Company Quick10K Filing
Aspen Aerogels
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 24 $153
10-Q 2019-11-01 Quarter: 2019-09-30
10-Q 2019-08-02 Quarter: 2019-06-30
10-Q 2019-05-03 Quarter: 2019-03-31
10-K 2019-03-08 Annual: 2018-12-31
10-Q 2018-11-07 Quarter: 2018-09-30
10-Q 2018-08-03 Quarter: 2018-06-30
10-Q 2018-05-04 Quarter: 2018-03-31
10-K 2018-03-01 Annual: 2017-12-31
10-Q 2017-11-03 Quarter: 2017-09-30
10-Q 2017-08-04 Quarter: 2017-06-30
10-Q 2017-05-05 Quarter: 2017-03-31
10-K 2017-03-02 Annual: 2016-12-31
10-Q 2016-11-03 Quarter: 2016-09-30
10-Q 2016-08-05 Quarter: 2016-06-30
10-Q 2016-05-06 Quarter: 2016-03-31
10-K 2016-03-04 Annual: 2015-12-31
10-Q 2015-11-06 Quarter: 2015-09-30
10-Q 2015-08-07 Quarter: 2015-06-30
10-Q 2015-05-08 Quarter: 2015-03-31
10-K 2015-03-13 Annual: 2014-12-31
10-Q 2014-11-07 Quarter: 2014-09-23
10-Q 2014-08-08 Quarter: 2014-06-30
8-K 2020-02-20 Earnings, Regulation FD, Exhibits
8-K 2020-02-13 Enter Agreement, Other Events, Exhibits
8-K 2020-01-27 Earnings, Regulation FD, Exhibits
8-K 2019-10-31 Earnings, Regulation FD, Exhibits
8-K 2019-10-30 Officers
8-K 2019-09-11 Officers
8-K 2019-08-28 Regulation FD, Exhibits
8-K 2019-08-01 Earnings, Regulation FD, Exhibits
8-K 2019-06-19 Shareholder Vote
8-K 2019-05-02 Earnings, Regulation FD, Exhibits
8-K 2019-04-24 Regulation FD, Exhibits
8-K 2019-03-13 Regulation FD, Exhibits
8-K 2019-03-04 Enter Agreement
8-K 2019-02-21 Earnings, Regulation FD, Exhibits
8-K 2019-01-14 Enter Agreement, Off-BS Arrangement
8-K 2018-12-21 Officers, Exhibits
8-K 2018-11-30 Enter Agreement
8-K 2018-11-01 Earnings, Regulation FD, Exhibits
8-K 2018-08-02 Earnings, Regulation FD, Exhibits
8-K 2018-06-20 Shareholder Vote
8-K 2018-05-03 Earnings, Regulation FD, Exhibits
8-K 2018-04-25 Enter Agreement
8-K 2018-02-16 Enter Agreement, Earnings, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2018-02-05 Regulation FD, Exhibits
8-K 2018-01-25 Enter Agreement
8-K 2018-01-23 Regulation FD, Exhibits
ASPN 2019-09-30
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 aspn-ex311_6.htm
EX-31.2 aspn-ex312_8.htm
EX-32 aspn-ex32_7.htm

Aspen Aerogels Earnings 2019-09-30

ASPN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
BLDR 1,837 3,250 2,546 7,470 1,975 228 391 3,276 26% 8.4 7%
BMCH 1,411 1,811 892 3,622 932 120 248 1,601 26% 6.4 7%
GMS 1,189 2,274 1,612 3,185 1,033 72 306 2,340 32% 7.7 3%
BCC 996 1,733 1,028 4,676 0 -19 167 1,234 0% 7.4 -1%
FBM 817 1,450 1,067 2,133 634 2 131 1,383 30% 10.6 0%
LL 325 578 437 1,094 393 -59 -40 313 36% -7.8 -10%
ASPN 153 102 41 117 14 -32 -22 149 12% -6.9 -31%
HBP 61 334 285 834 164 -20 5 219 20% 45.6 -6%
JCTCF 36 22 2 34 10 2 2 33 31% 14.8 10%
SGBX 4 8 2 7 1 -4 -4 4 17% -1.1 -51%

10-Q 1 aspn-10q_20190930.htm 10-Q aspn-10q_20190930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2019

OR

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

For the transition period from              to             

Commission file number: 001-36481

 

ASPEN AEROGELS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

04-3559972

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

30 Forbes Road, Building B

Northborough, Massachusetts

 

01532

(Address of principal executive offices)

 

(Zip Code)

 

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

 

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

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock

ASPN

The New York Stock Exchange

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        Yes      No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

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

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

As of October 30, 2019, the registrant had 24,300,264 shares of common stock outstanding.

 

 


ASPEN AEROGELS, INC.

INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

PART I FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (unaudited) as of September 30, 2019 and December 31, 2018

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2019 and 2018

 

2

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2019 and 2018

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2019 and 2018

 

4

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

5

 

 

 

 

 

Item 2.

 

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

 

16

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

30

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

30

 

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

32

 

 

 

 

 

Item 1A.

 

Risk Factors

 

33

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

33

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

33

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

33

 

 

 

 

 

Item 5.

 

Other Information

 

33

 

 

 

 

 

Item 6.

 

Exhibits

 

34

 

 

 

 

 

SIGNATURES

 

35

 

Trademarks, Trade Names and Service Marks

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

 

 

 


 

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

ASPEN AEROGELS, INC.

Consolidated Balance Sheets

(Unaudited)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

 

 

(In thousands, except

share and per share data)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

1,195

 

 

$

3,327

 

Accounts receivable, net of allowances of $122 and $2,877

 

 

24,362

 

 

 

25,565

 

Inventories

 

 

13,459

 

 

 

7,318

 

Prepaid expenses and other current assets

 

 

1,512

 

 

 

1,041

 

Total current assets

 

 

40,528

 

 

 

37,251

 

Property, plant and equipment, net

 

 

55,163

 

 

 

61,699

 

Operating lease right-of-use assets

 

 

4,277

 

 

 

 

Other long-term assets

 

 

86

 

 

 

73

 

Total assets

 

$

100,054

 

 

$

99,023

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

9,097

 

 

$

12,392

 

Accrued expenses

 

 

4,539

 

 

 

3,864

 

Revolving line of credit

 

 

4,863

 

 

 

4,181

 

Deferred revenue

 

 

6,149

 

 

 

2,629

 

Operating lease liabilities

 

 

1,051

 

 

 

 

Total current liabilities

 

 

25,699

 

 

 

23,066

 

Deferred rent

 

 

 

 

 

1,218

 

Prepayment liability

 

 

9,820

 

 

 

4,485

 

Deferred revenue long-term

 

 

915

 

 

 

 

Operating lease liabilities long-term

 

 

4,554

 

 

 

 

Total liabilities

 

 

40,988

 

 

 

28,769

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and

   outstanding at September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock, $0.00001 par value; 125,000,000 shares authorized, 24,300,264 and

   23,973,517 shares issued and outstanding at September 30, 2019 and December 31,

   2018, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

544,260

 

 

 

541,839

 

Accumulated deficit

 

 

(485,194

)

 

 

(471,585

)

Total stockholders’ equity

 

 

59,066

 

 

 

70,254

 

Total liabilities and stockholders’ equity

 

$

100,054

 

 

$

99,023

 

 

See accompanying notes to unaudited consolidated financial statements.

1


 

ASPEN AEROGELS, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands, except

share and per share data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

35,046

 

 

$

23,342

 

 

$

90,739

 

 

$

66,978

 

Research services

 

 

379

 

 

 

595

 

 

 

2,131

 

 

 

1,704

 

Total revenue

 

 

35,425

 

 

 

23,937

 

 

 

92,870

 

 

 

68,682

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

27,510

 

 

 

22,154

 

 

 

76,703

 

 

 

60,853

 

Research services

 

 

173

 

 

 

254

 

 

 

1,193

 

 

 

746

 

Gross profit

 

 

7,742

 

 

 

1,529

 

 

 

14,974

 

 

 

7,083

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,046

 

 

 

1,384

 

 

 

5,842

 

 

 

4,627

 

Sales and marketing

 

 

3,992

 

 

 

3,061

 

 

 

11,012

 

 

 

10,281

 

General and administrative

 

 

3,857

 

 

 

3,453

 

 

 

11,449

 

 

 

12,149

 

Total operating expenses

 

 

9,895

 

 

 

7,898

 

 

 

28,303

 

 

 

27,057

 

Loss from operations

 

 

(2,153

)

 

 

(6,369

)

 

 

(13,329

)

 

 

(19,974

)

Interest expense, net

 

 

(136

)

 

 

(163

)

 

 

(280

)

 

 

(358

)

Total interest expense, net

 

 

(136

)

 

 

(163

)

 

 

(280

)

 

 

(358

)

Net loss

 

$

(2,289

)

 

$

(6,532

)

 

$

(13,609

)

 

$

(20,332

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.09

)

 

$

(0.27

)

 

$

(0.57

)

 

$

(0.86

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

24,171,811

 

 

 

23,808,703

 

 

 

24,074,565

 

 

 

23,707,245

 

 

See accompanying notes to unaudited consolidated financial statements.

2


 

ASPEN AEROGELS, INC.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

Preferred Stock

$0.00001 Par

Value

 

 

Common Stock

$0.00001 Par

Value

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

Stockholders’

Equity

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

 

 

$

 

 

 

23,973,517

 

 

$

 

 

$

541,839

 

 

$

(471,585

)

 

$

70,254

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,002

)

 

 

(6,002

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

878

 

 

 

 

 

 

878

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

273,290

 

 

 

 

 

 

(454

)

 

 

 

 

 

(454

)

Balance at March 31, 2019

 

 

 

 

 

 

 

 

24,246,807

 

 

 

 

 

 

542,263

 

 

 

(477,587

)

 

 

64,676

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,318

)

 

 

(5,318

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

996

 

 

 

 

 

 

996

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

50,328

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

3,129

 

 

 

 

 

 

(10

)

 

 

 

 

 

(10

)

Balance at June 30, 2019

 

 

 

 

 

 

 

 

24,300,264

 

 

 

 

 

 

543,249

 

 

 

(482,905

)

 

 

60,344

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,289

)

 

 

(2,289

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,011

 

 

 

 

 

 

1,011

 

Balance at September 30, 2019

 

 

 

 

$

 

 

 

24,300,264

 

 

$

 

 

$

544,260

 

 

$

(485,194

)

 

$

59,066

 

 

 

 

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, 2017

 

 

 

 

$

 

 

 

23,643,189

 

 

$

 

 

$

538,088

 

 

$

(437,145

)

 

$

100,943

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,842

)

 

 

(6,842

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,136

 

 

 

 

 

 

1,136

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

239,064

 

 

 

 

 

 

(504

)

 

 

 

 

 

(504

)

Balance at March 31, 2018

 

 

 

 

 

 

 

 

23,882,253

 

 

 

 

 

 

538,720

 

 

 

(443,987

)

 

 

94,733

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,958

)

 

 

(6,958

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,150

 

 

 

 

 

 

1,150

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

58,062

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2018

 

 

 

 

 

 

 

 

23,940,315

 

 

 

 

 

 

539,870

 

 

 

(450,945

)

 

 

88,925

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,532

)

 

 

(6,532

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,128

 

 

 

 

 

 

1,128

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

21,046

 

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

Balance at September 30, 2018

 

 

 

 

$

 

 

 

23,961,361

 

 

$

 

 

$

540,970

 

 

$

(457,477

)

 

$

83,493

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3


 

ASPEN AEROGELS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(13,609

)

 

$

(20,332

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

7,651

 

 

 

8,259

 

Stock-compensation expense

 

 

2,885

 

 

 

3,414

 

Operating lease right-of-use assets

 

 

702

 

 

 

 

Lease incentives

 

 

 

 

 

(91

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

1,203

 

 

 

5,303

 

Inventories

 

 

(6,141

)

 

 

(994

)

Prepaid expenses and other assets

 

 

(484

)

 

 

(111

)

Accounts payable

 

 

(2,865

)

 

 

(3,310

)

Accrued expenses

 

 

826

 

 

 

(2,305

)

Deferred revenue

 

 

4,870

 

 

 

1,460

 

Operating lease liabilities

 

 

(743

)

 

 

 

Other liabilities

 

 

(56

)

 

 

(33

)

Net cash used in operating activities

 

 

(5,761

)

 

 

(8,740

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,589

)

 

 

(2,651

)

Net cash used in investing activities

 

 

(1,589

)

 

 

(2,651

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings under line of credit, net

 

 

682

 

 

 

1,406

 

Prepayment proceeds under customer supply agreement

 

 

5,000

 

 

 

5,000

 

Payments made for employee restricted stock tax withholdings

 

 

(464

)

 

 

(532

)

Net cash provided by financing activities

 

 

5,218

 

 

 

5,874

 

Net decrease in cash

 

 

(2,132

)

 

 

(5,517

)

Cash and cash equivalents at beginning of period

 

 

3,327

 

 

 

10,694

 

Cash and cash equivalents at end of period

 

$

1,195

 

 

$

5,177

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

333

 

 

$

237

 

Income taxes paid

 

$

 

 

$

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

Initial recognition of operating lease liabilities related to right-of-use assets

 

$

5,995

 

 

$

 

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

 

$

353

 

 

$

 

Changes in accrued capital expenditures

 

$

(430

)

 

$

541

 

 

See accompanying notes to unaudited consolidated financial statements.

4


 

ASPEN AEROGELS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Description of Business and Basis of Presentation

Nature of Business

Aspen Aerogels, Inc. (the Company) is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in the energy infrastructure and building materials markets. The Company also conducts research and development related to aerogel technology supported by funding from several agencies of the U.S. government and other institutions in the form of research and development contracts.

The Company maintains its corporate offices in Northborough, Massachusetts. The Company has three wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC, Aspen Aerogels Germany, GmbH and Aspen Aerogels Georgia, LLC.

Liquidity

During the nine months ended September 30, 2019, the Company incurred a net loss of $13.6 million and used $5.8 million of cash in operations. The Company had a cash and cash equivalents balance of $1.2 million and outstanding borrowing under its revolving line of credit of $4.9 million as of September 30, 2019 (see note 7). After giving effect to outstanding borrowings and letters of credit, the additional amount available to the Company at September 30, 2019 under the revolving line of credit was $7.6 million. The existing revolving line of credit matures on April 28, 2020.

The Company is making investments to increase capacity at its existing manufacturing facility in East Providence, Rhode Island and to develop new technologies and business opportunities. 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 fund a portion of these investments. The Company plans to manage other capital expenditures and working capital balances to maintain the cash resources required to support current operating requirements.

The Company will need to supplement its cash balance and amounts available under its revolving line of credit with anticipated cash flows from operations, debt financings, customer prepayments, technology licensing agreements, or equity financings to provide the capital required to complete the expansion of the existing manufacturing facility and to fund its strategic business initiatives.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2018 (the Annual Report), filed with the Securities and Exchange Commission on March 8, 2019.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of September 30, 2019 and the results of its operations and stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 and the cash flows for the nine month periods then ended. The Company has evaluated events through the date of this filing.

The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or any other period.

5


 

(2) Significant Accounting Policies

Principles of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

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

Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During the year ended December 31, 2018, the Company recorded a charge for a customer uncollectible accounts receivable of $2.8 million. As of September 30, 2019, the Company determined that collection of the remaining unpaid accounts receivable from this customer of $2.6 million is unlikely and recorded a write-off of the accounts receivable and the corresponding allowance for doubtful accounts.

Revenue Recognition

On January 1, 2018, the Company adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606). See note 3 for further details.

Leases

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). See note 8 for further details.

Stock-based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the award. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards, which requires a number of complex and subjective assumptions including 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 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 simulation model based upon the nature of the conditions, the expected volatility of the underlying security, and other relevant factors.

6


 

During the nine months ended September 30, 2019, the Company granted 50,328 shares of restricted common stock with a grant date fair value of $0.3 million and non-qualified options (NSOs) to purchase 71,700 shares of common stock with a grant date fair value of $0.2 million vesting over a period of one year to its non-employee directors under the 2014 Employee, Director, and Consultant Equity Incentive Plan (the 2014 Equity Plan).

During the nine months ended September 30, 2019, the Company granted 654,582 restricted common stock units (RSUs) with a grant date fair value of $2.4 million and NSOs to purchase 632,183 shares of common stock with a grant date fair value of $1.1 million to employees under the 2014 Equity Plan. The RSUs and NSOs granted to employees will vest over a three-year period.

During the nine months ended September 30, 2019, the Company also granted NSOs to purchase 20,000 shares of common stock under the 2014 Equity Plan to an outside consultant which will vest on March 26, 2020 with a grant date fair value of less than $0.1 million.

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Cost of product revenue

 

$

125

 

 

$

158

 

 

$

365

 

 

$

474

 

Research and development expenses

 

 

130

 

 

 

124

 

 

 

374

 

 

 

355

 

Sales and marketing expenses

 

 

168

 

 

 

206

 

 

 

461

 

 

 

647

 

General and administrative expenses

 

 

588

 

 

 

640

 

 

 

1,685

 

 

 

1,938

 

Total stock-based compensation

 

$

1,011

 

 

$

1,128

 

 

$

2,885

 

 

$

3,414

 

 

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 479,470 shares to 7,488,930 shares effective January 1, 2019.

As of September 30, 2019, 4,703,199 shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the 2014 Equity Plan. In addition, as of September 30, 2019, 86,074 shares of common stock were reserved for issuance upon the exercise of outstanding stock options granted under the Company’s 2001 Equity Incentive Plan, as amended (the 2001 Equity Plan). Any cancellations or forfeitures of the options outstanding under the 2001 Equity Plan will result in the shares reserved for issuance upon exercise of such options becoming available for grant under the 2014 Equity Plan. As of September 30, 2019, the Company has either issued or reserved in connection with statutory tax withholdings a total of 1,782,795 shares under the 2014 Equity Plan. As of September 30, 2019, there were 916,862 shares of common stock available for future grant under the 2014 Equity Plan.

Net Loss per Share

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

Segments

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

7


 

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

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

15,191

 

 

$

11,485

 

 

$

41,415

 

 

$

30,677

 

International

 

 

20,234

 

 

 

12,452

 

 

 

51,455

 

 

 

38,005

 

Total

 

$

35,425

 

 

$

23,937

 

 

$

92,870

 

 

$

68,682

 

Warranty

The Company provides warranties for its products and records the estimated cost within cost of revenue in the period that the related revenue is recorded. The Company’s standard warranty period 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. For an initial shipment of product for use in a system with new technical demands or new 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.

The Company did not record any warranty expense during the nine months ended September 30, 2019 and 2018. As of September 30, 2019, the Company had satisfied all warranty claims.

Recently Issued Accounting Standards

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.

Standards Implemented Since December 31, 2018

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). FASB ASU 2016-02 modified the accounting for leases and requires that all leases be recorded on the consolidated balance sheets as assets and liabilities. This standard was effective for fiscal years beginning after December 15, 2018. The Company adopted this standard on January 1, 2019 using the modified retrospective transition approach with the effective date as the date of initial application. As a result, the Company did not update financial information or provide the disclosures otherwise required under the new standard for dates and periods before January 1, 2019. To measure its lease liabilities, the Company used its incremental borrowing rate as of the date of adoption or the rate implicit in the lease, if available. The discount rate was applied to the remaining lease term and remaining payments at the date of adoption. The Company also elected the package of practical expedients under the new standard, which permitted the Company to not reassess prior conclusions about lease identification, lease classification, and initial direct costs. The most significant effects of this new standard on the consolidated financial statements related to the recognition of new right-of-use (ROU) assets and lease liabilities on the consolidated balance sheets and the provision of significant new disclosures about leasing activities. Upon adoption on January 1, 2019, the Company recognized operating lease liabilities of approximately $6.0 million with corresponding ROU assets of approximately $4.6 million. Additionally, the Company derecognized deferred rent liabilities of $1.4 million. This standard has not materially impacted the Company’s consolidated net loss or net cash used in operations. The Company also 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. In addition, the Company elected the practical expedient to not separate non-lease components from the associated lease components for all of its equipment leases.

Standards to be Implemented

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

8


 

(3) Revenue from Contracts with Customers

On January 1, 2018, the Company Adopted Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for all contracts not completed as of the date of adoption. The adoption of ASC 606 did not have a material impact on the allocation and timing of the recognition of previously reported revenues from the sale of products, subsea projects or the performance of research services. In addition, the Company determined that there are no incremental contract costs or contract fulfillment costs associated with the adoption of ASC 606. The adoption of ASC 606 represented a change in accounting principle that more closely aligns revenue recognition with the delivery of the Company's product or performance of research services and will provide financial statement readers with enhanced disclosures.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the separate performance obligations in the contract; and (v) recognition of the revenue associated with performance obligations as they are satisfied. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone-selling prices of the promised products or services underlying each performance obligation. The Company determines standalone-selling prices based on the price at which the performance obligation is sold separately. If the standalone-selling price is not observable through past transactions, the Company estimates the standalone-selling price taking into account 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, 2018 and did not enter into any contracts during the nine months ended September 30, 2019 that contained a significant financing component.

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

Shipping and Handling Costs

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

Product Revenue

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

The Company also enters into rebate agreements with certain customers. These agreements may be considered an additional performance obligation of the Company or variable consideration within a contract. Rebates are recorded as a reduction of revenue in the period the related product 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.

9


 

The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized. The Company currently estimates product return liabilities using historical rates of return, current quarter credit sales, and specific items of exposure on a contract-by-contract basis. Sales return reserves were approximately $0.1 million at both September 30, 2019 and December 31, 2018.

Subsea Projects

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/cost-to-cost method. The timing of revenue recognition is assessed on a contract-by-contract basis. During the nine months ended September 30, 2019 and 2018, the Company recognized revenue of $14.4 million and $2.4 million, respectively, in connection with subsea projects.

Research Services

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

Disaggregation of Revenue

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

 

 

 

Three Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total