Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

As of November ~~1, 2017,~~4, 2021, the registrant had ~~23,637,115~~33,079,299 shares of common stock outstanding.

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

	September 30,			December 31,			September 30,			December 31,
	2017			2016			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

	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

	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

	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

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 ~~conducts~~developing 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 ~~three~~3 wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC, Aspen Aerogels Germany, GmbH and Aspen Aerogels Georgia, LLC.

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.

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020 (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, ~~2017~~2021 and ~~2016~~2020 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, ~~2017~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017~~2021 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.

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.

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 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.

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.

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 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 revenue~~accounts for ~~product sales when (i) the Company has delivered products but other revenue recognition criteria have not been satisfied or (ii) payments have been received~~its leases in ~~advance of products being delivered.~~

~~The Company performs research services under contracts~~accordance 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 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 Carlo~~Monte-Carlo simulation model based upon the ~~terms~~nature 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 of~~63,947 restricted common stock units (RSUs) with a grant date fair value of $1.6 million and non-qualified stock options (NSOs) to purchase ~~119,133~~203,962 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 directors~~employees 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 RSUs~~14,934 shares of restricted common stock with a grant date fair value of $0.3 million and NSOs to purchase ~~320,571~~18,528 shares of common stock with a grant date fair value of ~~$1.3~~$0.2 million ~~and $0.7 million, respectively,~~ to ~~employees~~its non-employee directors under the 2014 Equity Plan. The ~~RSUs~~restricted common stock and NSOs granted to ~~employees will~~non-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 78,125~~also 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 period~~its Chief Executive Officer. The shares will vest subject to ~~achieve~~achievement 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 for~~used 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. The~~grant date fair value of the award. The award ~~as a result~~had 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 ~~sales~~revenue or operating expenses, as applicable, and consists of the following:

	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		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 ~~467,396~~556,433 shares to ~~6,536,597~~8,531,413 shares effective January 1, ~~2017.~~2021.

As of September 30, ~~2017, 3,219,510~~2021, 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, 92,178~~2021, 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 ~~2,358,632~~714,394 shares of common stock available for future grant under the 2014 Equity Plan.

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

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 ~~one~~1 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

The Company provides warranties for its products and records the estimated cost ~~of such warranties~~ within cost of ~~sales~~revenue 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 ~~shall~~should 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.~~

~~During~~did 0t record any warranty expense during the nine months ended September 30, ~~2017~~2021 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.

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

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 in~~implemented any accounting standards that had a material impact ~~to the Company’s~~on 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.

~~In August 2015,~~The Company believes that the ~~FASB~~impact 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 eliminate~~Customers

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

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. The Company did not have any contracts outstanding at December 31, 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 ~~standard~~criteria have not been satisfied, or (ii) payments have been received in advance of the completion of required performance obligations.

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 as~~cost 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.

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 quarter~~product 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 recorded~~deferred 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 selected~~estimates the amount of its product sales that may be returned by its customers and records this estimate as a ~~transition method and~~reduction 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 most~~estimates product return liabilities using historical rates of ~~its operating lease commitments will be subject to the new standard~~return, current quarter credit sales, and ~~recognized as right-of-use assets~~specific 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 amendment~~manufactures and ~~has determined~~sells subsea products that ~~adoption will~~are used in pipe-in-pipe applications in subsea oil production and are typically customized to meet customer specifications. Subsea products typically have no ~~significant impact~~alternative 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 adopt~~production and delivery schedule. Under the provisions of ASC 606, the ~~amendment effective January~~Company recognizes revenue at a point in time when transfer of control of the products is passed to the customer, or over time utilizing the input method. The timing of revenue recognition is assessed on a contract-by-contract basis. 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.

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.

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

	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

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.

	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

	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, ~~2017~~2021 and ~~2016,~~2020, respectively.

Construction in progress totaled ~~$7.8~~$3.7 million and ~~$11.1~~$1.9 million at September 30, ~~2017~~2021 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 constrained~~principally associated with capital ~~investment and low activity levels~~projects in the ~~global energy markets will continue into 2018. With this view of the market, the Company delayed the board approved project to construct the Statesboro, Georgia~~Company’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.

	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

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.

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

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.

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.

~~During 2016, the~~The Company ~~entered into~~is party to a supply agreement, ~~and a side agreement (together, the~~as 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 to~~will sell exclusively to BASF certain of the Company’s ~~Spaceloft~~ ^® ~~A2 product~~products 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 ~~between~~by the parties on the development and commercialization of new products.

In addition, ~~under the terms of the Supply Agreement,~~ BASF, ~~will~~in its sole discretion, may make ~~a non-interest bearing prepayment~~prepayments to the Company in the aggregate amount of ~~$22~~up to $22.0 million during the ~~construction~~term of the Company’s planned manufacturing facility in Statesboro, Georgia (Plant Two), subject to the Company’s prior satisfaction of certain preconditions, including securing a debt commitment from a third party lender for at least $30 million. BASF is obligated to pay the prepayment to the Company in eight equal consecutive quarterly installments commencing on the first day of the calendar quarter following the date on which the preconditions are met. Once commenced, BASF’s obligation to make such quarterly payments shall be subject to postponement in the event of delays of three months or more in the projected date of completion of Plant Two by a commensurate number of months.

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

~~30, 2023, BASF may request that the Company repay the uncredited amount to BASF in four equal quarterly installments beginning on December 31, 2023. The repayment obligation will be~~obligations 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 amounts and terms of additional prepayment installments, if any, are subject to negotiation between the Company and BASF.

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

The Company entered into an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (Loan Agreement), on August 31, 2014, which has been subsequently amended from time to time. On January 27, 2017, the Loan Agreement was amended to extend the maturity date of the revolving credit facility to January 28, 2018. On September 27, 2017, the Loan Agreement was further amended to modify required minimum Adjusted EBITDA. Under the Loan Agreement, the Company may borrow up to $20 millionis subject to ~~compliance with certain covenants~~federal, state and ~~borrowing base limitations. At~~local laws and regulations relating to the ~~Company’s election,~~environment. These laws generally provide for control of pollutants released into the ~~interest rate applicable~~environment and require responsible parties to ~~borrowings~~undertake 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.

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.

The Company leases office, laboratory, warehouse and ~~warehouse~~fabrication 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 increases~~The 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 of~~if available. The Company calculates its incremental borrowing rate using a synthetic credit rating analysis based on Moody’s Building Materials Industry Rating Methodology. ROU assets also include any direct costs and prepaid lease payments but exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company ~~recognizes rental~~will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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

Maturities of operating lease liabilities as of September 30, 2021 are as follows:

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 ~~records~~a lease term of 4.0 years.

The Company elected to defer approximately $0.9 million of its employer payroll tax obligation for the ~~difference between rent expense~~period 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.~~

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.

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

The Company has 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.

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.

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 under~~We have decided to cease efforts to secure additional funded research contracts and to wind down our existing contract ~~with government agencies~~research activities. This decision reflected our desire to focus our research and ~~other institutions enables us~~development resources on initiatives to improve the profitability of our existing business and on efforts to develop new products and ~~leverage~~next-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 in~~have operated the East Providence facility ~~during 2015, which~~since 2008 and have increased our annual ~~nameplate~~ capacity in phases to approximately 5055 million square feet of aerogel blankets. ~~During~~To 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 of~~are planning to expand our aerogel blanket capacity by constructing a second manufacturing ~~facility~~plant at a site in ~~Statesboro, Georgia supported by~~the 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 from~~state-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 ~~elected~~entered into production contracts with a major U.S. automotive original equipment manufacturer to ~~delay construction~~supply fabricated, multi-part thermal barriers for use in the battery system of ~~this facility~~its next-generation electric vehicles. Pursuant to ~~better align~~ the ~~capacity expansion~~contracts, 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 into~~We 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 ~~included~~includes a supply agreement governing the exclusive sale of ~~our Spaceloft A2 product~~specified products to BASF and a joint development agreement targeting innovative products and technologies. ~~Subject~~BASF has no obligation to ~~certain preconditions,~~purchase any products under the supply agreement. Pursuant to the supply agreement, BASF ~~also agreed to~~may, in its sole discretion, make ~~a series of~~ prepayments to us in the aggregate amount of ~~$22~~up to $22.0 million during the ~~construction~~term of ~~our planned manufacturing facility~~the agreement. We may repay the prepayments to BASF at any time in ~~Statesboro, Georgia. The prepayments will be either credited against~~whole 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 BASF~~that we invoice for Spaceloft A2 ~~or repaid by us~~sold 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. As~~2021 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 ~~result~~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, 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 construction~~requirements for the Product at our East Providence facility through the term of the ~~Statesboro facility, we have yet~~Supply Agreement, which term ends on September 30, 2023, unless either party terminates the agreement early pursuant to ~~fulfill~~ the ~~preconditions, and commencement~~terms of the ~~prepayments from BASF will be delayed until~~Supply 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 ~~announced~~sold to the ~~launch~~Purchaser an aggregate of 3,462,124 shares of our common stock at a ~~new product, Pyrogel® HPS, a high-temperature aerogel blanket engineered~~purchase 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, ~~2017~~2021 was ~~$75.3~~$90.1 million, which represented ~~a decrease~~an 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, ~~2017~~2021 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, ~~2016~~2020 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.

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

We price our 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 feet~~including revenue recognized over time utilizing the input method, for the periods presented:

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

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

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

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

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

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

	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.~~

Our financial performance, including such measures as net income (loss), earnings per share and Adjusted EBITDA, are affected by a number of factors including volume and mix of aerogel products sold, average selling prices, our material costs and manufacturing ~~costs,~~expenses, the costs associated with ~~and timing of~~capacity expansions and start-up of additional production capacity, and the amount and timing of operating expenses, including patent enforcement costs. As we build out our manufacturing capacity in the longer term, we expect increased manufacturing expenses will periodically have a negative impact on net income (loss), earnings per share and Adjusted EBITDA, but will set the framework for improved performance in the long term.expenses. Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to ~~period,~~period.

During 2021, we are projecting growth in ~~particular when~~total 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.

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, 2017~~2021 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.

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 ~~transfer~~the satisfaction of ~~title and risk of loss, which is upon shipment or delivery.~~contractual performance obligations.

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

~~We anticipate that constrained capital investment and low activity levels~~During 2021, we are projecting growth in total revenue principally due to an anticipated increase in maintenance-based demand in the ~~global energy~~refinery and chemical market, ~~will continue into 2018, particularly~~growth in the ~~global downstream market. As a result of this constrained capital investment~~European sustainable building materials market and ~~low activity levels~~initial thermal barrier revenue in the ~~global energy market, as well as the conclusion of the multiyear petrochemical project with~~electric vehicle market. We have also announced a ~~major Asian energy company, which comprised 25% of our product~~price 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 product revenue consists primarily of materials and manufacturing ~~expense, including labor, utilities, maintenance expense and depreciation on manufacturing assets.~~expense. Cost of product revenue is recorded when the related product revenue is recognized. ~~Cost~~

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

additives. Material costs as a percentage of product revenue vary from product to product due to differences in average selling prices, material requirements, product thicknesses and manufacturing yields. In addition, we provide warranties for our products and record the estimated cost within cost of ~~sales~~revenue in the period that the related revenue is ~~recorded.~~recorded or when we become aware that a potential warranty claim is probable and can be reasonably estimated. As a result of these factors, material costs as a percentage of product revenue will vary from period to period due to changes in the mix of aerogel products sold, the costs of our raw materials or the estimated cost of warranties. In addition, global supply chain disturbances, increased reliance on foreign materials procurement, industrial gas supply constraints, increases in the ~~longer term, we expect~~cost of our raw materials, and other factors may significantly impact our material costs and have a material impact on our operations. We expect that material costs will increase both in ~~the aggregate to decline~~absolute dollars and as a percentage of revenue ~~as we seek~~during 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 increase~~Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing ~~capacity through our planned construction~~assets. Manufacturing expense also includes stock-based compensation for manufacturing employees and ~~operation of a second manufacturing facility and, over time, potentially expand the production lines at the second facility, we~~shipping costs. We expect that manufacturing expense ~~as a percentage of product revenue~~ will increase ~~following each expansion but will decrease~~ in ~~the long-term with increased revenues supported by the effect of completed capacity expansions.~~

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

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 on~~project 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 product~~absolute dollars versus 2020 due to projected growth in total revenue, ~~during 2016,~~offset, in ~~combination with the impact of constrained capital investment~~part, by increases in manufacturing expense and ~~low activity levels in the global energy infrastructure market, we~~material costs. We expect ~~to continue to experience a decrease in revenue and an associated decrease in gross profit and~~that 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 revenue~~2021 due to ~~expected increases~~the projected increase in material costs and manufacturing ~~productivity and production volumes, supported by expected capacity expansions, improvements~~expense in ~~manufacturing yields and realization~~support of ~~material purchasing efficiencies.~~projected growth in PyroThin thermal barrier revenue

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 consist primarily of expenses for personnel engaged in the development of ~~next generation~~next-generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, trial formulations for new products, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel ~~technologies.~~technologies, including our carbon aerogel battery materials. We believe that these investments are necessary to maintain and improve our competitive position. We also expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts.

While we 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 ~~such~~these expenses will ~~continue to~~ increase in both absolute dollars and as a percentage of revenue ~~during 2017.~~in 2021.

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

We ~~plan~~expect that sales and marketing expenses will increase in absolute dollars and as a percentage of revenue during 2021, principally due to ~~expand~~an 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. While~~PyroThin thermal barrier business. In the longer term, we expect that sales and marketing expenses will increase in absolute dollars, but decrease as a percentage of ~~revenue in the longer-term, we expect such expenses to continue to increase as a percentage of revenue during 2017.~~revenue.

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.

~~For~~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 ~~nine~~CARES 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, other~~2021.

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

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

Three months ended September 30, ~~2017~~2021 compared to the three months ended September 30, ~~2016~~2020

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

	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:

Total revenue ~~decreased by $2.4~~increased $6.2 million, or 8%26%, to ~~$27.2~~$30.4 million for the three months ended September 30, ~~2017~~2021 from ~~$29.6~~$24.2 million in the comparable period in ~~2016 primarily as a~~2020. The increase in total revenue was the result of ~~a decrease~~an increase in product revenue.

Product revenue ~~decreased~~increased by ~~$2.1~~$6.4 million, or 7%26%, to ~~$26.8~~$30.3 million for the three months ended September 30, ~~2017~~2021 from ~~$28.9~~$23.9 million in the comparable period in ~~2016.~~2020. This ~~decrease~~increase was principally ~~the result of a decrease in sales~~driven by growth in the ~~Asian market, led by~~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 increase~~a decrease in ~~revenue~~project-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, ~~2017~~2021 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, ~~2016~~2020 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 ~~increased~~decreased by ~~$0.66,~~$0.15, or ~~27%~~4%, to ~~$3.10~~$3.36 per square foot for the three months ended September 30, ~~2017~~2021 from ~~$2.44~~$3.51 per square foot for the three months ended September 30, ~~2016. This increase~~2020. The decrease in average selling price principally reflected the impact of a ~~year-over-year increase~~change in the mix of ~~high-priced subsea~~ products ~~and the impact of price increases~~

~~enacted in early 2017.~~sold. This ~~increase~~decrease in average selling price had the effect of ~~increasing~~decreasing product revenue by ~~$5.7~~$1.3 million for the three months ended September 30, ~~2017~~2021 from the comparable period in ~~2016.~~2020.

~~Product~~In volume terms, product shipments ~~decreased~~increased by ~~3.2~~2.2 million square feet, or ~~27%~~32%, to ~~8.6~~9.0 million square feet of aerogel products for the three months ended September 30, ~~2017,~~2021, as compared to ~~11.8~~6.8 million square feet for the three months ended September 30, ~~2016. This decrease~~2020. The increase in product ~~shipments~~volume had the effect of ~~decreasing~~increasing product revenue by ~~$7.8~~$7.7 million for the three months ended September 30, ~~2017~~2021 from the comparable period in ~~2016.~~2020.

Research services revenue ~~decreased by $0.3 million, or 43%, to $0.4~~was $0.1 million for the three months ended September 30, ~~2017 from $0.7~~2021 and $0.3 million in the comparable period in ~~2016.~~2020. The ~~decrease~~decline in research services revenue reflected our decision to wind down our existing contract research activities.

	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 due~~the 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 ~~timing~~three 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 ~~amount~~a $3.2 million increase in manufacturing expense. The increase in material costs was principally the result of ~~funding available under existing research contracts~~the 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, ~~2017~~2021 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 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.~~

~~Product~~2020. 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, ~~2017~~2021 from 8% in the comparable period in 2020.

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

Three Months Ended September 30,

2017

2016

Change

Percentage
of Related

Percentage
of Total

Percentage
of Related

Percentage
of Total

Amount

Revenue

Revenue

Amount

Revenue

Revenue

Amount

Percentage

($ in thousands)

Cost of revenue:

Product

$
22,115

82
%

81
%

$
22,790

79
%

77
%

$
(675
)

(3
)%
Research services

135

35
%

1
%

368

54
%

1
%

(233
)

(63
)%
Total cost of revenue

$
22,250

82
%

82
%

$
23,158

78
%

78
%

$
(908
)

(4
)%

~~Total cost of revenue decreased~~development expenses increased by ~~$0.9~~$1.0 million, or 4%47%, to ~~$22.3~~$3.1 million for the three months ended September 30, ~~2017~~2021 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 material~~compensation 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 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 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, ~~2017~~2021 from 4%9% in the comparable period in ~~2016~~2020 due principally to ~~both the increase~~increases in ~~research~~personnel and ~~development expenses and the decrease in total revenue for the three months ended September 30, 2017.~~

~~We expect that~~expenditures 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 our~~carbon 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.

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 ~~decreased~~increased by ~~$0.3~~$2.1 million, or ~~10%~~78%, to ~~$2.8~~$4.9 million for the three months ended September 30, ~~2017~~2021 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 driven~~offset, in part, by a decrease in ~~outside consulting expense~~sales 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 2016~~2021 from 11% in the comparable period in 2020, due principally to the ~~relatively proportional decrease~~increase in compensation and related expenses associated with an increase in sales and ~~marketing~~business development personnel.

General and administrative expenses ~~and decrease in total revenue during~~increased 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 decreased by $0.7 million, or 15% to~~2021 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 ~~decrease~~increase was ~~primarily~~ the result of ~~a decrease~~increases in ~~patent enforcement~~compensation 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 increase~~a decrease in ~~compensation related expenses of $0.2 million and an increase in other general and administrative expenses~~the provision for uncollectible accounts of $0.2 million.

General and administrative expenses as a percentage of total revenue ~~decreased~~increased to ~~14%~~22% for the three months ended September 30, ~~2017~~2021 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.

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 increase~~CARES Act. On August 24, 2021, the SBA remitted $3.7 million in ~~general~~principal and ~~administrative expenses and~~accrued interest to the ~~projected decline in~~noteholder 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 percentage~~gain 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.

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. During~~2021.

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 costs~~2021 and ~~less than $0.1 million of costs related to our revolving credit facility.~~2020.

Nine months ended September 30, ~~2017~~2021 compared to the nine months ended September 30, ~~2016~~2020

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

	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:

Total revenue ~~decreased by $14.8~~increased $12.8 million, or ~~16%~~17%, to ~~$75.3~~$90.1 million for the nine months ended September 30, ~~2017~~2021 from ~~$90.1~~$77.3 million in the comparable period in ~~2016 primarily as a~~2020. The increase in total revenue was the result of ~~a decrease~~an increase in product revenue.

Product revenue ~~decreased~~increased by ~~$14.6~~$13.0 million, or 17%, to ~~$73.7~~$89.8 million for the nine months ended September 30, ~~2017~~2021 from ~~$88.3~~$76.8 million in the comparable period in ~~2016.~~2020. This ~~decrease~~increase was principally ~~the result of a decrease in sales~~driven by growth in the ~~Asian market, led by~~global 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 increase~~decreases 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, ~~2017~~2021 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, ~~2016~~2020 included ~~$17.8~~$15.3 million to ~~a major~~an Asian ~~energy company~~LNG project contractor and ~~$12.6~~$13.6 million to a North American distributor.

The average selling price per square foot of our products ~~increased~~decreased by ~~$0.25,~~$0.18, or ~~10%~~5%, to ~~$2.88~~$3.26 per square foot for the nine months ended September 30, ~~2017~~2021 from ~~$2.63~~$3.44 per square foot for the nine months ended September 30, ~~2016.~~2020. The ~~increase~~decrease in average selling price principally reflected ~~an increase in~~ the ~~mix~~impact of ~~high-priced subsea products,~~ a ~~decrease~~change 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 enacted~~comparable period in ~~early 2017.~~2020. This ~~increase~~decrease in average selling price had the effect of ~~increasing~~decreasing product revenue by ~~$6.4~~$5.0 million for the nine months ended September 30, ~~2017~~2021 from the comparable period in ~~2016.~~2020.

~~Product~~In volume terms, product shipments ~~decreased~~increased by ~~8.0~~5.2 million square feet, or ~~24%~~23%, to ~~25.6~~27.5 million square feet of aerogel products for the nine months ended September 30, ~~2017 from 33.6~~2021, as compared to 22.3 million square feet for the nine months ended September 30, ~~2016. This decrease~~2020. The increase in product ~~shipments~~volume had the effect of ~~decreasing~~increasing product revenue by ~~$21.0~~$18.0 million for the nine months ended September 30, ~~2017~~2021 from the comparable period in ~~2016.~~2020.

Research services revenue ~~decreased by $0.2~~was $0.3 million ~~or 13%, to $1.6~~and $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 timing~~2021 and ~~amount of funding available under existing research contracts during the nine months ended~~ September 30, ~~2017 from the comparable period~~2020, respectively. The decline in ~~2016.~~

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

	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 $6.1~~increased $12.0 million, or 9%18%, to ~~$64.4~~$78.5 million for the nine months ended September 30, ~~2017~~2021 from ~~$70.5~~$66.5 million in the comparable period in ~~2016.~~2020. The ~~decrease~~increase in total cost of revenue was ~~primarily~~principally the result of ~~a decrease~~an increase in product cost of revenue.

~~The~~Product cost of ~~product~~ revenue ~~decreased by $5.8~~increased $12.1 million, or 8%18%, to ~~$63.7~~$78.5 million for the nine months ended September 30, ~~2017~~2021 from ~~$69.5~~$66.4 million in the comparable period in ~~2016.~~2020. The ~~$5.8~~$12.1 million ~~decrease~~increase was the result of a ~~reduction~~$6.3 million increase in material costs ~~of $3.6~~and a $5.8 million ~~associated with~~increase in manufacturing expense. The increase in material costs was driven principally by the ~~decline~~5.2 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 ~~decrease~~increase in manufacturing expense was the result of ~~decreases~~increases in ~~utilities expense~~compensation and related expenses of ~~$1.1~~$4.0 million, ~~compensation expense~~operating supplies of ~~$0.8~~$1.0 million, maintenance costs of $0.5 million and other ~~operating expense~~expenses of ~~$0.7 million, offset, in part, by an increase in depreciation expense of $0.4~~$0.3 million.

~~The~~Product 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 in~~2021.

Research services cost of ~~product~~ revenue was ~~less than~~approximately $0.1 million for both the ~~percentage decline in total revenue during the three~~nine months ended September 30, ~~2017 due to the high proportion of fixed expenses in our manufacturing operations~~2021 and ~~a shift in mix to higher cost products and a decrease in manufacturing output.~~2020.

Gross profit increased $0.8 million, or ~~31%~~8%, to ~~$0.7~~$11.6 million for the nine months ended September 30, ~~2017~~2021 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 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 ~~decrease~~increase in total revenue, offset, in part, by the ~~$6.1~~$12.0 million ~~decrease~~increase in total cost of revenue. The ~~decrease~~increase in revenue was driven principally ~~associated with~~ by the ~~decrease~~23% 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 ~~decrease~~increase in total cost of revenue was driven ~~principally~~ by ~~reduced~~the $6.3 million increase in material costs and ~~decreased~~the $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, ~~2017~~2021 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.

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, ~~2017~~2021 from ~~$3.9~~$6.4 million in the comparable period in ~~2016.~~2020. The ~~$0.8~~$1.7 million increase was ~~due to an increase~~the 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, ~~2017~~2021 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.

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, ~~2017~~2021 from ~~$8.9~~$9.1 million in the comparable period in ~~2016.~~2020. The ~~$0.3~~$2.7 million increase was ~~due to an increase~~the result of increases in compensation and related ~~costs~~expenses of ~~$0.9~~$3.2 million and other sales related expenses of $0.3 million, offset, in part, by ~~a reduction~~decreases in ~~consulting and professional fees~~sales consultant costs of ~~$0.4~~$0.7 million and ~~a reduction in marketing expense~~travel 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.

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, ~~2017~~2021 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 costs~~compensation and related expenses of ~~$1.2~~$2.9 million, ~~compensation related costs~~recruiting 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, ~~2017~~2021 from 14% induring the comparable period in ~~2016, which was due both~~2020.

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 ~~increase~~CARES Act. On August 24, 2021, the SBA remitted $3.7 million in ~~general~~principal and ~~administrative expenses and~~accrued interest after approving the ~~decline in~~Borrower’s application for forgiveness of the PPP Loan. Accordingly, we recorded a total ~~revenue during~~gain 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.

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, consists primarily of ~~$0.1~~fees and interest expense associated with our revolving credit agreement and was approximately $0.2 million during both the nine months ended September 30, ~~2017~~2021 and ~~2016 consisted primarily of costs related to our revolving credit facility.~~2020.

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 ~~anticipate~~anticipated long-term revenue growth, ~~with~~ increasing levels of gross profit and improved cash ~~flows~~flow 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 ~~incur~~have 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 expansion~~expenditures. 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 needed~~extended the maturity of our revolving credit facility with Silicon Valley Bank to ~~support this expected long term growth~~April 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 of~~support current operating requirements, current research and development activities and the ~~construction of our second manufacturing facility. We expect~~initial capital expenditures required to support the evolving commercial opportunities in the electric vehicle market and other strategic business opportunities.

However, we plan to supplement our cash balance and available credit with ~~anticipated cash flows from operations, local government grants,~~equity financings, debt financings, customer prepayments ~~and equity financings, if necessary,~~or technology licensing fees to provide the additional capital ~~required~~necessary 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 resources~~expansions required to support ~~current operating requirements~~our 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.

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 $0.1~~common 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 ~~related~~after 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 secured~~the PPP under the CARES Act, as amended, and administered by the ~~revolving credit facility~~SBA. 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 ~~the~~our 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 to~~may borrow a maximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. ~~At our election, the~~The interest rate applicable to borrowings under the ~~amended~~ revolving credit facility ~~may be~~is based on the prime rate, ~~or LIBOR. Prime rate-based~~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 ~~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 replace~~and $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 of~~Under 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 ~~effective~~loan 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, ~~2017~~2021 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.

During the nine months ended September 30, ~~2017,~~2021, we used ~~$5.0~~$6.6 million in net cash ~~for~~in 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 ~~the~~an 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 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, ~~2017~~2021 and ~~2016~~2020 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 ~~efficiency~~reliability of our East Providence manufacturing facility.

Net cash ~~used in~~provided by financing activities for the nine months ended September 30, ~~2017~~2021 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, $0.4~~common 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 in~~provided by financing activities for the nine months ended September 30, ~~2016~~2020 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.

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

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

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

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See our Annual Report ~~filed with the Securities and Exchange Commission (SEC),~~ and note 2 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information about these critical accounting policies, as well as a description of our other significant accounting policies.

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: 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 flows~~business, 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; ~~growth~~our expectation that we will be successful in ~~demand for~~obtaining, enforcing and defending our patents against competitors and that such patents are valid and enforceable; our belief that our products ~~to support expansion~~possess 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 second~~expand 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 partnership~~ability to produce and deliver products to electric vehicle customers; beliefs about Aspen’s contracts with ~~BASF and~~ the ~~potential benefits of such a relationship, including~~major 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, and~~thermal 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 ~~future~~potential litigation or their respective timing, including expected legal expense in connection with ~~the~~ our patent enforcement actions; ~~our beliefs about the validity of our patents; our expectations about hiring additional personnel;~~ our plans to devote substantial resources to the development of new aerogel technology; our expectations about product mix; our expectations about future material costs and manufacturing expenses as a percentage of revenue; 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.

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

We are exposed to changes in interest rates in the normal course of our business. AtAs of September 30, ~~2017,~~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 ~~institution~~institutions in North America. Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material.

As of September 30, ~~2017,~~2021, we ~~have~~had no ~~debt~~borrowings outstanding ~~other than capital lease obligations~~on 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, the~~The interest rate applicable to borrowings under the revolving credit facility ~~may be~~is based on the prime rate, ~~or LIBOR. Prime rate-based~~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 ~~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 ~~January~~April 28, ~~2018.~~2022. We intend to extend or replace the facility prior to its maturity.

~~Due to~~As 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 on~~under the ~~revolving credit~~ facility.

~~Although we expect that our operating results will be influenced by general economic conditions, we~~We 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.

We are subject to inherent risks attributed to operating in a global economy. Principally all of our revenue, receivables, purchases and debts are denominated in U.S. dollars.

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

As of September 30, ~~2017,~~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.

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.

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 alleges~~affirmed that ~~these two China-based companies have engaged~~Alison 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 of~~Nano each violated Section 337 of the Tariff ~~Act. In the ITC complaint, we are seeking exclusion orders directing United States Customs~~Act 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 the~~prohibiting importation of infringing aerogel insulation products ~~into the United States. Respondents have petitioned the Commission for a review of the ALJ’s Initial Determination~~manufactured 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 appealed~~product 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 Patent~~Circuit (CAFC) was rejected and ~~Trademark Office (“USPTO”) requesting Inter-Partes Review to cancel certain claims~~resulted 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 challenging~~CAFC 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 of~~oral 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 issued~~same patent, whose validity was previously confirmed by ~~the SIPO, Alison withdrew all of its requests for~~PRB. 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 Respondents~~Nano, 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 other~~one European reseller in exchange for a commitment not to procure infringing products and cooperation with our case. ~~The litigation~~

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 against~~validity of one of our ~~asserted German manufacturing process patents. Alison likewise filed an opposition to~~patents 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 asserted~~our patents in Korea at the ~~European~~IPTAB 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 against~~Court confirmed the ~~same patent at~~validity 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 ~~Respondents~~counter 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.

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.

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.

We did not repurchase any of our equity securities during the quarter ended September 30, ~~2017.~~2021.

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

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

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


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

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

		Page
	PART I FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets (unaudited) as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020	1

	Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020	2

	Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity (unaudited) for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020	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

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

	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

10.1		~~Fifth~~First Amendment to the Second Amended and Restated Loan and Security Agreement, dated as of September ~~27, 2017,~~29, 2021, by and between the ~~Company~~Registrant 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.

~~101~~101.INS		~~The following materials from Aspen Aerogels, Inc.’s Quarterly Report on Form 10-Q for~~XBRL Instance Document - the ~~quarter ended September 30, 2017, formatted~~instance 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).

	ASPEN AEROGELS, INC.

Date: November ~~2, 2017~~4, 2021	By:	/s/ Donald R. Young
		Donald R. Young
		President and Chief Executive Officer (principal executive officer)

Date: November ~~2, 2017~~4, 2021	By:	/s/ John F. Fairbanks
		John F. Fairbanks
		Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)