte order and an order requiring AMA to serve the request on us. The court subsequently conducted an oral hearing on June 15, 2021. On June 24, 2021, the court denied AMA’s request for a PI, reasoning that Aspen’s Press Release was factually accurate, was not misleading, distinguished facts from opinions and that it was neither anti-competitive nor did it infringe trademark rights of AMA. The Court also ordered AMA to pay certain of our legal fees. On July 5, 2021, AMA informed us that it has decided not to appeal the denial of June 24, 2021. We subsequently learned that AMA had also made a criminal complaint against our chief executive officer for defamation in connection with the Press Release. In response to our infringement complaint, AMA has also added as a counter-claim in connection with its claims regarding the Press Release, those same claims that it previously sought a preliminary injunction which was denied by the court. The patent infringement proceedings are ongoing.

Additionally, a reseller of Nano’s products in Taiwan challenged the other defendants is ongoing. Nano has also initiated a nullity action in German Federal Patent Court againstvalidity of one of our asserted German manufacturing process patents. Alison likewise filed an opposition topatents in Taiwan in 2018. After careful review of our written response, the Taiwanese patent office has determined the patent as valid and dismissed the challenge in December 2018. In 2018, LG Chem Ltd. challenged the validity of one of the assertedour patents in Korea at the EuropeanIPTAB of the Korean Intellectual Property Office. After conducting an oral hearing, the IPTAB issued a decision on November 30, 2019 upholding claims related to aerogel sheets incorporating fibers. On January 14, 2021 the Korean Patent Office (“EPO”) and also initiated nullity action against two other patents. Nano also filed an opposition againstCourt confirmed the same patent atvalidity of the EPO.claims related to aerogel sheets incorporating fibers.

Due to their nature, it is difficult to predict the outcome or the costs involved in any litigation.litigation or administrative proceedings, including any appeals process. Furthermore, the Respondentscounter parties in these proceedings 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 a party to other legal proceedings that arise in the ordinary course of business and to other patent enforcement actions to assert our patent rights.

Item 1A.

Risk Factors.

There have been no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, except as follows.

We may not be able to successfully develop and introduce new products in a timely manner at competitive prices, which would limit our ability to grow and maintain our competitive position and 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 the performance of existing products, as well as 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 many 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 product could result in our not being the first to market, which could compromise 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 actualReport.


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 and financial condition could be adversely impacted.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Unregistered Sales of Equity Securities. Not applicable.

None.

(b) Use of Proceeds from Initial Public Offering of Common Stock.


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.

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.Not applicable.

(c) Purchases of Equity Securities Byby the Issuer and Affiliated Purchasers.

We did not repurchase any of our equity securities during the quarter ended September 30, 2017.2021.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

Not applicable.

Item 5.

Other Information.

None.


Item 6.

Exhibits.

(a) Exhibits

 

10.1

 

FifthFirst Amendment to the Second Amended and Restated Loan and Security Agreement, dated as of September 27, 2017,29, 2021, by and between the CompanyRegistrant and Silicon Valley Bank.

 

 

 

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.

 

 


101101.INS

  

The following materials from Aspen Aerogels, Inc.’s Quarterly Report on Form 10-Q forXBRL Instance Document - the quarter ended September 30, 2017, formattedinstance document does not appear in the Interactive Data File because its XBRL (eXtensible Business Reporting Language): (i)tags are embedded within the Consolidated Balance Sheets (unaudited) as of September 30, 2017 and December 31, 2016, (ii)Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File (embedded within the Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2017 and 2016, (iii) the Consolidated Statements of Cash Flows (unaudited) for the nine months

ended September 30, 2017 and 2016, and (iv) the Notes to Consolidated Financial Statements (unaudited)Inline XBRL document).

 


SIGNATURES

SIGNATURES

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.

 

 

 

ASPEN AEROGELS, INC.

 

 

 

 

 

Date: November 2, 20174, 2021

 

By:

 

/s/ Donald R. Young

 

 

 

 

Donald R. Young

 

 

 

 

President and Chief Executive Officer

(principal executive officer)

 

 

 

 

 

Date: November 2, 20174, 2021

 

By:

 

/s/ John F. Fairbanks

 

 

 

 

John F. Fairbanks

 

 

 

 

Vice President, Chief Financial Officer and Treasurer

(principal financial officer and principal accounting officer)

 

3241