ASPEN AEROGELS, INC.
The following discussion of our financial condition and results of operations
should be read in conjunction with the "Selected Financial Data" and our
consolidated financial statements and the related notes thereto included in this
Annual Report on Form 10-K. In addition to historical information, some of the
information contained in the following discussion and analysis or set forth
elsewhere in this report, including information with respect to our plans and
strategy for our business, includes forward-looking information that involves
risks, uncertainties and assumptions. You should read the Risk Factors set forth
in Item 1A of this Annual Report on Form 10-K for a discussion of important
factors that could cause actual results to differ materially from the results
described in or implied by the forward-looking statements contained in the
following discussion and analysis. Our actual results and the timing of events
could differ materially from those anticipated by these forward looking
statements.
Investors and others should note that we routinely use the Investors section of
our website to announce material information to investors and the marketplace.
While not all of the information that we post on the Investors section of our
website is of a material nature, some information could be deemed to be
material. Accordingly, we encourage investors, the media, and others interested
in us to review the information that we share on the Investors section of our
website, https://www.aerogel.com/.
Overview
We design, develop and manufacture innovative, high-performance aerogel insulation used primarily in the energy infrastructure and sustainable building materials markets. We believe our aerogel blankets deliver the best thermal performance of any widely used insulation product available on the market today and provide a combination of performance attributes unmatched by traditional insulation materials. Our end-user customers select our products where thermal performance is critical and to save money, improve resource efficiency, enhance sustainability, preserve operating assets and protect workers. Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, liquefied natural gas facilities, power generating assets and other energy infrastructure. Our Pyrogel® and Cryogel® product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. Our Spaceloft® building materials are increasingly used by building owners to improve the energy efficiency and to enhance fire protection in buildings ranging from historic brownstones to modern high rises. We are also actively developing a number of promising aerogel products and technologies for the electric vehicle market. We have developed and are commercializing our proprietary line of PyroThin® aerogel thermal barriers for use in battery packs in electric vehicles. Our PyroThin product is an ultra-thin, lightweight and flexible thermal barrier designed with other functional layers to impede the propagation of thermal runaway across multiple lithium-ion battery system architectures. Our thermal barrier technology offers a unique combination of thermal management, mechanical performance and fire protection properties that enable electric vehicle manufacturers to achieve critical battery performance and safety goals. In addition, we are seeking to leverage our patented carbon aerogel technology to develop industry-leading battery materials for use in lithium-ion battery cells. These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of electric vehicles. The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the electric vehicle market is significant. Accordingly, we are hiring additional personnel, incurring additional operating expenses, incurring significant capital expenditures to expand aerogel manufacturing capacity, establishing an automated thermal barrier fabrication operation, enhancing research and development resources and expanding our battery material research facilities, among other items. We also derive product revenue from a number of other end markets. Customers in these markets use our products for applications as diverse as military and commercial aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. As we continue to enhance our aerogel technology platform, we believe we will have additional opportunities to address high value applications in the global insulation market, the electric vehicle market and in a number of new, high-value markets, including hydrogen energy, filtration, water purification, and gas sorption. We generate product revenue through the sale of our line of aerogel blankets and thermal barriers. We market and sell our products primarily through a sales force based inNorth America ,Europe andAsia . The efforts of our sales force are supported by a small number of sales consultants with extensive knowledge of a particular market or region. Our sales force is responsible for establishing and maintaining customer and partner relationships, delivering highly technical information and ensuring high-quality customer service. 64 -------------------------------------------------------------------------------- Our salespeople work directly with end-user customers and engineering firms to promote the qualification, specification and acceptance of our aerogel and thermal barrier products. We also rely on an existing and well-established channel of qualified insulation distributors and contractors in more than 50 countries around the world to ensure rapid delivery of our aerogel products and strong end-user support.
We also perform research services under contracts with various agencies of the
We manufacture our products using our proprietary technology at our facility inEast Providence, Rhode Island . We have operated theEast Providence facility since 2008 and have increased our capacity in phases to approximately$250.0 million in annual revenue. To meet expected growth in demand for our aerogel products in the electric vehicle market, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant inBulloch County, Georgia . We expect to build the second plant in two phases at an estimated cost of$575.0 million for the first phase and$125.0 million for the second phase. We currently expect the first phase of the plant will increase our annual revenue capacity by approximately$650.0 million and the second phase by approximately$700.0 million . We expect to have the first phase of the second plant operational late in the second -half of 2023. In addition, we are planning to construct a state-of-the-art, automated thermal barrier fabrication operation inMonterrey, Mexico , in order to keep pace with the significant potential demand for our PyroThin thermal barriers. We have entered into production contracts with a majorU.S. automotive original equipment manufacturer (OEM) to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. Pursuant to the contracts, we are obligated to supply the barriers at fixed annual prices and at volumes to be specified by the customer up to a daily maximum quantity through the term of the agreements, which expire at various times from 2026 through 2034. While the customer has agreed to purchase its requirement for the barriers from us at locations to be designated from time to time, it has no obligation to purchase any minimum quantity of barriers under the contracts. In addition, the customer may terminate the contracts any time and for any or no reason. All other terms of the contracts are generally consistent with the customer's standard purchase terms, including quality and warranty provisions customary in the automotive industry. We have been engaged since 2016 in a strategic partnership with BASF to develop and commercialize products for the sustainable building materials and other markets. Pursuant to the partnership, we agreed to sell certain products exclusively to BASF at annual volumes specified by BASF, subject to certain volume limits, throughDecember 31, 2027 . Pursuant to the partnership, through the year endedDecember 31, 2019 , BASF also made two prepayments of$5.0 million each to us. BASF had the right to request that 25.3% of any amounts we invoiced to BASF for Spaceloft A2 be credited against the prepayment balances. BASF also had the right to request that we repay any uncredited amount of the first prepayment following a six-week notice period on or afterJanuary 1, 2022 and the second prepayment on or afterJanuary 1, 2023 . As ofDecember 31, 2021 , we had received$10.0 million in prepayments from BASF and applied approximately$0.3 million of credits against amounts we had invoiced to BASF. During 2021,Aspen and BASF jointly announced that BASF would discontinue further marketing and sale of Spaceloft A2 as ofNovember 15, 2021 . After that date, BASF customers have had the right to purchase Spaceloft A2 directly from us. OnDecember 15, 2021 , we terminated the supply arrangement withBASF. As part of the termination,Aspen and BASF agreed that any uncredited prepayment balances would remain outstanding and subject to repayment upon BASF's request following the requisite six-week notice periods afterJanuary 1, 2022 andJanuary 1, 2023 , respectively. OnJanuary 31, 2022 , BASF requested that an outstanding prepayment balance of$4.6 million be repaid and we made the requested repayment onFebruary 15, 2022 . OnNovember 5, 2020 , we entered into a sales agreement for an at-the-market ("ATM") offering program withB. Riley Securities as our sales agent. During the year endedDecember 31, 2021 , we sold 929,981 shares of our common stock through the ATM offering program and received net proceeds of$19.4 million . OnFebruary 3, 2021 , we entered into a supply agreement withSilbond Corporation for the purchase of certain silanes products. Pursuant to the agreement, we agreed to purchase, and Silbond agreed to supply, all of our requirements for the specified silanes at ourEast Providence facility through the term of the agreement onSeptember 30, 2023 , unless either party terminates the agreement earlier pursuant to its terms. OnJune 29, 2021 , we sold 3,462,124 shares to an affiliate of Koch, in a private placement of our common stock and received net proceeds of$73.5 million after deducting fees and offering expenses of$1.5 million . OnFebruary 15, 2022 , we entered into a securities purchase agreement with an affiliate of Koch to sell 1,791,986 shares for aggregate gross proceeds of$50.0 million . The closing of the sale of 1,791,986 shares is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. On 65 --------------------------------------------------------------------------------February 18, 2022 , we sold and issued to an affiliate of Koch$100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes due 2027, or the Notes. The Notes bear interest at the Secured Overnight Financing Rate, or SOFR, plus 5.50% per annum if interest is paid in cash, or the Cash Interest, or, if interest is paid in kind (through an increase in the principal amount of the outstanding Notes or through the issuance of additional Notes), at SOFR plus 6.50% per annum, or PIK Interest. Under the terms of the investment, SOFR has a floor of 1% and a cap of 3%. We can elect to make any interest payment through Cash Interest, PIK Interest or any combination thereof. Interest on the Notes is payable semi-annually in arrears onJune 30 andDecember 30 , commencing onJune 30, 2022 . It is expected that the Notes will mature onFebruary 18, 2027 , subject to earlier conversion, redemption or repurchase. OnMarch 12, 2021 , we entered into an Amended and Restated Loan and Security Agreement (Loan Agreement) withSilicon Valley Bank to extend the maturity date of the revolving credit facility toApril 28, 2022 . Pursuant to the Loan Agreement, we are permitted to borrow a maximum of$20.0 million , subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, subject to a minimum rate of 4.00% per annum, plus a margin. The rates applicable to borrowings vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility. The credit facility has also been amended to establish minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants, each as defined in the Loan Agreement. OnSeptember 29, 2021 , and subsequently onDecember 27, 2021 , we entered into amendments to the Loan Agreement to revise certain financial covenants, among other things. OnMay 1, 2020 , our wholly owned subsidiary,Aspen Aerogels Rhode Island, LLC , executed a note for an unsecured loan of$3.7 million (PPP Loan) pursuant to the Paycheck Protection Program established by the CARES Act, as amended, and administered by theU.S. Small Business Administration (SBA). OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and less than$0.1 million in accrued interest after approving the Borrower's application for forgiveness of the PPP Loan under the provisions of the CARES Act. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the year endedDecember 31, 2021 . In response to the COVID-19 pandemic, we have implemented and are following safe practices recommended by public health authorities and other government entities. We continue to focus on the safety and health of our employees, customers and vendors. In addition, we have implemented various precautionary measures, including remote work arrangements, restricted business travel and procedures for social distancing, face coverings and safe hygiene. We continue to monitor public health guidance as it evolves and plan to adapt our practices as appropriate. Refer to the section below entitled "Item 1A. Risk Factors" for more information concerning risks to our business associated with COVID-19.
Our revenue for the year ended
Key Metrics and Non-GAAP Financial Measures
We regularly review a number of metrics, including the following key metrics, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Square Foot Operating Metric
We price our product and measure our product shipments in square feet. We estimate our annual capacity was 55 million square feet of aerogel blankets atDecember 31, 2021 . We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and product shipments on a uniform and consistent basis. The following chart sets forth product shipments in square feet associated with recognized revenue, including revenue recognized over time utilizing the input method, for the periods presented: Year Ended December 31, 2021 2020 2019 (Square feet in thousands)
Product shipments in square feet 34,977 28,635 40,720
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--------------------------------------------------------------------------------Adjusted EBITDA
We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance. We define Adjusted EBITDA as net income (loss) before interest expense, taxes, depreciation, amortization, stock-based compensation expense and other items, from time to time, which we do not believe are indicative of our core operating performance, which in 2021 included a gain on the extinguishment of debt. Adjusted EBITDA is a supplemental measure of our performance that is not presented in accordance withU.S. GAAP. Adjusted EBITDA should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance withU.S. GAAP. In addition, our definition and presentation of Adjusted EBITDA may not be comparable to similarly titled measures presented by other companies.
We use Adjusted EBITDA:
• as a measure of operating performance because it does not include the
impact of items that we do not consider indicative of our core operating
performance;
• for planning purposes, including the preparation of our annual operating
budget;
• to allocate resources to enhance the financial performance of our
business; and
• as a performance measure used under our bonus plan.
We also believe that the presentation of Adjusted EBITDA provides useful
information to investors with respect to our results of operations and in
assessing the performance and value of our business. Various measures of EBITDA
are widely used by investors to measure a company's operating performance
without regard to items that can vary substantially from company to company
depending upon financing and accounting methods, book values of assets, capital
structures and the methods by which assets were acquired.
Although measures similar to Adjusted EBITDA are frequently used by investors
and securities analysts in their evaluation of companies, we understand that
Adjusted EBITDA has limitations as an analytical tool, and you should not
consider it in isolation or as a substitute for net income (loss), income (loss)
from operations, net cash provided by (used in) operating activities or an
analysis of our results of operations as reported under U.S. GAAP. Some of these
limitations are:
• Adjusted EBITDA does not reflect our historical cash expenditures or
future requirements for capital expenditures or other contractual
commitments;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our
working capital needs;
• Adjusted EBITDA does not reflect stock-based compensation expense;
• Adjusted EBITDA does not reflect our income tax expense or cash
requirements to pay our income taxes;
• Adjusted EBITDA does not reflect our interest expense, or the cash
requirements necessary to service interest or principal payments on our
debt;
• although depreciation, amortization and impairment charges are non-cash
charges, the assets being depreciated, amortized or impaired will often
have to be replaced in the future, and Adjusted EBITDA does not reflect
any cash requirements for these replacements; and
• other companies in our industry may calculate EBITDA or Adjusted EBITDA
differently than we do, limiting their usefulness as a comparative
measure.
Because of these limitations, our Adjusted EBITDA should not be considered as a measure of discretionary cash available to us to reinvest in the growth of our business or as a measure of cash available for us to meet our obligations. To properly and prudently evaluate our business, we encourage you to review theU.S. GAAP financial statements included elsewhere in this Annual Report on Form 10-K, and not to rely on any single financial measure to evaluate our business. 67
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The following table presents a reconciliation of net loss, the most directly
comparable
Year Ended December 31,
2021 2020 2019
($ in thousands)
Net loss $ (37,094 ) $ (21,809 ) $ (14,565 )
Depreciation and amortization 9,440 10,198 10,213
Stock-based compensation (1) 5,176 5,004 3,771
Gain on the extinguishment of debt (3,734 ) - -
Interest expense, net 229 240 406
Adjusted EBITDA $ (25,983 ) $ (6,367 ) $ (175 ) (1) Represents non-cash stock-based compensation related to vesting and
modifications of stock option grants, vesting of restricted stock units and
vesting and modification of restricted common stock.
The following table presents a reconciliation of net loss, the most directly comparableU.S. GAAP measure, to Adjusted EBITDA for the quarters presented: Three Months Ended Three Months Ended 2021 2020 March 31 June 30 Sept. 30 Dec. 31 March 31 June 30 Sept. 30 Dec. 31 ($ in thousands) Net loss$ (6,250 ) $ (6,669 ) $ (7,822 )
2,638 2,104 2,114 2,584 2,563 2,562 2,545 2,528 Stock-based compensation (1)
976 1,070 1,554 1,576 992 1,007 991 2,014
Gain on the extinguishment of debt - - (3,734 ) - - - - -
Interest expense, net 75 55 58 41 83 50 49 58
Adjusted EBITDA $ (2,561 ) $ (3,440 ) $ (7,830 ) $ (12,152 ) $ 469 $ (2,079 ) $ (3,168 ) $ (1,589 ) (1) Represents non-cash stock-based compensation related to vesting and
modifications of stock option grants, vesting of restricted stock units and
vesting and modification of restricted common stock.
Our financial performance, including such measures as net income (loss), earnings per share and Adjusted EBITDA, are affected by a number of factors including volume and mix of aerogel products sold, average selling prices, our material costs and manufacturing expenses, the costs associated with capacity expansions and start-up of additional production capacity, and the amount and timing of operating expenses. Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to period. During 2021, we experienced strong volume growth in our energy infrastructure business, particularly inNorth America , due to the beginning stages of a post-COVID recovery, initial revenues in the electric vehicle market, and continued market share gains in the sustainable building materials market. As a result, we experienced total revenue growth of 21% during the year. We significantly increased staffing and spending levels in support of growing demand for our thermal barrier business and our carbon aerogel battery material opportunity in coming years. We also increased staffing and spending to expand and defend our IP portfolio, and to enhance our general and administrative functions to manage the anticipated strong growth in our business. As a result, we experienced an increase in net loss and a decrease in Adjusted EBITDA during 2021 versus 2020. We expect to maintain strong revenue growth during 2022 driven by a continued post-COVID recovery in the energy infrastructure market, accelerating demand in the electric vehicle market and continued market share gains in the sustainable building materials market. Our expectation to maintain strong revenue growth is based, in part, on our OEM customers' production volume forecasts and targets as well as our expectation to successfully scale our manufacturing capabilities and address any potential supply chain issues to meet this expected demand. We are also planning a significant increase in staffing and spending levels in support of our electric vehicle market opportunities, including expenses associated with the start-up and operation of an automated fabrication facility inMonterrey, Mexico , during the year. As a result, we expect to experience an increase in net loss and a decrease in Adjusted EBITDA during 2022. We also expect to incur significant capital expenditures and growing expenses during 2022, related to our planned second aerogel manufacturing facility to be located inBulloch County, Georgia . We are planning to invest approximately$700.0 million in 68
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two phases in the construction of the second facility. We expect to have the first phase of the second plant operational late in the second-half of 2023.
At full capacity, we estimate theGeorgia facility alone can produce thermal barriers for 4.4 million electric vehicles per year and support more than$1.35 billion in annual revenue. In the aggregate, we project ourEast Providence andGeorgia plants will provide the capacity to support more than$1.6 billion in annual revenue with potential gross margins of 35%, EBITDA margins of 25% and free cash flow sufficient to fund future capacity expansions, including a third aerogel plant. Revenue We recognize product revenue from the sale of our line of aerogel products and research services revenue from the provision of services under contracts with various agencies of theU.S. government and other institutions. Product and research services revenue is recognized upon the satisfaction of contractual performance obligations. We record deferred revenue for product sales when (i) we have delivered products but other revenue recognition criteria have not been satisfied or (ii) payments have been received in advance of the completion of required performance obligations.
We have decided to cease efforts to secure additional research contracts and to wind down existing contract research activities.
The following table sets forth the total revenue for the periods presented:
Year Ended December 31,
2021 2020 2019
($ in thousands)
Revenue:
Product $ 121,112 $ 99,834 $ 136,934
Research services 510 439 2,441
Total revenue $ 121,622 $ 100,273 $ 139,375
Product revenue accounted for greater than 99% of total revenue for both the
years ended December 31, 2021 and 2020, and 98% for the year ended December 31,
2019 . We experienced a 21% increase in total revenue during 2021 driven by the
increase in square feet shipped in our energy infrastructure business,
particularly in North America , initial revenues in the electric vehicle market,
and continued market share gains in the sustainable building materials market.
Our product revenue increase was partially curtailed by COVID-related staffing
and raw material shortages during the year, particularly in the fourth quarter.
We project revenue growth during 2022 due to a continued post-COVID recovery in
the energy infrastructure market, accelerating demand in the electric vehicle
market and continued market share gains in the sustainable building materials
market. Our projected revenue growth may be constrained by a shortage of
unskilled labor associated with the COVID-19 pandemic.
A substantial majority of our revenue is generated from a limited number of
direct customers, including distributors, contractors, fabricators, partners and
end-user customers. Our ten largest customers accounted for approximately 68% of
our total revenue during the year ended December 31, 2021 , and we expect that
most of our revenue will continue to come from a relatively small number of
customers for the foreseeable future.
In 2021, sales to Distribution International, Inc. represented 28% of our total
revenue. In 2020, sales to Distribution International, Inc. and SPCC Joint
Venture represented 21% and 15% of our total revenue, respectively. In 2019,
sales to Distribution International, Inc. and SPCC Joint Venture represented 20%
and 13% of our total revenue, respectively. For each of the noted periods, there
were no other customers that represented 10% or more of our total revenues.
We conduct business across the globe and a substantial portion of our revenue is
generated outside of the United States . Total revenue from outside of the United
States , based on shipment destination, amounted to $54.8 million , or 45% of our
total revenue, $55.5 million , or 55% of our total revenue, and $81.0 million , or
58% of our total revenue, in the years ended December 31, 2021 , 2020 and 2019,
respectively.
Cost of Revenue
Cost of product revenue consists primarily of materials and manufacturing expense. Cost of product revenue is recorded when the related product revenue is recognized.
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Material is our most significant component of cost of product revenue and
includes fibrous batting, silica materials and additives. Material costs as a
percentage of product revenue were 48%, 44% and 48% for the years ended December
31, 2021 , 2020 and 2019, respectively. Material costs as a percentage of product
revenue vary from product to product due to differences in average selling
prices, material requirements, product thicknesses, and manufacturing yields. In
addition, we provide warranties for our products and record the estimated cost
within cost of revenue in the period that the related revenue is recorded or
when we become aware that a potential warranty claim is probable and can be
reasonably estimated. As a result of these factors, material costs as a
percentage of product revenue will vary from period to period due to changes in
the mix of aerogel products sold, the costs of our raw materials or the
estimated cost of warranties. In addition, global supply chain disturbances,
increased reliance on foreign materials procurement, industrial gas supply
constraints, increases in the cost of our raw materials, and other factors may
significantly impact our material costs and have a material impact on our
operations. We expect that material costs will increase in absolute dollars
during 2022 due to projected growth in product shipments, but decrease as a
percentage of revenue due to projected increases in average selling prices,
improved manufacturing, and fabrication yields and a favorable mix of products
sold.
Manufacturing expense is also a significant component of cost of revenue.
Manufacturing expense includes labor, utilities, maintenance expense, and
depreciation on manufacturing assets. Manufacturing expense also includes
stock-based compensation of manufacturing employees and shipping costs.
Manufacturing expense as a percentage of product revenue was 44%, 42% and 33%
for the years ended December 31, 2021 , 2020 and 2019, respectively. We expect
that manufacturing expense will increase in absolute dollars and as a percentage
of revenue during 2022 due to increased staffing and spending levels in support
of our thermal barrier business, including the start-up and operation of an
automated fabrication facility in Monterrey, Mexico and the initial staffing and
operational requirements of our planned second aerogel manufacturing facility in
Bulloch County, Georgia .
During 2022, we expect that cost of product revenue will increase in absolute
dollars due to projected volume growth and a planned increase in staffing and
spending levels, but decrease as a percentage of product revenue due to
projected increases in average selling prices, improved manufacturing and
fabrication yields and a favorable mix of products sold.
Cost of research services revenue consists of direct labor costs of research
personnel engaged in the contract research, third-party consulting and
subcontractor expense, and associated direct material costs. This cost of
revenue also includes overhead expenses associated with project resources,
development tools and supplies. In 2022, we expect that cost of research
services revenue will continue to decline as we wind down our existing contract
research activities.
Gross Profit
Our gross profit as a percentage of revenue is affected by a number of factors,
including the volume of aerogel products produced and sold, the mix of aerogel
products sold, average selling prices, our material and manufacturing costs,
realized capacity utilization and the costs associated with expansions and
start-up of production capacity. Accordingly, we expect our gross profit to vary
significantly in absolute dollars and as a percentage of revenue from period to
period. Gross profit as a percentage of total revenue was 8%, 15%, and 19% for
the years ended December 31, 2021 , 2020 and 2019, respectively.
During 2022, we expect gross profit to increase in both absolute dollars and as
a percentage of total revenue due to the combination of a projected increase in
total revenue combined with projected reduction in material costs as a
percentage of total revenue, offset, in part, by a projected increase in
manufacturing expense as a percentage of revenue.
In the longer term, we expect gross profit to improve in absolute dollars and as
a percentage of revenue due to expected increases in total revenue, production
volumes and manufacturing productivity. In addition, we expect the gross profit
improvement derived from the increases in revenue, volume and productivity will
be supported by the continued implementation of lower cost product formulations
and realization of material purchasing efficiencies.
Operating Expenses
Operating expenses consist of research and development, sales and marketing, and
general and administrative expenses. Operating expenses include personnel costs,
legal fees, professional fees, service fees, insurance premiums, travel expense,
facilities related costs and other costs, expenses and fees. The largest
component of our operating expenses is personnel costs, consisting of salaries,
benefits, incentive compensation and stock-based compensation. In any particular
period, the timing and extent of personnel additions or reductions, legal
activities, including patent enforcement actions, marketing programs, research
efforts and a range of similar activities or actions could materially affect our
operating expenses, both in absolute dollars and as a percentage of revenue.
During 2022, we expect to continue to hire additional personnel and incur
additional operating expenses to support the anticipated multi-year growth in
our PyroThin thermal barrier business. As a result, we expect that operating
expenses will increase in
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both absolute dollars and as a percentage of revenue during the year. In the longer term, we expect that operating expenses will increase in absolute dollars, but decrease as a percentage of revenue.
Research and Development Expenses
Research and development expenses consist primarily of expenses for personnel engaged in the development of next generation aerogel compositions, form factors and manufacturing technologies. These expenses also include testing services, prototype expenses, consulting services, trial formulations for new products, equipment depreciation, facilities costs and related overhead. We expense research and development costs as incurred. We expect to continue to devote substantial resources to the development of new aerogel technologies, including our carbon aerogel battery materials. We believe that these investments are necessary to maintain and improve our competitive position. We also expect to continue to invest in research and engineering personnel and the infrastructure required in support of their efforts. While we expect our research and development expenses will increase in absolute dollars but decrease as a percentage of revenue in the longer term, in 2022 we expect these expenses will increase in both absolute dollars and as a percentage of revenue.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel costs, incentive compensation, marketing programs, travel and related costs, consulting expenses and facilities related costs. We expect that sales and marketing expenses will increase in absolute dollars and as a percentage of revenue during 2022 principally due to an increase in compensation associated with the addition of personnel in support of our PyroThin thermal barrier business. In the longer term, we expect that sales and marketing expenses will increase in absolute dollars but decrease as a percentage of revenue.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, legal expenses, consulting and professional services, audit and tax consulting costs, and expenses for our executive, finance, legal, human resources and information technology organizations. General and administrative expenses have increased as we have incurred additional costs related to operating as a publicly-traded company, which include costs of compliance with securities, corporate governance, and related laws and regulations, investor relations expenses, increased insurance premiums, including director and officer insurance, and increased audit and legal fees. In addition, we expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business. We also expect that the patent enforcement actions, described in more detail under "Legal Proceedings" in Part I, Item 3 of this Annual Report on Form 10-K, if protracted, could result in significant legal expense over the medium to long-term. While we expect that our general and administrative expenses will increase in absolute dollars but decrease as a percentage of revenue in the longer term, in 2022 we expect such expenses will increase in both absolute dollars and as a percentage of revenue.
Gain on Extinguishment of Debt
OnMay 1, 2020 , our wholly-owned subsidiary,Aspen Aerogels Rhode Island, LLC , or the Borrower, executed a note for an unsecured PPP loan of$3.7 million pursuant to the CARES Act. OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and accrued interest to the noteholder after approving the Borrower's application for forgiveness of the PPP Loan. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the year endedDecember 31, 2021
Interest Expense, Net
For the years endedDecember 31, 2021 , 2020, and 2019, interest expense, net consisted primarily of fees and interest expense related to our revolving credit facility. Provision for Income Taxes We have incurred net losses since inception and have not recorded benefit provisions forU.S. federal income taxes or state income taxes since the tax benefits of our net losses have been offset by valuation allowances due to the uncertainty associated with the utilization of net operating loss carryforwards. 71 -------------------------------------------------------------------------------- AtDecember 31, 2021 , we had$296.1 million of net operating losses available to offset future federal income tax, if any, of which$194.6 million expire on various dates throughDecember 31, 2037 . Net operating losses of$101.5 million generated from 2018 through 2021 have an unlimited carryforward.
Results of Operations
The following tables set forth our results of operations for the periods
presented:
Year Ended December 31,
2021 2020 2019
($ in thousands)
Revenue:
Product $ 121,112 $ 99,834 $ 136,934
Research services 510 439 2,441
Total revenue 121,622 100,273 139,375
Cost of revenue:
Product 111,552 85,545 111,759
Research services 133 134 1,332
Gross profit 9,937 14,594 26,284
Operating expenses:
Research and development 11,441 8,729 8,407
Sales and marketing 16,581 11,753 15,557
General and administrative 22,514 15,681 16,479
Total operating expenses 50,536 36,163 40,443
Loss from operations (40,599 ) (21,569 ) (14,159 )
Interest expense, net (229 ) (240 ) (406 )
Gain on extinguishment of debt 3,734 - -
Total other income (expense) 3,505 (240 ) (406 ) Net loss
$ (37,094 ) $ (21,809 ) $ (14,565 )
Year ended
The following tables set forth our results of operations for the periods
presented:
Year Ended
Year Ended December 31, December 31,
2021 2020 $ Change % Change 2021 2020
(Percentage of
($ in thousands) total revenue)
Revenue:
Product $ 121,112 $ 99,834 $ 21,278 21 % 100 % 100 %
Research services 510 439 71 16 % 0 % 0 %
Total revenue 121,622 100,273 21,349 21 % 100 % 100 %
Cost of revenue:
Product 111,552 85,545 26,007 30 % 92 % 85 %
Research services 133 134 (1 ) (1 )% 0 % 0 %
Gross profit 9,937 14,594 (4,657 ) (32 )% 8 % 15 %
Operating expenses:
Research and development 11,441 8,729 2,712 31 % 9 % 9 %
Sales and marketing 16,581 11,753 4,828 41 % 14 % 12 %
General and administrative 22,514 15,681 6,833 44 % 19 % 16 %
Total operating expenses 50,536 36,163 14,373 40 % 42 % 36 %
Loss from operations (40,599 ) (21,569 ) (19,030 ) 88 % (33 )% (22 )%
Interest expense, net (229 ) (240 ) 11 (5 )% (0 )% (0 )%
Gain on extinguishment of debt 3,734 - 3,734 100 % 3 % - %
'Total other income (expense) 3,505 (240 ) 3,745
1,560 % 3 % (0 )%
Net loss $ (37,094 ) $ (21,809 ) $ (15,285 ) 70 % (30 )% (22 )%
72--------------------------------------------------------------------------------
Revenue
Year Ended December 31, Change
2021 2020
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Revenue:
Product $ 121,112 100 % $ 99,834 100 % $ 21,278 21 %
Research services 510 0 % 439 0 % 71 16 %
Total revenue $ 121,622 100 % $ 100,273 100 % $ 21,349 21 %
The following chart sets forth product shipments in square feet associated with
recognized revenue, including revenue recognized over time utilizing the input
method, for the periods presented:
Year Ended
December 31, Change
2021 2020 Amount Percentage
Product shipments in square feet (in
thousands) 34,977 28,635 6,342 22 %
Total revenue increased
Product revenue increased by$21.3 million , or 21%, to$121.1 million in 2021 from$99.8 million in 2020. This increase was driven by the increase in square feet shipped in our energy infrastructure business, particularly inNorth America , due to the beginning stages of a post-COVID recovery, initial revenues in the electric vehicle market, and continued market share gains in the sustainable building materials market. Product revenue for the year endedDecember 31, 2021 , included$34.1 million in sales toDistribution International, Inc. Product revenue for the year endedDecember 31, 2020 , included$20.7 million in sales toDistribution International, Inc. and$15.3 million in sales to SPCC Joint Venture. The average selling price per square foot of our products decreased by$0.03 , or 1%, to$3.46 per square foot for the year endedDecember 31, 2021 , from$3.49 per square foot for the year endedDecember 31, 2020 . This decrease in average selling price principally reflected the impact of a change in the mix of products sold. This decrease in average selling price had the effect of decreasing product revenue by approximately$0.9 million for the year endedDecember 31, 2021 . In volume terms, product shipments increased by 6.4 million square feet, or 22%, to 35.0 million square feet of aerogel products for the year endedDecember 31, 2021 , as compared to 28.6 million square feet in the year endedDecember 31, 2020 . The increase in product volume had the effect of increasing product revenue by approximately$22.1 million for the year endedDecember 31, 2021 .
Research services revenue increased by
Product revenue as a percentage of total revenue was greater than 99% of total
revenue in 2021 and in 2020. Research services revenue was less than 1% of total
revenue in 2021 and in 2020. We expect that product revenue will compose
virtually all of our total revenue in the long-term.
We project revenue growth during 2022 due to a continued post-COVID recovery in
the energy infrastructure market, accelerating demand in the electric vehicle
market and continued market share gains in the sustainable building materials
market.
73--------------------------------------------------------------------------------
Cost of Revenue
Year Ended December 31, Change
2021 2020
Percentage Percentage Percentage Percentage
of Related of Total of Related of Total
Amount Revenue Revenue Amount Revenue Revenue Amount Percentage
($ in thousands)
Cost of revenue:
Product $ 111,552 92 % 92 % $ 85,545 86 % 85 % $ 26,007 30 %
Research services 133 26 % 0 % 134 31 % 0 % (1 ) (1 )%
Total cost of revenue $ 111,685 92 % 92 % $ 85,679 85 % 85 % $ 26,006 30 %
Total cost of revenue increased $26.0 million , or 30%, to $111.7 million in 2021
from $85.7 million in 2020. The increase in total cost of revenue was the result
of an increase in product cost of revenue.
Product cost of revenue increased $26.1 million , or 30%, to $111.6 million in
2021 from $85.5 million in 2020. The $26.1 million increase was the result of a
$14.5 million increase in material costs and an $11.6 million increase in
manufacturing expense. The increase in material costs was driven principally by
the 6.4 million square feet, or 22%, increase in product shipments, an increase
in manufacturing costs and an unfavorable mix of products sold. The increase in
manufacturing expense was primarily driven by increases in compensation and
related costs of $8.0 million , operating supplies of $2.1 million , maintenance
costs of $0.6 million , waste disposal costs of $0.5 million , and operating costs
of $0.4 million .
Product cost of revenue as a percentage of product revenue increased to 92% in
2021 from 86% in 2020. This increase was the result of the increase in both
material costs and manufacturing expense as a percentage of revenue during the
year ended December 31, 2021 .
During 2022, we expect that cost of product revenue will increase in absolute
dollars due to projected volume growth and a planned increase in staffing and
spending levels to meet our expected revenue growth, but decrease as a
percentage of product revenue due to projected increases in average selling
prices, improved manufacturing and fabrication yields and a favorable mix of
products sold.
Gross Profit
Year Ended December 31, Change
2021 2020
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Gross profit $ 9,937 8 % $ 14,594 15 % $ (4,657 ) (32 )%
Gross profit decreased $4.7 million , or 32%, to $9.9 million in 2021 from $14.6
million in 2020. The decrease in gross profit was the result the $26.0 million
increase in total cost of revenue, partially offset by the $21.3 million
increase in total revenue. The increase in total cost of revenue was principally
driven by the 6.4 million square feet, or 22%, increase in product shipments.
The increase in total revenue was principally the result of the 6.4 million
square feet, or 22%, increase in product shipments.
Gross profit as a percentage of total revenue decreased to 8% in 2021 from 15%
in 2020. This decrease was principally the result of the $11.6 million increase
in manufacturing costs and the unfavorable mix of products sold.
During 2022, we expect gross profit to increase in both in absolute dollars and
as a percentage of total revenue due principally to the projected increase in
total revenue combined with a projected reduction in material costs as a
percentage of total revenue, offset, in part, by a projected increase in
manufacturing expense as a percentage of revenue.
74--------------------------------------------------------------------------------
Research and Development Expenses
Year Ended December 31, Change
2021 2020
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Research and development expenses $ 11,441 9 % $ 8,729 9 % $ 2,712 31 %
Research and development expenses increased by $2.7 million , or 31%, to $11.4
million in 2021 from $8.7 million in 2020. The $2.7 million increase was the
result of increases in compensation and related costs of $1.6 million ,
professional fees of $0.6 million and other research and development expenses of
$0.5 million .
Research and development expenses as a percentage of total revenue was 9% during
the years ended
We expect that our research and development expenses will increase in both absolute dollars and as a percentage of revenue during 2022 in line with our decision to increase resources dedicated to the development of new aerogel products and technologies, including our carbon aerogel battery materials.
In the long-term, we expect to continue to increase investment in research and
development in our efforts to enhance and expand our aerogel technology
platform. However, we expect that research and development expenses will decline
as a percentage of total revenue in the long-term due to projected growth in
product revenue.
Sales and Marketing Expenses
Year Ended December 31, Change
2021 2020
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Sales and marketing expenses $ 16,581 14 % $ 11,753 12 % $ 4,828 41 %
Sales and marketing expenses increased by $4.8 million , or 41%, to $16.6 million
in 2021 from $11.8 million in 2020. The increase was the result of increases in
compensation and related costs of $4.6 million and other expenses of $0.7
million , partially offset by a decrease in sales consultant expenditures of $0.5
million .
Sales and marketing expenses as a percentage of total revenue increased to 14% in 2021 from 12% in 2020 primarily due to elevated levels of compensation associated with an increase in sales and marketing personnel.
We expect sales and marketing expenses to increase in both absolute dollars and as a percentage of revenue during 2022, due principally to planned increases in staffing in support of our PyroThin thermal barrier business and a planned increase in marketing expense during the year. In the long-term, we expect that sales and marketing expenses will continue to increase in absolute dollars as we continue to increase sales personnel and marketing efforts in support of expected growth in demand for our products. However, we expect that sales and marketing expenses will decrease as a percentage of total revenue in the long-term due to projected growth in product revenue.
General and Administrative Expenses
Year Ended December 31, Change
2021 2020
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
General and administrative expenses $ 22,514 19 % $ 15,681 16 % $ 6,833 44 %
General and administrative expenses increased by
75--------------------------------------------------------------------------------
million, and other general and administrative costs of
General and administrative expenses as a percentage of total revenue increased to 19% in 2021 from 16% in 2020 primarily due to increased expenditures associated with the growth in our human resource, finance, information technology and general management organizations in preparation for the anticipated growth in our business.
We expect general and administrative expenses to increase in both absolute dollars and as a percentage of revenue during 2022.
We also expect to increase general and administrative personnel and expense
levels in the long term to support the anticipated growth of our business and
continued expansion of our manufacturing operations. We also expect that the
patent enforcement actions, described in more detail under "Legal Proceedings"
in part I, Item 3, of this Annual Report on Form 10-K, could result in
significant additional legal expense over the medium-to-long term. However, in
the longer term, we expect that general and administrative expenses will
decrease as a percentage of revenue due to projected growth in product revenue.
Interest Expense, Net
Year Ended December 31, Change
2021 2020
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Interest expense, net $ (229 ) (0 )% $ (240 ) (0 )% $ 11 (5 )%
Interest expense, net, consisting primarily of fees and interest expense
associated with outstanding balances under our revolving credit agreement, was
Year ended
The following tables set forth our results of operations for the periods
presented:
Year Ended December 31, Year Ended December 31,
2020 2019 $ Change % Change 2020 2019
(Percentage of
($ in thousands) total revenue)
Revenue:
Product $ 99,834 $ 136,934 $ (37,100 ) (27 )% 100 % 98 %
Research services 439 2,441 (2,002 ) (82 )% 0 % 2 %
Total revenue 100,273 139,375 (39,102 ) (28 )% 100 % 100 %
Cost of revenue:
Product 85,545 111,759 (26,214 ) (23 )% 85 % 80 %
Research services 134 1,332 (1,198 ) (90 )% 0 % 1 %
Gross profit 14,594 26,284 (11,690 ) (44 )% 15 % 19 %
Operating expenses:
Research and development 8,729 8,407 322 4 % 9 % 6 %
Sales and marketing 11,753 15,557 (3,804 ) (24 )% 12 % 11 %
General and administrative 15,681 16,479 (798 ) (5 )% 16 % 12 %
Total operating expenses 36,163 40,443 (4,280 ) (11 )% 36 % 29 %
Loss from operations (21,569 ) (14,159 ) (7,410 ) 52 % (22 )% (10 )%
Interest expense, net (240 ) (406 ) 166 (41 )% (0 )% (0 )%
Total interest expense, net (240 ) (406 ) 166 (41 )% (0 )% (0 )%
Net loss $ (21,809 ) $ (14,565 ) $ (7,244 ) 50 % (22 )% (10 )%
76--------------------------------------------------------------------------------
Revenue
Year Ended December 31, Change
2020 2019
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Revenue:
Product $ 99,834 100 % $ 136,934 98 % $ (37,100 ) (27 )%
Research services 439 0 % 2,441 2 % (2,002 ) (82 )%
Total revenue $ 100,273 100 % $ 139,375 100 % $ (39,102 ) (28 )%
The following chart sets forth product shipments in square feet associated with
recognized revenue, including revenue recognized over time utilizing the input
method, for the periods presented:
Year Ended
December 31, Change
2020 2019 Amount Percentage
Product shipments in square feet (in
thousands) 28,635 40,720 (12,085 ) (30 )%
Total revenue decreased
Product revenue decreased by$37.1 million , or 27%, to$99.8 million in 2020 from$136.9 million in 2019. This decrease was principally the result of COVID-19 related decreases in both project and maintenance-based demand in the global energy infrastructure market, offset, in small part, by growth in the building materials market and the impact of our 2020 price increase. Product revenue for the year endedDecember 31, 2020 , included$20.7 million in sales toDistribution International, Inc. and$15.3 million in sales to SPCC Joint Venture. Product revenue for the year endedDecember 31, 2019 , included$27.3 million in sales toDistribution International, Inc. and$18.0 million in sales to SPCC Joint Venture. The average selling price per square foot of our products increased by$0.13 , or 4%, to$3.49 per square foot for the year endedDecember 31, 2020 , from$3.36 per square foot for the year endedDecember 31, 2019 . The increase in average selling price principally reflected the impact of price increases enacted in 2020. This increase in average selling price had the effect of increasing product revenue by approximately$3.6 million for the year endedDecember 31, 2020 . In volume terms, product shipments decreased by 12.1 million square feet, or 30%, to 28.6 million square feet of aerogel products for the year endedDecember 31, 2020 , as compared to 40.7 million square feet in the year endedDecember 31, 2019 . The decrease in product volume had the effect of decreasing product revenue by approximately$40.7 million for the year endedDecember 31, 2020 . Research services revenue decreased by$2.0 million , or 82%, to$0.4 million in 2020 from$2.4 million in 2019. The decrease was primarily due to our decision to wind down our contract research activities to focus our research and development resources on improving the profitability of our existing business and developing new products and next-generation technology with application in new, high value markets. Product revenue as a percentage of total revenue was greater than 99% of total revenue in 2020 and 98% of total revenue in 2019. Research services revenue was less than 1% of total revenue in 2020 and 2% of total revenue in 2019. Cost of Revenue Year Ended December 31, Change 2020 2019 Percentage Percentage Percentage Percentage of Related of Total of Related of Total Amount Revenue Revenue Amount Revenue Revenue Amount Percentage ($ in thousands) Cost of revenue: Product$ 85,545 86 % 85 %$ 111,759 82 % 80 %$ (26,214 ) (23 )% Research services 134 31 % 0 % 1,332 55 % 1 % (1,198 ) (90 )% Total cost of revenue$ 85,679 85 % 85 %$ 113,091 81 % 81 %$ (27,412 ) (24 )% 77
-------------------------------------------------------------------------------- Total cost of revenue decreased$27.4 million , or 24%, to$85.7 million in 2020 from$113.1 million in 2019. The decrease in total cost of revenue was the result of decreases in both product cost of revenue and research services cost of revenue. Product cost of revenue decreased$26.2 million , or 23%, to$85.5 million in 2020 from$111.8 million in 2019. The$26.2 million decrease was the result of a$22.7 million decrease in material costs and a$3.5 million decrease in manufacturing expense. The decrease in material costs was driven principally by the 12.1 million square feet, or 30%, decrease in product shipments and the impact of our bill of material cost reduction initiatives. The decrease in manufacturing expense was primarily driven by decreases in variable plant and operating costs of$2.3 million and compensation and related costs of$1.2 million . Product cost of revenue as a percentage of product revenue increased to 86% in 2020 from 82% in 2019. This increase was the result of the high proportion of fixed manufacturing expenses in ourEast Providence manufacturing facility that remained essentially unchanged despite a 27% decrease in product revenue in 2020, offset, in part, by the impact of our 2020 price increases, bill of material sourcing efficiencies, and discretionary expense controls in response to the COVID-19 pandemic. Research services cost of revenue decreased by$1.2 million , or 90%, to$0.1 million in 2020 from$1.3 million in 2019. Cost of research service revenue as a percentage of research services revenue decreased to 31% in 2020 from 55% in 2019 due to our decision to wind down existing research activities. Gross Profit Year Ended December 31, Change 2020 2019 Percentage Percentage Amount of Revenue Amount of Revenue Amount Percentage ($ in thousands) Gross profit$ 14,594 15 %$ 26,284 19 %$ (11,690 ) (44 )% Gross profit decreased$11.7 million , or 44%, to$14.6 million in 2020 from$26.3 million in 2019. The decrease in gross profit was the result of the$39.1 million decrease in total revenue, offset, in part, by the$27.4 million decrease in total cost of revenue. The decrease in revenue was principally the result of COVID-19 related decreases in both project and maintenance-based demand in the global energy infrastructure market, offset, in small part, by growth in our building materials business and the impact of our 2020 price increase. The decrease in total cost of revenue was principally the result of the 12.1 million square feet, or 30%, decrease in product shipments. Gross profit as a percentage of total revenue decreased to 15% in 2020 from 19% in 2019. This decrease was principally the result of the high proportion of fixed manufacturing expenses in ourEast Providence manufacturing facility that remained essentially unchanged despite the 27% decrease in product revenue in 2020.
Research and Development Expenses
Year Ended December 31, Change
2020 2019
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Research and development expenses $ 8,729 9 % $ 8,407 6 % $ 322 4 %
Research and development expenses increased by $0.3 million , or 4%, to $8.7
million in 2020 from $8.4 million in 2019. The $0.3 million increase reflected
our decision to focus research activities on the development of new products and
next-generation technology with application in new, high value markets,
including the electric vehicle market.
Research and development expenses as a percentage of total revenue increased to
9% during the year ended December 31, 2020 , from 6% during the comparable period
in 2019. The increase was the result of both the increase in research and
development expenses and the decrease in total revenue.
78--------------------------------------------------------------------------------
Sales and Marketing Expenses
Year Ended December 31, Change
2020 2019
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Sales and marketing expenses $ 11,753 12 % $ 15,557 11 % $ (3,804 ) (24 )%
Sales and marketing expenses decreased by $3.8 million , or 24%, to $11.8 million
in 2020 from $15.6 million in 2019. The decrease was the result of decreases in
compensation and related costs of $1.7 million , travel and related costs of $1.3
million , sales consultant costs of $0.6 million , and other expenses of $0.2
million .
Sales and marketing expenses as a percentage of total revenue increased to 12%
in 2020 from 11% in 2019 primarily due to the decrease in overall revenue of
28%.
General and Administrative Expenses
Year Ended December 31, Change
2020 2019
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
General and administrative expenses $ 15,681 16 % $ 16,479 12 % $ (798 ) (5 )%
General and administrative expenses decreased by $0.8 million , or 5%, to
$15.7 million in 2020 from $16.5 million in 2019. The $0.8 million decrease was
the result of decreases in patent enforcement costs of $0.6 million ,
professional and legal fees of $0.3 million , compensation and related costs of
$0.3 million and other general administrative expenses of $0.1 million , offset
in part by an increase in the provision for bad debts of $0.3 million and a $0.2
million decrease in recoveries of bad debt in 2020 as compared to 2019.
General and administrative expenses as a percentage of total revenue increased
to 16% in 2020 from 12% in 2019 primarily due to the 28% decrease in revenue in
2020.
Interest Expense, net
Year Ended December 31, Change
2020 2019
Percentage Percentage
Amount of Revenue Amount of Revenue Amount Percentage
($ in thousands)
Interest expense, net $ (240 ) (0 )% $ (406 ) (0 )% $ 166 (41 )%
Interest expense, net, consisting primarily of fees and interest expense
associated with outstanding balances under our revolving credit agreement, was
Liquidity and Capital Resources
Overview
We have experienced significant losses and invested substantial resources since our inception to develop, commercialize and protect our aerogel technology and to build a manufacturing infrastructure capable of supplying aerogel products at the volumes and costs required by our customers. These investments have included research and development and other operating expenses, capital expenditures, and investment in working capital balances. Our long-term financial projections anticipate revenue growth, increasing levels of gross profit, and improved cash flows from operations. To meet expected growth in demand for our aerogel products in the electric vehicle market, we are planning to expand our aerogel blanket capacity by constructing a second manufacturing plant inBulloch County, Georgia . We expect to build the second plant in two phases at an estimated cost of$575.0 million for the first phase and$125.0 million for the second phase. We expect to 79 -------------------------------------------------------------------------------- have the first phase of the second plant operational late in the second-half of 2023. In addition, we are planning to construct and commence operation of a state-of-the-art, automated thermal barrier fabrication operation inMonterrey, Mexico during 2022 in order to keep pace with the significant potential demand for our PyroThin thermal barriers. We are also increasing our investment in the research and development of next-generation aerogel products and technologies. During 2022, we will continue to develop aerogel products and technologies for the electric vehicle market. We believe the commercial potential for our technology in the electric vehicle market is significant. To meet the anticipated revenue growth and take advantage of this market opportunity, we are adding personnel, incurring additional operating expenses, and planning to construct a carbon aerogel battery materials facility, among other items. We took several actions during 2021 to increase the financial resources available to support current operating requirements and capital expenditures. During the year endedDecember 31, 2021 , we sold an additional 929,981 shares of our common stock through the ATM offering program and received net proceeds of$19.4 million . OnJune 29, 2021 , we sold 3,462,124 shares to an affiliate of Koch in a private placement of our common stock and received net proceeds of$73.5 million . OnFebruary 15, 2022 , we entered into a securities purchase agreement with an affiliate of Koch to sell 1,791,986 shares for aggregate gross proceeds of$50.0 million , or the Common Stock PIPE. The closing of the Common Stock PIPE is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. OnFebruary 18, 2022 , we sold and issued to an affiliate of Koch$100.0 million in aggregate principal amount of Notesor the Convertible Note PIPE. The Notes bear interest at the rate of SOFR plus 5.50% per annum if interest is paid in cash, or, if interest is paid in kind (through an increase in the principal amount of the outstanding Notes or through the issuance of additional Notes), at SOFR plus 6.50% per annum. Under the terms of the investment, SOFR has a floor of 1% and a cap of 3%. We can elect to make any interest payment through Cash Interest, PIK Interest or any combination thereof. Interest on the Notes is payable semi-annually in arrears onJune 30 andDecember 30 , commencing onJune 30, 2022 . It is expected that the Notes will mature onFebruary 18, 2027 , subject to earlier conversion, redemption or repurchase. We believe that ourDecember 31, 2021 cash and cash equivalents balance of$76.6 million , plus the existing and anticipated proceeds from the Convertible Note PIPE and the Common Stock PIPE, respectively, and funds available under our revolving credit facility will be sufficient to support current operating requirements, current research and development activities and the initial capital expenditures required to support the evolving commercial opportunities in the electric vehicle market and other strategic business opportunities. However, we plan to supplement our cash balance and available credit with equity financings, debt financings, customer prepayments or technology licensing fees to provide the additional capital necessary to purchase the capital equipment, construct the new facilities and complete the aerogel capacity expansions required to support our evolving commercial opportunities and strategic business initiatives. We also intend to extend or replace our revolving credit facility withSilicon Valley Bank prior to its maturity.
Primary Sources of Liquidity
Our principal sources of liquidity are currently our cash and cash equivalents and our revolving credit facility withSilicon Valley Bank . Cash and cash equivalents consist primarily of cash, money market accounts, and sweep accounts on deposit with banks. As ofDecember 31, 2021 , we had$76.6 million of cash and cash equivalents. OnNovember 5, 2020 , we entered into a sales agreement for an at-the-market offering program (ATM) under which we could sell up to$33,871,250 of our common stock throughB. Riley Securities, Inc. We agreed to payB. Riley a commission of 3.0% of the gross proceeds of shares sold under the agreement. During the year endedDecember 31, 2021 , we sold 929,981 shares of our common stock through the ATM and received net proceeds of$19.4 million . OnJune 29, 2021 , we sold 3,462,124 shares to an affiliate of Koch in a private placement of our common stock and received net proceeds of$73.5 million after deducting fees and offering expenses of$1.5 million . OnFebruary 15, 2022 , we entered into a securities purchase agreement with an affiliate of Koch to sell 1,791,986 shares for aggregate gross proceeds of$50.0 million . The closing of the Common Stock PIPE is subject to customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. OnFebruary 18, 2022 , we issued to an affiliate of Koch$100.0 million in aggregate principal amount of Notes. OnMay 1, 2020 , our wholly owned subsidiary,Aspen Aerogels Rhode Island, LLC , (Borrower) executed a note for a loan of$3.7 million pursuant to the Paycheck Protection Program under the CARES Act, as amended, and administered by theSmall Business Administration (SBA). OnAugust 24, 2021 , the SBA remitted$3.7 million in principal and less than$0.1 million in accrued 80 -------------------------------------------------------------------------------- interest to the noteholder after approving the Borrower's application for forgiveness of the loan under the provisions of the CARES Act. Accordingly, we recorded a total gain on the extinguishment of debt of$3.7 million during the year endedDecember 31, 2021 . We have maintained our revolving credit facility, as amended from time to time, withSilicon Valley Bank sinceMarch 2011 . OnMarch 12, 2021 , we amended and restated the revolving credit facility to extend the maturity date toApril 28, 2022 and to establish certain minimum Adjusted EBITDA and minimum Adjusted QuickRatio covenants. OnSeptember 29, 2021 , and subsequently onDecember 27, 2021 , we entered into an amendment to the loan agreement to revise certain financial covenants, among other items. We intend to extend or replace the facility prior to its maturity. Under our revolving credit facility, we may borrow a maximum of$20.0 million , subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, as defined, subject to a minimum rate of 4.00% per annum, plus a margin. The rates applicable to borrowings vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, we are required to pay a monthly unused revolving line facility fee of 0.50% per annum of the average unused portion of the revolving credit facility. Under the revolving credit facility, we are required to comply with both non-financial and financial covenants, including minimum Adjusted EBITDA and Adjusted Quick Ratio covenants, as defined in the loan agreement. AtDecember 31, 2021 , we were in compliance with all such covenants. The amount available to us under the revolving credit facility atDecember 31, 2021 was$12.6 million after giving effect to$1.3 million in outstanding letters of credit. AtDecember 31, 2021 , we had no outstanding borrowings under our revolving credit facility withSilicon Valley Bank ,$1.3 million of outstanding letters of credit secured by the revolving credit facility, and an obligation of$9.7 million associated with prepayments received pursuant to our supply agreement with BASF. InJanuary 2022 , BASF requested that an outstanding prepayment balance of$4.6 million be repaid and we made the requested repayment onFebruary 15, 2022 . See "Risk Factors - Risks Related to Our Business and Strategy - We will require significant additional capital to pursue our growth strategy, but we may not be able to obtain additional financing on acceptable terms or at all" in this Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Analysis of Cash Flow
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2021 2020 2019
($ in thousands)
Net cash provided by (used in):
Operating activities $ (18,628 ) $ (9,924 ) $ (1,054 )
Investing activities (13,778 ) (3,416 ) (2,112 )
Financing activities 92,474 26,203 3,472
Net increase in cash 60,068 12,863 306
Cash, beginning of period 16,496 3,633 3,327
Cash and cash equivalents, end of period
Operating Activities During 2021, we used$18.6 million in net cash in operating activities, as compared to the use of$9.9 million in net cash during 2020, an increase in the use of cash of$8.7 million . This increase in the use of cash was the result of the increase in net loss adjusted for non-cash items of$19.4 million , and a decrease in cash provided by changes in working capital of$10.8 million . During 2020, we used$9.9 million in net cash in operating activities, as compared to the use of$1.1 million in net cash during 2019, an increase in the use of cash of$8.8 million . This increase in the use of cash was the result of the increase in net loss adjusted for non-cash items of$5.7 million , and a decrease in cash provided by changes in working capital of$3.1 million .
Investing Activities
Net cash used in investing activities is for capital expenditures for machinery and equipment principally to improve the throughput, efficiency and capacity of ourEast Providence facility and engineering designs for the planned aerogel manufacturing 81
--------------------------------------------------------------------------------
facility in
Financing Activities
Net cash provided by financing activities in 2021 totaled$92.5 million and consisted of$19.4 million of net proceeds from our ATM, net proceeds from the private placement of common stock of$73.5 million , and proceeds from employee stock option exercises of$2.3 million , offset, in part, by$2.7 million for payments for employee tax withholdings associated with the vesting of restricted stock units. Net cash provided by financing activities in 2020 totaled$26.2 million and consisted of$19.4 million in borrowings under our revolving credit facility,$14.8 million in net proceeds from an underwritten public offering of our common stock,$9.5 million in net proceeds from our ATM,$3.7 million in net proceeds from the issuance of long term debt and$2.6 million in proceeds from employee stock option exercises, offset, in part, by$22.6 million of repayments under our revolving credit facility and$1.2 million for payments for employee tax withholdings associated with the vesting of restricted stock units.
Capital Spending and Future Capital Requirements
We have made capital expenditures primarily to develop and expand our manufacturing capacity. Our capital expenditures totaled$13.8 million in 2021,$3.4 million in 2020 and$2.1 million in 2019. As ofDecember 31, 2021 , we had capital commitments of approximately$16.9 million , which included commitments for which we have entered into contracts as well as commitments authorized by our Board of Directors and relate to the enhancement of our existing production lines in ourEast Providence facility and the planned aerogel manufacturing facility inBulloch County, Georgia . These commitments consist primarily of costs for equipment and construction. We expect to build a second manufacturing plant inBulloch County, Georgia , in two phases at an estimated cost of$575.0 million for the first phase and$125.0 million for the second phase. We currently expect that the first phase of the plant will increase our annual revenue capacity by approximately$650.0 million and the second phase by approximately$700.0 million . We intend to fund capital expenditures related to the expansion of capacity of our existing manufacturing facility with our existing cash balance, available credit and anticipated cash flows from operations. We plan to fund the capital expenditures required to establish an automated thermal barrier fabrication operation, build a carbon aerogel battery materials facility, and to construct a new aerogel blanket manufacturing facility with additional equity financings, debt financings, customer prepayments, technology licensing fees or credit facilities.
Off-Balance Sheet Arrangements
Since inception, we have not engaged in any off-balance sheet activities that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.
Contractual Obligations and Commitments
Operating Leases
We lease office space for our corporate offices inNorthborough, Massachusetts , which expires in 2031. We also lease additional facilities inEast Providence, Rhode Island ;Marlborough, Massachusetts ; andPawtucket, Rhode Island for research, administrative, fabrication, and warehousing purposes under leases expiring betweenMarch 31, 2024 andOctober 1, 2031 . See "Item 2 - Properties." We also lease vehicles and equipment under non-cancelable operating leases that expire at various dates. OnDecember 22, 2021 we entered into a modified lease withG&I IX Forbes Whitney LLC , to lease approximately 51,650 square feet of space located at30 Forbes Road ,Northborough, Massachusetts 01532, the location of our current headquarters. The lease superseded a lease between us andForbes Whitney LLC's predecessor-in-interest. The term of the lease began retroactively onSeptember 1, 2021 and ends onDecember 31, 2031 . The annual base rent associated with the lease was approximately$459,000 during 2021 and has and will increase by approximately 3% annually throughAugust 31, 2027 . BeginningSeptember 1, 2027 , the base rent for the Leased Property would be reset to$11.75 per square foot, increasing by 3% annually for the remaining term of the 82 -------------------------------------------------------------------------------- lease. The lease also provides for our payment of our pro rata share of real estate taxes and certain other expenses. Upon the expiration of the lease term, we will have the right to extend the lease for an additional five years.
Thermal Barrier Contract
We are party to production contracts with a majorU.S. automotive original equipment manufacturer, or OEM, to supply fabricated, multi-part thermal barriers, or Barriers, for use in the battery system of its next-generation electric vehicles, or Contracts. Pursuant to the Contracts, we are obligated to supply Barriers at fixed annual prices and at volumes to be specified by the OEM up to a daily maximum quantity through the respective terms of the agreements, which expire at various times from 2026 through 2034. While the OEM has agreed to purchase its requirement for Barriers for locations to be designated from time to time by the OEM, it has no obligation to purchase any minimum quantity of Barriers under the Contracts. In addition, the OEM may terminate the Contracts any time and for any or no reason. All other terms of the Contracts are generally consistent with the OEM's standard purchase terms, including quality and warranty provisions customary in the automotive industry.
Supply Agreement
We were party to a supply agreement, as amended, withBASF Polyurethanes GmbH (BASF), or the Supply Agreement, and a joint development agreement with BASF SE, or the JDA. Pursuant to the Supply Agreement, the Company agreed to sell exclusively to BASF certain of our products at annual volumes specified by BASF, subject to certain volume limits, throughDecember 31, 2027 . Through the year endedDecember 31, 2019 , BASF made two prepayments each in the amount of$5.0 million to us. BASF had the right to request that 25.3% of any amounts invoiced by us to BASF for Spaceloft A2 were to be credited against the outstanding balance of the prepayments. BASF also had the right to request that we repay any uncredited amount of the first prepayment to BASF following a six-week notice period on or afterJanuary 1, 2022 and the second prepayment on or afterJanuary 1, 2023 . As ofDecember 31, 2021 , we had received$10.0 million in prepayments from BASF and applied approximately$0.3 million of credits against amounts invoiced to BASF for Spaceloft A2.
During 2021, we jointly announced that BASF would discontinue further marketing
and sale of Spaceloft A2 as of
OnDecember 15, 2021 , we terminated the supply arrangement withBASF. As part of the termination, we agreed that any uncredited prepayment balances would remain outstanding and subject to repayment upon BASF's request following the requisite six-week notice periods afterJanuary 1, 2022 andJanuary 1, 2023 , respectively.
Revolving Credit Facility
InMarch 2011 , we entered into a revolving credit facility withSilicon Valley Bank . This facility had been amended at various dates throughDecember 2020 . OnMarch 12, 2021 , we amended and restated our revolving credit facility withSilicon Valley Bank to extend the maturity date of the revolving credit facility toApril 28, 2022 and to establish certain minimum Adjusted EBITDA levels with respect to the minimum Adjusted EBITDA and minimum Adjusted Quick Ratio covenants, as defined. OnSeptember 29, 2021 and subsequently onDecember 27, 2021 , we entered into an amendment to the Loan Agreement to revise certain financial covenants, among other things. Under our revolving credit facility, we are permitted to borrow a maximum of$20.0 million , subject to continued covenant compliance and borrowing base requirements. The interest rate applicable to borrowings under the revolving credit facility is based on the prime rate, subject to a minimum rate of 4.00% per annum, plus a margin. Prime rate-based rates vary from prime rate plus 0.75% per annum to prime rate plus 2.00% per annum. In addition, we are required to pay a monthly unused revolving line of credit facility fee of 0.50% per annum of the average unused portion of the revolving credit facility. We intend to extend or replace the facility prior to its maturity.
At
OnFebruary 18, 2022 , we sold and issued to an affiliate of Koch$100.0 million in aggregate principal amount of Notes. The Notes bear interest at the rate of SOFR plus 5.50% per annum if interest is paid in cash, or, if interest is paid in kind (through an increase in the principal amount of the outstanding Notes or through the issuance of additional Notes), at SOFR plus 6.50% per annum. Under the terms of the investment, SOFR has a floor of 1% and a cap of 3%. We can elect to make any interest payment through Cash Interest, PIK Interest or any combination thereof. Interest on the Notes is payable semi-annually in arrears onJune 30 83
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and
The Notes are convertible at the option of the holder at any time until the business day prior to the maturity date, including in connection with a redemption by us. The Notes are convertible into shares of common stock based on an initial conversion rate of 28.623257 shares of our common stock per$1,000 principal amount of the Notes (which is equal to an initial conversion price of$34.936625 per share, or the Conversion Price), in each case subject to customary anti-dilution and other adjustments (as described in the Indenture, which governs the Notes). If the closing price per share of our common stock on theNew York Stock Exchange is at least 130% of the Conversion Price for 20 consecutive trading days, we may elect to convert the principal and accrued interest owing under the Notes, plus a make-whole amount equal to the sum of the present values of the remaining interest payments that would have otherwise been payable from the date of such conversion, redemption or repurchase, as applicable, through maturity, or the Make-Whole Amount, into our common stock at the Conversion Price. The Notes are redeemable by us at any time and from time to time in the event that the volume weighted average price of our common stock for the 10 trading days immediately preceding the date on which we provide the redemption notice has been at least 130% of the Conversion Price then in effect, at a redemption price of 100% of the principal amount of such Notes, plus accrued and unpaid interest to, but excluding the redemption date, plus the Make-Whole Amount.
Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by theFinancial 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
The Company has not implemented any accounting standards that had a material impact on its consolidated financial statements during the year endedDecember 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.
Critical Accounting Policies and Estimates
Our financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America . The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses and related disclosures. We believe that the estimates, assumptions and judgments involved in these accounting policies have the greatest potential impact on our financial statements; and therefore, we consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See note 2 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information about these critical accounting policies, as well as a description of our other significant accounting policies. Revenue Recognition We recognize product revenue from the sale of our line of aerogel products and research services revenue from the provision of services under contracts with various agencies of theU.S. government and other institutions. Product and research services revenue is recognized upon the satisfaction of contractual performance obligations. In general, our customary shipping terms are FOB shipping point. Products are typically delivered without significant post-sale obligations to customers other than standard warranty obligations for product defects. We provide warranties for our products and record the estimated cost within cost of sales in the period that the revenue is recorded. Our standard warranty period extends one to two years from the date of shipment, depending on the type of product purchased. Our warranties provide that our products will be free from defects in material and workmanship, and will, under normal use, conform to the specifications for the product. 84 -------------------------------------------------------------------------------- We recorded warranty expense of less than$0.1 million during the year endedDecember 31, 2021 . We did not record any warranty expense during the years endedDecember 31, 2020 and 2019. As ofDecember 31, 2021 , we had satisfied all outstanding warranty claims. Research services revenue is derived from the execution of contracts awarded by theU.S. government, other government agencies and other institutions. Our research service arrangements require us to perform research to investigate new forms and applications of aerogel technology. We record revenue earned on research services contracts using the percentage-of-completion method in two ways: (1) for firm-fixed-price contracts, we accrue that portion of the total contract price that is allocable, on the basis of our estimates of costs incurred to date to total contract cost; (2) for cost-plus-fixed-fee contracts, we record revenue that is equal to total payroll cost incurred times a stated factor plus reimbursable expenses, to a stated upper limit. The primary cost in these arrangements is the labor effort expended in completing the research. Typically, the only deliverable, other than 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 towards completion. Contract costs and rates used to allocate overhead to contracts are subject to audit by the respective contracting government agency. 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. In 2019, we decided to wind down our existing contract research activities. This decision reflected our desire to focus our research and development resources on initiatives to improve the profitability of our existing business and on efforts to develop new products and next-generation technology with application in new, high value markets. Stock-based Compensation We maintain an equity incentive plan pursuant to which our board of directors may grant qualified and nonqualified stock options, restricted stock, restricted stock units and other stock-based awards to board members, officers, key employees and others who provide or have provided service to us. We measure the costs associated with stock-based awards based on their estimated fair value at date of grant. We recognize the cost of stock-based awards as service, performance or market conditions are met. Future expense amounts for any particular quarterly or annual period could be affected by changes in our assumptions or changes in market conditions.
Stock Options
We use the Black-Scholes option-pricing model to estimate the fair value of
stock option awards. The determination of the estimated fair value of stock
option awards is based on a number of complex and subjective assumptions. These
assumptions include the determination of the estimated fair value of the
underlying security, the expected volatility of the underlying security, a
risk-free interest rate, the expected term of the option, and the forfeiture
rate for the award class. The following assumptions were used to estimate the
fair value of the option awards:
Year Ended
December 31,
2021 2020 2019
Weighted-average assumptions:
Expected term (in years) 5.96 5.96 5.81
Expected volatility 59.80 % 52.27 % 49.90 %
Risk free rate 0.86 % 1.08 % 2.44 %
Expected dividend yield - % - % - %
• The expected term represents the period that our stock-based awards are
expected to be outstanding and is determined using the simplified method
described in ASC Topic 718, Compensation - Stock Compensation, for all
grants. We believe this is a better representation of the estimated life
than our actual limited historical exercise behavior.
• For the year ended
a basis to estimate expected volatility in the valuation of stock options.
For the years ended
primarily based on the weighted-average volatility of up to 17 companies
within various industries that we believe are similar to our own.
• The risk-free interest rate is based on
with a remaining term equal to the expected life assumed at the date of
grant.
• We use an expected dividend yield of zero, since we do not intend to pay
cash dividends on our common stock in the foreseeable future, nor have we
paid dividends on our common stock in the past.
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For stock options that contained a market condition we use a Monte-Carlo
Simulation model to estimate the grant date fair value of awards expected to
vest. We based the simulation model on the Black Scholes option-pricing model
and a number of other complex assumptions including (i) whether the vesting
condition would be satisfied within the time-vesting periods, and (ii) the date
the common stock price target would be achieved per the terms of the agreement.
On December 10, 2020 , we modified the vesting conditions of NSOs to purchase
116,279 shares of common stock held by our CEO to extend the time period to
achieve the common stock price target. We accounted for the extension of the
time period as a modification and recognized $1.1 million of incremental stock
compensation expense during the year ended December 31, 2020 .
For the restricted stock award issued to our Chief Executive Officer during the
year ended December 31, 2015 that contains a performance condition, we assess
the probability that the performance condition will be satisfied. On August 2,
2017 , we modified the performance target with respect to 78,125 shares of these
awards. As of December 31, 2020 , the performance condition was not achieved and
the award expired by its terms.
For the restricted stock awards issued to our Chief Executive Officer during the
year ended December 31, 2021 that will vest subject to achievement of certain
volume weighted average common stock price targets over a three-to-five year
period, we used a Monte-Carlo simulation model to estimate the grant date fair
value with respect to 461,616 shares of restricted common stock. The award had
an aggregate date fair value of $6.5 million .
During 2020, we estimated the fair value of the modified NSOs to purchase 116,279 of common stock held by our Chief Executive Officer by use of the Black-Scholes option-pricing model assuming an expected term of 2.5 years, an expected volatility of 67.23%, a risk-free rate of 0.17% and an expected dividend yield of zero.
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