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,~~August 4, 2022, the registrant had ~~23,637,115~~40,440,651 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,			June 30,			December 31,
	2017			2016			2022			2021
	(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		$	162,185		$	76,564
Accounts receivable, net of allowances of $98 and $93		17,106			17,535
Accounts receivable, net of allowances of $142 and $150								29,481			20,426
Inventories		13,992			12,868			17,000			11,987
Prepaid expenses and other current assets		1,478			1,697			4,616			3,173
Total current assets		39,881			50,186			213,282			112,150
Property, plant and equipment, net		78,073			84,394			122,206			55,778
Operating lease right-of-use assets								17,892			13,531
Other long-term assets		84			89			2,554			1,495
Total assets	$	118,038		$	134,669		$	355,934		$	182,954
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	8,886		$	13,065		$	51,126		$	17,440
Accrued expenses		4,685			3,987			10,973			10,819
Current portion of prepayment liability								5,000			4,728
Deferred revenue		1,608			1,043			1,616			1,321
Capital leases, current portion		4			35
Operating lease liabilities								2,488			2,247
Total current liabilities		15,183			18,130			71,203			36,555
Capital leases, excluding current portion		—			4
Deferred rent		1,332			971
Prepayment liability								—			5,000
Convertible note - related party								102,721			—
Operating lease liabilities long-term								17,256			12,991
Total liabilities		16,515			19,105			191,180			54,546
Commitments and contingencies (Note 6)
Commitments and contingencies (Note 10)
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 June 30, 2022 and December 31, 2021								—			—
Common stock, $0.00001 par value; 125,000,000 shares authorized, 36,478,284 and 33,218,115 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively								—			0
Additional paid-in capital		536,985			533,088			753,341			673,461
Accumulated deficit		(435,462	)		(417,524	)		(588,587	)		(545,053	)
Total stockholders’ equity		101,523			115,564			164,754			128,408
Total liabilities and stockholders’ equity	$	118,038		$	134,669		$	355,934		$	182,954

	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2022			2021			2022			2021
	(In thousands, except share and per share data)												(In thousands, except share and per share data)						(In thousands, except share and per share data)
Revenue:
Product	$	26,812		$	28,877		$	73,700		$	88,286
Research services		386			683			1,569			1,813
Total revenue		27,198			29,560			75,269			90,099
Cost of revenue:
Product		22,115			22,790			63,706			69,505
Research services		135			368			700			1,012
Gross profit		4,948			6,402			10,863			19,582

Revenue													$	45,640		$	31,670		$	84,047		$	59,767
Cost of revenue														46,851			27,090			87,046			51,231
Gross (loss) profit														(1,211	)		4,580			(2,999	)		8,536
Operating expenses:
Research and development		1,468			1,328			4,753			3,924			4,447			2,609			8,039			5,051
Sales and marketing		2,745			3,056			9,271			8,939			7,633			3,568			13,651			6,869
General and administrative		3,765			4,422			14,354			12,229			9,355			5,017			16,581			9,405
Total operating expenses		7,978			8,806			28,378			25,092			21,435			11,194			38,271			21,325
Loss from operations		(3,030	)		(2,404	)		(17,515	)		(5,510	)		(22,646	)		(6,614	)		(41,270	)		(12,789	)
Other expense, net
Other income (expense)
Interest expense, convertible note - related party														(1,550	)		—			(2,369	)		—
Interest expense, net		(58	)		(37	)		(123	)		(115	)		146			(55	)		105			(130	)
Postponed financing costs		—			(656	)		—			(656	)
Total other expense, net		(58	)		(693	)		(123	)		(771	)
Total other income (expense), net														(1,404	)		(55	)		(2,264	)		(130	)
Net loss	$	(3,088	)	$	(3,097	)	$	(17,638	)	$	(6,281	)	$	(24,050	)	$	(6,669	)	$	(43,534	)	$	(12,919	)
Net loss per share:
Basic and diluted	$	(0.13	)	$	(0.13	)	$	(0.76	)	$	(0.27	)	$	(0.68	)	$	(0.23	)	$	(1.27	)	$	(0.46	)
Weighted-average common shares outstanding:
Basic and diluted		23,442,241			23,168,251			23,356,997			23,114,280			35,207,975			28,501,044			34,276,083			28,243,687

	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, 2021		—	$	—		33,218,115	$	—	$	673,461		$	(545,053	)	$	128,408
Net loss		—		—		—		—		—			(19,484	)		(19,484	)
Stock compensation expense		—		—		—		—		1,828			—			1,828
Vesting of restricted stock units		—		—		166,211		—		(2,315	)		—			(2,315	)
Proceeds from employee stock option exercises		—		—		4,681				38			—			38
Proceeds from at-the-market offering, net of commissions of $729 and issuance costs of $318		—		—		737,288		—		23,272			—			23,272
Proceeds from private placement of common stock, net of fees and issuance costs of $136		—		—		1,791,986		—		49,864			—			49,864
Balance at March 31, 2022		—	$	—		35,918,281	$	—	$	746,148		$	(564,537	)	$	181,611
Net loss		—		—		—		—		—			(24,050	)		(24,050	)
Stock compensation expense		—		—		—		—		2,295			—			2,295
Issuance of restricted stock		—		—		391,324		—		—			—			-
Vesting of restricted stock units		—		—		2,569		—		(24	)		—			(24	)
Proceeds from employee stock option exercises		—		—		21,110				136			—			136
Proceeds from at-the-market offering, net of commissions of $149 and issuance costs of $28		—		—		145,000		—		4,786			—			4,786
Proceeds from private placement of common stock, net of fees and issuance costs		—		—		—		—		—			—			-
Balance at June 30, 2022		—	$	—		36,478,284	$	—	$	753,341		$	(588,587	)	$	164,754

	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 common stock offering, 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

	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017			2016			2022			2021
	(In thousands)						(In thousands)
Cash flows from operating activities:
Net loss	$	(17,638	)	$	(6,281	)	$	(43,534	)	$	(12,919	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		8,032			7,298
Depreciation								4,161			4,742
Accretion of interest on convertible note - related party								2,369			—
Amortization of convertible note issuance costs								13			7
Provision for bad debt								(1	)		(98	)
Stock-compensation expense		3,982			4,277			4,123			2,046
Lease incentives		(80	)		—
Postponed financing costs		—			656
Other		(1	)		—
Reduction in the carrying amount of operating lease right-of-use assets								1,219			520
Changes in operating assets and liabilities:
Accounts receivable		944			999			(9,054	)		(3,570	)
Inventories		(1,124	)		(6,370	)		(5,013	)		3,661
Prepaid expenses and other assets		224			189			(2,500	)		(1,174	)
Accounts payable		(478	)		(17	)		15,980			3,962
Accrued expenses		752			(2,189	)		154			3,083
Deferred revenue		565			72			295			(192	)
Deferred rent		(128	)		—
Operating lease liabilities								(1,076	)		(597	)
Net cash used in operating activities		(4,950	)		(1,366	)		(32,864	)		(529	)
Cash flows from investing activities:
Capital expenditures		(5,423	)		(9,994	)		(52,359	)		(3,879	)
Net cash used in investing activities		(5,423	)		(9,994	)		(52,359	)		(3,879	)
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 issuance of convertible note related party								100,000			—
Issuance costs from convertible note								(185	)		—
Proceeds from employee stock option exercises								174			693
Payments made for employee restricted stock tax withholdings		(385	)		(196	)		(2,339	)		(2,677	)
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 of $879 and $576								28,404			18,611
Fees and issuance costs from at-the-market offering								(346	)		(44	)
Proceeds from private placement of common stock								50,000			75,000
Fees and issuance costs from private placement of common stock								(136	)		(1,414	)
Repayment of prepayment liability								(4,728	)		—
Net cash provided by financing activities								170,844			90,169
Net increase in cash								85,621			85,761
Cash and cash equivalents at beginning of period								76,564			16,496
Cash and cash equivalents at end of period							$	162,185		$	102,257
Supplemental disclosures of cash flow information:
Interest paid	$	151		$	153		$	95		$	113
Income taxes paid	$	—		$	—		$	0		$	0
Supplemental disclosures of non-cash activities:
Right-of-use assets obtained in exchange for new operating lease liabilities							$	5,582		$	9,032
Capitalized interest							$	524		$	—
Changes in accrued capital expenditures	$	(3,701	)	$	602		$	17,706		$	209
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 sustainable 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 research and development related to~~developing applications for its aerogel technology ~~supported by funding from several agencies of the U.S. government and other institutions~~ in the ~~form~~battery materials and a number of ~~research and development contracts.~~other high-potential markets.

The Company maintains its corporate offices in Marlborough and 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 six months ended June 30, 2022, the Company incurred a net loss of $43.5 million, used $32.9 million of cash in operations, used $52.4 million of cash for capital expenditures, received net proceeds of $28.1 million through an at-the-market (ATM) offering of the Company’s common stock from the sale of 882,288 shares of the Company’s common stock, and received net proceeds of $49.9 million through a private placement of the Company’s common stock. On February 15, 2022, the Company entered into a note purchase agreement with an affiliate of Koch Strategic Platforms, LLC, relating to the issuance and sale of $100.0 million of the Company’s convertible debt (see note 9). The Company had cash and cash equivalents of $162.2 million, a $5.0 million current prepayment liability (see note 10), and 0 outstanding borrowings under its revolving line of credit (see note 7). After giving effect to $1.2 million of outstanding letters of credit, the amount available to the Company at June 30, 2022 under the revolving line of credit was $18.0 million. The revolving line of credit matures on August 26, 2022.

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

The Company expects its existing cash balance 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 necessary to purchase the capital equipment, construct the new facilities, establish the operations and complete the aerogel capacity expansions required to support these evolving commercial opportunities and strategic business initiatives.

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~~2021 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March ~~2, 2017.~~1, 2022.

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~~June 30, ~~2017,~~2022 and the results of its operations and stockholders’ equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 and the cash flows for the ~~nine month~~six-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~~six months ended ~~September~~June 30, ~~2017~~2022 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2017~~2022 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, 2022 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, convertible note, 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 and high-quality debt securities issued by the U.S. government via cash sweep 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’s customers are primarily insulation distributors, insulation contractors, insulation fabricators and select energy and automotive end-users located throughout the world. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During the six months ended June 30, 2022, the Company recorded a reduction for estimated customer uncollectible accounts receivable of less than $0.1 million. During the six months ended June 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.

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 11 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~~ six months ended ~~September~~June 30, ~~2017,~~2022, the Company granted ~~86,023 shares of~~161,004 restricted common stock units (RSUs) with a grant date fair value of $4.2 million and non-qualified stock options (NSOs) to purchase ~~119,133~~432,480 shares of common stock with a grant date fair value of ~~$0.4~~$6.4 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~~six months ended ~~September~~June 30, ~~2017,~~2022, the Company also granted ~~481,373 RSUs~~16,194 shares of restricted common stock with a grant date fair value of $0.3 million and NSOs to purchase ~~320,571~~19,068 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 date or the day prior to the Company’s annual meeting of stockholders to be held in 2023.

On ~~August~~June 2, ~~2017,~~2022, the Company ~~reduced the performance target for the year ending December 31, 2020 with respect to 78,125~~issued 53,590 shares of restricted common stock, ~~held by its chief executive officer. In addition, the Company modified the~~pursuant to a performance-based restricted stock agreement, to each of certain employees. The restricted common stock vests in tranches, subject to achievement of certain time and performance vesting conditions, ~~of NSOs held by its chief executive officer to purchase 131,578 and 122,324 shares of common stock to extend the time period to achieve certain common stock price targets by an additional~~as defined, over a three-to-five year ~~to four and five years from the date of grant, respectively.~~

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 as~~awards. The equity awards had a ~~result~~total aggregate fair value of ~~the modification was $0.4 million. The Company recognized expense of $0.1~~$4.0 million ~~related to this award during the period ended September 30, 2017.~~

~~The Company accounted for the extension of~~at 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.grant.

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				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2022		2021		2022		2021
	(In thousands)								(In thousands)				(In thousands)
Cost of product revenue	$	201	$	241	$	641	$	632	$	230	$	129	$	386	$	241
Research and development expenses		151		184		449		472		313		189		537		378
Sales and marketing expenses		294		314		865		852		456		206		780		374
General and administrative expenses		718		735		2,027		2,321		1,296		546		2,420		1,053
Total stock-based compensation	$	1,364	$	1,474	$	3,982	$	4,277	$	2,295	$	1,070	$	4,123	$	2,046

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~~664,362 shares to ~~6,536,597~~9,195,775 shares effective January 1, ~~2017.~~2022.

As of ~~September~~June 30, ~~2017, 3,219,510~~2022, 4,234,562 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 shares of common stock were reserved for issuance upon the exercise of outstanding stock options granted under the Company’s~~Plan and 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~~June 30, ~~2017,~~2022, the Company has either

reserved in connection with statutory tax withholdings or issued a total of 4,580,653 shares under the 2014 Equity Plan. As of June 30, 2022, there were ~~2,358,632~~380,560 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.

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

The Company’s standard warranty period for energy industrial products extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product. The Company’s products may be utilized in systems that involve new technical demands and new configurations. Accordingly, the Company regularly reviews and assesses whether warranty reserves should be recorded in the period the related revenue is recorded.

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

The Company recorded warranty expense related to its thermal barrier products of less than $0.1 million during the six months ended June 30, 2022. The Company did 0t record any warranty expense during the six months ended June 30, 2021.

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

During the six months ended June 30, 2022, the Company adopted Accounting Standards Update (ASU) 2020-06, Debt-Debt with Conversion and Other Options (Topic 470) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Topic 815): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the accounting for convertible instruments by eliminating the cash conversion and beneficial conversion feature models used to separately account for embedded conversion features as a component of equity. Instead, the entity will account for the convertible debt or convertible preferred stock securities as a single unit of account, unless the conversion feature requires bifurcation and recognition as derivatives. Additionally, the guidance requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of potential share settlement for instruments that may be settled in cash or shares. The adoption of this standard did not have a material impact on our consolidated financial statements.

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

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

When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. Applying the practical expedient in paragraph ASC 606-10-32-18, the Company does not assess whether a significant financing component exists if the period between when the Company performs its obligations under the contract and when the customer pays is one year or less. The Company did not have any contracts outstanding at December 31, 2021 and did not enter into any contracts during the six months ended June 30, 2022 that contained a significant financing component.

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

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

The Company generally enters into contracts containing 1 type of performance obligation. The Company recognizes 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 period the related revenue is recognized. A corresponding liability is recorded as a component of deferred revenue on the consolidated balance sheets. These arrangements are primarily based on the customer attaining contractually specified sales volumes.

The Company estimates the amount of its sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related revenue is recognized. The Company currently estimates return liabilities using historical rates of return, current quarter credit sales, and specific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $0.1 million at both June 30, 2022 and December 31, 2021.

The Company manufactures and sells subsea products that are designed for pipe-in-pipe applications in offshore oil production and are typically customized to meet customer specifications. Subsea products typically have no alternative use and contain an enforceable right to payment. Customer invoicing terms for subsea products are typically based on certain milestones within the production and delivery schedule. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of control of the products is passed to the customer, or over time utilizing the input method. The timing of revenue recognition is assessed on a contract-by-contract basis. During the six months ended June 30, 2022 and 2021, the Company recognized revenue of $3.1 million and $1.1 million, respectively, from subsea projects.

The Company supplies fabricated, multi-part thermal barriers for use in battery packs in the electric vehicle market. These thermal barriers are customized to meet customer specifications. Thermal barrier products typically have no alternative use and may contain an enforceable right to payment. Under the provisions of ASC 606, the Company may recognize revenue at a point in time when transfer of the 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 six months ended June 30, 2022 and 2021, the Company recognized revenue of $18.4 million and $0.3 million, respectively, from thermal barrier contracts.

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

	Three Months Ended June 30,
	2022						2021
	U.S.		International		Total		U.S.		International		Total
	(In thousands)
Geographical region
Asia	$	—	$	11,651	$	11,651	$	—	$	4,553	$	4,553
Canada		—		1,452		1,452		—		991		991
Europe		—		6,160		6,160		—		9,435		9,435
Latin America		—		1,295		1,295		—		1,147		1,147
U.S.		25,082		—		25,082		15,544		—		15,544
Total revenue	$	25,082	$	20,558	$	45,640	$	15,544	$	16,126	$	31,670

Source of revenue
Energy industrial	$	15,293	$	17,071	$	32,364	$	15,367	$	15,424	$	30,791
Subsea projects		911		1,602		2,513		—		667		667
Thermal barrier		8,878		1,885		10,763		177		35		212
Total revenue	$	25,082	$	20,558	$	45,640	$	15,544	$	16,126	$	31,670

	Six Months Ended June 30,
	2022						2021
	U.S.		International		Total		U.S.		International		Total
	(In thousands)
Geographical region
Asia	$	—	$	18,975	$	18,975	$	—	$	10,141	$	10,141
Canada		—		2,312		2,312		—		1,955		1,955
Europe		—		10,071		10,071		—		16,681		16,681
Latin America		—		2,901		2,901		—		2,691		2,691
U.S.		49,788		—		49,788		28,299		—		28,299
Total revenue	$	49,788	$	34,259	$	84,047	$	28,299	$	31,468	$	59,767

Source of revenue
Energy industrial	$	33,020	$	29,560	$	62,580	$	28,070	$	30,311	$	58,381
Subsea projects		1,459		1,613		3,072		—		1,074		1,074
Thermal barrier		15,309		3,086		18,395		229		83		312
Total revenue	$	49,788	$	34,259	$	84,047	$	28,299	$	31,468	$	59,767

The following table presents changes in the Company’s contract assets and contract liabilities during the six months ended June 30, 2022:

	Balance at December 31, 2021		Additions		Deductions			Balance at June 30, 2022
	(In thousands)
Contract assets
Subsea projects	$	1,448	$	3,462	$	(2,417	)	$	2,493
Research services		148		77		(225	)		—
Thermal barrier		235		—		—			235
Total contract assets	$	1,831	$	3,539	$	(2,642	)	$	2,728
Contract liabilities
Deferred revenue
Energy industrial	$	1,321	$	1,396	$	(1,491	)	$	1,226
Subsea projects		—		1,939		(1,549	)		390
Prepayment liability		9,728		—		(4,728	)		5,000
Total contract liabilities	$	11,049	$	3,335	$	(7,768	)	$	6,616

During the six months ended June 30, 2022, the Company recognized $1.3 million of revenue that was included in deferred revenue as of December 31, 2021.

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.

Depreciation expense was $4.2 million and $4.7 million for the six months ended June 30, 2022 and 2021, respectively.

Construction in progress totaled $75.5 million and $13.5 million at June 30, 2022 and December 31, 2021, respectively. The balance at June 30, 2022 and December 31, 2021 included engineering designs and construction costs totaling $62.5 million and $6.1 million, respectively for a planned aerogel manufacturing facility in Bulloch County, Georgia.

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. At various dates in 2021, and subsequently on March 31, 2022 and April 28, 2022, the Company entered into amendments to the Loan Agreement to revise certain financial covenants, among other things. On June 23, 2022, the Loan Agreement was amended to extend the maturity date of the revolving credit facility to August 26, 2022.

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 June 30, 2022, 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 June 30, 2022 and December 31, 2021, 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 $1.2 million and $1.3 million at June 30, 2022 and December 31, 2021, respectively, which reduce the funds otherwise available to the Company under the facility.

As of June 30, 2022, the amount available to the Company under the revolving credit facility was $18.0 million after giving effect to the $1.2 million of outstanding letters of credit.

During the six months ended June 30, 2022, the Company issued a $100.0 million aggregate principal amount convertible note to Wood River Capital, LLC, an entity affiliated with Koch Strategic Platforms, LLC (the 2022 Convertible Note). Refer to note 9 for more information.

During the six months ended June 30, 2022, the Company incurred $2.9 million of interest from the 2022 Convertible Note, of which $0.5 million was capitalized as part of the construction in progress for the planned manufacturing facility in Bulloch County, Georgia.

During the six months ended June 30, 2022, the Company sold 1,791,986 shares of common stock to Wood River Capital, LLC, an entity affiliated with Koch Strategic Platforms, LLC, at a purchase price equal to $27.902 per share, for aggregate gross proceeds of approximately $50.0 million.

During the six months ended June 30, 2022, the Company recorded costs of $2.1 million as a component of construction in progress in connection with the planned aerogel manufacturing facility in Bulloch County, Georgia in fees from Koch Project Solutions, LLC, an entity affiliated with Koch Strategic Platforms, LLC for project management services.

During the six months ended June 30, 2022, the Company sold 135,870 shares of its common stock to Robert M. Gervis, a director of the Company, in the Company’s at-the-market offering pursuant to a sales agreement, dated March 16, 2022, by and among the Company and Cowen and Company, LLC and Piper Sandler & Co. (the Sales Agreement), for net proceeds of $4.4 million.

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

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

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

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

Interest accrued was $2.9 million for the six months ended June 30, 2022, of which debt issuance costs comprised less than $0.2 million. The effective interest rate approximated the contract interest rate for the six months ended June 30, 2022.

The 2022 Convertible Note is convertible at the option of the holder at any time prior to the business day immediately preceding the maturity date at an initial conversion rate of 28.623257 shares of the Company’s common stock per $1,000 of capitalized principal. The effective conversion price is approximately $34.936625 per share (the Conversion Price). The Conversion Price is subject to adjustment upon the occurrence of certain dilutive events such as stock splits and combinations, stock dividends, mergers and spin-off. For the six months ended June 30, 2022, there were no adjustments to Conversion Price. As of June 30, 2022, 2,945,133 shares of the Company’s common stock were issuable upon conversion of the 2022 Convertible Note. The Company has the right to settle conversions in shares of common stock, cash, or any combination thereof. If the closing price per share of the Company’s common stock on the New York Stock Exchange is at least 130% of the Conversion Price for 20 consecutive trading days, the Company may elect to convert the principal and accrued interest owing under the Notes, plus a make-whole amount equal to the sum of the present values of the remaining interest payments that would have otherwise been payable from the date of such conversion, redemption or repurchase, as applicable, through maturity (the Make-Whole Amount), into the Company’s common stock at the Conversion Price.

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

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

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

The Company is party to a cloud computing agreement that is a service contract for enterprise resource planning software. During the six months ended June 30, 2022, the Company amended the agreement to a new five-year term. As of June 30, 2022, the Company capitalized $1.7 million of costs related to implementation of the agreement that will begin to amortize during 2022. The capitalized implementation costs are classified on the consolidated balance sheets as follows:

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.

The Company was party to a supply agreement, as amended, with BASF Polyurethanes GmbH (BASF) (the Supply Agreement) and a joint development agreement with BASF SE (the JDA). Pursuant to the Supply Agreement, the Company agreed to sell exclusively to BASF certain of the Company’s products at annual volumes specified by BASF, subject to certain volume limits, through December 31, 2027.

Through the year ended December 31, 2019, BASF made two prepayments each in the amount of $5.0 million to the Company. BASF had the right to request that 25.3% of any amount invoiced by the Company to BASF for Spaceloft A2 were to be credited against the outstanding balance of the prepayments. BASF also had the right to request that the Company repay any uncredited amount of the first prepayment to BASF following a six-week notice period on or after January 1, 2022 and the second prepayment on or after January 1, 2023.

As of June 30, 2022, the Company had received $10.0 million in prepayments from BASF and applied approximately $0.3 million of credits against amounts invoiced to BASF for Spaceloft A2.

During 2021, the Company and BASF jointly announced that BASF would discontinue further marketing and sale of Spaceloft A2 as of November 15, 2021. After that date, BASF customers have had the right to purchase Spaceloft A2 directly from the Company.

On December 15, 2021, the Company terminated the supply arrangement and JDA with BASF and BASF SE, respectively. As part of the termination, the Company and BASF agreed that any uncredited prepayment balances would remain outstanding and subject to repayment upon BASF’s request following the requisite six-week notice periods after January 1, 2022 and January 1, 2023, respectively. On January 31, 2022, BASF requested that an outstanding prepayment balance of $4.7 million be repaid and the Company made the requested repayment on February 17, 2022.

The Company is subject to federal, state and local laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation. Penalties may be imposed for 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 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 fabrication space in Massachusetts, Rhode Island and Monterrey, Mexico under operating leases. Under these agreements, the Company is obligated to pay annual rent, real estate taxes, and certain other operating expenses. The Company also leases equipment under operating leases. The Company’s operating leases expire at various dates through 2034.

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

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

The Company incurred operating lease costs of $1.8 million and $0.7 million during the six months ended June 30, 2022 and 2021, respectively. Cash payments related to operating lease liabilities were $1.6 million and $0.8 million during the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, the weighted average remaining lease term for operating leases was 9.7 years. As of June 30, 2022, the weighted average discount rate for operating leases was 6.6%.

As of June 30, 2022, the Company had additional operating equipment leases that will commence during 2022 with total lease payments of less than $0.1 million and a weighted average lease term of 3.3 years.

As of June 30, 2022, the Company had no additional operating real estate lease that would commence during 2022.

The Company elected to defer approximately $0.9 million of its employer payroll tax obligation for the period from March 27, 2020 to December 31, 2020 pursuant to the provisions of the CARES Act. The Company was required to remit 50 percent of the deferred tax balance on or before December 31, 2021 and the remaining 50 percent on or before December 31, 2022. As of December 31, 2021, the Company had remitted its initial repayment obligation. As of June 30, 2022 and December 31, 2021, a corresponding liability of $0.4 million was recorded as a component of accrued expenses on the consolidated balance sheets.

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

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

As the Company incurred a net loss for the three and six months ended, June 30, 2022 and 2021, the potential dilutive shares from common stock options, restricted common stock units, restricted common stock awards, and the convertible note were excluded from the calculation of diluted net loss per share because their effect would have been anti-dilutive for the periods presented. The Company excludes the shares issued in connection with restricted stock awards from the calculation of basic weighted average common shares outstanding until the restrictions lapse.

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.

Operating segments are identified as components of an enterprise about which separate, discrete financial information is available for evaluation by the chief operating decision maker in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the Chief Executive Officer. The Company’s chief operating decision maker reviews consolidated operating results to make decisions about allocating resources and assessing performance for the entire Company. The Company ~~views its operations~~reports 2 segments: Energy Industrial and ~~manages its business as one operating segment.~~

~~Information about the Company’s total revenues,~~Thermal Barrier. We evaluate segment performance based on ~~shipment destination or services location, is presented in~~ the ~~following table:~~segment profit (loss) before corporate expenses.

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

The Company provides warranties for its products and records the estimated cost of such warranties within cost of sales 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, the Company regularly reviews and assesses whether warranty reserves shall be recorded in the period the related revenue is recorded. For an initial shipment of product in a system with new technical demands or configurations and where the Company is unsure of meeting the customer’s specifications, the Company will defer the recognition of product revenue and related costs until written customer acceptance is obtained.

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

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

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 any material impact to the Company’s consolidated financial statements or other disclosures.

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

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

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

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

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

September 30,

December 31,

2017

2016

(In thousands)

Raw materials

$
3,031

$
3,511

Finished goods

10,961

9,357

Total

$
13,992

$
12,868

	Three Months Ended				Three Months Ended						Six Months Ended				Six Months Ended
	Revenue				Segment Operating Profit (Loss)						Revenue				Segment Operating Profit (Loss)
	June 30,				June 30,						June 30,				June 30,
	2022		2021		2022			2021			2022		2021		2022			2021
	(In thousands)										(In thousands)
Energy industrial	$	34,877	$	31,458	$	5,984		$	5,798		$	65,652	$	59,455	$	8,981		$	10,675
Thermal barrier		10,763		212		(7,195	)		(1,218	)		18,395		312		(11,980	)		(2,139	)
Total	$	45,640	$	31,670	$	(1,211	)	$	4,580		$	84,047	$	59,767	$	(2,999	)	$	8,536
Corporate expenses						21,435			11,194							38,271			21,325
Operating loss						(22,646	)		(6,614	)						(41,270	)		(12,789	)
Other expense, net						(1,404	)		(55	)						(2,264	)		(130	)
Net loss					$	(24,050	)	$	(6,669	)					$	(43,534	)	$	(12,919	)

~~Depreciation expense was $8.0 million and $7.3 million for the nine months ended September 30, 2017 and 2016, respectively.~~

Construction in progress totaled $7.8 million and $11.1 million at September 30, 2017 and December 31, 2016, respectively, which included engineering designs and other pre-construction costs for the planned manufacturing facility in Statesboro, Georgia of $7.2 million at September 30, 2017 and December 31, 2016.(16) Subsequent Events

The Company ~~anticipates that~~has evaluated subsequent events through August 4, 2022, the ~~impact~~date of ~~constrained capital investment and low activity levels in the global energy markets will continue into 2018. With this view~~issuance of the ~~market,~~consolidated financial statements for the three and six months ended June 30, 2022.

The Company received net proceeds of $39.5 million upon the sale of 3,959,798 shares of its common stock, pursuant to a sales agreement, dated March 16, 2022, by and among the Company ~~delayed the board approved project to construct the Statesboro, Georgia manufacturing facility~~ and ~~its related financing to better align the capacity expansion with the Company’s assessment of future demand.~~

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In the table above, anti-dilutive shares consist of those common stock equivalents that have (i) an exercise price above the average stock price for the period or (ii) related average unrecognized stock compensation expense sufficient to buy back the entire amount of shares. The Company excludes the shares issued in connection with restricted stock awards from the calculation of basic weighted average common shares outstanding until the restrictions lapse.

The following information should be read in conjunction with the unaudited financial information and the notes thereto included in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in the Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2021, filed with the U.S. Securities and Exchange Commission (SEC) on March ~~2, 2017,~~1, 2022, 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.

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

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

We design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy infrastructure 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~~end-user customers select our products where thermal performance is critical and to save money, ~~reduce energy use,~~improve resource efficiency, enhance sustainability, preserve operating assets and protect workers.

Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, liquefied natural gas ~~(LNG)~~ facilities, power generating assets and other energy infrastructure. Our Pyrogel and Cryogel product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. Our Spaceloft building materials are increasingly used by building owners to improve the energy efficiency and to enhance fire protection in buildings ranging from historic brownstones to modern high rises.

We also derive ~~product~~ revenue from ~~the building materials and~~a number of other end markets. Customers in these markets use our products for applications as diverse as ~~wall systems,~~ military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. As we continue to enhance our aerogel technology platform, we believe we will have additional opportunities to address high value applications in the global

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

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

Our salespeople work directly with ~~end-use~~end-user customers and engineering firms to promote the qualification, specification and acceptance of our aerogel and thermal barrier products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 3050 countries around the world to ensure rapid delivery of our aerogel products and strong end-user support.

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

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

We ~~also perform research services under~~have entered into production contracts with ~~various agencies~~certain major OEMs, including General Motors LLC (GM) to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. Pursuant to the contracts with GM, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the ~~U.S. government,~~agreements, which expire at various times from 2026 through 2034. While GM has agreed to purchase its requirement for the barriers from us at locations to be designated from time to time, it has no obligation to purchase any minimum quantity of barriers under the contracts. In addition, GM may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with GM’s standard purchase terms, including quality and warranty provisions customary in the Department of Defense and the Department of Energy, and other institutions. Research performed under contract with government agencies and other institutions enables us to develop and leverage technologies into broader commercial applications.automotive industry.

We manufacture our products using our proprietary technology at our facility in East Providence, Rhode Island. We ~~completed the construction and start-up of a third production line in~~have operated the East Providence facility ~~during 2015, which~~since 2008 and have increased our ~~annual nameplate~~ capacity in phases to approximately 50$250.0 million ~~square feet~~in annual revenue. To meet expected growth in demand for our aerogel products in the electric vehicle market, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia.

On February 17, 2022, we entered into an Inducement Agreement with the Development Authority of ~~aerogel blankets. During~~Bulloch County (the Development Authority), the ~~first quarter~~City of ~~2016, we announced~~Statesboro, Bulloch County, Georgia (collectively, Statesboro Entities). Pursuant to the ~~planned construction of a~~Inducement Agreement, the Statesboro Entities will provide various incentives to induce us to invest at least $325.0 million in constructing and equipping our second manufacturing facility in ~~Statesboro,~~Bulloch County, Georgia ~~supported~~and to create at least 250 full-time jobs. Separately, and concurrently, the Company entered into a Memorandum of Understanding (the MOU) with the Georgia Department of Economic Development (the GDEcD). Pursuant to both the Inducement Agreement and the MOU, the Local Governmental Entities and the GDEcD will provide various incentives to induce the Company to invest at least $325.0 million in constructing and equipping a facility to produce aerogel-based products in Bulloch County, Georgia and to create at least 250 full-time jobs (the Project). We will also receive statutory incentives for economic development provided by ~~a package of incentives from~~ the State of ~~Georgia~~Georgia. Incentives afforded by the Statesboro Entities to us include, but are not limited to, property tax reductions and ~~local governmental authorities. We have elected~~utility and site infrastructure improvements for the Project. Additionally, the Development Authority, with assistance from the GDEcD, will also apply for a grant, the proceeds of which shall be used by us for certain equipment in connection with the Project. The Development Authority will lease to ~~delay construction~~us an approximately 90-acre property along with buildings and equipment to be built therein, for a term of ~~this facility~~five years, with an option to ~~better align~~renew for an additional

5 years, in consideration for the ~~capacity expansion with our assessment~~payment of ~~future demand.~~nominal rent, and grant to us an option to purchase the property upon the earlier of the expiration or termination of the lease at a nominal price.

~~During 2016,~~In addition, we entered into a ~~strategic partnership~~(i) PILOT Agreement with ~~BASF SE~~the Statesboro Entities that sets forth our rights and obligations with respect to ~~develop~~the incentives received pursuant to the Inducement Agreement and ~~commercialize products~~(ii) a Performance and Accountability Agreement with other state authorities, which provides for a grant of $1,000,000. Pursuant to these agreements, in the event that we fail to meet at least 80% of the investment and job creation goals within 36 months following the earlier to occur of (i) the completion and issuance of the certificate of occupancy with respect to the planned second manufacturing facility or (ii) December 31, 2024 (the Commencement Date), we may be required to repay portions of property tax savings, the grant to the Development Authority and other incentives. In addition, we must maintain our achievement of 80% of the investment and job creation goals for a period of 60 months thereafter.

We expect to build the second plant in two phases at an estimated cost of $575.0 million for the ~~building materials~~first phase and ~~other markets.~~ ~~The strategic partnership included~~$125.0 million for the second phase. We currently expect the first phase of the plant will increase our annual revenue capacity by approximately $650.0 million and the second phase by approximately $700.0 million. We expect to have the first phase of the second plant operational late in the second-half of 2023. In addition, we are constructing a ~~supply agreement governing~~state-of-the-art, automated thermal barrier fabrication operation in Monterrey, Mexico in order to keep pace with the ~~sale~~significant potential demand for our PyroThin thermal barriers.

On February 18, 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our ~~Spaceloft A2 product~~Convertible Senior PIK Toggle Notes due 2027 (the Notes), pursuant to ~~BASF~~a note purchase agreement, dated as of February 15, 2022, by and between us and the affiliate of Koch. The Notes bear interest at the Secured Overnight Financing Rate (SOFR) plus 5.50% per annum if interest is paid in cash (the Cash Interest), or, if interest is paid in kind (through an increase in the principal amount of the outstanding Notes or through the issuance of additional Notes), at SOFR plus 6.50% per annum (PIK Interest). Under the terms of the investment, SOFR has a floor of 1% and a ~~joint development agreement targeting innovative products and technologies. Subject to certain preconditions, BASF also agreed~~cap of 3%. We can elect to make any interest payment through Cash Interest, PIK Interest or any combination thereof. Interest on the Notes is payable semi-annually in arrears on June 30 and December 30, commencing on June 30, 2022. It is expected that the Notes will mature on February 18, 2027, subject to earlier conversion, redemption or repurchase.

On March 28, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock for aggregate gross proceeds of $50.0 million, pursuant to a ~~series~~securities purchase agreement, dated as of ~~prepayments~~February 15, 2022, by and between us and the affiliate of Koch.

On March 16, 2022, we entered into a sales agreement for an at-the-market (ATM) offering program with Cowen and Company, LLC as our sales agent. During the six months ended June 30, 2022, we sold 882,288 shares of our common stock, through the ATM offering program and received net proceeds of $28.1 million,after deducting commissions and estimated offering expenses payable by us.

On March 12, 2021, we entered into an Amended and Restated Loan and Security Agreement (Loan Agreement) with Silicon Valley Bank to usextend the maturity date of the revolving credit facility to April 28, 2022. Pursuant to the Loan Agreement, we are 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, plus a margin. 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 ~~aggregate of $22 million during~~Loan Agreement. At various dates in 2021, and subsequently on March 31, 2022 and April 28, 2022, we entered into amendments to the ~~construction of our planned manufacturing facility in Statesboro, Georgia. The prepayments will be either credited against amounts invoiced~~Loan Agreement to ~~BASF for Spaceloft A2 or repaid by us~~revise certain financial covenants, among other things. On June 23, 2022, the Loan Agreement was amended to ~~BASF after December 31, 2023. As a result of our decision to delay construction~~extend the maturity date of the ~~Statesboro~~revolving credit facility ~~we have yet~~ to ~~fulfill the preconditions, and commencement of the prepayments from BASF will be delayed until the preconditions are satisfied.~~

In July 2017, we announced the launch of a new product, Pyrogel® HPS, a high-temperature aerogel blanket engineered to provide thermal conductivity and economic performance at service temperatures of up to 650°C (1200°F).August 26, 2022.

Our revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~$75.3~~$84.0 million, which represented ~~a decrease~~an increase of ~~$14.8~~$24.2 million, or 41%, from $59.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2021. Net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 was ~~$17.6~~$43.5 million and net loss per ~~diluted~~ share was ~~$0.76.~~$1.27. Net loss for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2021 was ~~$6.3~~ $12.9million and net loss per ~~diluted~~ share was ~~$0.27.~~$0.46.

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 energy industrial product and measure our ~~product~~ shipments in square feet. ~~We estimate our annual nameplate capacity was approximately 50 million square feet of aerogel blankets at September 30, 2017.~~ We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and energy industrial product shipments on a uniform and consistent basis. The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, ~~in square feet~~including revenue recognized over time 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						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2017			2016			2017			2016			2022			2021			2022			2021
	(In thousands)												(In thousands)						(In thousands)
Net loss	$	(3,088	)	$	(3,097	)	$	(17,638	)	$	(6,281	)	$	(24,050	)	$	(6,669	)	$	(43,534	)	$	(12,919	)
Depreciation and amortization		2,726			2,472			8,032			7,298			2,032			2,104			4,161			4,742
Stock-based compensation ⁽¹⁾		1,364			1,474			3,982			4,277
Interest expense, net		58			37			123			115
Postponed financing costs		—			656			—			656
Stock-based compensation⁽¹⁾														2,295			1,070			4,123			2,046
Interest expense														1,404			55			2,264			130
Adjusted EBITDA	$	1,060		$	1,542		$	(5,501	)	$	6,065		$	(18,319	)	$	(3,440	)	$	(32,986	)	$	(6,001	)

₍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.

We expect growth in ~~particular when we expand~~revenue during 2022 driven by a continued post-COVID recovery in the energy infrastructure market, accelerating demand in the electric vehicle market and continued market share gains in the sustainable building materials market. Our expectation to maintain revenue growth is based, in part, on our original equipment manufacturer (OEM) customers’ production volume forecasts and targets as well as our expectation to successfully scale our manufacturing ~~capacity.~~

capabilities and address any potential supply chain issues to meet this expected demand. We are also planning a significant increase in staffing and spending levels in support of our electric vehicle market opportunities during the year, including expenses associated with the start-up and operation of an automated fabrication facility in Monterrey, Mexico and the initial staffing and operational requirements of our planned second aerogel manufacturing facility in Bulloch County, Georgia. 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 ~~a decrease in revenue,~~to experience an increase in net loss ~~and loss per share~~ and a decrease in Adjusted EBITDA during ~~the year ending December 31, 2017 versus the comparable period in 2016. Given fixed cost structures~~2022.

We also expect to incur significant capital expenditures 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 revenueincreased expenses during the ~~year.~~remainder of 2022, related to our planned second aerogel manufacturing facility to be located in Bulloch County, Georgia. We are planning to invest approximately $700.0 million in two phases in the construction of the second facility. We expect to have the first phase of the second plant operational late in the second-half of 2023.

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

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

We ~~anticipate that constrained capital investment and low activity levels~~project revenue growth during 2022 due to a continued post-COVID recovery in the ~~global~~ energy infrastructure market, ~~will continue into 2018, particularly~~accelerating demand in the ~~global downstream market. As a result of this constrained capital investment~~electric vehicle market for our thermal barrier product and ~~low activity levels~~continued market share gains in the ~~global energy market, as well as~~sustainable building materials market. Our projected revenue growth may be constrained by a shortage of unskilled labor associated with the conclusion of the multiyear petrochemical project with a major Asian energy company, which comprised 25% of our product revenue during 2016, we expect to continue to experience a decrease in revenue during the year ending December 31, 2017.COVID-19 pandemic.

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 energy industrial 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. In May 2022, one of our silanes suppliers, Silbond Corporation, informed us that it needs to curtail supply of one of the silanes we use, such that we may not receive all of our requirements in the ~~aggregate~~near term due to ~~decline~~difficulties in arranging transportation of the silanes to us. We are currently working with our supplier to identify and obtain an adequate supply of silanes or otherwise fill the shortage. We are also exploring other potential options for obtaining transportation and supply, including potentially from other third parties including from Asia or by arranging transportation of silanes ourselves. However, there can be no assurance that we will be able to obtain sufficient supplies of silanes in a timely matter, which could result in material adverse impacts on our business and our financial condition. We expect that material costs will increase in absolute dollars during 2022 due to projected growth in product shipments, but decrease as a percentage of revenue ~~as we seek~~due to ~~achieve higher~~projected increases in average selling prices, ~~material sourcing improvements, quality improvements~~improved manufacturing, and ~~manufacturing yield enhancements for our aerogel products.~~fabrication yields and a favorable mix of products sold.

Manufacturing expense is also a significant component of cost of revenue. ~~As we increase~~Manufacturing expense includes labor, utilities, maintenance expense, and depreciation on manufacturing ~~capacity through~~assets. Manufacturing expense also includes stock-based compensation for manufacturing employees and shipping costs. Manufacturing expense is our ~~planned construction and operation~~most significant component of ~~a second manufacturing facility and, over time, potentially expand the production lines at the second facility, we~~cost of our thermal barrier product revenue. 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.~~2022 due to increased manual fabrication staffing and spending levels in support of our thermal barrier business, including the start-up and operation of a fabrication facility in Monterrey, Mexico and the initial staffing and operational requirements of our planned second aerogel manufacturing facility in Bulloch County, Georgia.

~~Cost of research services revenue consists of direct labor costs of research personnel engaged in the contract research, third-party consulting expense, and associated direct material costs. This~~In total, we expect that cost of product revenue ~~also includes overhead expenses associated with~~

~~project resources, development tools~~will increase in absolute dollars during 2022 versus 2021 and ~~supplies. Cost~~as a percentage of ~~research services~~ revenue ~~is recorded when~~versus 2021 driven by the ~~related research services~~costs to support our expected higher run-rate revenue ~~is recognized.~~in future periods.

Our gross profit as a percentage of revenue is affected by a number of factors, including the volume of aerogel products produced and sold, the mix of aerogel products sold, average selling prices, our material and manufacturing costs, realized capacity utilization and the costs associated with expansions and start-up of production capacity. Accordingly, we expect our gross profit to vary significantly in absolute dollars and as a percentage of revenue ~~to vary significantly~~ from period to period. ~~As we build out our manufacturing capacity, we expect increased manufacturing expenses will periodically have a significant negative impact on gross profit in the periods following any such expansion.~~

~~As a result of the conclusion of the multiyear petrochemical project with a major Asian energy company, which comprised~~ ~~25%~~ of our product revenue during 2016, in combination with the impact of constrained capital investment and low activity levels in the global energy infrastructure market, we expect to continue to experience a decrease in revenue and an associated decrease in gross profit and gross profit as a percentage of revenue 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,~~During 2022, we expect gross profit to ~~improve~~increase in both absolute dollars and as a percentage of total revenue due to the combination of a projected increase in total revenue combined with projected reduction in material costs as a percentage of total revenue related to our energy industrial products, offset, in part, by a projected increase in manufacturing expense as a percentage of revenue ~~due~~primarily related to expected increases in manufacturing productivity and production volumes, supported by expected capacity expansions, improvements in manufacturing yields and realization of material purchasing efficiencies.our thermal barrier business.

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 2022, we expect to continue to hire additional technical, operational and commercial personnel and incur additional operating expenses to support the anticipated multi-year growth in our PyroThin thermal barrier business. As a result, we expect that operating expenses will increase in 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, in 2022, we expect ~~such~~these expenses will ~~continue to~~ increase in both absolute dollars and as a percentage of ~~revenue during 2017.~~revenue.

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 2022 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.~~.

General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit and tax consulting costs, and expenses for our executive, finance, legal, human resources and information technology organizations. General and administrative expenses have increased as we have incurred additional costs related to operating as a publicly-traded company, which include costs offees, compliance with securities, corporate governance and related laws and regulations, investor relations expenses ~~increased~~and insurance premiums, including director and officer ~~insurance, and increased audit and legal fees. In addition, we~~insurance.

We expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our ~~business and continued expansion of our manufacturing operations.~~business. We also expect that the patent

enforcement actions, described in more detail under “Legal Proceedings” in Part ~~II,~~I, Item 13 of ~~this Quarterly~~our Annual Report on Form ~~10-Q,~~10-K for the year ended December 31, 2021, 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 in the longer term, in 2022, we expect such expenses will increase in both absolute dollars and as a percentage of revenue.

~~For the nine months ended September 30, 2017, other~~Interest expense, net ~~consisted primarily~~consists of interest expense on our convertible note and 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~~June 30, ~~2017~~2022 compared to the three months ended ~~September~~June 30, ~~2016~~2021

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

	Three Months Ended June 30,
	2022					2021					Change
			Percentage					Percentage
	Amount		of Revenue			Amount		of Revenue			Amount		Percentage
	($ in thousands)
Revenue:
Energy industrial	$	34,877		76	%	$	31,458		99	%	$	3,419		11	%
Thermal barrier		10,763		24	%		212		1	%		10,551	NM
Total revenue	$	45,640		100	%	$	31,670		100	%	$	13,970		44	%

Total revenue increased $14.0 million, or 44%, to $45.6 million for the three months ended June 30, 2022 from $31.6 million in the comparable period in 2021. The increase in total revenue was the result of increases in both thermal barrier and energy industrial revenue.

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

Energy industrial revenue increased by $3.4 million, or 11%, to $34.9 million for the three months ended June 30, 2022 from $31.5 million in the comparable period in 2021. This increase was driven by project-based demand in the subsea market in addition to an increase in maintenance-based demand in the Asia global petrochemical and refinery markets offset by a decrease in Europe.

Energy industrial revenue for the three months ended June 30, 2022 included $9.3 million to a North American distributor. Energy industrial revenue for the three months ended June 30, 2021 included $9.6 million to a North American distributor and $3.7 million to a European LNG project contractor.

The average selling price per square foot of our energy industrial products increased by $0.59, or 18%, to $3.79 per square foot for the three months ended June 30, 2022 from $3.20 per square foot for the three months ended June 30, 2021. The increase in average selling price principally reflected the impact of a change in the mix of products sold. This increase in average selling price had the effect of increasing product revenue by $5.4 million for the three months ended June 30, 2022 from the comparable period in 2021.

In volume terms, energy industrial product shipments decreased by 0.6 million square feet, or 6%, to 9.2 million square feet for the three months ended June 30, 2022, as compared to 9.8 million square feet for the three months ended June 30, 2021. The decrease in volume had the effect of decreasing product revenue by $2.0 million for the three months ended June 30, 2022 from the comparable period in 2021.

Thermal barrier revenue was $10.8 million for the three months ended June 30, 2022 as compared to $0.2 million for the three months ended June 30, 2021. Thermal barrier revenue for the three months ended June 30, 2022 included $7.4 million to a major U.S. automotive OEM and $1.9 million to a major Asian automotive OEM.

	Three Months Ended June 30,
	2022								2021								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:
Energy industrial	$	28,893		83	%		63	%	$	25,660		82	%		81	%	$	3,233		13	%
Thermal barrier		17,958		167	%		39	%		1,430	NM				5	%		16,528	NM
Total cost of revenue	$	46,851		103	%		103	%	$	27,090		86	%		86	%	$	19,761		73	%

Total cost of revenue increased $19.8 million, or 73%, to $46.9 million for the three months ended June 30, 2022 from $27.1 million in the comparable period in 2021. The increase in total cost of revenue was the result of increases in thermal barrier and energy industrial cost of revenue.

Energy industrial cost of revenue increased $3.2 million, or 13%, to $28.9 million for the three months ended June 30, 2022 from $25.7 million in the comparable period in 2021. The $3.2 million increase was the result of a $6.2 million increase in material costs to support the 11% increase in energy industrial revenue from the comparable period in 2021, offset by a $3.0 million decrease in manufacturing and other operating costs.

Thermal barrier cost of revenue increased $16.6 million to $18.0 million for the three months ended June 30, 2022 as compared to $1.4 million for the three months ended June 30, 2021. The $16.6 million increase was the result of a $4.9 million increase in material costs and an $11.7 million increase in manufacturing. The increase in material costs was the result of the increase in revenue volume from the comparable period in 2021 in which there were minimal thermal barrier sales. The increase in manufacturing was driven by increases in compensation and related costs of $7.8 million and other manufacturing and operating costs of $3.9 million.

	Three Months Ended June 30,
	2022						2021						Change
				Percentage						Percentage
	Amount			of Revenue			Amount			of Revenue			Amount			Percentage
	($ in thousands)
Gross profit:
Energy industrial	$	5,984			17	%	$	5,798			18	%	$	186			3	%
Thermal barrier		(7,195	)		(67	)%		(1,218	)	NM				(5,977	)	NM
Total gross (loss) profit	$	(1,211	)		(3	)%	$	4,580			14	%	$	(5,791	)		(126	)%

Gross profit decreased by $5.8 million, or 126%, to $(1.2) million for the three months ended June 30, 2022 from $4.6 million in the comparable period in 2021. The decrease in gross profit was the result of the $19.8 million increase in total cost of revenue, offset, in part, by the $14.0 million increase in total revenue. The decrease in gross profit reflects the increase in overhead costs and additional resources to support our expected higher run-rate revenue in future periods for both our energy industrial and thermal barrier products.

Research and development expenses increased by $1.8 million, or 70%, to $4.4 million for the three months ended June 30, 2022 from $2.6 million in the comparable period in 2021. The $1.8 million increase reflects an increase in compensation and related costs of $0.8 million, equipment and lease expenses of $0.6 million and other research and development expenses of $0.4 million.

Research and development expenses as a percentage of total revenue increased to 10% of total revenue for three months ended June 30, 2022 from 8% in the comparable period in 2021.

Sales and marketing expenses increased by $4.0 million, or 114%, to $7.6 million for the three months ended June 30, 2022 from $3.6 million in the comparable period in 2021. The $4.0 million increase was principally the result of increases in compensation and related costs of $2.2 million, operating supplies expenses of $0.9 million, travel-related expenditures of $0.4 million, marketing expenses of $0.2 million and other sales and marketing expenses of $0.3 million.

Sales and marketing expenses as a percentage of total revenue increased to 17% for the three months ended June 30, 2022 from 11% in the comparable period in 2021, due principally to the increase in compensation and related expenses associated with an increase in sales and business development personnel.

General and administrative expenses increased by $4.3 million, or 86%, to $9.3 million for the three months ended June 30, 2022 from $5.0 million in the comparable period in 2021. The $4.3 million increase was the result of increases in compensation and related costs of $2.6 million, operating and lease expenses of $1.0 million, professional fees of $0.6 million and other general and administrative expenses of $0.1 million.

General and administrative expenses as a percentage of total revenue increased to 20% for the three months ended June 30, 2022 from 16% in the comparable period in 2021.

	Three Months Ended June 30,
	2022						2021						Change
				Percentage						Percentage
	Amount			of Revenue			Amount			of Revenue			Amount			Percentage
	($ in thousands)
Interest expense:
Interest expense, related party	$	(1,550	)		(3	)%	$	—			—		$	(1,550	)	NM
Interest expense, net		146			0	%		(55	)		—			201		NM
Total interest expense, net	$	(1,404	)		(3	)%	$	(55	)		0	%	$	(1,349	)	NM

Interest expense, net increased by $1.3 million to $1.4 million for the three months ended June 30, 2022 from less than $0.1 million in the comparable period in 2021. The $1.3 million increase was the result of interest relating to our Convertible Note.

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

	Three Months Ended September 30,																Six Months Ended June 30,
	2017					2016					Change						2022					2021					Change
			Percentage					Percentage											Percentage of					Percentage of
	Amount		of Revenue			Amount		of Revenue			Amount			Percentage			Amount		Revenue			Amount		Revenue			Amount		Percentage
	($ in thousands)																($ in thousands)
Revenue:
Product	$	26,812		99	%	$	28,877		98	%	$	(2,065	)		(7	)%
Research services		386		1	%		683		2	%		(297	)		(43	)%
Energy industrial																	$	65,652		78	%	$	59,455		99	%	$	6,197		10	%
Thermal barrier																		18,395		22	%		312		1	%		18,083	NM
Total revenue	$	27,198		100	%	$	29,560		100	%	$	(2,362	)		(8	)%	$	84,047		100	%	$	59,767		100	%	$	24,280		41	%

Total revenue increased $24.2 million, or 41%, to $84.0 million for the three months ended June 30, 2022 from $59.8 million in the comparable period in 2021. The increase in total revenue was the result of increases in both thermal barrier and energy industrial revenue.

~~Total~~Energy industrial revenue ~~decreased~~increased by ~~$2.4~~$6.2 million, or 8%10%, to ~~$27.2~~$65.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$29.6~~$59.5 million in the comparable period in ~~2016 primarily as a result of a decrease in product revenue.~~

~~Product revenue decreased~~2021. This increase was driven by ~~$2.1 million, or 7%, to $26.8 million for the three months ended September 30, 2017 from $28.9 million~~maintenance-based demand in the ~~comparable period~~global petrochemical and refinery markets, particularly in ~~2016. This decrease was principally~~Asia and North America, due to the ~~result of a decrease in sales~~continued post-COVID recovery, project based demand in the ~~Asian~~subsea market, ~~led by the conclusion of the multiyear petrochemical project with a major Asian energy company,~~ offset, in part, by ~~an increase in revenue~~a maintenance-based demand in the ~~U.S., South American~~global petrochemical and ~~European~~refinery markets, ~~and growth~~particularly in ~~the subsea market during the three months ended September 30, 2017.~~Europe.

~~Product~~Energy industrial revenue for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 included ~~$5.0~~$20.2 million ~~in sales~~ to a ~~subsea contractor, $4.0 million and $3.2 million in sales to two~~ North American ~~distributors, respectively, and $3.0 million in sales to a South American contractor. Product~~distributor. Energy industrial revenue for the ~~three~~six months ended ~~September~~June 30, ~~2016~~2021 included ~~$9.3~~$17.0 million to a ~~major Asian energy company~~North American distributor and ~~$3.8~~$8.8 million to ~~an Asian distributor.~~a European LNG project contractor.

The average selling price per square foot of our energy industrial products increased by ~~$0.66,~~$0.56, or ~~27%~~17%, to ~~$3.10~~$3.78 per square foot for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$2.44~~$3.22 per square foot for the ~~three~~six months ended ~~September~~June 30, ~~2016. This~~2021. The increase 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 in average selling price had the effect of increasing product revenue by ~~$5.7~~$9.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from the comparable period in ~~2016.~~2021.

~~Product~~In volume terms, energy industrial product shipments decreased by ~~3.2~~1.1 million square feet, or ~~27%~~6%, to ~~8.6 million square feet of aerogel products for the three months ended September 30, 2017, as compared to 11.8~~17.4 million square feet for the ~~three~~six months ended ~~September~~June 30, ~~2016. This~~2022, as compared to 18.4 million square feet for the six months ended June 30, 2021. The decrease in ~~product shipments~~volume had the effect of decreasing product revenue by ~~$7.8~~$3.5 million ~~for~~ the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from the comparable period in ~~2016.~~2021.

~~Research services~~Thermal barrier revenue ~~decreased by $0.3 million, or 43%, to $0.4~~was $18.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 as compared to $0.3 million for the six months ended June 30, 2021. Thermal barrier revenue for the six months ended June 30, 2022 included $13.6 million to a major U.S. automotive OEM and $3.1 million to a major Asian automotive OEM.

	Six Months Ended June 30,
	2022								2021								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:
Energy industrial	$	56,671		86	%		67	%	$	48,780		82	%		82	%	$	7,891		16	%
Thermal barrier		30,375		165	%		36	%		2,451	NM				4	%		27,924	NM
Total cost of revenue	$	87,046		104	%		104	%	$	51,231		86	%		86	%	$	35,815		70	%

Total cost of revenue increased $35.8 million, or 70%, to $87.0 million for the six months ended June 30, 2022 from ~~$0.7~~$51.2 million in the comparable period in ~~2016.~~ 2021. The ~~decrease was primarily due to the timing and amount of funding available under existing research contracts during the three months ended September 30, 2017 from the comparable period in 2016.~~

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

Three Months Ended September 30,

2017

2016

Change

Percentage
of Related

Percentage
of Total

Percentage
of Related

Percentage
of Total

Amount

Revenue

Revenue

Amount

Revenue

Revenue

Amount

Percentage

($ in thousands)

Cost of revenue:

Product

$
22,115

82
%

81
%

$
22,790

79
%

77
%

$
(675
)

(3
)%
Research services

135

35
%

1
%

368

54
%

1
%

(233
)

(63
)%
Total cost of revenue

$
22,250

82
%

82
%

$
23,158

78
%

78
%

$
(908
)

(4
)%

~~Total cost of revenue decreased by $0.9 million, or 4%, to $22.3 million for the three months ended September 30, 2017 from $23.2 million in the comparable period in 2016. The decrease~~increase in total cost of revenue was the result of ~~both a decrease~~increases in ~~product~~thermal barrier and energy industrial cost of revenue.

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

~~Cost of product revenue decreased by $0.7~~increased $7.9 million, or 3%16%, to ~~$22.1~~$56.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$22.8~~$48.8 million in the comparable period in ~~2016. This $0.7~~2021. The $7.9 million ~~decrease~~increase was the result of a ~~decrease in manufacturing expense of $0.8 million, offset, in part, by a $0.1~~$9.6 million increase in material ~~costs. The percentage decrease in material~~ costs ~~was lower than~~to support 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 million and other expense of $0.2 million, offset, in part, by an10% increase in ~~depreciation expense of $0.2 million.~~

~~The cost of product~~energy industrial 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.~~2021 and a $1.7 million decrease in manufacturing and other operating costs.

~~The~~Thermal barrier cost of ~~research services~~ revenue ~~decreased by $0.2~~increased $27.9 million ~~or 63%~~ to ~~$0.1~~$30.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2017 from $0.3~~2022 as compared to $2.5 million in the comparable period in ~~2016. Cost~~2021. The $27.9 million increase was the result of ~~research service~~a $9.6 million increase in material costs and an $18.3 million increase in manufacturing costs. The increase in material costs was the result of the increase in revenue ~~as a percentage of research services revenue decreased to 35% during the three months ended September 30, 2017~~volume from ~~54% in~~ the comparable period in ~~2016 due to a reduction~~2021 in ~~outside services utilized to support the contracted research.~~which there were minimal thermal barrier sales. The increase in manufacturing costs was driven by increases in compensation and related costs of $14.3 million and other operating and manufacturing costs of $4.0 million.

Three Months Ended September 30,

2017

2016

Change

Percentage

Percentage

Amount

of Revenue

Amount

of Revenue

Amount

Percentage

($ in thousands)

Gross profit

$
4,948

18
%

$
6,402

22
%

$
(1,454
)

(23
)%

	Six Months Ended June 30,
	2022						2021						Change
				Percentage						Percentage
	Amount			of Revenue			Amount			of Revenue			Amount			Percentage
	($ in thousands)
Gross profit:
Energy industrial	$	8,981			14	%	$	10,675			18	%	$	(1,694	)		(16	)%
Thermal barrier		(11,980	)		(65	)%		(2,139	)	NM				(9,841	)	NM
Total gross (loss) profit	$	(2,999	)		(4	)%	$	8,536			14	%	$	(11,535	)		(135	)%

Gross profit decreased by ~~$1.5~~$11.5 million, or ~~23%~~135%, to ~~$4.9~~$(3.0) million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$6.4~~$8.5 million in the comparable period in ~~2016.~~2021. The decrease in gross profit was the result of the ~~$2.4~~$35.8 million ~~decrease~~increase in total cost of 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~~$24.2 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~~revenue. The decrease in gross profit reflects the increase in overhead costs and additional resources to support our ~~expectation that the percentage reduction~~expected higher run-rate revenue 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~~future periods for both our ~~manufacturing facility~~energy industrial and ~~a shift in mix to higher cost~~thermal barrier products.

Three Months Ended September 30,

2017

2016

Change

Percentage

Percentage

Amount

of Revenue

Amount

of Revenue

Amount

Percentage

($ in thousands)

Research and development expenses

$
1,468

5
%

$
1,328

4
%

$
140

11
%

	Six Months Ended June 30,
	2022					2021					Change
			Percentage					Percentage
	Amount		of Revenue			Amount		of Revenue			Amount		Percentage
	($ in thousands)
Research and development expenses	$	8,039		10	%	$	5,051		8	%	$	2,988		59	%

Research and development expenses increased by ~~$0.1~~$3.0 million, or ~~11%~~59%, to ~~$1.5~~$8.0 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$1.3~~$5.0 million in the comparable period in ~~2016.~~2021. The ~~$0.1~~$3.0 million increase ~~was primarily due to~~reflects an increase ~~of $0.1 million~~ in compensation and related ~~expenses.~~costs of $1.3 million, equipment and lease expenses of $1.1 million and other research and development expenses of $0.6 million.

Research and development expenses as a percentage of total revenue increased to 5%10% for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 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 three months ended September 30, 2017.~~

We expect that our research and development expenses during 2017 will increase from 2016 expense levels in support of new product development, improved manufacturing technology and the operation of our full scale pilot line. Due to the expected growth in research and development expenses and the projected decline in total revenue, we expect research and development expenses as a percentage of total revenue to increase in 2017. In the long term, we expect to continue to increase investment in research, development and engineering personnel, projects and infrastructure in support of efforts to expand and deepen our aerogel technology platform, develop new products, technologies and markets. However, we expect that research and development expenses will decline as a percentage of total revenue in the long-term due to projected growth in product revenue.2021.

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
)%

	Six Months Ended June 30,
	2022					2021					Change
			Percentage					Percentage
	Amount		of Revenue			Amount		of Revenue			Amount		Percentage
	($ in thousands)
Sales and marketing expenses	$	13,651		16	%	$	6,869		11	%	$	6,782		99	%

Sales and marketing expenses ~~decreased~~increased by ~~$0.3~~$6.8 million, or ~~10%~~99%, to ~~$2.8~~$13.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$3.1~~$6.9 million in the comparable period in ~~2016.~~2021. The ~~$0.3~~$6.8 million ~~decrease was driven by a decrease in outside consulting expense of $0.3 million.~~

Sales and marketing expenses as a percentage of total revenue remained flat at 10% for the three months ended September 30, 2017 and 2016 due to the relatively proportional decrease in sales and marketing expenses and decrease in total revenue during the three months ended September 30, 2017 versus the comparable period in 2016.

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

General and administrative expenses decreased by $0.7 million, or 15% to $3.8 million during the three months ended September 30, 2017 from $4.4 million in the comparable period in 2016. The $0.7 million decrease was primarily the result of a decrease in patent enforcement costs of $1.1 million, offset, in part, by an increase in compensation related expenses of $0.2 million and an increase in other general and administrative expenses of $0.2 million.

General and administrative expenses as a percentage of total revenue decreased to 14% for the three months ended September 30, 2017 from 15% 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.

We expect general and administrative expenses to increase during 2017 given that we expect to pay incentive based compensation related to 2017 performance that we did not pay related to 2016 performance. Due to the expected increase in general and administrative expenses and the projected decline in total revenue, we expect general and administrative expenses as a percentage of total revenue to increase in 2017. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part II, Item 1, of this Quarterly Report on Form 10-Q, if protracted, and similar actions could result in significant, on-going 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 million during the three months ended September 30, 2017. During the three months ended September 30, 2016, other expense, net of $0.7 million consisted of a $0.7 million charge relating to postponed financing costs and less than $0.1 million of costs related to our revolving credit facility.

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

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

Nine Months Ended September 30,

2017

2016

Change

Percentage of

Percentage of

Amount

Revenue

Amount

Revenue

Amount

Percentage

($ in thousands)

Revenue:

Product

$
73,700

98
%

$
88,286

98
%

$
(14,586
)

(17
)%
Research services

1,569

2
%

1,813

2
%

(244
)

(13
)%
Total Revenue

$
75,269

100
%

$
90,099

100
%

$
(14,830
)

(16
)%

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

Total revenue decreased by $14.8 million, or 16%, to $75.3 million for the nine months ended September 30, 2017 from $90.1 million in the comparable period in 2016 primarily as a result of a decrease in product revenue.

~~Product revenue decreased by $14.6 million, or 17%, to $73.7 million for the nine months ended September 30, 2017 from $88.3 million in the comparable period in 2016. This decrease~~ was principally the result of ~~a decrease~~increases in sales in the Asian market, led by the conclusion of the multiyear petrochemical project with a major Asian energy company, offset, in part, by an increase in revenue in the U.S. market, including growth in the LNGcompensation and district energy markets, and by growth in South American, European and subsea markets. Product revenue for the nine months ended September 30, 2017 included $11.0 million in sales to a North American distributor and $7.5 million in sales to an Asian distributor. Product revenue for the nine months ended September 30, 2016 included $17.8 million to a major Asian energy company and $12.6 million to a North American distributor.

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

Product shipments decreased by 8.0 million square feet, or 24%, to 25.6 million square feet of aerogel products for the nine months ended September 30, 2017 from 33.6 million square feet for the nine months ended September 30, 2016. This decrease in product shipments had the effect of decreasing product revenue by $21.0 million for the nine months ended September 30, 2017 from the comparable period in 2016.

Research services revenue decreased by $0.2 million, or 13%, to $1.6 million for the nine months ended September 30, 2017 from $1.8 million in the comparable period in 2016. The decrease was primarily due to the timing and amount of funding available under existing research contracts during the nine months ended September 30, 2017 from the comparable period in 2016.

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

Nine Months Ended September 30,

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

$
63,706

86
%

85
%

$
69,505

79
%

77
%

$
(5,799
)

(8
)%
Research services

700

45
%

1
%

1,012

56
%

1
%

(312
)

(31
)%
Total cost of revenue

$
64,406

86
%

86
%

$
70,517

78
%

78
%

$
(6,111
)

(9
)%

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

The cost of product revenue decreased by $5.8 million, or 8%, to $63.7 million for the nine months ended September 30, 2017 from $69.5 million in the comparable period in 2016. The $5.8 million decrease was the result of a reduction in materialrelated costs of ~~$3.6~~$4.3 million, associated with the decline in product revenue and a reduction in manufacturing expense of $2.2 million during the nine months ended September 30, 2017. The decrease in manufacturing expense was the result of decreases in utilities expenseoperating supplies expenses of $1.1 million, ~~compensation expense~~travel-related expenditures of ~~$0.8~~$0.6 million, ~~and other operating expense of $0.7 million, offset, in part, by an increase in depreciation expense of $0.4 million.~~

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

The cost of research services revenue decreased by $0.3 million, or 31%, to $0.7 million for the nine months ended September 30, 2017 from $1.0 million in the comparable period in 2016. The cost of research service revenue 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 million decrease in total revenue offset, in part, by the $6.1 million decrease in total cost of revenue. ~~The decrease in revenue was principally associated with~~ ~~the decrease 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. The decrease in total cost of revenue was driven principally by reduced material costs and decreased manufacturing expenses associated with the 17% decline in product revenue.~~

~~Gross profit as a percentage of total revenue decreased to 14% of total revenue for the nine months ended September 30, 2017 from 22% 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.

Research and development expenses increased by $0.8 million, or 21%, to $4.8 million for the nine months ended September 30, 2017 from $3.9 million in the comparable period in 2016. The $0.8 million increase was due to an increase 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.

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

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

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

Sales and marketing expenses as a percentage of total revenue increased to ~~12%~~16% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~10%~~11% in the comparable period in ~~2016~~2021, due ~~both~~principally to the increase in ~~sales~~compensation and ~~marketing~~related 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~~associated with ~~a planned~~an 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.business development personnel.

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
%

	Six Months Ended June 30,
	2022					2021					Change
			Percentage					Percentage
	Amount		of Revenue			Amount		of Revenue			Amount		Percentage
	($ in thousands)
General and administrative expenses	$	16,581		20	%	$	9,405		16	%	$	7,176		76	%

General and administrative expenses increased by ~~$2.1~~$7.2 million, or ~~17%~~76%, to ~~$14.4~~$16.6 million ~~during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~$12.2~~$9.4 million in the comparable period in ~~2016.~~2021. The ~~$2.1~~$7.2 million increase was ~~primarily~~ the result of

increases in ~~patent enforcement costs of $1.2 million,~~ compensation and related costs of ~~$0.5~~$3.5 million,operating and lease expenses of $2.1 million, an increase in professional fees of $0.8 million and other general and administrative expenses of ~~$0.4 million.~~$0.8 million.

General and administrative expenses as a percentage of total revenue increased to ~~19%~~20% for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 from ~~14%~~16% in the comparable period in ~~2016, which was due both~~2021.

	Six Months Ended June 30,
	2022						2021						Change
				Percentage						Percentage
	Amount			of Revenue			Amount			of Revenue			Amount			Percentage
	($ in thousands)
Interest expense:
Interest expense, related party	$	(2,369	)		(3	)%	$	—		$	—		$	(2,369	)	NM
Interest expense, net		105			—			(130	)		—			235			(181	)%
Total interest expense, net	$	(2,264	)		(3	)%	$	(130	)		0	%	$	(2,134	)		1642	%

Interest expense, net increased by $2.1 million to $2.2 million for the ~~increase in general and administrative expenses and the decline in total revenue during the nine~~six months ended ~~September~~June 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 percentage of total revenue to increase in 2017. We also expect that the patent enforcement actions, described in more detail under “Legal Proceedings” in Part II, Item 1, of this Quarterly Report on Form 10-Q, and similar actions, could result in significant, on-going 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~~2022 from $0.1 ~~million during the nine months ended September 30, 2017 from $0.8~~ million in the comparable period in ~~2016.~~2021. The ~~$0.7~~$2.1 million ~~decrease~~increase was ~~primarily~~ the result of ~~the $0.7 million charge in 2016~~interest relating to ~~postponed financing costs. Interest expense, net, of $0.1 million during the nine months ended September 30, 2017 and 2016 consisted primarily of costs related to~~ our ~~revolving credit facility.~~Convertible Note.

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

~~Through 2015, we experienced revenue growth and gained share in our target markets. Despite a decline in revenue in 2016 and an expected decline in revenue in 2017, our~~Our long-term financial projections anticipate ~~long-term~~ revenue growth, ~~with~~ increasing levels of gross profit, and improved cash flows from operations. ~~However,~~To meet expected growth in demand for our aerogel products in the electric vehicle market, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia. We expect to ~~incur~~build the second plant in two phases at an estimated cost of $575.0 million for the first phase and $125.0 million for the second phase. We expect to have the first phase of the second plant operational late in the second-half of 2023. In addition, we are constructing and planning commence the operation of a state-of-the-art, thermal barrier fabrication operation in Monterrey, Mexico during 2022 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 2022, 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. To meet the anticipated revenue growth and take advantage of this market opportunity, we are adding personnel, incurring additional operating expenses, and planning to construct a carbon aerogel battery materials facility, among other items.

We took several actions during 2021 to increase the financial resources available to support current operating requirements and capital ~~expenditures related~~expenditures. In June 2021, we sold 3,462,124 shares to ~~the expansion~~an affiliate of Koch Strategic Platforms in a private placement of our ~~manufacturing capacity which, while currently delayed,~~common stock and received net proceeds of $73.5 million after deducting fees and offering expenses of $1.5 million. During 2021, we ~~believe will be needed~~also sold shares of our common stock through our ATM offering program and received net proceeds of $19.4 million.

In February 2022, we sold 1,791,986 shares to ~~support this expected long term growth~~an affiliate of Koch Strategic Platforms in ~~demand.~~a private placement of our common stock and received net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million. In addition, in February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes. During the six months ended June 30, 2022, we sold 882,288 shares of our common stock through our ATM offering program and received net proceeds of $28.1 million, after deducting commissions and estimated offering expenses payable by us.

We believe that our ~~existing~~June 30, 2022 cash and cash equivalents balance of $162.2 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 theaerogel capacity ~~expansion with our assessment of future demand. In addition, we are managing capital expenditures and working capital balances to maintain the cash resources~~expansions required to support ~~current~~our evolving commercial opportunities and strategic business initiatives. We also intend to extend or replace our revolving credit facility with Silicon Valley Bank prior to its maturity. We believe that the consummation of equity financings could potentially result in an ownership change under Section 382 of the Internal Revenue Code. Such an ownership change would lead to the use of our net operating ~~requirements~~loss carryforwards being restricted. Our inability to use a substantial portion of our net operating loss carryforwards would result in a higher effective tax rate and adversely affect our ~~long term capacity plan.~~financial condition and results of operations.

Our principal sources of liquidity are currently our cash and cash equivalents and our revolving credit facility with Silicon Valley Bank. Cash and cash equivalents consist primarily of cash and money market accounts on deposit with banks. As of ~~September~~June 30, ~~2017,~~2022, we had ~~$7.3~~$162.2 million of cash and cash equivalents.

~~At September~~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 after deducting fees and offering expenses of $1.5 million.

In February 2022, we sold 1,791,986 shares to an affiliate of Koch Strategic Platforms in a private placement of our common stock and received net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million. In addition, in February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes.

On March 16, 2022, we entered into a sales agreement for an ATM offering program with Cowen and Company, LLC and Piper Sandler & Co., as our sales agents. During the six months ended June 30, ~~2017,~~2022, we sold 882,288 shares of our ~~only debt obligations were less than $0.1~~common stock through the ATM offering program and received net proceeds of $28.1million, after deducting commissions and estimated offering expenses payable by us. Subsequent to June 30, 2022, we sold 3,959,798 shares of our common stock and received net proceeds of $39.5 million ~~related~~through the ATM offering program.

We have a prepayment balance of $5.0 million associated with prepayments received pursuant to ~~capital lease obligations. At September 30, 2017,~~our supply agreement with BASF, which we ~~also had $2.4 million of outstanding letters of credit secured by the revolving credit facility with Silicon Valley Bank.~~expect to repay on or after January 1, 2023.

We have maintained ~~the~~our revolving credit facility, as amended from time to time, with Silicon Valley Bank since March 2011. At various dates in 2021, and subsequently on March 31, 2022 and April 28, 2022, the Company entered into amendments to the Loan Agreement to revise certain financial covenants, among other things. On June 23, 2022, the Loan Agreement was amended to extend the maturity date of the revolving credit facility to August 26, 2022. 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 June 30, 2022, we had no outstanding borrowings under our revolving credit facility ~~matures on January 28, 2018. We intend to extend or replace~~and $1.2 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 June 30, 2022, we were in compliance with all such covenants.

The amount available to us under the revolving credit facility ~~at September~~as of June 30, ~~2017~~2022 was ~~$11.3~~$18.0 million after giving effect to the ~~$2.4~~$1.2 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~~six months ended ~~September~~June 30, ~~2017,~~2022, we used ~~$5.0~~$32.9 million in net cash ~~for~~in operating activities, as compared to the use of ~~$1.4~~$0.5 million in net cash during the comparable period in ~~2016,~~2021, an increase in the use of cash of ~~$3.6~~$32.4 million. This increase in use of cash was the result of ~~the increase~~increases in net loss adjusted for non-cash items of ~~$11.7~~$25.9 million ~~offset, by an increase~~and in net cash ~~provided~~used by changes in operating assets and liabilities of ~~$8.1~~$6.3 million.

Net cash used in investing activities is ~~related to~~for capital expenditures for machinery and equipment principally to ~~maintain~~improve the throughput, efficiency and capacity of our ~~equipment~~East Providence facility and ~~facilities and to support our growth.~~engineering designs for the planned aerogel manufacturing facility in Bulloch County, Georgia. Net cash used in investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021 was ~~$5.4~~$52.4 million and ~~$10.0~~$3.9 million, respectively, for capital expenditures for the engineering and design and other pre-construction costs related to our planned manufacturing facility in Statesboro, Georgia, for machinery and equipment in support of the manufacture of new products and to improve the throughput and efficiency of our East Providence facility.respectively.

Net cash ~~used in~~provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 totaled ~~$0.4~~$170.8 million and consisted of ~~$6.0~~$99.8 million in net proceeds from the issuance of convertible debt, $49.9 million in net proceeds from the private placement of our common stock, $28.1 million in net proceeds from the ATM offering program, and less than $0.2 million in proceeds from employee stock

option exercises, offset, in part, by $4.7 million in cash used for payments made for repayments ~~under our line~~ of ~~credit, $0.4~~a prepayment liability and $2.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock ~~units~~units.

Net cash provided by financing activities for the six months ended June 30, 2021 totaled $90.2 million and ~~less than $0.1~~consisted of $73.6 million ~~for repayments of obligations under capital leases,~~in net proceeds from the Private Placement, $18.6 million in net proceeds from the ATM offering program, and $0.7 million in proceeds from employee stock option exercises, offset, in part, by ~~$6.0~~$2.7 million in ~~borrowing under our line of credit.~~

~~Net~~ cash used ~~in financing activities for the nine months ended September 30, 2016 totaled $0.3 million and consisted of $0.2 million~~ 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.~~

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

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

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

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

The SEC encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This Quarterly Report on Form 10-Q contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other important factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements about: the expected future growth of the market for our aerogel products and our continued gain in market share, in particular in the electric vehicle market, the energy infrastructure insulation market, the lithium-ion battery thermal barrier markets, and other markets we target; our beliefs in the appropriateness of our assumptions, the accuracy of our estimates regarding expenses, loss contingencies, future revenues, 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 construction and ~~related variations~~development of our second manufacturing facility in Bulloch County, Georgia, or ~~trends; beliefs about the general strength or health of Aspen Aerogels’ business;~~fabrication operations in Monterrey, Mexico, and to fund our planned strategic business initiatives; the performance of our aerogel blankets; ~~growth~~our expectation that we will be successful in ~~demand for~~obtaining, enforcing and defending our patents against competitors and that such patents are valid and enforceable; our belief that our products possess strong competitive advantages over traditional insulation materials, including the superior thermal performance and the thin, easy-to-use and durable blanket form of our products; our expectations regarding the investment to ~~support expansion of manufacturing capacity, our plans to construct~~open a second manufacturing facility in ~~Statesboro, Georgia;~~Georgia and the anticipated job creation as a result thereof; the anticipated capacity expansion as a result of the planned second manufacturing facility in Georgia and the expected commencement of production; 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; our expectations about the size and timing of awarded business in the electric vehicle market, future revenues and profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the electric vehicle market; beliefs about the performance of our thermal

barrier products in the battery systems of electric vehicles; beliefs about the potential commercial opportunity for Aspen’s thermal barrier products; ~~our joint development agreement with BASF,~~the current or future trends in the energy, energy infrastructure, chemical and refinery, LNG, sustainable building materials, electric vehicle thermal barrier, electric vehicle battery materials or other markets and the ~~potential for it to support~~impact of these trends on our business; our investments in the ~~development of new~~electric vehicle market and aerogel ~~products and technologies;~~technology platform; 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~~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, including in Mexico; 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. ~~At September~~As of June 30, ~~2017,~~2022, we had unrestricted cash and cash equivalents of ~~$7.3~~$162.2 million. These amounts were held for working capital and capital expansion purposes and were invested primarily in deposit ~~and~~accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts at a major financial institution in North America. Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material.

As of June 30, 2022, we had a convertible note outstanding with principal balance of $100.0 million. Our convertible note bears interest at the Secured Overnight Financing Rate (SOFR) plus 5.50% per annum if interest is paid in cash, or, if interest is paid in-kind as an increase in the principal amount of the outstanding note, at the SOFR plus 6.50% per annum. Under the terms of the investment, SOFR has a floor of 1% and a cap of 3%. Interest is paid semi-annually in arrears on June 30 and December 30. We, at our option, are permitted to settle each semi-annual interest payment in cash, in-kind, or any combination thereof.

As of ~~September~~June 30, ~~2017,~~2022, 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~~June 30, ~~2017,~~2022, we ~~also~~ had ~~$2.4~~$1.2 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 28, 2018.~~August 26, 2022. We intend to extend or replace the facility prior to its maturity.

~~Due to~~As of June 30, 2022, the ~~borrowing base limitations, the effective~~ amount available to us under the revolving credit facility ~~at September 30, 2017~~ was ~~$11.3~~$18.0 million after giving effect to the ~~$2.4~~$1.2 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 do not believe that inflation has had a material effect on our results of operations during the periods presented in this report. However, our business may be affected by inflation in the future.

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

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

As of ~~September~~June 30, ~~2017,~~2022, 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~~June 30, ~~2017,~~2022, 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~~six months ended ~~September~~June 30, ~~2017,~~2022, 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.

~~On May 5, 2016, we filed a complaint for patent infringement against Nano Tech Co., Ltd. (“Nano”)~~We are involved in various legal claims and ~~Guangdong Alison Hi-Tech., Ltd. (“Alison” and, together with Nano, the “Respondents”)~~proceedings in the ~~United States International Trade Commission (the “ITC” or~~normal course of operations. We believe the “Commission”). The ITC complaint alleges that these two China-based companies have engaged 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 Section 337 of the Tariff Act. In the ITC complaint, we are seeking exclusion orders directing United States Customs and Border Protection to stop the importationoutcome of these ~~infringing products. On June 2, 2016, the ITC instituted an investigation based~~matters will not have a material adverse effect 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~~consolidated financial position, results 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 provisionoperations or liquidity, except as a remedy to prevent the importation of infringing aerogel products into the United States. Respondents have petitioned the Commission for a review of the ALJ’s Initial Determination and have filed statements concerning whether an exclusion order serves the public interest. A final determination on the violation and remedy is expected from the full ITC commission by January 29, 2018, which final determination will determine whether or not a limited exclusion order will be issued. In the event that a limited exclusion order is issued, the order is subject to a 60-day presidential review period. Upon a request by a party, the final determination may be appealed to the United States Court of Appeals for the Federal Circuit. In addition to Respondents’ contention at the ITC that the asserted patents were invalid, Alison has also filed petitions with United States Patent and Trademark Office (“USPTO”) requesting Inter-Partes Review to cancel certain claimsdescribed 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 the validity of Aspen patents. Alison has also filed similar requests with the Chinese Patent Office (“SIPO”) seeking to invalidate twoPart 1, Item 3. “Legal Proceedings” of our ~~Chinese manufacturing process patents and two~~Annual Report on Form 10-K. Since the filing of our ~~Chinese product patents. After the conclusion of the oral proceedings and before any decision issued by the SIPO, Alison withdrew all of its requests for invalidation of our Chinese patents.~~

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

Due to their nature, it is difficult to predict the outcome or the costs involved in any litigation. Furthermore, the Respondents may have significant resources and interest to litigate and therefore, these litigation matters could be protracted and may ultimately involve significant legal expenses. In addition to the foregoing, weForm 10-K, there have been ~~and may be from time to time party to other~~no material changes in our legal proceedings ~~that arise in the ordinary course of business and to other patent enforcement actions to assert our patent rights.~~from those disclosed therein.

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

Legislation and policies adopted to address forced labor practices in China may adversely affect our business.

On December 21, 2021, the United States adopted the Uyghur Forced Labor Prevention Act (the “UFLPA”), which creates a rebuttable presumption that any goods, wares, articles, and merchandise mined, produced, or manufactured in whole or in part in the Xinjiang Uyghur Administrative Region of China (“XUAR”) or that are produced by certain entities are prohibited from importation into the United States and are not entitled to entry unless U.S. Customs and Border Protection (the “CBP”) determines, based on “clear and convincing evidence”, that the goods in question were not produced wholly or in part by forced labor, and submits a report to the ~~risk factors included~~U.S. Congress setting out its findings. Other countries and jurisdictions, including the European Union, may be considering similar measures. The UFLPA directs the Forced Labor Enforcement Task Force (the “FLETF”), chaired by the Department of Homeland Security, to develop a strategy to support the enforcement of the UFLPA. On June 17, 2022, the FLETF published a strategy that includes the listing of various entities associated with forced labor in XUAR. The import restrictions pursuant to the UFLPA came into effect on June 21, 2022. Pursuant to the UFLPA, the CBP may detain any shipments if it suspects the goods involved have a connection to XUAR and are subject to the UFLPA. It is unclear how broadly or aggressively CBP will pursue the detention of shipments in furtherance of this enforcement strategy. It is also unclear what evidence may be persuasive to the CBP to allow the release of detained shipments. While we are not presently aware of any direct impacts these restrictions will have on our ~~Annual Report on Form 10-K for~~supply chain, the ~~fiscal year ended December 31, 2016, except as follows.~~

WeUFLPA and its enforcement may ~~not be able to successfully develop~~materially and ~~introduce new products in a timely manner at competitive prices, which would limit~~adversely impact our ability to ~~grow~~import the goods, materials and ~~maintain~~products we rely on to manufacture our ~~competitive position~~products and operate our business, as it may adversely impact the availability and cost of such goods, materials and products. In addition, the UFPLA and similar potential legislation in other countries and jurisdictions may adversely impact our customers’ ability to source goods, materials and products necessary to meet expected their production volumes, as it may adversely impact the availability and cost of such goods, materials and products. The full potential impact to us of the UFLPA remains uncertain and could ~~adversely affect~~have an adverse effect on our ~~financial conditions,~~business and 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 actualoperations.

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~~June 30, ~~2017.~~2022.

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~~June 30, ~~2017~~2022 and December 31, ~~2016~~2021	1

	Consolidated Statements of Operations (unaudited) for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	2

	Consolidated Statements of ~~Cash Flows~~Stockholders’ Equity (unaudited) for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017~~2022 and ~~2016~~2021	3

	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2022 and 2021	4

	Notes to Consolidated Financial Statements (unaudited)	45

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1221

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2737

Item 4.	Controls and Procedures	2738

	PART II OTHER INFORMATION

Item 1.	Legal Proceedings	2940

Item 1A.	Risk Factors	2940

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3040

Item 3.	Defaults Upon Senior Securities	3041

Item 4.	Mine Safety Disclosures	3041

Item 5.	Other Information	3041

Item 6.	Exhibits	3042

SIGNATURES		3243

	June 30,			December 31,			Useful
	2022			2021			life
	(In thousands)
Construction in progress	$	75,488		$	13,456			—
Buildings		24,540			24,016		30 years
Machinery and equipment		138,234			130,529		3-10 years
Computer equipment and software		9,785			9,457		3 years
Total		248,047			177,458
Accumulated depreciation		(125,841	)		(121,680	)
Property, plant and equipment, net	$	122,206		$	55,778

	June 30,
	2022

Convertible note, principal	$	100,000
Accrued interest		2,893
Debt issuance costs, net of accumulated amortization		(172	)
Convertible note	$	102,721

Year	Operating Leases
	(In thousands)
2022 (excluding the six months ended June 30, 2022)	$	1,944
2023		3,480
2024		2,810
2025		2,579
2026		2,208
Thereafter		13,942
Total lease payments		26,963
Less imputed interest		(7,219	)
Total lease liabilities	$	19,744

	Three and Six Months Ended
	June 30,
	2022		2021
Common stock options		3,979,424		3,834,009
Restricted common stock units		255,139		347,633
Restricted common stock awards		852,940		476,550
Convertible note, if converted		2,945,133		—
Total		8,032,636		4,658,192

	Nine Months Ended September 30,
	2017					2016					Change
			Percentage of					Percentage of
	Amount		Revenue			Amount		Revenue			Amount			Percentage
	($ in thousands)
Revenue:
Product	$	73,700		98	%	$	88,286		98	%	$	(14,586	)		(17	)%
Research services		1,569		2	%		1,813		2	%		(244	)		(13	)%
Total Revenue	$	75,269		100	%	$	90,099		100	%	$	(14,830	)		(16	)%

10.1		Fifth Amendment to the Second Amended and Restated Loan and Security Agreement, dated ~~September 27, 2017,~~as of June 23, 2022, by and between the ~~Company~~Registrant and Silicon Valley Bank.

10.2		Form of Performance-Based Restricted Stock Agreement for certain employees +

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


	ASPEN AEROGELS, INC.

Date: ~~November 2, 2017~~August 4, 2022	By:	/s/ Donald R. Young
		Donald R. Young
		President and Chief Executive Officer (principal executive officer)

Date: ~~November 2, 2017~~August 4, 2022	By:	/s/ ~~John F. Fairbanks~~Ricardo C. Rodriguez
		~~John F. Fairbanks~~Ricardo C. Rodriguez
		Senior Vice President, Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)