10-Q 1 aspn-10q_20220331.htm 10-Q aspn-10q_20220331.htm
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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 March 31, 2022

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: (508691-1111

 

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

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.00001 per share

ASPN

The New York Stock Exchange

 

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

Indicate by check mark whether the registrant has submitted electronically 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 May 9, 2022, the registrant had 36,080,990 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 March 31, 2022 and December 31, 2021

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2022 and 2021

 

2

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended March 31, 2022 and 2021

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021

 

4

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

5

 

 

 

 

 

Item 2.

 

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

 

19

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

33

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

34

 

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A.

 

Risk Factors

 

36

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

37

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

37

 

 

 

 

 

Item 5.

 

Other Information

 

37

 

 

 

 

 

Item 6.

 

Exhibits

 

38

 

 

 

 

 

SIGNATURES

 

39

 

Trademarks, Trade Names and Service Marks

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

 

 

 


 

 

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

ASPEN AEROGELS, INC.

Consolidated Balance Sheets

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

(In thousands, except

share and per share data)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

205,177

 

 

$

76,564

 

Accounts receivable, net of allowances of $139 and $150

 

 

24,533

 

 

 

20,426

 

Inventories

 

 

15,505

 

 

 

11,987

 

Prepaid expenses and other current assets

 

 

2,835

 

 

 

3,173

 

Total current assets

 

 

248,050

 

 

 

112,150

 

Property, plant and equipment, net

 

 

77,720

 

 

 

55,778

 

Operating lease right-of-use assets

 

 

12,996

 

 

 

13,531

 

Other long-term assets

 

 

2,240

 

 

 

1,495

 

Total assets

 

$

341,006

 

 

$

182,954

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

30,069

 

 

$

17,440

 

Accrued expenses

 

 

7,737

 

 

 

10,819

 

Current portion of prepayment liability

 

 

5,000

 

 

 

4,728

 

Deferred revenue

 

 

1,201

 

 

 

1,321

 

Operating lease liabilities

 

 

2,194

 

 

 

2,247

 

Total current liabilities

 

 

46,201

 

 

 

36,555

 

Prepayment liability

 

 

 

 

 

5,000

 

Convertible note - related party

 

 

100,638

 

 

 

 

Operating lease liabilities long-term

 

 

12,556

 

 

 

12,991

 

Total liabilities

 

 

159,395

 

 

 

54,546

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

   outstanding at March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.00001 par value; 125,000,000 shares authorized, 35,918,281 and

   33,218,115 shares issued and outstanding at March 31, 2022 and December 31,

   2021, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

746,148

 

 

 

673,461

 

Accumulated deficit

 

 

(564,537

)

 

 

(545,053

)

Total stockholders’ equity

 

 

181,611

 

 

 

128,408

 

Total liabilities and stockholders’ equity

 

$

341,006

 

 

$

182,954

 

 

See accompanying notes to unaudited consolidated financial statements.

1


 

ASPEN AEROGELS, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

(In thousands, except

share and per share data)

 

Revenue:

 

 

 

 

 

 

 

 

Product

 

$

38,330

 

 

$

28,056

 

Research services

 

 

77

 

 

 

41

 

Total revenue

 

 

38,407

 

 

 

28,097

 

Cost of revenue:

 

 

 

 

 

 

 

 

Product

 

 

40,171

 

 

 

24,129

 

Research services

 

 

24

 

 

 

12

 

Gross (loss) profit

 

 

(1,788

)

 

 

3,956

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

3,592

 

 

 

2,442

 

Sales and marketing

 

 

6,018

 

 

 

3,301

 

General and administrative

 

 

7,226

 

 

 

4,388

 

Total operating expenses

 

 

16,836

 

 

 

10,131

 

Loss from operations

 

 

(18,624

)

 

 

(6,175

)

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense, convertible note - related party

 

 

(819

)

 

 

 

Interest expense, net

 

 

(41

)

 

 

(75

)

Total other income (expense), net

 

 

(860

)

 

 

(75

)

Net loss

 

$

(19,484

)

 

$

(6,250

)

Net loss per share:

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.59

)

 

$

(0.22

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

32,940,040

 

 

 

27,983,470

 

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, 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

 

 

 

 

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

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3


 

 

ASPEN AEROGELS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(19,484

)

 

$

(6,250

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

2,128

 

 

 

2,638

 

Accretion of interest on convertible note - related party

 

 

819

 

 

 

 

Amortization of convertible note issuance costs

 

 

4

 

 

 

3

 

Provision for bad debt

 

 

(5

)

 

 

(95

)

Stock-compensation expense

 

 

1,828

 

 

 

976

 

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

 

 

570

 

 

 

257

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(4,102

)

 

 

(4,875

)

Inventories

 

 

(3,518

)

 

 

2,252

 

Prepaid expenses and other assets

 

 

(374

)

 

 

630

 

Accounts payable

 

 

3,063

 

 

 

1,432

 

Accrued expenses

 

 

(3,082

)

 

 

1,422

 

Deferred revenue

 

 

(120

)

 

 

31

 

Operating lease liabilities

 

 

(556

)

 

 

(293

)

Net cash used in operating activities

 

 

(22,829

)

 

 

(1,872

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(14,504

)

 

 

(1,470

)

Net cash used in investing activities

 

 

(14,504

)

 

 

(1,470

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of convertible note related party

 

 

100,000

 

 

 

 

Issuance costs from convertible note

 

 

(185

)

 

 

 

Proceeds from employee stock option exercises

 

 

38

 

 

 

463

 

Payments made for employee restricted stock tax withholdings

 

 

(2,315

)

 

 

(2,613

)

Proceeds from at-the-market offering, net of commissions of $729 and $193

 

 

23,590

 

 

 

6,232

 

Fees and issuance costs from at-the-market offering

 

 

(318

)

 

 

(17

)

Proceeds from private placement of common stock

 

 

50,000

 

 

 

 

Fees and issuance costs from private placement of common stock

 

 

(136

)

 

 

 

Repayment of prepayment liability

 

 

(4,728

)

 

 

 

Net cash provided by financing activities

 

 

165,946

 

 

 

4,065

 

Net increase in cash

 

 

128,613

 

 

 

723

 

Cash and cash equivalents at beginning of period

 

 

76,564

 

 

 

16,496

 

Cash and cash equivalents at end of period

 

$

205,177

 

 

$

17,219

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

52

 

 

$

65

 

Income taxes paid

 

$

 

 

$

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

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

 

$

68

 

 

$

888

 

Changes in accrued capital expenditures

 

$

9,566

 

 

$

176

 

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

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

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 three months ended March 31, 2022, the Company incurred a net loss of $19.5 million, used $22.8 million of cash in operations, used $14.5 million of cash for capital expenditures, received net proceeds of $23.3 million through an at-the-market (ATM) offering of the Company’s common stock from the sale of 737,288 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, 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 $205.2 million, a $5.0 million current prepayment liability (see note 10), and no outstanding borrowings under its revolving line of credit (see note 7). After giving effect to $1.3 million of outstanding letters of credit, the amount available to the Company at March 31, 2022 under the revolving line of credit was $15.8 million. The revolving line of credit matures on June 27, 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.

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

5


 

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, 2021 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 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 March 31, 2022 and the results of its operations and stockholders’ equity for the three months ended March 31, 2022 and 2021 and the cash flows for the three-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 months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 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.

(2) Significant Accounting Policies

Principles of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts 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.

Concentration of Credit Risk

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of accounts receivable. The Company’s customers are primarily insulation distributors, insulation contractors, insulation fabricators and select energy and automotive end-users located throughout the world. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for doubtful accounts based on its assessment of the collectability of accounts receivable. The Company reviews the allowance for doubtful accounts quarterly. During the three months ended March 31, 2022, the Company recorded a reduction for estimated customer uncollectible accounts receivable of less than $0.1 million. During the three months ended March 31, 2021, the Company recorded a reduction for estimated customer uncollectible accounts receivable of $0.1 million and had collections of $0.1 million of previously reserved customer accounts receivables.

6


 

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606, Revenue from Contracts with Customers (ASC 606). See note 3 for further details.

Leases

The Company accounts for its leases in accordance with Accounting Standards Update (ASU) 2016-02 (Topic 842). See note 11 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 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 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.

During the three months ended March 31, 2022, the Company granted 151,478 restricted common stock units (RSUs) with a grant date fair value of $4.0 million and non-qualified stock options (NSOs) to purchase 396,570 shares of common stock with a grant date fair value of $6.0 million to 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.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

(In thousands)

 

Cost of product revenue

 

$

156

 

 

$

112

 

Research and development expenses

 

 

224

 

 

 

189

 

Sales and marketing expenses

 

 

324

 

 

 

168

 

General and administrative expenses

 

 

1,124

 

 

 

507

 

Total stock-based compensation

 

$

1,828

 

 

$

976

 

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 664,362 shares to 9,195,775 shares effective January 1, 2022.

As of March 31, 2022, 4,206,286 shares of common stock were reserved for issuance upon the exercise or vesting of outstanding stock-based awards granted under the 2014 Equity 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 March 31, 2022, the Company has either reserved in connection with statutory tax withholdings or issued a total of 4,164,039 shares under the 2014 Equity Plan. As of March 31, 2022, there were 825,450 shares of common stock available for future grant under the 2014 Equity Plan.

Net Loss per Share

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

7


 

Warranty

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

The Company’s standard warranty period for energy industrial products extends to one year from the date of shipment. This standard warranty provides that the Company’s products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product. The Company’s 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 three months ended March 31, 2022. The Company did not record any warranty expense during the three months ended March 31, 2021. 

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, 2021

During the three months ended March 31, 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.

Standards to be Implemented

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

(3) Revenue from Contracts with Customers

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the contract with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the separate performance obligations in the contract; and (v) recognition of the revenue associated with performance obligations as they are satisfied. The Company applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price based on the estimated relative standalone-selling prices of the promised products or services underlying each performance obligation. The

8


 

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 three months ended March 31, 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

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.

Energy Industrial

The Company generally enters into contracts containing one 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 March 31, 2022 and December 31, 2021.

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 method. The timing of revenue recognition is assessed on a contract-by-contract basis. During the three months ended March 31, 2022 and 2021, the Company recognized revenue of $0.6 million and $0.4 million, respectively, from subsea projects.

Thermal Barriers

The Company supplies fabricated, multi-part thermal barriers for use in battery packs in the electric vehicle market. These thermal barriers are customized to meet customer specifications. 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

9


 

recognition is assessed on a contract-by-contract basis. During the three months ended March 31, 2022 and 2021, the Company recognized revenue of $7.6 million and $0.1 million, respectively, from thermal barrier contracts.

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 certain licenses to any resulting intellectual property. The Company records revenue using the percentage-of-completion method in two ways: (1) for firm-fixed-price contracts, the Company accrues that portion of the total contract price that is allocable on the basis of the Company’s estimates of costs incurred to date to total contract costs; and (2) for cost-plus-fixed-fee contracts, the Company records revenue that is equal to total payroll cost incurred times a stated factor plus reimbursable expenses, to a stated upper limit. The primary cost under the Company’s research service contracts is the labor 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 March 31,

 

 

 

2022

 

 

2021

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total

 

 

 

(In thousands)

 

Geographical region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

 

 

$

7,324

 

 

$

7,324

 

 

$

 

 

$

5,588

 

 

$

5,588

 

Canada

 

 

 

 

 

860

 

 

 

860

 

 

 

 

 

 

964

 

 

 

964

 

Europe

 

 

 

 

 

3,911

 

 

 

3,911

 

 

 

 

 

 

7,246

 

 

 

7,246

 

Latin America

 

 

 

 

 

1,606

 

 

 

1,606

 

 

 

 

 

 

1,544

 

 

 

1,544

 

U.S.

 

 

24,706

 

 

 

 

 

 

24,706

 

 

 

12,755

 

 

 

 

 

 

12,755

 

Total revenue

 

$

24,706

 

 

$

13,701

 

 

$

38,407

 

 

$

12,755

 

 

$

15,342

 

 

$

28,097

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy industrial

 

$

17,650

 

 

$

12,489

 

 

$

30,139

 

 

$

12,662

 

 

$