Fred
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
|
||
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
||
(Address of principal executive offices) |
|
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of exchange on which registered |
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.
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).
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 |
|
☐ |
|
|
☒ |
|
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 August 7, 2024, the registrant had
ASPEN AEROGELS, INC.
INDEX TO FORM 10-Q
|
|
|
|
Page |
|
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets (unaudited) as of June 30, 2024 and December 31, 2023 |
|
1 |
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2024 and 2023 |
|
4 |
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
Item 2. |
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
19 |
|
|
|
|
|
Item 3. |
|
|
35 |
|
|
|
|
|
|
Item 4. |
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Item 1. |
|
|
37 |
|
|
|
|
|
|
Item 1A. |
|
|
37 |
|
|
|
|
|
|
Item 2. |
|
|
38 |
|
|
|
|
|
|
Item 3. |
|
|
38 |
|
|
|
|
|
|
Item 4. |
|
|
38 |
|
|
|
|
|
|
Item 5. |
|
|
38 |
|
|
|
|
|
|
Item 6. |
|
|
39 |
|
|
|
|
|
|
|
40 |
|||
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)
|
|
June 30, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
(In thousands, except |
|
|||||
Assets |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Accounts receivable, net of allowances of $ |
|
|
|
|
|
|
||
Inventories |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property, plant and equipment, net |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
|
|
|
|
|
||
Other long-term assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses |
|
|
|
|
|
|
||
Deferred revenue |
|
|
|
|
|
|
||
Finance obligation for sale and leaseback transactions |
|
|
|
|
|
— |
|
|
Operating lease liabilities |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Convertible note - related party |
|
|
|
|
|
|
||
Finance obligation for sale and leaseback transactions long-term |
|
|
|
|
|
— |
|
|
Operating lease liabilities long-term |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, $ |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
Total liabilities and stockholders’ equity |
|
$ |
|
|
$ |
|
||
See accompanying notes to unaudited consolidated financial statements.
1
ASPEN AEROGELS, INC.
Consolidated Statements of Operations
(Unaudited)
|
|
Three Months Ended |
|
|
Six Months Ended |
|
||||||||||
|
|
June 30, |
|
|
June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
|
|
(In thousands, except |
|
|||||||||||||
Revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Cost of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of equipment under development |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from operations |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense, convertible note - related party |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other income (expense) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Income (loss) before income tax expense |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income tax expense |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Net income (loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Diluted |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Weighted-average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
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 |
|
Common Stock |
|
Additional |
|
Accumulated |
|
Total Stockholders' Equity |
|
|||||||||||||
|
Shares |
|
|
Value |
|
Shares |
|
|
Value |
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2023 |
|
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
|
|||
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Stock-based compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
||
Issuance costs from private placement of common stock |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Cancellation of restricted stock |
|
— |
|
|
|
— |
|
|
( |
) |
|
|
— |
|
|
|
|
— |
|
|
|
||
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Balance at March 31, 2024 |
|
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
|
|||
Net income |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
|
|
||
Stock-based compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
||
Issuance costs from private placement of common stock |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
- |
|
Issuance of restricted stock awards |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Employee restricted stock awards withheld for tax |
|
— |
|
|
|
— |
|
|
( |
) |
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Balance at June 30, 2024 |
|
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
|
|||
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
Accumulated |
|
Total Stockholders' Equity |
|
|||||||||||||
|
Shares |
|
|
Value |
|
Shares |
|
|
Value |
|
|
|
|
|
|
|
|||||||
Balance at December 31, 2022 |
|
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
|
|||
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Stock-based compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
||
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Balance at March 31, 2023 |
|
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
|
|||
Net loss |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
Stock-based compensation expense |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
||
Issuance of restricted stock |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Vesting of restricted stock units |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
( |
) |
|
— |
|
|
( |
) |
|
Proceeds from employee stock option exercises |
|
— |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Balance at June 30, 2023 |
|
— |
|
|
$ |
— |
|
|
|
|
$ |
— |
|
$ |
|
$ |
( |
) |
$ |
|
|||
See accompanying notes to unaudited consolidated financial statements.
3
ASPEN AEROGELS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Six Months Ended |
|
|||||
|
|
June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
(In thousands) |
|
|||||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation |
|
|
|
|
|
|
||
Accretion of interest on convertible note - related party |
|
|
|
|
|
— |
|
|
Amortization of convertible note issuance costs |
|
|
|
|
|
|
||
Amortization of debt discount due to modification of convertible note – related party |
|
|
|
|
|
|
||
Deferred financing costs written off |
|
|
|
|
|
— |
|
|
Provision for bad debt |
|
|
|
|
|
( |
) |
|
Stock-based compensation expense |
|
|
|
|
|
|
||
Impairment of property, plant and equipment |
|
|
|
|
|
— |
|
|
Reduction in the carrying amount of operating lease right-of-use assets |
|
|
|
|
|
|
||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
|
|
Inventories |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
|
|
|
( |
) |
|
Accrued expenses |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
|
( |
) |
|
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
||
Capital expenditures |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from employee stock option exercises |
|
|
|
|
|
|
||
Proceeds from sale and leaseback transactions |
|
|
|
|
|
— |
|
|
Repayment of finance obligation for sale and leaseback transactions |
|
|
( |
) |
|
|
— |
|
Payments made for employee restricted stock tax withholdings |
|
|
( |
) |
|
|
( |
) |
Fees and issuance costs from private placement of common stock |
|
|
( |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
Net decrease in cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
||
Interest paid |
|
$ |
|
|
$ |
|
||
Income taxes paid |
|
$ |
— |
|
|
$ |
— |
|
Supplemental disclosures of non-cash activities: |
|
|
|
|
|
|
||
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
$ |
|
|
$ |
|
||
Capitalized interest |
|
$ |
— |
|
|
$ |
|
|
Changes in accrued capital expenditures |
|
$ |
( |
) |
|
$ |
( |
) |
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 industrial and sustainable insulation 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 maintains its corporate offices in Northborough, Massachusetts. The Company has
Liquidity
During the six months ended June 30, 2024, the Company earned net income of $
In
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, incurring significant capital expenditures to expand aerogel manufacturing capacity and automated thermal barrier fabrication operations, and enhancing research and development resources, among other items.
The Company expects its existing cash balance 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 with equity financings, debt financings, equipment leasing, sale and leaseback transactions, customer prepayments, or government grant and loan programs 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 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, 2023 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 7, 2024.
5
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 June 30, 2024 and the results of its operations and stockholders’ equity for the three and six months ended June 30, 2024 and 2023 and the cash flows for the 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 six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or any other period.
(2) Significant Accounting Policies
Please refer to "Note 2. Summary of Basis of Presentation and Significant Accounting Policies," to the Company's consolidated financial statements from the Annual Report for the discussion of the Company's significant accounting policies.
Use of Estimates
The preparation of the consolidated financial statements requires the Company to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include allowances for doubtful accounts, sales returns and allowances, product warranty costs, inventory valuation, the carrying amount of property and equipment, right-of-use assets, lease liabilities, stock-based compensation, and deferred income taxes. The Company evaluates its estimates and assumptions on an on-going basis using historical experience and other factors, including 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.
Restricted Cash
As of June 30, 2024, the Company had $
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 six months ended June 30, 2024, the Company recorded an increase for estimated customer uncollectible accounts receivable of $
For the six months ended June 30, 2024 and 2023,
At June 30, 2024, the Company had
Revenue Recognition
6
Sale and Leaseback Accounting
The Company has entered into sale and leaseback transactions for certain equipment within its plants. Due to the Company not meeting criteria to account for the transfer of the assets as a sale, sale accounting is precluded. Accordingly, the Company uses the financing method to account for these transactions.
Under the financing method of accounting for a sale and leaseback, the Company does not derecognize the assets and does not recognize as revenue any of the sale proceeds received from the lessor that contractually constitutes payment to acquire the assets subject to these arrangements. Instead, the sale proceeds received are accounted for as finance obligations and leaseback payments made by the Company are allocated between interest expense and a reduction to the finance obligation. Interest on the finance obligation is calculated using the Company’s incremental borrowing rate at the inception of the arrangement on the outstanding finance obligation.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board 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, 2023
The Company has not implemented any accounting standards that had a material impact on its consolidated financial statements during the six months ended June 30, 2024.
Standards to be Implemented
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2023-07 Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures to enhance disclosures about significant segment expenses. This ASU is effective for the Company’s fiscal year 2024 and interim periods in fiscal year 2025. Early adoption is permitted. The Company is currently evaluating segment expense disclosures related to its annual report for fiscal year 2024.
In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740) Improvements to Income Tax Disclosures that requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. This ASU is effective for the Company’s fiscal year 2025. Early adoption is permitted. The Company is currently evaluating income tax disclosures related to its annual report for fiscal year 2025. Although there are several other new accounting pronouncements issued by the FASB, the Company does not believe any of these accounting pronouncements had or will have a material impact on its 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.
(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
7
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, 2023 and did not enter into any contracts during the six months ended June 30, 2024 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.
Energy Industrial
The Company generally enters into contracts containing
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 $
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. Although thermal barrier products are customized with no alternative use to the Company, the Company does not always have an enforceable right to payment. Under the provisions of ASC 606, the Company recognizes revenue at a point in time when transfer of the control of the products is passed to the customer according to the terms of the contract, including under bill and hold arrangements. The timing of revenue recognition is assessed on a contract-by-contract basis.
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.
8
Disaggregation of Revenue
In the following tables, revenue is disaggregated by primary geographical region and source of revenue:
|
|
Three Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
Total |
|
|
U.S. |
|
|
International |
|
|
Total |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Geographical region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asia |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
Canada |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Europe |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Latin America |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
U.S. |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Source of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Energy industrial |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Thermal barrier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
Six Months Ended June 30, |
|
|||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||
|
|
U.S. |
|
|
International |
|
|
Total |
|
|
U.S. |
|
|
International |
|
|
Total |
|
||||||
|
|
(In thousands) |
|
|||||||||||||||||||||
Geographical region |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asia |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
Canada |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Europe |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
Latin America |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
||||
U.S. |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Source of revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Energy industrial |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Thermal barrier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Contract Balances
The following table presents changes in the Company’s contract liabilities during the six months ended June 30, 2024:
|
|
Balance at |
|
|
Additions |
|
|
Deductions |
|
|
Balance at |
|
||||
|
|
(In thousands) |
|
|||||||||||||
Contract liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Deferred revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Energy industrial |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Total contract liabilities |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
During the six months ended June 30, 2024, the Company recognized $
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 right to consideration and are included within accounts receivable and other current assets on the consolidated balance sheets.
9
A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services under the terms of the contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met.
(4) Inventories
Inventories consist of the following:
|
|
June 30, |
|
|||||