ASPEN AEROGELS INC, 10-Q filed on 5/4/2021
Quarterly Report
v3.21.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2021
May 03, 2021
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2021  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q1  
Trading Symbol ASPN  
Entity Registrant Name ASPEN AEROGELS, INC.  
Entity Central Index Key 0001145986  
Current Fiscal Year End Date --12-31  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   28,350,272
Entity Current Reporting Status Yes  
Entity Shell Company false  
Entity File Number 001-36481  
Entity Tax Identification Number 04-3559972  
Entity Address, Address Line One 30 Forbes Road  
Entity Address, Address Line Two Building B  
Entity Address, State or Province MA  
Entity Address, City or Town Northborough  
Entity Address, Postal Zip Code 01532  
City Area Code 508  
Local Phone Number 691-1111  
Entity Interactive Data Current Yes  
Title of 12(b) Security Common Stock, par value $0.00001 per share  
Security Exchange Name NYSE  
Entity Incorporation, State or Country Code DE  
Document Quarterly Report true  
Document Transition Report false  
v3.21.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 17,219 $ 16,496
Accounts receivable, net of allowances of $199 and $442 20,668 15,698
Inventories 10,847 13,099
Prepaid expenses and other current assets 1,152 1,830
Total current assets 49,886 47,123
Property, plant and equipment, net 45,747 46,739
Operating lease right-of-use assets 4,109 3,478
Other long-term assets 132 84
Total assets 99,874 97,424
Current liabilities:    
Accounts payable 6,968 5,351
Accrued expenses 5,306 3,884
Current portion of long-term debt 2,854 1,609
Current portion of prepayment liability 4,562  
Deferred revenue 2,061 2,037
Operating lease liabilities 1,152 1,046
Total current liabilities 22,903 13,927
Prepayment liability 5,000 9,555
Long-term debt 817 2,059
Operating lease liabilities long-term 4,077 3,597
Other long-term liabilities 434 434
Total liabilities 33,231 29,572
Commitments and contingencies (Note 9)
Stockholders’ equity:    
Preferred stock, $0.00001 par value; 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2021 and December 31, 2020
Common stock, $0.00001 par value; 125,000,000 shares authorized, 28,343,535 and 27,821,685 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively   0
Additional paid-in capital 580,852 575,811
Accumulated deficit (514,209) (507,959)
Total stockholders’ equity 66,643 67,852
Total liabilities and stockholders’ equity $ 99,874 $ 97,424
v3.21.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2021
Dec. 31, 2020
Statement Of Financial Position [Abstract]    
Allowance for accounts receivables $ 199 $ 442
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Preferred stock, shares outstanding 0 0
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 125,000,000 125,000,000
Common stock, shares issued 28,343,535 27,821,685
Common stock, shares outstanding 28,343,535 27,821,685
v3.21.1
Consolidated Statements of Operations - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Revenue:    
Total revenue $ 28,097 $ 28,419
Cost of revenue:    
Gross profit 3,956 5,980
Operating expenses:    
Research and development 2,442 2,227
Sales and marketing 3,301 3,324
General and administrative 4,388 3,515
Total operating expenses 10,131 9,066
Loss from operations (6,175) (3,086)
Interest expense, net (75) (83)
Total interest expense, net (75) (83)
Net loss $ (6,250) $ (3,169)
Net loss per share:    
Basic and diluted $ (0.22) $ (0.13)
Weighted-average common shares outstanding:    
Basic and diluted 27,983,470 25,194,292
Product [Member]    
Revenue:    
Total revenue $ 28,056 $ 28,307
Cost of revenue:    
Cost of revenue 24,129 22,399
Research Services [Member]    
Revenue:    
Total revenue 41 112
Cost of revenue:    
Cost of revenue $ 12 $ 40
v3.21.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Underwritten Public Offering [Member]
At The Market Offering [Member]
Common Stock 0.00001 Par Value [Member]
Common Stock 0.00001 Par Value [Member]
Underwritten Public Offering [Member]
Common Stock 0.00001 Par Value [Member]
At The Market Offering [Member]
Additional Paid-in Capital [Member]
Additional Paid-in Capital [Member]
Underwritten Public Offering [Member]
Additional Paid-in Capital [Member]
At The Market Offering [Member]
Accumulated Deficit [Member]
Beginning balance at Dec. 31, 2019 $ 58,990           $ 545,140     $ (486,150)
Beginning balance, shares at Dec. 31, 2019       24,302,504            
Net loss (3,169)                 (3,169)
Stock compensation expense 992           992      
Vesting of restricted stock units (1,195)           (1,195)      
Vesting of restricted stock units, shares       336,951            
Proceeds from offering, net   $ 14,751           $ 14,751    
Proceeds from offering, net, shares         1,955,000          
Ending balance at Mar. 31, 2020 70,369           559,688     (489,319)
Ending balance, shares at Mar. 31, 2020       26,594,455            
Beginning balance at Dec. 31, 2020 67,852           575,811     (507,959)
Beginning balance, shares at Dec. 31, 2020       27,821,685            
Net loss (6,250)                 (6,250)
Stock compensation expense 976           976      
Vesting of restricted stock units (2,613)           (2,613)      
Vesting of restricted stock units, shares       246,737            
Proceeds from employee stock option exercises 463           463      
Proceeds from employee stock option exercises, shares       48,056            
Proceeds from offering, net     $ 6,215           $ 6,215  
Proceeds from offering, net, shares           305,182        
Forfeiture of performance-based restricted stock, shares       (78,125)            
Ending balance at Mar. 31, 2021 $ 66,643           $ 580,852     $ (514,209)
Ending balance, shares at Mar. 31, 2021       28,343,535            
v3.21.1
Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
At The Market Offering [Member]    
Commissions and fees $ 193  
Issuance costs $ 17  
Underwritten Public Offering [Member]    
Issuance costs   $ 285
Underwriting discounts and commissions   $ 1,093
v3.21.1
Consolidated Statements of Cash Flows - USD ($)
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Cash flows from operating activities:    
Net loss $ (6,250,000) $ (3,169,000)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation 2,638,000 2,563,000
Amortization of debt issuance costs 3,000  
Provision for bad debt (95,000) 0
Stock-compensation expense 976,000 992,000
Reduction in the carrying amount of operating lease right-of-use assets 257,000 243,000
Changes in operating assets and liabilities:    
Accounts receivable (4,875,000) 11,799,000
Inventories 2,252,000 (4,664,000)
Prepaid expenses and other assets 630,000 181,000
Accounts payable 1,432,000 (3,732,000)
Accrued expenses 1,422,000 (4,441,000)
Deferred revenue 31,000 (851,000)
Operating lease liabilities (293,000) (274,000)
Net cash used in operating activities (1,872,000) (1,353,000)
Cash flows from investing activities:    
Capital expenditures (1,470,000) (927,000)
Net cash used in investing activities (1,470,000) (927,000)
Cash flows from financing activities:    
Repayments of borrowings under line of credit, net   (3,123,000)
Proceeds from employee stock option exercises 463,000  
Payments made for employee restricted stock tax withholdings (2,613,000) (1,195,000)
Net cash provided by financing activities 4,065,000 10,433,000
Net increase in cash 723,000 8,153,000
Cash and cash equivalents at beginning of period 16,496,000 3,633,000
Cash and cash equivalents at end of period 17,219,000 11,786,000
Supplemental disclosures of cash flow information:    
Interest paid 65,000 84,000
Income taxes paid 0 0
Supplemental disclosures of non-cash activities:    
Right-of-use assets obtained in exchange for new operating lease liabilities 888,000 152,000
Changes in accrued capital expenditures 176,000 (147,000)
Underwritten Public Offering [Member]    
Cash flows from financing activities:    
Proceeds from offering, net   15,036,000
Issuance costs   $ (285,000)
At The Market Offering [Member]    
Cash flows from financing activities:    
Proceeds from offering, net 6,232,000  
Issuance costs $ (17,000)  
v3.21.1
Consolidated Statements of Cash Flows (Parenthetical) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2021
Mar. 31, 2020
Underwritten Public Offering [Member]    
Underwriting discounts and commissions, net   $ 1,093
At The Market Offering [Member]    
Commissions and fees net $ 193  
v3.21.1
Description of Business and Basis of Presentation
3 Months Ended
Mar. 31, 2021
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Description of Business and Basis of Presentation

(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. In addition, the Company is developing high-value applications for its aerogel technology in the electric vehicle market. The Company also conducts 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, 2021, the Company incurred a net loss of $6.3 million, used $1.9 million of cash in operations, used $1.5 million of cash for capital expenditures and received net proceeds of $6.2 million through an at-the-market offering of the Company’s common stock. At March 31, 2021, the Company had cash and cash equivalents of $17.2 million, total debt of $3.7 million, a $4.6 million current prepayment liability (see note 9), and no outstanding borrowings under its revolving line of credit (see note 7). After giving effect to $1.5 million of outstanding letters of credit, the amount available to the Company at March 31, 2021 under the revolving line of credit was $13.1 million. The existing revolving line of credit matures on April 28, 2022.

The Company is increasing investment in the research and development of next-generation aerogel products and manufacturing process technologies. The Company is continuing to develop aerogel products and technologies for the electric vehicle market. The Company believes that the commercial potential for the Company’s technology in the electric vehicle market is significant. Accordingly, the Company plans to continue to hire additional personnel, incur additional operating expenses, and incur 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 items.

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 and research and development activities. 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 capital necessary to fund the incremental operating expenses and capital expenditures required to support the evolving commercial opportunity in the electric vehicle market and other strategic business opportunities.

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, 2020 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 12, 2021.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of March 31, 2021 and the results of its operations and stockholders’ equity for the three months ended March 31, 2021 and 2020 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, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or any other period. In addition, the Company is uncertain of the continued duration and severity of the COVID-19 pandemic and the impact it will have on the Company’s results of operations for the year ending December 31, 2021 or any other period.

v3.21.1
Significant Accounting Policies
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Significant Accounting Policies

(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 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. 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 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. The Company did not record a charge for uncollectible accounts receivable during the three months ended March 31, 2020.

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 10 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.

During the three months ended March 31, 2021, the Company granted 61,370 restricted common stock units (RSUs) with a grant date fair value of $1.5 million and non-qualified stock options (NSOs) to purchase 199,324 shares of common stock with a grant date fair value of $2.6 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,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cost of product revenue

 

$

112

 

 

$

319

 

Research and development expenses

 

 

189

 

 

 

146

 

Sales and marketing expenses

 

 

168

 

 

 

171

 

General and administrative expenses

 

 

507

 

 

 

356

 

Total stock-based compensation

 

$

976

 

 

$

992

 

 

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 556,433 shares to 8,531,413 shares effective January 1, 2021.

As of March 31, 2021, 4,130,907 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 March 31, 2021, 80,658 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 March 31, 2021, the Company has either reserved in connection with statutory tax withholdings or issued a total of 3,123,562 shares under the 2014 Equity Plan. As of March 31, 2021, there were 1,196,286 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.

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 presently views its operations and manages its business as one operating segment.

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Revenue:

 

 

 

 

 

 

 

 

U.S.

 

$

12,755

 

 

$

13,673

 

International

 

 

15,342

 

 

 

14,746

 

Total

 

$

28,097

 

 

$

28,419

 

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.

The Company did not record any warranty expense during the three months ended March 31, 2021 and 2020.

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, 2020

The Company has not implemented any accounting standards that had a material impact on its consolidated financial statements during the three months ended March 31, 2021.

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.

v3.21.1
Revenue from Contracts with Customers
3 Months Ended
Mar. 31, 2021
Revenue From Contract With Customer [Abstract]  
Revenue from Contracts with Customers

(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 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, 2020 and did not enter into any contracts during the three months ended March 31, 2021 that contained a significant financing component.

The Company records deferred revenue for product sales when (i) the Company has delivered products but other revenue recognition 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.

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.

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 March 31, 2021 and December 31, 2020.

Subsea Projects

The Company manufactures and sells subsea products that are designed for pipe-in-pipe applications in subsea 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, 2021 and 2020, the Company recognized revenue of $0.4 million and $2.2 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 certain licenses to any resulting intellectual property. The Company records revenue using the percentage-of-completion method in two ways: (1) for firm-fixed-price contracts, the Company accrues that portion of the total contract price that is allocable on the basis of the Company’s estimates of costs incurred to date to total contract costs; and (2) for cost-plus-fixed-fee contracts, the Company records revenue that is equal to total payroll cost incurred times a stated factor plus reimbursable expenses, to a stated upper limit. The primary cost under the Company’s research service contracts is the labor effort expended in completing the research. Typically, the only deliverable, other than the labor hours expended, is reporting research results to the customer or delivery of research grade aerogel products. Because the input measure of labor hours expended is also reflective of the output measure, it is a reliable means to measure the extent of progress toward completion. Revisions in cost estimates and fees during the course of the contract are reflected in the accounting period in which the facts that require the revisions become known. Contract costs and rates used to allocate overhead to contracts are subject to audit by the respective contracting government agency. Adjustments to revenue as a result of audit are recorded within the period they become known. To date, adjustments to revenue as a result of contracting agency audits have been insignificant.

Disaggregation of Revenue

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

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

U.S.

 

 

International

 

 

Total

 

 

U.S.

 

 

International

 

 

Total

 

 

 

(In thousands)

 

Geographical region

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asia

 

$

 

 

$

5,588

 

 

$

5,588

 

 

$

 

 

$

10,104

 

 

$

10,104

 

Canada

 

 

 

 

 

964

 

 

 

964

 

 

 

 

 

 

455

 

 

 

455

 

Europe

 

 

 

 

 

7,246

 

 

 

7,246

 

 

 

 

 

 

3,137

 

 

 

3,137

 

Latin America

 

 

 

 

 

1,544

 

 

 

1,544

 

 

 

 

 

 

1,050

 

 

 

1,050

 

U.S.

 

 

12,755

 

 

 

 

 

 

12,755

 

 

 

13,673

 

 

 

 

 

 

13,673

 

Total revenue

 

$

12,755

 

 

$

15,342

 

 

$

28,097

 

 

$

13,673

 

 

$

14,746

 

 

$

28,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Source of revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

12,714

 

 

$

14,935

 

 

$

27,649

 

 

$

12,453

 

 

$

13,633

 

 

$

26,086

 

Subsea projects

 

 

 

 

 

407

 

 

 

407

 

 

 

1,108

 

 

 

1,113

 

 

 

2,221

 

Research services

 

 

41

 

 

 

 

 

 

 

41

 

 

 

112

 

 

 

 

 

 

112

 

Total revenue

 

$

12,755

 

 

$

15,342

 

 

$

28,097

 

 

$

13,673

 

 

$

14,746

 

 

$

28,419

 

 

 

Contract Balances

The following table presents changes in the Company’s contract assets and contract liabilities during the three months ended March 31, 2021:

 

 

 

Balance at

December 31,

2020

 

 

Additions

 

 

Deductions

 

 

Balance at

March 31, 2021

 

 

 

(In thousands)

 

Contract assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subsea projects

 

$

1,370

 

 

$

720

 

 

$

(1,045

)

 

$

1,045

 

Research services

 

 

67

 

 

 

41

 

 

 

(83

)

 

 

25

 

Total contract assets

 

$

1,437

 

 

$

761

 

 

$

(1,128

)

 

$

1,070

 

Contract liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue

 

$

1,859

 

 

$

2,030

 

 

$

(2,319

)

 

$

1,570

 

Subsea projects

 

 

178

 

 

$

491

 

 

$

(178

)

 

 

491

 

Prepayment liability

 

 

9,555

 

 

 

7

 

 

 

 

 

 

9,562

 

Total contract liabilities

 

$

11,592

 

 

$

2,528

 

 

$

(2,497

)

 

$

11,623

 

 

During the three months ended March 31, 2021, the Company recognized $1.5 million of revenue that was included in deferred revenue at December 31, 2020.

A contract asset is recorded when the Company satisfies a performance obligation by transferring a promised good or service and has earned the right to consideration from its customer. These assets may represent a conditional or unconditional right to consideration and are included within accounts receivable on the consolidated balance sheets.

A contract liability is recorded when consideration is received, or such consideration is unconditionally due, from a customer prior to transferring goods or services under the terms of the contract. Contract liabilities are recognized as revenue after control of the products or services is transferred to the customer and all revenue recognition criteria have been met. 

v3.21.1
Inventories
3 Months Ended
Mar. 31, 2021
Inventory Disclosure [Abstract]  
Inventories

(4) Inventories

Inventories consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Raw materials

 

$

4,090

 

 

$

4,068

 

Finished goods

 

 

6,757

 

 

 

9,031

 

Total

 

$

10,847

 

 

$

13,099

 

v3.21.1
Property, Plant and Equipment, Net
3 Months Ended
Mar. 31, 2021
Property Plant And Equipment [Abstract]  
Property, Plant and Equipment, Net

(5) Property, Plant and Equipment, Net

Property, plant and equipment consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

Useful

 

 

 

2021

 

 

2020

 

 

life

 

 

 

(In thousands)

 

 

 

 

 

Construction in progress

 

$

1,784

 

 

$

1,906

 

 

 

 

Buildings

 

 

24,016

 

 

 

24,016

 

 

30 years

 

Machinery and equipment

 

 

126,284

 

 

 

124,807

 

 

3-10 years

 

Computer equipment and software

 

 

8,885

 

 

 

8,850

 

 

3 years

 

Total

 

 

160,969

 

 

 

159,579

 

 

 

 

 

Accumulated depreciation

 

 

(115,222

)

 

 

(112,840

)

 

 

 

 

Property, plant and equipment, net

 

$

45,747

 

 

$

46,739

 

 

 

 

 

 

Depreciation expense was $2.6 million for the three months ended March 31, 2021 and 2020.

Construction in progress totaled $1.8 million and $1.9 million at March 31, 2021 and December 31, 2020, respectively, associated with the Company’s East Providence, Rhode Island facility.

v3.21.1
Accrued Expenses
3 Months Ended
Mar. 31, 2021
Payables And Accruals [Abstract]  
Accrued Expenses

(6) Accrued Expenses

Accrued expenses consist of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Employee compensation

 

$

3,817

 

 

$

2,587

 

Other accrued expenses

 

 

1,489

 

 

 

1,297

 

Total

 

$

5,306

 

 

$

3,884

 

v3.21.1
Revolving Line of Credit
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Revolving Line of Credit

(7) Revolving Line of Credit

The Company is party to an Amended and Restated Loan and Security Agreement with Silicon Valley Bank (Loan Agreement). On March 12, 2021, the Loan Agreement was amended and restated to extend the maturity date of the revolving credit facility to April 28, 2022 and to establish certain minimum Adjusted EBITDA levels and minimum Adjusted Quick Ratio covenants, as defined.

Under the revolving credit facility, the Company is permitted to borrow a maximum of $20.0 million, subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on prime rate, subject to a minimum rate of 4.00% per annum. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, the Company is required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility.

Under the Loan Agreement, the Company is required to comply with both non-financial and financial covenants, including a minimum Adjusted EBITDA covenant and a minimum Adjusted Quick Ratio covenant, as defined. At March 31, 2021, the Company was in compliance with all such covenants. Obligations under the Loan Agreement are secured by a security interest in all assets of the Company, including those at the East Providence facility, except for certain exclusions. The Company intends to extend or replace the facility prior to its maturity.

At March 31, 2021 and December 31, 2020, the Company had no amounts drawn from the revolving credit facility.

The Company has provided letters of credit to secure obligations under certain commercial contracts and other obligations. The Company had outstanding letters of credit backed by the revolving credit facility of $1.5 million and $1.4 million at March 31, 2021 and December 31, 2020, respectively, which reduce the funds otherwise available to the Company under the facility.

At March 31, 2021, the amount available to the Company under the revolving credit facility was $13.1 million after giving effect to the $1.5 million of outstanding letters of credit.

v3.21.1
Debt
3 Months Ended
Mar. 31, 2021
Debt Disclosure [Abstract]  
Debt

(8) Debt

On May 1, 2020, Aspen Aerogels Rhode Island, LLC (Borrower) executed a promissory note (Note) in favor of Northeast Bank to receive an unsecured loan in the principal amount of $3.7 million (the PPP Loan) pursuant to the Paycheck Protection Program (PPP) established by the CARES Act, as amended by the Paycheck Protection Program Flexibility Act (Flexibility Act), and administered by the SBA. The Borrower conferred with representatives of the SBA prior to finalizing the PPP Loan. The PPP Loan was subsequently sold by Northeast Bank to The Loan Source, Inc. (PPP Investor), a secondary market investor.

The PPP Loan carries an interest rate of 1% per year and matures two years from the date of the Note. The PPP Loan indebtedness may be forgiven in whole or in part upon application by the Borrower to the PPP Investor. The PPP Investor will determine to what extent the PPP Loan is eligible for forgiveness, subject to SBA guidelines and other regulations, based on the use of loan proceeds for payroll costs, payment of interest on covered mortgage obligations, rent and utility costs over either an eight-week or 24-week period, at the Borrower’s option, following the Borrower’s receipt of the loan proceeds. Upon the Borrower’s application for forgiveness, the SBA will review the Borrower’s eligibility, use of proceeds and other certifications in connection with the application for the PPP Loan. Upon such review, the SBA may approve or deny the Borrower’s loan forgiveness application, in whole or part. As of March 31, 2021, the Borrower had not applied for forgiveness.

If the Borrower has not applied for forgiveness within ten months from the end of the 24-week period following receipt of the loan proceeds, the Borrower will be required make payments of principal and accrued interest in equal monthly installments over the remaining term of the loan. In addition, the Flexibility Act permits the Borrower and the PPP Investor to mutually agree to extend the term of the PPP Loan to five years from the date of the Note. The Borrower may repay the PPP Loan at any time without penalty.

While the Borrower is not required to apply for forgiveness of the PPP Loan, upon application for forgiveness, the Borrower may not receive forgiveness of the PPP Loan in whole or in part. In addition, the amount of potential loan forgiveness may be reduced if the Borrower failed to maintain employee and salary levels during the applicable eight-week or 24-week period following receipt of the loan proceeds. If the Borrower applies for forgiveness, and the PPP Loan is not forgiven in whole or in part, the Borrower will be required to make payments of principal and accrued interest in equal monthly installments over the remaining term of the loan for the post-forgiveness balance outstanding.

The Note contains customary events of default relating to, among other things, payment defaults, breaches of representations and warranties, and defaults under any loan or agreement with another debtor, including the Company’s credit facility with SVB, to the extent the PPP Investor believes such default may materially affect the Borrower’s ability to repay the PPP Loan. The occurrence of an event of default, if not cured, may result in the Borrower’s repayment of the PPP Loan prior to maturity.

The Borrower has used the proceeds of the PPP Loan to support ongoing operations and to sustain staffing levels in its East Providence, Rhode Island manufacturing facility despite the unfavorable impact of the COVID-19 pandemic and volatile energy markets on its business.

Long-term debt consists of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Long-term debt, principal

 

$

3,686

 

 

$

3,686

 

Current portion of long-term debt

 

 

(2,854

)

 

 

(1,609

)

Debt issuance costs, net of accumulated amortization

 

 

(15

)

 

 

(18

)

Long-term debt

 

$

817

 

 

$

2,059

 

The schedule of required principal payments remaining on long-term debt outstanding as of March 31, 2021 is as follows:

 

 

Year

 

Principal

Payments

 

 

 

(In thousands)

 

2021 (excluding the three months ended March 31, 2021)

 

 

1,609

 

2022

 

 

2,077

 

Total principal payments

 

$

3,686

 

v3.21.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2021
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

(9) Commitments and Contingencies

Cloud Computing Agreement

The Company is party to a cloud computing agreement that is a service contract for enterprise resource planning software. The agreement has a three-year term beginning on January 15, 2021. During the three months ended March 31, 2021, the Company capitalized less than $0.1 million of costs related to implementation of the agreement that will begin to amortize during 2022. The capitalized implementation costs are included within other long-term assets on the consolidated balance sheets.

Thermal Barrier Contract

The Company is party to a contract with a major U.S. automotive original equipment manufacturer (OEM) to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation electric vehicles (Contract). Pursuant to the Contract, the Company is obligated to supply Barriers at fixed annual prices and at volumes to be specified by the OEM up to a daily maximum quantity through the term of the agreement, which expires on September 1, 2026. While the OEM has agreed to purchase its requirement for Barriers at locations to be designated from time to time from the Company, it has no obligation to purchase any minimum quantity of Barriers under the Contract. In addition, the OEM may terminate the Contract any time and for any or no reason. All other terms of the Contract are generally consistent with the OEM’s standard purchase terms, including customary quality and warranty provisions.

BASF Supply Agreement

The Company is party to a supply agreement, as amended, with BASF Polyurethanes GmbH (BASF) (the Supply Agreement) and a joint development agreement with BASF SE (the JDA). Pursuant to the Supply Agreement, the Company will sell exclusively to BASF certain of the Company’s products at annual volumes to be specified by BASF, subject to certain volume limits. However, BASF has no obligation to purchase products under the Supply Agreement. The Supply Agreement will terminate on December 31, 2027 with respect to the Company’s Spaceloft A2 product and December 31, 2028 with respect to a new product developed under the JDA. Upon the expiration of the Supply Agreement with respect to each product, the Company will be subject to a post-termination supply commitment for an additional two years. The JDA is designed to facilitate collaboration by the parties on the development and commercialization of new products.

In addition, BASF, in its sole discretion, may make prepayments to the Company in the aggregate amount of up to $22.0 million during the term of the Supply Agreement. These prepayment obligations are secured by a security interest in real estate, plant and equipment at the Company’s Rhode Island facility and a license to certain intellectual property. BASF made a prepayment in the amount of $5.0 million to the Company in 2018 (the 2018 Prepayment). As of January 1, 2019, 25.3% of any amounts that the Company invoices for Spaceloft A2 sold to BASF are credited against the outstanding balance of the 2018 prepayment. If any of the 2018 Prepayment remains uncredited as of December 31, 2021, BASF may require that the Company repay the uncredited amount to BASF beginning in 2022.

Pursuant to the first addendum to the Supply Agreement, on January 30, 2019, BASF made an additional prepayment in the amount of $5.0 million to the Company (the 2019 Prepayment). As of January 1, 2020, 50.0% of any amounts that the Company invoices for the newly developed product sold to BASF are credited against the outstanding balance of the 2019 Prepayment. After December 31, 2022, BASF may require that the Company credit an additional 24.7% of any amounts invoiced by the Company for Spaceloft A2 product sold to BASF against the outstanding balance of the 2019 Prepayment, if any, or may require that the Company repay the uncredited amount of the 2019 Prepayment to BASF in full.

As of March 31, 2021, the Company had received $10.0 million in prepayments from BASF and applied approximately $0.2 million of credits against amounts invoiced.

The prepayment liability consists of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Prepayment liability

 

$

9,832

 

 

$

9,845

 

Current portion of prepayment liability

 

 

(4,562

)

 

 

 

Prepayment liability included within deferred revenue

 

 

(270

)

 

 

(290

)

Prepayment liability, long-term

 

$

5,000

 

 

$

9,555

 

 

The amounts and terms of additional prepayment installments, if any, are subject to negotiation between the Company and BASF.

Federal, State and Local Environmental Regulations

The Company is subject to federal, state and local laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation. Penalties may be imposed for noncompliance.

Litigation

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

v3.21.1
Leases
3 Months Ended
Mar. 31, 2021
Leases [Abstract]  
Leases

(10) Leases

The Company leases office and warehouse space in Northborough, Massachusetts and East Providence, Rhode Island under operating leases. Under these agreements, the Company is obligated to pay annual rent, real estate taxes, and certain other operating expenses. The Company also leases equipment under operating leases. The Company’s operating leases expire at various dates through 2026.

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

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

Maturities of operating lease liabilities at March 31, 2021 are as follows:

 

Year

 

Operating

Leases

 

 

 

(In thousands)

 

2021 (excluding the three months ended March 31, 2021)

 

 

1,121

 

2022

 

 

1,440

 

2023

 

 

1,389

 

2024

 

 

885

 

2025

 

 

723

 

Thereafter

 

 

584

 

Total lease payments

 

 

6,142

 

Less imputed interest

 

 

(913

)

Total lease liabilities

 

$

5,229

 

 

The Company incurred operating lease costs of $0.4 million and $0.3 million during the three months ended March 31, 2021 and 2020, respectively. Cash payments related to operating lease liabilities were $0.4 million during both the three months ended March 31, 2021 and 2020.

 

At March 31, 2021, the weighted average remaining lease term for operating leases was 4.6 years. At March 31, 2021, the weighted average discount rate for operating leases was 7.3%.

 

As of March 31, 2021, the Company has additional operating equipment leases that will commence during 2021 with total lease payments of $0.2 million and a weighted average lease term of 4.0 years.

v3.21.1
CARES Act Payroll Tax Deferral
3 Months Ended
Mar. 31, 2021
Other Liabilities Disclosure [Abstract]  
CARES Act Payroll Tax Deferral

(11) CARES Act Payroll Tax Deferral

The Company elected to defer approximately $0.9 million of its employer payroll tax obligation for the period from March 27, 2020 to December 31, 2020 pursuant to the provisions of the CARES Act. The Company is required to remit 50 percent of the deferred tax balance on or before December 31, 2021 and the remaining 50 percent on or before December 31, 2022.

Other long-term liabilities consist of the following:

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Deferred employer payroll tax obligation

 

$

870

 

 

$

870

 

Current portion of deferred payroll tax obligation

 

 

(436

)

 

 

(436

)

Other long-term liabilities

 

$

434

 

 

$

434

 

 

 

v3.21.1
Net Loss Per Share
3 Months Ended
Mar. 31, 2021
Earnings Per Share [Abstract]  
Net Loss Per Share

(12) Net Loss Per Share

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

 

 

(In thousands, except

share and per share data)

 

Numerator:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,250

)

 

$

(3,169

)

Denominator:

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

27,983,470

 

 

 

25,194,292

 

Net loss per share, basic and diluted

 

$

(0.22

)

 

$

(0.13

)

 

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

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Common stock options

 

 

3,846,738

 

 

 

4,143,821

 

Restricted common stock units

 

 

364,828

 

 

 

720,969

 

Restricted common stock awards

 

 

45,066

 

 

 

128,453

 

Total

 

 

4,256,632

 

 

 

4,993,243

 

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

v3.21.1
Income Taxes
3 Months Ended
Mar. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

(13) Income Taxes

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

v3.21.1
Subsequent Events
3 Months Ended
Mar. 31, 2021
Subsequent Events [Abstract]  
Subsequent Events

(14) Subsequent Events

The Company has evaluated subsequent events through May 4, 2021, the date of issuance of the consolidated financial statements for the three months ended March 31, 2021 

v3.21.1
Description of Business and Basis of Presentation (Policies)
3 Months Ended
Mar. 31, 2021
Accounting Policies [Abstract]  
Nature of Business

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. In addition, the Company is developing high-value applications for its aerogel technology in the electric vehicle market. The Company also conducts 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

Liquidity

During the three months ended March 31, 2021, the Company incurred a net loss of $6.3 million, used $1.9 million of cash in operations, used $1.5 million of cash for capital expenditures and received net proceeds of $6.2 million through an at-the-market offering of the Company’s common stock. At March 31, 2021, the Company had cash and cash equivalents of $17.2 million, total debt of $3.7 million, a $4.6 million current prepayment liability (see note 9), and no outstanding borrowings under its revolving line of credit (see note 7). After giving effect to $1.5 million of outstanding letters of credit, the amount available to the Company at March 31, 2021 under the revolving line of credit was $13.1 million. The existing revolving line of credit matures on April 28, 2022.

The Company is increasing investment in the research and development of next-generation aerogel products and manufacturing process technologies. The Company is continuing to develop aerogel products and technologies for the electric vehicle market. The Company believes that the commercial potential for the Company’s technology in the electric vehicle market is significant. Accordingly, the Company plans to continue to hire additional personnel, incur additional operating expenses, and incur 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 items.

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 and research and development activities. 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 capital necessary to fund the incremental operating expenses and capital expenditures required to support the evolving commercial opportunity in the electric vehicle market and other strategic business opportunities.

Unaudited Interim Financial Information

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, 2020 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 12, 2021.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of March 31, 2021 and the results of its operations and stockholders’ equity for the three months ended March 31, 2021 and 2020 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, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or any other period. In addition, the Company is uncertain of the continued duration and severity of the COVID-19 pandemic and the impact it will have on the Company’s results of operations for the year ending December 31, 2021 or any other period.

Principles of Consolidation

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

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 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 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

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 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. The Company did not record a charge for uncollectible accounts receivable during the three months ended March 31, 2020.

Revenue Recognition

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

Leases

The Company accounts for its leases in accordance with Accounting Standards Update (ASU) 2016-02 (Topic 842). See note 10 for further details.

Stock-based Compensation

 

 

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.

During the three months ended March 31, 2021, the Company granted 61,370 restricted common stock units (RSUs) with a grant date fair value of $1.5 million and non-qualified stock options (NSOs) to purchase 199,324 shares of common stock with a grant date fair value of $2.6 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,

 

 

 

2021

 

 

2020

 

 

 

(In thousands)

 

Cost of product revenue

 

$

112

 

 

$

319

 

Research and development expenses

 

 

189

 

 

 

146

 

Sales and marketing expenses

 

 

168

 

 

 

171

 

General and administrative expenses