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What changed in ASPEN AEROGELS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of ASPEN AEROGELS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+578 added−586 removedSource: 10-K (2024-03-07) vs 10-K (2023-03-16)

Top changes in ASPEN AEROGELS INC's 2023 10-K

578 paragraphs added · 586 removed · 418 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

107 edited+46 added−32 removed101 unchanged
Biggest changeWe have benefited from our technical and commercial relationships with ExxonMobil in the oil refinery and petrochemical sector, with TechnipFMC in the offshore oil sector, and with BASF in the sustainable insulation market. We will continue our strategy of working with innovative companies to target and penetrate additional opportunities in the energy industrial and sustainable insulation materials markets.
Biggest changeWe will continue our strategy of working with innovative companies to target and penetrate additional opportunities in the energy industrial and sustainable insulation materials markets. Thermal Barrier We are actively developing a number of promising aerogel products and technologies for the EV market.
We will seek to exploit the unique characteristics of aerogels, including low thermal conductivity, high surface area, high electrical conductivity, and tunable porosity, to develop aerogel-enhanced products and next generation technology addressing complex and unmet market needs.
We will seek to exploit the unique characteristics of aerogels, including low thermal conductivity, high surface area, and tunable electrical conductivity and porosity to develop aerogel-enhanced products and next generation technology addressing complex and unmet market needs.
We purchase silica precursors from several suppliers in the United States, Europe and Asia, including China. Based on the current level of demand for our products, we believe that an adequate long-term supply of silica precursors is available.
We purchase silica precursors from several suppliers in the United States, Europe and Asia, including China. Based on the current level of demand for our products, we believe that an adequate long-term supply of silica precursors is available.
See “Risk Factors — Risks Related to Our Business and Strategy — Shortages of the raw materials used in the production of our products, increases in the cost of such materials or disruptions in our supply chain could adversely impact our financial condition and results of operations.” We seek to lower our manufacturing costs, while maintaining appropriate performance characteristics, and to improve the per square foot costs of our aerogel blankets by optimizing our formulations to reduce material costs, by enhancing manufacturing process controls to improve yields, by realizing price reductions from existing vendors, by qualifying new vendors and by reducing shipping costs.
See “Risk Factors — Risks Related to Our Business and Strategy — Shortages of the raw materials used 15 in the production of our products, increases in the cost of such materials or disruptions in our supply chain could adversely impact our financial condition and results of operations.” We seek to lower our manufacturing costs, while maintaining appropriate performance characteristics, and to improve the per square foot costs of our aerogel blankets by optimizing our formulations to reduce material costs, by enhancing manufacturing process controls to improve yields, by realizing price reductions from existing vendors, by qualifying new vendors and by reducing shipping costs.
Many of our competitors have greater market presence, larger market share, longer operating histories, stronger name recognition, larger customer bases and significantly greater financial, technical, sales and marketing, manufacturing and other resources than we have and may be better able to withstand volatility within the industry and throughout the economy as a whole, while retaining greater operating and financial flexibility.
Many of our competitors have greater market presence, larger market share, longer operating histories, stronger name recognition, larger customer bases and significantly greater financial, technical, sales and marketing, manufacturing and other resources than we have and may be better able to withstand volatility within the industry and throughout the 6 economy as a whole, while retaining greater operating and financial flexibility.
Item 1. B USINESS When used in this report, the terms “we,” “us,” “our” and “the Company” refer to Aspen Aerogels, Inc. and its subsidiaries. Aspen Aerogels, Inc. is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel materials used primarily in the energy industrial, sustainable insulation materials and electric vehicle markets.
Item 1. B USINESS When used in this report, the terms “we,” “us,” “our” and “the Company” refer to Aspen Aerogels, Inc. and its subsidiaries. Aspen Aerogels, Inc. is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel materials used primarily in the energy industrial, sustainable insulation materials and electric vehicle (EV) markets.
As part of the material qualification process established by these companies, a new insulation or thermal barrier product must meet general industry standards, such as consensus standards developed by ASTM International, and, in many cases, company-specific internal standards to be considered and approved for use or designed into vehicle platforms.
As part of the material qualification process established by these companies, a new insulation or thermal barrier product must meet general industry standards, such as consensus standards developed by ASTM International, and, in many 11 cases, company-specific internal standards to be considered and approved for use or designed into vehicle platforms.
In addition, some insulation contractors provide end-users with project engineering and design services. • Fabricators: We currently sell directly to a small network of fabricators that design, customize and manufacture insulation components and systems for use in the energy industrial, sustainable insulation materials, transportation, appliance and apparel markets. • Direct Sales to End-Users: In certain instances, we sell directly to end-users in the energy industrial insulation market.
In addition, some insulation contractors provide end-users with project engineering and design services. 12 • Fabricators: We currently sell directly to a small network of fabricators that design, customize and manufacture insulation components and systems for use in the energy industrial, sustainable insulation materials, transportation, appliance and apparel markets. • Direct Sales to End-Users: In certain instances, we sell directly to end-users in the energy industrial insulation market.
Furthermore, our adversaries may have significant resources and interest to litigate and therefore, these litigation matters could be protracted and may ultimately involve significant legal expenses. We believe that having distinctive names is an important factor in marketing our products, and therefore we use trademarks to brand some of our products, including Pyrogel, PyroThin, Cryogel and Spaceloft.
Furthermore, our adversaries may have significant resources and interest to litigate and therefore, these litigation matters could be protracted and may ultimately involve significant legal expenses. We believe that having distinctive names is an important factor in marketing our products, and therefore we use trademarks to brand some of our products, including Pyrogel, PyroThin and Cryogel.
Insulation systems in the energy industrial market are designed to maintain hot and cold process equipment, piping and storage tanks at optimal temperatures, to protect plant and equipment from the elements and from the risk of fire, and to protect workers. The market is served by a well-organized, well-established worldwide network of distributors, contractors, and engineers.
Insulation systems in the energy industrial market are designed to maintain hot and cold process equipment, piping and storage tanks at optimal temperatures, to protect plant and equipment from the elements and from the risk of fire, and to protect workers. This market is served by a well-organized, well-established worldwide network of distributors, contractors, and engineers.
Our aerogel insulation provides two to five times the thermal performance of widely used traditional insulation in a thin, easy-to-use and durable blanket form. We believe our array of 6 product attributes provides strong competitive advantages over traditional insulation and will enable us to gain a larger share of the energy industrial insulation market.
Our aerogel insulation provides two to five times the thermal performance of widely used traditional insulation in a thin, easy-to-use and durable blanket form. We believe our array of product attributes provides strong competitive advantages over traditional insulation and will enable us to gain a larger share of the energy industrial insulation market.
These partners, OEMs and fabricators are manufacturers of components and systems for buildings, refrigerated and hot appliances, cold storage equipment, automobiles, aircraft, trains, electronics, and outdoor gear and apparel. The end-users of our products in these markets include a wide range of institutions, businesses, individuals, municipalities and government agencies.
These partners, OEMs and fabricators are manufacturers of components and systems for refrigerated and hot appliances, cold storage equipment, automobiles, aircraft, trains, electronics, and outdoor gear and apparel. The end-users of our products in these markets include a wide range of institutions, businesses, individuals, municipalities and government agencies.
We believe the key performance criteria for insulation in these markets and applications include thermal performance, compact design, durability and fire resistance. We operate in a highly competitive environment. In the energy industrial insulation markets, we compete with traditional insulation materials based on product performance, price, availability and proximity to the customer.
We believe the key performance criteria for insulation in these markets and applications include thermal performance, compact design, durability and fire resistance. We operate in a highly competitive environment. In the energy industrial insulation market, we compete with traditional insulation materials based on product performance, price, availability and proximity to the customer.
In general, insulation distributors stock, sell and distribute aerogel materials to insulation contractors and end-users. The distribution of our product outside of the United States is at times conducted under agreements that provide for exclusivity by geography 11 linked to annual purchase volume minimums.
In general, insulation distributors stock, sell and distribute aerogel materials to insulation contractors and end-users. The distribution of our product outside of the United States is at times conducted under agreements that provide for exclusivity by geography linked to annual purchase volume minimums.
We also make available on our website the charters for our Board of Directors’ Audit Committee, Compensation and Leadership Development Committee and Nominating and Corporate Governance Committee, as well as our Code of Business Conduct and Ethics, our Corporate Governance Guidelines and other related materials. The information on our website is not part of this annual report.
We also make available on our website the charters for our Board of Directors’ Audit Committee, Compensation and Leadership Development Committee and Nominating, Governance and Sustainability Committee, as well as our Code of Business Conduct and Ethics, our Corporate Governance Guidelines and other related materials. The information on our website is not part of this annual report.
In addition, we will seek to leverage the unique properties of our proprietary and patented carbon aerogels to improve the performance and cost of lithium-ion batteries. We will continue our efforts with our partners to explore the potential use of Aspen’s silicon-rich carbon aerogel materials in the anode and cathode of lithium-ion batteries and in solid-state batteries.
In addition, we will seek to leverage the unique properties of our proprietary and patented carbon aerogels to improve the performance and cost of lithium-ion batteries. We will continue our efforts with our partners to explore the potential use of our silicon-rich carbon aerogel materials in the anode and cathode of lithium-ion batteries and in solid-state batteries.
Our Customers and End-Users Customers Energy Industrial Our primary customers in the energy industrial market are distributors, installation contractors and fabricators that stock, install and customize insulation products, components and systems for technically sophisticated end-users that require high-performance insulation. • Distributors: We currently operate through a global network of 67 insulation distributors.
Our Customers and End-Users Customers Energy Industrial Our primary customers in the energy industrial market are distributors, installation contractors and fabricators that stock, install and customize insulation products, components and systems for technically sophisticated end-users that require high-performance insulation. • Distributors: We currently operate through a global network of insulation distributors.
In new markets, research and development personnel seek to exploit the unique characteristics of aerogels, including low 14 thermal conductivity, high surface area, high electrical conductivity, and tunable porosity, to develop aerogel-enhanced products and next generation technology addressing complex and unmet market needs.
In new markets, research and development personnel seek to exploit the unique characteristics of aerogels, including low thermal conductivity, high surface area, and tunable electrical conductivity and porosity, to develop aerogel-enhanced products and next generation technology addressing complex and unmet market needs.
See “Risk Factors — A substantial portion of our revenue comes from sales in foreign countries and we may expand our operations outside of the United States, which subjects us to increased economic, foreign exchange, operational and political risks that could increase our costs and make it difficult for us to operate profitably.” 12 End-Users The end-users of our aerogel blankets and thermal barriers include some of the largest and most well-capitalized companies in the world.
See “Risk Factors — A substantial portion of our revenue comes from sales in foreign countries, and we may expand our operations outside of the United States, which subjects us to increased economic, foreign exchange, operational, and political risks that could increase our costs and make it difficult for us to operate profitably.” 13 End-Users The end-users of our aerogel blankets and thermal barriers include some of the largest and most well-capitalized companies in the world.
These OEMs develop products incorporating our aerogel blankets for applications in a diverse set of markets including military aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. While these are not presently our core markets, we anticipate that we will allocate a growing portion of our manufacturing capacity to serve these markets in the long term.
These OEMs develop products incorporating our aerogel blankets for applications in a diverse set of markets including military aircraft, trains, buses, appliances, apparel, footwear and outdoor gear. While these are not presently our core markets, we anticipate that we may allocate a growing portion of our manufacturing capacity to serve these markets in the long term.
We believe our current expansion plans and available manufacturing technology advancements will enhance profit potential, increase operating cash flow capability, and offer 8 attractive returns on incremental invested capital. In addition, we will focus our development efforts on new products and next generation technology with application in new, high value market segments.
We believe our current expansion plans and available manufacturing technology advancements will enhance profit potential, increase operating cash flow capability, and offer 9 attractive returns on incremental invested capital. In addition, we will focus our development efforts on new products and next generation technology with application in new, high value market segments.
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.
Pursuant to the GM Contracts, we are obligated to supply Barriers at fixed annual prices and at volumes to be specified by GM up to a daily maximum quantity through the respective terms of the agreements, which expire at various times from 2026 through 2034.
Historically, our third and fourth quarter results have shown increased levels of revenue, which we believe is associated with our end-user customers’ maintenance schedules and timing of capital projects. As we pursue and grow revenue opportunities in the electric vehicle market, we expect that a portion of our revenues may be subject to seasonal patterns typical of automotive suppliers.
Historically, our third and fourth quarter results have shown increased levels of revenue, which we believe is associated with our end-user customers’ maintenance schedules and timing of capital projects. As we pursue and grow revenue opportunities in the EV market, we expect that a portion of our revenues may be subject to seasonal patterns typical of automotive suppliers.
PyroThin thermal barriers are our new generation of ultra-thin flexible aerogel products engineered to satisfy the needs of the electric vehicle and energy storage industries to address thermal runaway issues in lithium-ion batteries. PyroThin thermal barriers can be used to provide passive fire protection at the cell, module or pack level within multiple lithium-ion battery system architectures.
PyroThin thermal barriers are our new generation of ultra-thin flexible aerogel products engineered to satisfy the needs of the EV and energy storage industries to address thermal runaway issues in lithium-ion batteries. PyroThin thermal barriers can be used to provide passive fire protection at the cell, module or pack level within multiple lithium-ion battery system architectures.
Our aerogel thermal barrier products are gaining share in the rapidly growing, high value electric vehicle market. Given the projected high growth in the e-mobility markets and continued growth in global energy consumption in the long-term, and the construction of new facilities to satisfy this demand, we believe that we serve well-capitalized and rapidly growing global end markets.
Our aerogel thermal barrier products are gaining share in the rapidly growing, high value EV market. Given the projected high growth in the e-mobility markets and continued growth in global energy consumption in the long-term, and the construction of new facilities to satisfy this demand, we believe that we serve well-capitalized and rapidly growing global end markets.
We employ statistical processes and quality controls in our manufacturing systems. We routinely measure and monitor thermal conductivity, hydrophobicity and other key properties of the aerogel blankets produced in our manufacturing operations. We are ISO 9001:2015 certified. 13 We have operated the East Providence facility since 2008 and have increased our capacity in phases since that time.
We employ statistical processes and quality controls in our manufacturing systems. We routinely measure and monitor thermal conductivity, hydrophobicity and other key properties of the aerogel blankets produced in our manufacturing operations. We are ISO 9001:2015 certified. 14 We have operated the East Providence, RI facility since 2008 and have increased our capacity in phases since that time.
Accordingly, we are hiring additional personnel, incurring additional operating expenses, incurring significant capital expenditures to expand our aerogel manufacturing capacity, establishing an automated thermal barrier fabrication operation, enhancing research and development resources, and expanding our battery materials research facilities, among other items. Our patented aerogel products and manufacturing technologies are significant assets.
Accordingly, we are continuing to hire additional personnel, incurring additional operating expenses, incurring significant capital expenditures to expand our aerogel manufacturing capacity, establishing an automated thermal barrier fabrication operation, enhancing research and development resources, and expanding our battery materials research facilities, among other items. Our patented aerogel products and manufacturing technologies are significant assets.
We will continue to seek to engage with additional leading battery material and electric vehicle manufacturers to realize the full potential of our silica aerogels, our carbon aerogels and our broader Aerogel Technology Platform within the electric vehicle market. • Strategically Increase Capacity to Meet Demand. Demand for our aerogel products has grown significantly since our inception.
We will continue to seek to engage with additional leading battery material and EV manufacturers to realize the full potential of our silica aerogels, our carbon aerogels and our broader Aerogel Technology Platform within the EV market. • Strategically Increase Capacity to Meet Demand. Demand for our aerogel products has grown significantly since our inception.
We believe our dedicated and experienced team is an important competitive asset. Our Growth Strategy Our strategy is to create economic value by leveraging our technological and market leadership in aerogels to be the premier provider of high-performance aerogel products serving the global electric vehicle and energy industrial markets.
We believe our dedicated and experienced team is an important competitive asset. Our Growth Strategy Our strategy is to create economic value by leveraging our technological and market leadership in aerogels to be the premier provider of high-performance aerogel products serving the global EV and energy industrial markets.
In addition, our sales and business development personnel work directly with OEMs and strategic partners, including within the electric vehicle industry, to create new product designs and solutions to expand our market reach. The sales cycle for a new insulation material or thermal barrier is typically lengthy.
In addition, our sales and business development personnel work directly with OEMs and strategic partners, including within the EV industry, to create new product designs and solutions to expand our market reach. The sales cycle for a new insulation material or thermal barrier is typically lengthy.
In these instances, our end-users directly manage and control specification, logistic, installation, inspection, maintenance and fabrication activities of our aerogel products. Electric Vehicle and Energy Storage Our customers in the evolving electric vehicle and energy storage markets include electric vehicle manufacturers, Tier 1 automotive suppliers, lithium-ion battery manufacturers, and e-mobility and energy storage companies.
In these instances, our end-users directly manage and control specification, logistic, installation, inspection, maintenance and fabrication activities of our aerogel products. EV and Energy Storage Our customers in the evolving EV and energy storage markets include EV manufacturers, Tier 1 automotive suppliers, lithium-ion battery manufacturers, and e-mobility and energy storage companies.
If we are unable to compete successfully, we may not be able to increase or maintain our market share and revenues.” Our market share was approximately 3% of the estimated $3.9 billion annual global market for energy industrial insulation materials during 2022.
If we are unable to compete successfully, we may not be able to increase or maintain our market share and revenues.” Our market share was approximately 3% of the estimated multi-billion dollar annual global market for energy industrial insulation materials during 2022.
These patented carbon aerogels are uniquely strong, providing the physical strength, charge and ion conductivity, and porosity required to host high concentrations of silicon in lithium-ion battery anodes. These silicon carbon aerogels have the potential to lower the costs and increase the energy density of electric vehicle battery systems.
These patented carbon aerogels are uniquely strong, providing the physical strength, charge and ion conductivity, and porosity required to host high concentrations of silicon in lithium-ion battery anodes. These silicon carbon aerogels have the potential to lower the costs and increase the energy density of EV battery systems.
While the OEM has agreed to purchase its requirement for Barriers from us at 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 at any time and for any or no reason.
While GM has agreed to purchase its requirement for Barriers from us at locations to be designated from time to time by them, it has no obligation to purchase any minimum quantity of Barriers under the GM Contracts. In addition, GM may terminate the GM Contracts at any time and for any or no reason.
We believe the following combination of capabilities distinguishes us from our competitors and positions us to continue to gain market share in the energy industrial, sustainable insulation materials and electric vehicle markets: • Disruptive Products with a Compelling Value Proposition.
We believe the following combination of capabilities distinguishes us from our competitors and positions us to continue to gain market share in the energy industrial, sustainable insulation materials and EV markets: • Disruptive Products with a Compelling Value Proposition.
We believe that we are well-positioned to leverage over 20 years of research and development to develop and commercialize disruptive aerogel products for a wide array of new markets beyond the energy industrial, sustainable insulation materials and electric vehicle markets.
We believe that we are well-positioned to leverage over 20 years of research and development to develop and commercialize disruptive aerogel products for a wide array of new markets beyond the energy industrial, sustainable insulation materials and EV markets.
Cutting, lamination, and production of components and multi-layer systems for custom applications in the electric vehicle and subsea markets. • Quality Control. Utilizing statistical process and quality controls to measure thermal conductivity, hydrophobicity and other key properties of our aerogel products.
Cutting, lamination, and production of components and multi-layer systems for custom applications in the EV and subsea markets. • Quality Control. Utilizing statistical process and quality controls to measure thermal conductivity, hydrophobicity and other key properties of our aerogel products.
Although silica aerogels are usually fragile materials, we have developed innovative and proprietary manufacturing processes that enable us to produce industrially robust aerogel insulation cost-effectively and at commercial scale. We believe that our electrically conductive carbon aerogel materials are reaching development maturity and expanding our market opportunities in energy storage.
Although silica aerogels are usually fragile materials, we have developed innovative and proprietary manufacturing processes that enable us to produce industrially robust aerogel insulation cost-effectively and at commercial scale. We believe that our electrically conductive carbon aerogel materials are reaching development maturity and subsequently can expand our market opportunities in energy storage.
We have specifically developed our line of aerogel blankets to meet the requirements of a broad set of applications within our target markets. The composition and attributes of our standard aerogel blankets are described below: Electric Vehicle & Energy Storage Market • PyroThin.
We have specifically developed our line of aerogel blankets to meet the requirements of a broad set of applications within our target markets. The composition and attributes of our standard aerogel blankets are described below: EV & Energy Storage Market • PyroThin.
We manufacture and sell our blankets in 60-inch-wide, three-foot diameter rolls with a standard range of thickness of two millimeters to ten millimeters. Our base products are all flexible, hydrophobic, vapor permeable, compression resistant and able to be cut and fabricated using conventional tools.
We manufacture and sell our blankets primarily in 60-inch-wide, three-foot diameter rolls with a standard range of thickness of one millimeter to ten millimeters. Our base products are all flexible, hydrophobic, vapor permeable, compression resistant and able to be cut and fabricated using conventional tools.
Qualification for Use Our products have undergone rigorous testing and are now qualified for global usage in both routine maintenance and in capital projects at many of the world’s largest oil producers, refiners, and petrochemical companies, and within the next-generation 10 lithium-ion battery systems of two of the largest global automotive manufacturers.
Qualification for Use Our products have undergone rigorous testing and are qualified for global usage in both routine maintenance and in capital projects at many of the world’s largest oil producers, refiners, and petrochemical companies, and within the next-generation lithium-ion battery systems of five of the largest global automotive manufacturers.
Our process allows the ethanol to be extracted without causing the solid matrix in the gel to collapse from capillary forces. Our material costs were 51%, 48%, and 44% of product revenue for the years ended December 31, 2022, 2021 and 2020, respectively.
Our process allows the ethanol to be extracted without causing the solid matrix in the gel to collapse from capillary forces. Our material costs were 36%, 51%, and 48% of product revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
Our material costs were 51%, 48%, and 44% of product revenue for the years ended December 31, 2022, 2021 and 2020, respectively. The materials used in the production of our products consist primarily of several silica precursors, fiber batting, and other additives.
Our material costs were 36%, 51%, and 48% of product revenue for the years ended December 31, 2023, 2022 and 2021, respectively. The materials used in the production of our products consist primarily of several silica precursors, fiber batting, and other additives.
Our carbon aerogel program seeks to increase the performance of lithium-ion battery cells to enable electric vehicle manufacturers to extend the driving range and reduce the cost of electric vehicles, among other uses. We are targeting the manufacturers of battery components, batteries, grid battery systems, and electric vehicles as potential customers for our carbon aerogel materials.
Our carbon aerogel program seeks to increase the performance of lithium-ion battery cells to enable EV manufacturers to extend the driving range and reduce the cost of EVs, among other uses. We are targeting the manufacturers of battery components, batteries, grid battery systems, and EVs as potential customers for our carbon aerogel materials.
During this period, we have sold nearly $1.3 billion of our insulation products globally, representing an installed base of more than 400 million square feet of insulation. We believe that our long-term record of success positions us for future growth and continued gain in market share in the energy industrial and sustainable insulation markets.
During this period, we have sold over $1.4 billion of our insulation products globally, representing an installed base of more than 475 million square feet of insulation. We believe that our long-term record of success positions us for future growth and continued gain in market share in the energy industrial and sustainable insulation markets.
To date, the majority of our revenue has been generated from applications in refineries and petrochemical facilities. We will continue to pursue and expect greater adoption of our products for applications in the LNG and power markets.
To date, the majority of our energy industrial insulation market revenue has been generated from applications in refineries and petrochemical facilities. We will continue to pursue and expect greater adoption of our products for applications in the LNG and power markets.
Electric Vehicle Market Our thermal barrier products are in use today in electric vehicle battery systems of General Motors and Toyota with a leading global platform. We believe our customer base will expand in the near term to include additional electric vehicle manufacturers, Tier 1 automotive suppliers, lithium-ion battery manufacturers, and e-mobility and energy storage companies.
EV Market Our thermal barrier products are in use today in EV battery systems of GM and Toyota with a leading global platform. We believe our customer base will expand in the near term to include additional EV manufacturers, Tier 1 automotive suppliers, lithium-ion battery manufacturers, and e-mobility and energy storage companies.
Total revenue generated from outside of the United States amounted to $66.4 million or 37% of total revenue, $54.8 million or 45% of total revenue and $55.4 million or 55% of total revenue, in the years ended December 31, 2022, 2021 and 2020, respectively. In addition, we may continue to expand our operations outside of the United States.
Total revenue generated from outside of the United States amounted to $87.7 million or 37% of total revenue, $66.4 million or 37% of total revenue and $54.8 million or 45% of total revenue, in the years ended December 31, 2023, 2022 and 2021, respectively. In addition, we may continue to expand our operations outside of the United States.
Competition in the thermal barrier market is evolving. We believe our patented aerogel thermal barrier technology offers a unique combination of attributes to mitigate thermal runaway in lithium-ion battery systems. These attributes include industry-leading thermal performance, limited combustibility, tunable compressibility and scalable density.
We believe our patented aerogel thermal barrier technology offers a unique combination of attributes to mitigate thermal runaway in lithium-ion battery systems. These attributes include industry-leading thermal performance, limited combustibility, tunable compressibility and scalable density.
During 2021, our first full year of serving the electric vehicle and energy storage market, we sold $6.7 million of our PyroThin thermal barriers. We are engaged in system development and quoting activities with a wide range of additional prospective customers in the broader e-mobility and energy storage markets.
During 2021, our first full year of serving the EV and energy storage market, we sold $6.7 million of our PyroThin thermal barriers. We are engaged in system development and quoting activities with a wide range of additional prospective customers in the broader e-mobility and energy storage markets. • Proven, Scalable Business Model.
In 2020 and 2021, we entered into contracts with General Motors to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles. This relationship has helped to validate our thermal barrier technology with other companies providing products and solutions to the electric vehicle, lithium-ion battery and grid storage markets.
In 2020 and 2021, we entered into contracts with GM to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation EVs. This relationship has helped to validate our thermal barrier technology with other companies providing products and solutions to the EV, lithium-ion battery and grid storage markets.
We will continue to hire experienced automotive business development personnel, construct a state-of-the-art thermal barrier fabrication operation, hire dedicated thermal barrier fabrication employees, and increase our aerogel blanket manufacturing capacity to keep pace with the significant potential demand for our PyroThin thermal barriers.
We will continue to hire experienced automotive business development personnel, hire dedicated thermal barrier fabrication employees, and increase our aerogel blanket manufacturing capacity to keep pace with the significant potential demand for our PyroThin thermal barriers.
Our research and development expenditures were $16.9 million, $11.4 million, and $8.7 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Our research and development expenditures were $16.4 million, $16.9 million, and $11.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.
We are required to file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended, or the Exchange Act, with the Securities and Exchange Commission, or the SEC. SEC filings are available at the SEC’s website at https://www.sec.gov.
We maintain our corporate offices in Northborough, Massachusetts. We are required to file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended, or the Exchange Act, with the Securities and Exchange Commission, or the SEC. SEC filings are available at the SEC’s website at https://www.sec.gov.
We have entered into production contracts with General Motors, to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation electric vehicles, or the Contracts.
We have entered into production contracts with GM to supply fabricated, multi-part thermal barriers (Barriers) for use in the battery system of its next-generation EVs, or the GM Contracts.
We also rely on trade secrets, trademarks, licensing agreements, confidentiality and nondisclosure agreements and continuing technological innovation to safeguard our intellectual property rights and develop and maintain our competitive edge. As of December 31, 2022, we owned 59 issued U.S. patents, 85 pending U.S. patent applications, 196 issued foreign patents and 241 pending foreign patent applications.
We also rely on trade secrets, trademarks, licensing agreements, confidentiality and nondisclosure agreements and continuing technological innovation to safeguard our intellectual property rights and develop and maintain our competitive edge. As of December 31, 2023, we owned 75 issued U.S. patents, 51 pending U.S. patent applications, 358 issued foreign patents and 332 pending foreign patent applications.
The scope of each of our patents varies in accordance with local law. We have successfully enforced our patent rights against Chinese aerogel manufacturers in the U.S. at the International Trade Commission and in Europe at the District Court in Mannheim, Germany. We have an ongoing patent infringement action against AMA S.p.A. and AMA Composites S.r.l.
The scope of each of our patents varies in accordance with local law. We have successfully enforced our patent rights against Chinese aerogel manufacturers in the U.S. at the International Trade Commission and in Europe at the District Court in Mannheim, Germany.
Our products are priced at a premium to traditional insulation materials. While our competitors offer many traditional insulation products that are priced below our products on a per-unit basis, we believe our products have superior performance attributes and may have the lowest cost on a fully-installed basis or offer significant life-cycle cost savings.
While our competitors offer many traditional insulation products that are priced below our products on a per-unit basis, we believe our products have superior performance attributes and may have the lowest cost on a fully-installed basis or offer significant life-cycle cost savings. Competition in the thermal barrier market is evolving.
(collectively, AMA) at the Court of Genoa, Italy in connection with alleged infringement of the Italian part of our patents previously asserted successfully in Germany. Further details of these actions are set forth in our prior Annual Reports on Form 10-K and in other filings.
We have an ongoing patent infringement action against AMA S.p.A. and AMA Composites S.r.l. (collectively, AMA) at the Court of Genoa, Italy in connection with alleged infringement of the Italian part of our patents previously asserted successfully in Germany. Further details of these actions are set forth in our prior Annual Reports on Form 10-K and in other filings.
We have grown our business by forming technical and commercial relationships with industry leaders, which has allowed us to optimize our products to meet the particular demands of targeted market sectors.
We have grown our business by forming technical and commercial relationships with industry leaders, which has allowed us to optimize our products to meet the particular demands of targeted market sectors. We have benefited from our technical and commercial relationships with ExxonMobil in the oil refinery and petrochemical sector, and with TechnipFMC in the offshore oil sector.
Our technologically advanced insulation products are principally targeted at the estimated $3.9 billion annual global market for energy industrial insulation materials.
Our technologically advanced insulation products are principally targeted at the multi-billion dollar global market for energy industrial insulation materials.
We also have strong relationships with a global network of energy-focused distributors, contractors and engineering firms that understand the significant advantages our products provide to end-users. • Thermal Barrier Adoption by Leading Electric Vehicle Customers.
These relationships have shortened the sales cycle with other customers and have helped to facilitate our market penetration. We also have strong relationships with a global network of energy-focused distributors, contractors and engineering firms that understand the significant advantages our products provide to end-users. • Thermal Barrier Adoption by Leading EV Customers.
As of December 31, 2022, we had five trademark registrations in the United States, two trademark registrations with the World Intellectual Property Organization, and 80 trademark registrations in foreign jurisdictions, including the European Union, United Kingdom, Japan, China, Canada, Mexico, India, South Korea and Brazil. Additionally, we had four pending US trademark applications and six pending foreign trademark applications.
As of December 31, 2023, we had eight trademark registrations in the United States, and 81 trademark registrations in foreign jurisdictions, including the European Union, United Kingdom, Japan, China, Canada, Mexico, India, South Korea and Brazil. Additionally, we had two pending US trademark applications and four 16 pending foreign trademark applications.
We are currently supplying thermal barrier production parts to both General Motors and Toyota. We are also supplying thermal barrier prototype parts to a number of other U.S., European and Asian manufacturers of electric vehicles, grid storage and home battery systems. During 2022, we sold $55.6 million of our PyroThin thermal barriers.
We are currently supplying thermal barrier production parts to both 3 General Motors and Toyota, and thermal barrier prototype parts to a number of global manufacturers of EVs, grid storage and home battery systems. During 2023, we sold $110.1 million of our PyroThin thermal barriers. During 2022, we sold $55.6 million of our PyroThin thermal barriers.
Our Investor Relations Department can be contacted at Aspen Aerogels, Inc., 26 Forest Street, Suite 200, Marlborough, MA 01752, Attention: Investor Relations; telephone: 508-691-1111; e-mail: ir@aerogel.com. Human Capital Resources As of December 31, 2022, we had 533 full-time employees. Of our employees, 506 are located in the United States and 27 are located abroad.
Our Investor Relations Department can be contacted at Aspen Aerogels, Inc., 30 Forbes Road, Northborough, MA 01532, Attention: Investor Relations; telephone: 508-691-1111; e-mail: ir@aerogel.com. Human Capital Resources As of December 31, 2023, we had 548 full-time employees. Of our employees, 517 are located in the United States and 31 are located abroad.
Pyrogel and Cryogel have undergone rigorous technical validation by industry-leading end-users and achieved significant market adoption. We introduced our aerogel insulation product for the sustainable insulation materials market, Spaceloft®, in 2006. Our insulation product revenue has grown from $17.2 million in 2008 to $124.8 million in 2022, representing a compound annual growth rate of 15%.
Pyrogel and Cryogel have undergone rigorous technical validation by industry-leading end-users and achieved significant market adoption. Our insulation product revenue has grown from $17.2 million in 2008 to $128.6 million in 2023, representing a compound annual growth rate of 14%.
In order to capture the opportunities in our end markets, we have a network of sales professionals and qualified distributors in more than 50 countries around the world. • Strong Installed Base with Industry-leading Energy Customers. We have an installed base of more than 400 million square feet of insulation, representing nearly $1.3 billion in cumulative product sales since 2008.
In order to capture the opportunities in our end markets, we have a network of sales professionals and qualified distributors in more than 50 countries around the world. 7 • Strong Installed Base with Industry-leading Energy Customers.
Pyrogel XTE, our best-selling product, is reinforced with a glass-fiber batting and has an upper use temperature of 650° C. Pyrogel XTE was initially designed for use in refineries and petrochemical facilities, but has proven to have wide applicability throughout the energy industrial market. Pyrogel XTE is optimized for high temperature 9 applications between 100° C and 400° C.
Pyrogel XTE was initially designed for use in refineries and petrochemical facilities, but has proven to have wide applicability throughout the energy industrial market. Pyrogel XTE is optimized for high temperature 10 applications between 100° C and 400° C.
Our thermal barrier technology is designed to offer a unique combination of thermal management, mechanical performance and fire protection properties. These properties 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 properties enable EV 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.
We are currently supplying thermal barrier production parts to both General Motors and Toyota. We are also supplying thermal barrier prototype parts to a number of other U.S., European and Asian manufacturers of electric vehicles, grid storage and home battery systems. During 2022, we sold $55.6 million of our PyroThin thermal barriers.
We are currently supplying thermal barrier production parts to both GM and Toyota. We are also supplying thermal barrier prototype parts to a number of other U.S., European and Asian manufacturers of EVs, grid storage and home battery systems.
We also will pursue high-value opportunities for our aerogel insulation products within the sustainable insulation materials market and a diverse set of new 7 markets. In addition, we will leverage our Aerogel Technology Platform to develop innovative, aerogel-enhanced products for applications outside of the global insulation market.
We also will pursue high-value opportunities for our aerogel insulation products within the sustainable insulation materials market and a diverse set of new markets.
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. We have entered into multi-year production contracts with General Motors to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles.
These battery materials have the potential to increase the energy density of the battery cells, thus enabling an increase in the driving range of EVs. We have entered into multi-year production contracts with a number of automotive EV OEM customers to supply fabricated, multi-part thermal barriers for use in the battery systems of their EV models.
This market includes companies operating refinery, petrochemical, oil production, and LNG production and storage facilities. The market also includes firms operating gas, coal, nuclear, hydro and solar thermal power generating plants and district energy systems.
These markets are global, well-established and include large and well-capitalized end-users. The energy industrial market includes companies operating refinery, petrochemical, oil production, and liquefied natural gas (LNG) production and storage facilities. The energy industrial market also includes firms operating gas, coal, nuclear, hydro and solar thermal power generating plants and district energy systems.
Additional Customer Information General Motors LLC and Distribution International, Inc. represented 25% and 22%, respectively, of our total revenue in 2022 and were our only customers representing 10% or more of our revenue for that period. Our product revenue is generated by sales to customers around the world.
Additional Customer Information General Motors LLC and Distribution International, Inc. represented 41% and 14%, respectively, of our total revenue in 2023 and were our only customers representing 10% or more of our revenue for that period.
PyroThin thermal barriers can also be customized to offer a unique combination of thermal management, mechanical performance and fire protection properties that enable an electric vehicle manufacturer to achieve targeted battery performance and safety goals. Energy Industrial Markets • Pyrogel XTE.
PyroThin thermal barriers can also be customized to offer a unique combination of thermal management, mechanical performance and fire protection properties that enable an EV manufacturer to achieve targeted battery performance and safety goals. Energy Industrial Markets • Pyrogel XTE. Pyrogel XTE, our best-selling product, is reinforced with a glass-fiber batting and has an upper use temperature of 650° C.
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 in Bulloch County, Georgia, construction of which is currently in progress.
To meet expected growth in demand for our aerogel products in the EV market, we remain in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia.
Our thermal barrier technology offers a unique combination of thermal management, mechanical performance, and fire protection properties that enables electric vehicle manufacturers to achieve critical battery performance and safety goals.
The multi-billion global lithium-ion battery market continues to grow and evolve rapidly. Our thermal barrier technology offers a unique combination of thermal management, mechanical performance, and fire protection properties that enables EV manufacturers to achieve critical battery performance and safety goals.
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 in Bulloch County, Georgia, construction of which is currently in progress.
To meet expected growth in demand for our aerogel products in the EV market, we remain in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia.
During 2021, our first full year of serving the electric vehicle and energy storage market, we sold $6.7 million of our PyroThin thermal barriers.
During 2021, our first full year of serving the EV and energy storage market, we sold $6.7 million of our PyroThin thermal barriers. The commercial potential for our PyroThin thermal barriers and our carbon aerogel battery materials in the EV market is significant.
Key elements of our strategy include: • Leverage Aerogel Technology Platform in the Electric Vehicle Market. We plan to build upon the initial commercial success of our industry-leading PyroThin thermal barriers within the battery systems of electric vehicles.
In addition, we will leverage our Aerogel Technology Platform to develop innovative, aerogel-enhanced products for applications outside of the global insulation market. 8 Key elements of our strategy include: • Leverage Aerogel Technology Platform in the EV Market. We plan to build upon the commercial success of our industry-leading PyroThin thermal barriers within the battery systems of EVs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThese forward-looking statements include, among other things, statements about: • the expected future growth of the market for our aerogel products and our continued gain in market share, in particular in the electric vehicle market, the energy industrial insulation market, the lithium-ion battery thermal barrier markets, and other markets we target; • our beliefs about the competitive strengths and value propositions of our technology and our products and our ability to gain additional market share and enter into new markets based on those strengths; 53 • our expectation that our investment in incremental manufacturing and operating expense will sustain long-term growth in our existing markets and develop new business opportunities; • our plans to continue to develop and optimize aerogel products for high-value applications within the sustainable insulation materials market and our plan to realize revenue from this market; • our plans and expectations to partner with industry leaders in the battery and EV market or such partnerships resulting in products and technologies or otherwise resulting in meaningful financial results; • our expectations about the size and timing of awarded business in the EV market, future revenues and profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the EV market; • our pursuit of high-value opportunities for our aerogel products within different segments of the EV market, the global insulation market, including the sustainable insulation materials market, and our plans to leverage our aerogel technology platform to develop innovative, aerogel enhanced products for applications in new markets; • our plans to focus additional resources to continue to grow our share of the EV market and the energy industrial insulation market; • the current or future trends in the energy, energy industrial, chemical and refinery, liquid natural gas, or LNG, sustainable insulation materials, EV thermal barrier, EV battery materials or other markets and the impact of these trends on our business; • our investments in the EV market and aerogel technology platform; • our pursuit of and the expected greater adoption of our products in the LNG and power generation markets and our expectation that product revenue will be generated in large part by demand for insulation associated with scheduled plant shutdowns, or turnarounds, and other maintenance-related projects; • our expectation that our products will be specified during the design phase in a growing number of new plant construction and capital expansion projects and our expectation that we will have an increasing percentage of our products sold for use in capital projects; • our expectation that the growth in global energy demand and EV market will result in increased new-build and large capacity expansion projects, driving demand for our aerogel products; • our plans to continue our strategy of working with innovative companies to target and penetrate additional market opportunities; • our plans to develop strategic partnerships to facilitate market penetration beyond the energy industrial and sustainable insulation materials market, as well as the expected goals and priorities of such strategic partnerships; • our belief that an adequate long-term supply of silica-precursors and other raw materials is available and that our plans to reduce reliance on precursors susceptible to significant price fluctuations will be successful; • our belief that we can strategically increase our capacity to meet the demand or that we will be able to make such capacity increases in a timely manner; • our expectation in our ability to implement lower cost product formulations and realize material purchasing efficiencies; • our belief that our portfolio of patents, trade secrets and know-how present a significant barrier to potential new entrants in the production of aerogel blanket insulation; • our expectation that we will be successful in enforcing and defending our patents against competitors and that such patents are valid and enforceable, as well as our expectations about the costs and consequences of our current or potential future patent litigation and the potential for additional patent litigation; • our belief that our products possess strong competitive advantages over traditional insulation materials, including the superior thermal performance and the thin, easy-to-use and durable blanket form of our products; • our belief that we can finance the construction and development of our second manufacturing facility in Statesboro, Georgia and continued productivity improvements to our second manufacturing facility and all related thermal assembly facilities and equipment and that we may obtain the required additional funding, which may include one or more equity, equity-linked or debt financings, in the future to complete these projects; • our expectations regarding the investment to open a second manufacturing facility in Georgia and the anticipated job creation as a result thereof; 54 • the anticipated aerogel capacity expansion as a result of the planned second manufacturing facility in Georgia and the expected commencement of production; • our belief that our end-use customers will continue to invest in major energy industrial projects; • our expectation that we will continue to sell our products in the sustainable insulation materials and other end markets; • our expectations that our work with partners will accelerate the commercialization of these carbon aerogel anode materials in the EV market; • our belief that the potential for significant technological innovation in traditional insulation materials is limited and that new high-performance materials will be required to meet evolving market requirements for energy efficient insulation systems; • our belief that our aerogel products and manufacturing processes are proprietary and that we can protect our patents, trade secrets and know-how associated therewith; • our belief that we can continue to improve the cost efficiency of our manufacturing process, that our current expansion plans offer attractive returns on incremental invested capital, and that we will focus our development efforts on new products and next generation technology with application in new, high value market segments; • our belief that we will have opportunities to address additional high value applications in the estimated $3.9 billion global insulation market, and that we are well-positioned to leverage a decade’s worth of research and development to design and commercialize disruptive aerogel products for a wide array of new markets; • our belief that our products have the lowest cost on a fully-installed basis or offer significant life-cycle cost savings in energy industrial and certain other applications as compared to traditional insulation materials; • our plans to continue to expand our global sales force and distribution network to support anticipated growth in customers and demand for our products and our plans to seek to promote greater enterprise-wide utilization of our products by existing end-use customers; • our expectations and projections about future revenues, revenue growth, costs, expenses, production volumes, manufacturing productivity, gross profit, profitability, net loss, loss per share and Adjusted EBITDA, sources and uses of cash, liquidity, cash flow, capital requirements and the sufficiency of our existing cash balance and available credit; • our expectations that most of our revenue will continue to come from a relatively small number of customers for the foreseeable future; • our expectations of long-term revenue growth, with increasing levels of gross profit and improved cash flows from operations and our expectations that we will incur significant capital expenditures related to the expansion of our manufacturing capacity to support this expected long-term growth in demand; • our expectations that the operating expenses will increase in both absolute dollars and as a percentage of revenue in 2023 but increase in absolute dollars and decrease as a percentage of revenue in the long term, our research and development expenses will increase in both absolute dollars and as a percentage of revenue in 2023 but increase in absolute dollars and decrease as a percentage of revenue in the long term, our sales and marketing expenses will increase in both absolute dollars and as a percentage of revenue in 2023 but increase in absolute dollars and decrease as a percentage of revenue in the long term, and our general and administrative expenses will increase in both absolute dollars and as a percentage of revenue in 2023 but increase in absolute dollars and decrease as a percentage of revenue in the long term; • our expectation to continue to increase investment in research and development in our efforts to enhance and expand our aerogel technology platform; • our expectations about the impact of new accounting pronouncements on our consolidated financial statements and related disclosures; • our belief that our experienced and dedicated leadership team will provide us with a competitive advantage in the industry; • our belief of our technological and market leadership in aerogels; • the expected future development of new aerogel technologies; • our expectations about limitations of net operating losses; • our expectation of rising interest rates and operating costs; • rising inflation; 55 • our expectation of starting up our planned second plant by the first-half of 2024 and our ability to do so at a cost consistent with our prior estimates; • our beliefs about our Mexico thermal barrier assembly facility and its timely operations, its ability to meet the demand, the growth in thermal barrier demand to match the assembly operation and vice versa; and • our ability to shift thermal barrier assembly operations from East Providence, Rhode Island to Mexico in a timely manner.
Biggest changeThese forward-looking statements include, among other things, statements about: • the expected future growth of the market for our aerogel products and our continued gain in market share, in particular in the EV market, the energy industrial insulation market, the lithium-ion battery thermal barrier markets, and other markets we target; • our beliefs about the competitive strengths and value propositions of our technology and our products and our ability to gain additional market share and enter into new markets based on those strengths; • our expectation that our investment in incremental manufacturing and operating expense will sustain long-term growth in our existing markets and develop new business opportunities; • our plans to continue to develop and optimize aerogel products for high-value applications within the sustainable insulation materials market and our plan to realize revenue from this market; • our plans and expectations to partner with industry leaders in the battery and EV market or such partnerships resulting in products and technologies or otherwise resulting in meaningful financial results; • our expectations about the size and timing of awarded business in the EV market, future revenues and profit margins, arising from our supply relationship and contract with automotive OEMs and our ability to win more business and increase revenue in the EV market; 55 • our pursuit of high-value opportunities for our aerogel products within different segments of the EV market, the global insulation market, including the sustainable insulation materials market, and our plans to leverage our aerogel technology platform to develop innovative, aerogel enhanced products for applications in new markets; • our plans to focus additional resources to continue to grow our share of the EV market and the energy industrial insulation market; • the current or future trends in the energy, energy industrial, chemical and refinery, liquid natural gas, or LNG, sustainable insulation materials, EV thermal barrier, EV battery materials or other markets and the impact of these trends on our business; • our investments in the EV market and aerogel technology platform; • our pursuit of and the expected greater adoption of our products in the LNG and power generation markets and our expectation that product revenue will be generated in large part by demand for insulation associated with scheduled plant shutdowns, or turnarounds, and other maintenance-related projects; • our expectation that our products will be specified during the design phase in a growing number of new plant construction and capital expansion projects and our expectation that we will have an increasing percentage of our products sold for use in capital projects; • our expectation that the growth in global energy demand and EV market will result in increased new-build and large capacity expansion projects, driving demand for our aerogel products; • our plans to continue our strategy of working with innovative companies to target and penetrate additional market opportunities; • our plans to develop strategic partnerships to facilitate market penetration beyond the energy industrial and sustainable insulation materials market, as well as the expected goals and priorities of such strategic partnerships; • our belief that an adequate long-term supply of silica-precursors and other raw materials is available and that our plans to reduce reliance on precursors susceptible to significant price fluctuations will be successful; • our belief that we can strategically increase our capacity to meet the demand or that we will be able to make such capacity increases in a timely manner; • our expectation in our ability to implement lower cost product formulations and realize material purchasing efficiencies; • our belief that our portfolio of patents, trade secrets and know-how present a significant barrier to potential new entrants in the production of aerogel blanket insulation; • our expectation that we will be successful in enforcing and defending our patents against competitors and that such patents are valid and enforceable, as well as our expectations about the costs and consequences of our current or potential future patent litigation and the potential for additional patent litigation; • our belief that our products possess strong competitive advantages over traditional insulation materials, including the superior thermal performance and the thin, easy-to-use and durable blanket form of our products; • our belief that we can finance the construction and development of our second manufacturing facility in Statesboro, Georgia and continued productivity improvements to our second manufacturing facility and all related thermal assembly facilities and equipment and that we may obtain the required additional funding, which may include one or more equity, equity-linked or debt financings, in the future to complete these projects; • our expectations regarding the investment to open a second manufacturing facility in Georgia, the extended construction and commissioning timeframe for the planned second manufacturing facility, our efforts to manage the construction of the second plant to align with our expectations of demand from EV customers; • the anticipated aerogel capacity expansion as a result of the planned second manufacturing facility in Georgia and the expected commencement of production; • our beliefs about the Department of Energy loan application process; • our belief that our end-use customers will continue to invest in major energy industrial projects; • our expectation that we will continue to sell our products in the sustainable insulation materials and other end markets; • our expectations that our work with partners will accelerate the commercialization of these carbon aerogel anode materials in the EV market; 56 • our belief that the potential for significant technological innovation in traditional insulation materials is limited and that new high-performance materials will be required to meet evolving market requirements for energy efficient insulation systems; • our belief that our aerogel products and manufacturing processes are proprietary and that we can protect our patents, trade secrets and know-how associated therewith; • our belief that we can continue to improve the cost efficiency of our manufacturing process, that our current expansion plans offer attractive returns on incremental invested capital, and that we will focus our development efforts on new products and next generation technology with application in new, high value market segments; • our belief that we will have opportunities to address additional high value applications in the multi-billion dollar global insulation market, and that we are well-positioned to leverage a decade’s worth of research and development to design and commercialize disruptive aerogel products for a wide array of new markets; • our expectations about future material costs and manufacturing expenses as a percentage of revenue, including the impact of engaging one or more external manufacturing facilities in China for the supplemental supply of our energy industrial products; our expectation about the ability of the Chinese external manufacturing facilities that we engage to consistently supply the aerogel product that we order in a timely manner; • our belief that our products have the lowest cost on a fully-installed basis or offer significant life-cycle cost savings in energy industrial and certain other applications as compared to traditional insulation materials; • our plans to continue to expand our global sales force and distribution network to support anticipated growth in customers and demand for our products and our plans to seek to promote greater enterprise-wide utilization of our products by existing end-use customers; • our expectations and projections about future revenues, revenue growth, costs, expenses, production volumes, manufacturing productivity, gross profit, profitability, net loss, loss per share and Adjusted EBITDA, sources and uses of cash, liquidity, cash flow, capital requirements and the sufficiency of our existing cash balance and available credit; • our expectations that most of our revenue will continue to come from a relatively small number of customers for the foreseeable future; • our expectations of long-term revenue growth, with increasing levels of gross profit and improved cash flows from operations and our expectations that we will incur significant capital expenditures related to the expansion of our manufacturing capacity to support this expected long-term growth in demand; • our expectations that the operating expenses will increase in absolute dollars and decrease as a percentage of revenue in 2024 and in the long term, our research and development expenses will increase in absolute dollars and decrease as a percentage of revenue in 2024 and in the long term, our sales and marketing expenses will increase in absolute dollars and decrease as a percentage of revenue in 2024 and in the long term, and our general and administrative expenses will increase in absolute dollars and decrease as a percentage of revenue in 2024 and in the long term; • our expectation to continue to increase investment in research and development in our efforts to enhance and expand our aerogel technology platform; • our expectations about the impact of new accounting pronouncements on our consolidated financial statements and related disclosures; • our belief that our experienced and dedicated leadership team will provide us with a competitive advantage in the industry; • our belief of our technological and market leadership in aerogels; • the expected future development of new aerogel technologies; • our expectations about limitations of net operating losses; • our expectation of rising interest rates and operating costs; • rising inflation; • our expectation of starting up our planned second plant and our ability to do so at a cost consistent with our prior estimates; 57 • our beliefs about our Mexico thermal barrier assembly facility and its timely operations, its ability to meet the demand, the growth in thermal barrier demand to match the assembly operation and vice versa; and • our ability to shift thermal barrier assembly operations from East Providence, Rhode Island to Mexico in a timely manner.
These could include, but may not be limited to, the following: • Delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets; • Loss of access to revolving existing credit facilities or other working capital sources and/or the inability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources; • Potential or actual breach of contractual obligations that require us to maintain letters or credit or other credit support arrangements; or • Termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.
These could include, but may not be limited to, the following: • Delayed access to deposits or other financial assets or the uninsured loss of deposits or other financial assets; • Loss of access to revolving existing credit facilities or other working capital sources and/or the inability to refund, roll over or extend the maturity of, or enter into new credit facilities or other working capital resources; • Potential or actual breach of contractual obligations that require us to maintain letters of credit or other credit support arrangements; or • Termination of cash management arrangements and/or delays in accessing or actual loss of funds subject to cash management arrangements.
Many factors could prevent our existing and future potential manufacturing facilities from producing at expected, projected or targeted nameplate capacities or could cause us to reduce the scale or scope of future capacity expansions or facilities, including: • design and engineering failures; • inability to retain, manage and train a skilled workforce; • the challenges of operating technically advanced or higher volume equipment than currently employed at our existing facility in East Providence, Rhode Island; • improper operation of the manufacturing equipment; • decreases in our manufacturing yields due to the inefficient use of the materials needed to make our products in our manufacturing process; • the availability of raw materials at reasonable costs to support the levels of production that we anticipate at these facilities; • strikes or labor disputes; and • damage to the manufacturing equipment due to design and engineering flaws, construction difficulties or operator error.
Many factors could prevent our existing and future potential manufacturing facilities from producing at expected, projected or targeted nameplate capacities or could cause us to reduce the scale or scope of future capacity expansions or facilities, including: • inability to retain, manage and train a skilled workforce; • the challenges of operating technically advanced or higher volume equipment than currently employed at our existing facility in East Providence, Rhode Island; • improper operation of the manufacturing equipment; • decreases in our manufacturing yields due to the inefficient use of the materials needed to make our products in our manufacturing process; • the availability of raw materials at reasonable costs to support the levels of production that we anticipate at these facilities; • strikes or labor disputes; and • damage to the manufacturing equipment due to design and engineering flaws, construction difficulties or operator error.
Any such security breach or interruption, as well as any action by us or our employees or contractors that might be inconsistent with the rapidly evolving data privacy and security laws and regulations applicable within the United States and elsewhere where we conduct business, could result in enforcement actions by U.S. states, the U.S. federal government or foreign governments, liability or sanctions under data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business operations and collaborations, diversion of management efforts and damage to our reputation, which could harm our business and operations.
Any such security breach or interruption, as well as any action by us or our employees or contractors that might be inconsistent with the rapidly evolving data privacy and security laws and regulations applicable within the United States and 44 elsewhere where we conduct business, could result in enforcement actions by U.S. states, the U.S. federal government or foreign governments, liability or sanctions under data privacy laws that protect personally identifiable information, regulatory penalties, other legal proceedings such as but not limited to private litigation, the incurrence of significant remediation costs, disruptions to our development programs, business operations and collaborations, diversion of management efforts and damage to our reputation, which could harm our business and operations.
The GDPR sets out a number of requirements that must be complied with when handling the personal data of EU based data subjects, including: providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g. access requests); the principal of accountability and demonstrating compliance through policies, procedures, training and audit; and a new mandatory data breach regime.
The GDPR sets out a number of requirements that must be complied with when handling the personal data of EU based 50 data subjects, including: providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certain circumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g. access requests); the principal of accountability and demonstrating compliance through policies, procedures, training and audit; and a new mandatory data breach regime.
Factors that may influence the purchase and use of electric vehicles include: • perceptions about electric vehicle quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of electric vehicles; • perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced technology, including vehicle electronics and regenerative braking systems; • the decline of an EV’s range resulting from (i) deterioration over time in the battery’s ability to hold a charge or (ii) operation in colder weather; • concerns about electric grid capacity and reliability, which could derail efforts to promote electric vehicles as a practical solution to vehicles that require gasoline; • the environmental consciousness of consumers; • volatility in the cost of oil and gasoline; • safety concerns around electric vehicles generally and battery systems in particular; and • access to charging stations, standardization of electric vehicles charging systems and consumers’ perceptions about convenience and cost to charge an electric vehicle; The influence of any of the factors described above may cause current or potential customers not to purchase electric vehicles and could impact the widespread consumer adoption of electric vehicles, which would materially adversely affect our business, operating results, financial condition and prospects.
Factors that may influence the purchase and use of EVs include: • perceptions about EV quality, safety (in particular with respect to lithium-ion battery packs), design, performance and cost, especially if adverse events or accidents occur that are linked to the quality or safety of EVs; • perceptions about vehicle safety in general, in particular safety issues that may be attributed to the use of advanced technology, including vehicle electronics and regenerative braking systems; • the decline of an EV’s range resulting from (i) deterioration over time in the battery’s ability to hold a charge or (ii) operation in colder weather; • concerns about electric grid capacity and reliability, which could derail efforts to promote EVs as a practical solution to vehicles that require gasoline; • the environmental consciousness of consumers; • volatility in the cost of oil and gasoline; • safety concerns around EVs generally and battery systems in particular; and • access to charging stations, standardization of EVs charging systems and consumers’ perceptions about convenience and cost to charge an EV; The influence of any of the factors described above may cause current or potential customers not to purchase EVs and could impact the widespread consumer adoption of EVs, which would materially adversely affect our business, operating results, financial condition and prospects.
Furthermore, disruptions in the components that our customers in the EV market, including our automotive OEM customers, use in their products may adversely affect our business operations and projected revenue. 17 • Trends in the selection of cell chemistries, battery pack system architectures, and the adoption of active cooling methods may reduce thermal complexities to render the demand for our thermal barrier products less obvious. • We are currently dependent on a single manufacturing facility.
Furthermore, disruptions in the components that our customers in the EV market, including our automotive OEM customers, use in their products may adversely affect our business operations and projected revenue. • Trends in the selection of cell chemistries, battery pack system architectures, and the adoption of active cooling methods may reduce thermal complexities to render the demand for our thermal barrier products less obvious. • We are currently dependent on a single manufacturing facility.
Negative covenants include, among others, covenants restricting us from transferring all or any part of our business or property (including intellectual property), incurring additional indebtedness, except for certain permitted indebtedness, engaging in mergers or acquisitions, repurchasing shares, paying dividends or making other distributions, making investments, and creating other liens on our assets (including our intellectual property), in each case subject to customary exceptions and baskets.
Negative covenants include, among others, covenants restricting us from transferring all or any part of our business or property (including intellectual property), incurring additional indebtedness, except for certain permitted indebtedness, engaging in mergers or acquisitions, repurchasing shares, paying dividends or making other distributions, making investments, and creating other liens on our assets (including our intellectual property), in each case subject to customary exceptions 24 and baskets.
If actual production orders from our EV market customers are not consistent with the projections we use in calculating the amount of our awarded business, we could realize substantially less revenue over the life of these projects than the currently projected estimate estimates and our financial targets developed based on such estimates.
If actual production orders from our EV market customers are not consistent with the projections we use in calculating the amount of our awarded business, we could realize substantially less revenue over the life of these projects than the currently projected estimates and our financial targets developed based on such estimates.
The process of documenting our internal controls and complying with Section 404 is expensive and time consuming, and requires significant attention of management. Complying with these requirements applicable to public companies may place a strain on our personnel, information technology systems and resources while diverting management’s attention from other business concerns.
The process of documenting our internal controls and complying with Section 404 is expensive and time consuming, and requires significant attention of management. 51 Complying with these requirements applicable to public companies may place a strain on our personnel, information technology systems and resources while diverting management’s attention from other business concerns.
Such an event, or the perception of such an event, could quickly result in our direct and end-user customers replacing our products with traditional insulation materials which could have a material adverse effect on our results of operations. Our activities and operations are subject to numerous health and safety laws and regulations.
Such an event, or the perception of such an event, could quickly result in our direct and end-user customers replacing our products with traditional insulation materials which could have a material adverse effect on our results of operations. 41 Our activities and operations are subject to numerous health and safety laws and regulations.
Although we have not had to make material expenditures to satisfy these requirements to date, in the future, we may incur additional costs to comply with these requirements and failure to do so could disrupt the operation of our facility or could subject us to liability for environmental remediation.
Although we have not had to make material expenditures to satisfy these requirements to date, in the future, we may incur additional 43 costs to comply with these requirements and failure to do so could disrupt the operation of our facility or could subject us to liability for environmental remediation.
Based on these factors, and the fact that our automotive OEM customers’ product programs are anticipated to encompass large volumes, our customers are able to negotiate favorable pricing. Accordingly, we are subject to substantial continuing pressure from automotive OEMs to reduce the price of our products.
Based on these factors, and the fact that our automotive OEM customers’ product programs are anticipated to encompass large volumes, our customers are able to negotiate 27 favorable pricing. Accordingly, we are subject to substantial continuing pressure from automotive OEMs to reduce the price of our products.
The loss or interruption of the service of any of these individuals or our inability to attract or retain other qualified personnel or advisors could have a material adverse effect on our business, financial condition, and results of operations and could significantly reduce our ability to manage our operations and implement our strategy.
The loss or interruption of the service of any of 36 these individuals or our inability to attract or retain other qualified personnel or advisors could have a material adverse effect on our business, financial condition, and results of operations and could significantly reduce our ability to manage our operations and implement our strategy.
If our assumptions regarding these factors prove to be 37 incorrect or if competing products gain further market share, then actual demand for our aerogel products could be significantly less than the demand we anticipate and we may not be able to grow our revenue or achieve profitability.
If our assumptions regarding these factors prove to be incorrect or if competing products gain further market share, then actual demand for our aerogel products could be significantly less than the demand we anticipate and we may not be able to grow our revenue or achieve profitability.
Our ability to meet this excess or changing 22 customer demand depends on our ability to arrange for additional financing for any ongoing working capital shortages, since it is likely that cash flow from sales will lag behind these investment requirements.
Our ability to meet this excess or changing customer demand depends on our ability to arrange for additional financing for any ongoing working capital shortages, since it is likely that cash flow from sales will lag behind these investment requirements.
Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual 25 obligations or result in violations of federal or state wage and hour laws.
Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, result in breaches of our financial and/or contractual obligations or result in violations of federal or state wage and hour laws.
Automotive OEMs also possess significant leverage over 26 their suppliers, including us, because the automotive technology and component supply industry is highly competitive, serves a limited number of customers, has a high fixed cost base and historically has had excess capacity.
Automotive OEMs also possess significant leverage over their suppliers, including us, because the automotive technology and component supply industry is highly competitive, serves a limited number of customers, has a high fixed cost base and historically has had excess capacity.
Although the composition of our significant distributors, contractors, OEMs, partners and end-user customers will vary from period to period, we expect that most of our revenues will continue, for the foreseeable future, to come from sales to a relatively small number 39 of direct customers.
Although the composition of our significant distributors, contractors, OEMs, partners and end-user customers will vary from period to period, we expect that most of our revenues will continue, for the foreseeable future, to come from sales to a relatively small number of direct customers.
The integration of our products may entail the risk of product liability or warranty claims based on malfunctions or hazards from both our products and the final products of our customers. A material product liability claim may seriously harm our results of operations, as well as damage our customer relationships and reputation.
The integration of our products may entail the risk of product liability or warranty claims based on malfunctions or hazards from both our products and the final products of our customers. 42 A material product liability claim may seriously harm our results of operations, as well as damage our customer relationships and reputation.
We have measures in place that are designed to detect and respond to such security incidents and breaches 43 of privacy and security mandates, but there can be no assurance that our efforts will prevent or detect such breakdowns or breaches in our systems, if at all.
We have measures in place that are designed to detect and respond to such security incidents and breaches of privacy and security mandates, but there can be no assurance that our efforts will prevent or detect such breakdowns or breaches in our systems, if at all.
We operate and sell our products in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-corruption, anti-bribery and anti-kickback laws may conflict with local customs and practices.
We operate and sell our products in many parts of the world that have experienced governmental corruption to 39 some degree and, in certain circumstances, strict compliance with anti-corruption, anti-bribery and anti-kickback laws may conflict with local customs and practices.
The contracts we enter into with our direct customers generally do not include long-term commitments or minimum volumes that ensure future sales of our products. In addition, we understand that our direct customers’ contracts with end-user customers also generally do not include such commitments or minimums.
The contracts we enter into with our direct customers generally do not include long-term commitments or minimum volumes that ensure future sales of our products. In addition, we understand that our direct customers’ contracts with end-user customers also generally do not include such commitments or 40 minimums.
While we are investing considerable capital and other resources based on what we believe to be the currently identified needs of the industry, our belief as to the current needs of the industry may be incorrect or our technology, products or other resources may not be applicable to the future needs of the industry.
While we are investing considerable capital and other resources based on what we believe to be the currently 21 identified needs of the industry, our belief as to the current needs of the industry may be incorrect or our technology, products or other resources may not be applicable to the future needs of the industry.
Furthermore, because our customers typically have no obligation to purchase a specific quantity of parts, a decline in the production levels of any of our major customers, particularly with respect to EV models for which we become a significant supplier, could reduce our sales and thereby adversely affect our financial condition, operating results and cash flows and could reduce the value of the awarded business and our revenue targets. 31 Employee strikes and labor-related disruptions involving us or one or more of our automotive OEM customers or suppliers may adversely affect our operations.
Furthermore, because our customers typically have no obligation to purchase a specific quantity of parts, a decline in the production levels of any of our major customers, particularly with respect to EV models for which we become a significant supplier, could reduce our sales and thereby adversely affect our financial condition, operating results and cash flows and could reduce the value of the awarded business and our revenue targets. 32 Employee strikes and labor-related disruptions involving us or one or more of our automotive OEM customers or suppliers may adversely affect our operations.
Any material variation between our estimates and financial targets and our actual results may adversely affect our future profitability, cash flows and stock price. We have yet to achieve positive total cash flow, and our ability to generate positive cash flow is uncertain.
Any material variation between our estimates and financial targets and our actual results may adversely affect our future profitability, cash flows and stock price. 23 We have yet to achieve positive total cash flow, and our ability to generate positive cash flow is uncertain.
We continue to develop and refine the manufacturing technologies used to produce our aerogel products and believe that we have already developed, and will continue to develop, significant know-how related to these technologies. However, trade secrets can be difficult to protect.
We continue to develop and refine the 49 manufacturing technologies used to produce our aerogel products and believe that we have already developed, and will continue to develop, significant know-how related to these technologies. However, trade secrets can be difficult to protect.
As a result, third parties may be able to obtain patents with claims relating to our product forms, applications and/or manufacturing processes which they could attempt to assert against us or our end-users.
As a result, 48 third parties may be able to obtain patents with claims relating to our product forms, applications and/or manufacturing processes which they could attempt to assert against us or our end-users.
Any bankruptcy or insolvency, or the failure to make payments when due, of any counterparty of ours, or the loss of any significant relationships, could result in material losses to us and may material adverse impacts on our business.
Any bankruptcy or insolvency, or the failure to make payments when due, of any counterparty of ours, or the loss of any significant relationships, could result in material losses to us and may have material adverse impacts on our business.
If we fail to manage our long-term growth effectively, we may be unable to execute our business plan, address competitive challenges and meet applicable product specifications and technical and delivery requirements .” 29 Furthermore, we seek to lower our manufacturing costs, while maintaining appropriate performance characteristics, and to improve the per square foot costs of our silica aerogel blankets by optimizing our formulations to reduce material costs.
If we fail to manage our long-term growth effectively, we may be unable to execute our business plan, address competitive challenges and meet applicable product specifications and technical and delivery requirements .” 30 Furthermore, we seek to lower our manufacturing costs, while maintaining appropriate performance characteristics, and to improve the per square foot costs of our silica aerogel blankets by optimizing our formulations to reduce material costs.
Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediately liquidity may exceed the capacity of such program.
Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program.
In regions where labor costs are significantly lower than in the United States and Europe, the cost benefits of reduced installation times may not be adequate to overcome the relatively high price of our products and may make it more difficult for us to grow our revenue in those regions. 32 The insulation markets we serve are highly competitive.
In regions where labor costs are significantly lower than in the United States and Europe, the cost benefits of reduced installation times may not be adequate to overcome the relatively high price of our products and may make it more difficult for us to grow our revenue in those regions. 33 The insulation markets we serve are highly competitive.
Such contamination remains in place under a state-approved deed restriction, and 42 we are required to comply with such deed restriction and the accompanying soil management plan.
Such contamination remains in place under a state-approved deed restriction, and we are required to comply with such deed restriction and the accompanying soil management plan.
Prolonged periods of little or no economic growth could decrease demand for oil and gas, which, in turn, could result in lower demand for our products and a negative impact on our results of 30 operations and cash flows. This risk increases as we seek to increase the project-based revenue as a percentage of the total revenue.
Prolonged periods of little or no economic growth could 31 decrease demand for oil and gas, which, in turn, could result in lower demand for our products and a negative impact on our results of operations and cash flows. This risk increases as we seek to increase the project-based revenue as a percentage of the total revenue.
Our estimates regarding market opportunity for our products in the electric vehicle market, the assumptions underlying our estimates regarding market opportunity and our financial targets, including any revenue targets we may provide from time to time, are dependent on certain estimates and assumptions related to, among other things, demand for our products from our automotive OEM customers, development and launch of innovative new products, market share projections, product pricing and sale, volume and product mix, volatility, material prices, distribution, cost savings, and our ability to generate sufficient cash flow to reinvest in our existing business.
Our estimates regarding market opportunity for our products in the EV market, the assumptions underlying our estimates regarding market opportunity and our financial targets, including any revenue targets we may provide from time to time, are dependent on certain estimates and assumptions related to, among other things, demand for our products from our automotive OEM customers, development and launch of innovative new products, market share projections, product pricing and sale, volume and product mix, volatility, material prices, distribution, cost savings, and our ability to generate sufficient cash flow to reinvest in our existing business.
Even if significant sales of our products to automotive OEMs materialize, the need to make these significant capital investments, as well as the costs related to developing these products and related process and manufacturing developments, and the costs of meeting the stringent requirements of the automotive industry, could result in sales to the automotive industry being significantly less profitable than we expect, or potentially unprofitable. • Automotive OEMs require that we timely meet stringent requirements with respect to capital investment and quality standards in connection with our efforts to develop, sell and support products for use in the electric vehicle market.
Even if significant sales of our products to automotive OEMs materialize, the need to make these significant capital investments, as well as the costs related to developing these products and related process and manufacturing developments, and the costs of meeting the stringent requirements of the automotive industry, could result in sales to the automotive industry being significantly less profitable than we expect, or potentially unprofitable. • Automotive OEMs require that we timely meet stringent requirements with respect to capital investment and quality standards in connection with our efforts to develop, sell and support products for use in the EV market.
If we are unable to improve utilization levels for these manufacturing lines and correctly manage capacity, the increased expense levels will have an adverse effect on our business, financial condition and results of operations. In addition, we are constructing a fabrication facility in Mexico.
If we are unable to improve utilization levels for these manufacturing lines and correctly manage capacity, the increased expense levels will have an adverse effect on our business, financial condition and results of operations. In addition, we are operating a fabrication facility in Mexico.
Pursuant to Section 404a of the Sarbanes-Oxley Act, we have furnished a report by management on the effectiveness of our internal control over financial reporting for the fiscal year ended December 31, 2022 and will continue to do so in each year thereafter.
Pursuant to Section 404a of the Sarbanes-Oxley Act, we have furnished a report by management on the effectiveness of our internal control over financial reporting for the fiscal year ended December 31, 2023 and will continue to do so in each year thereafter.
This assessment is required to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting for the year ended December 31, 2022 and subsequent years.
This assessment is required to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our independent registered public accounting firm is required to formally attest to the effectiveness of our internal control over financial reporting for the year ended December 31, 2023 and subsequent years.
In addition, during 2018, we determined that our engineering plans, designs and drawings for a second manufacturing facility in Bulloch County, Georgia, would not be used due principally to our decision to significantly delay construction of the facility and intervening technical developments.
For example, during 2018, we determined that our engineering plans, designs and drawings for a second manufacturing facility in Bulloch County, Georgia, would not be used due principally to our decision to significantly delay construction of the facility and intervening technical developments.
As a result, these stockholders, if they act together, may be able to control the management and affairs of our company and certain matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.
As a result, these stockholders, if they act together, may be able to influence the management and affairs of our company and certain matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.
In addition, since 2021, Virginia, Colorado, Connecticut and Utah all enacted new data privacy laws which will take effect in 2023 that have similarities to the CCPA and CPRA, but also have significant differences from the California laws, and from each other, creating compliance challenges across different jurisdictions. Other states, including Massachusetts, are considering expansive data privacy laws.
In addition, since 2021, Virginia, Colorado, Connecticut and Utah all enacted new data privacy laws which took effect in 2023 that have similarities to the CCPA and CPRA, but also have significant differences from the California laws, and from each other, creating compliance challenges across different jurisdictions. Other states, including Massachusetts, are considering expansive data privacy laws.
We are also projecting significant revenue growth associated with the expected demand for PyroThin thermal barriers in the electric vehicle market. To keep pace with this anticipated growth, we are expanding our manufacturing capacity by constructing a second aerogel plant in Bulloch County, Georgia and an automated fabrication operation in Mexico.
We are also projecting significant revenue growth associated with the expected demand for PyroThin thermal barriers in the EV market. To keep pace with this anticipated growth, we are expanding our manufacturing capacity by constructing a second aerogel plant in Bulloch County, Georgia and an automated fabrication operation in Mexico.
Our estimates regarding market opportunity for our products in the electric vehicle market and the assumptions on which our financial targets and our planned production capacity increases are based may prove to be inaccurate, which may cause our actual results to materially differ from such targets, which may adversely affect our future profitability, cash flows, and stock price.
Our estimates regarding market opportunity for our products in the EV market and the assumptions on which our financial targets and our planned production capacity increases are based may prove to be inaccurate, which may cause our actual results to materially differ from such targets, which may adversely affect our future profitability, cash flows, and stock price.
Our business strategy also includes the development of next generation products with the performance characteristics and price points required by markets outside of the energy industrial and sustainable insulation materials markets, including the electric vehicle market. These performance and price requirements can be more demanding than those we faced in energy industrial and sustainable insulation materials markets.
Our business strategy also includes the development of next generation products with the performance characteristics and price points required by markets outside of the energy industrial and sustainable insulation materials markets, including the EV market. These performance and price requirements can be more demanding than those we faced in energy industrial and sustainable insulation materials markets.
Our efforts in developing, selling, and supplying products in the electric vehicle market may subject us to increased financial, operational, and legal risks that could materially adversely impact our business, financial conditions, and results of operations and may also increase our costs and make it difficult for us to operate profitably.
Our efforts in developing, selling, and supplying products in the EV market may subject us to increased financial, operational, and legal risks that could materially adversely impact our business, financial conditions, and results of operations and may also increase our costs and make it difficult for us to operate profitably.
We face competition from other manufacturers of insulation, thermal barriers, battery materials, and similar products in seeking out and entering into such partnerships and relationships with industry leaders in our targeted electric vehicle market and we may therefore not be successful in establishing strategic relationships in those markets.
We face competition from other manufacturers of insulation, thermal barriers, battery materials, and similar products in seeking out and entering into such partnerships and relationships with industry leaders in our targeted EV market and we may therefore not be successful in establishing strategic relationships in those markets.
A substantial portion of our sales are to destinations outside of the United States, including France, Norway, Thailand, Canada, Germany, Taiwan, Great Britain, Columbia, and South Korea.
A substantial portion of our sales are to destinations outside of the United States, including France, Norway, Thailand, Canada, Germany, Taiwan, Great Britain, Colombia, and South Korea.
Any of these outcomes could have a material adverse effect on our results of operations, financial condition and cash flows. Furthermore, we are in the early stages of developing battery materials for lithium-ion battery systems in electric vehicles, using our carbon aerogel technology.
Any of these outcomes could have a material adverse effect on our results of operations, financial condition and cash flows. Furthermore, we are in the early stages of developing battery materials for lithium-ion battery systems in EVs, using our carbon aerogel technology.
Failure by us to develop, maintain and strengthen strategic relationships with industry leaders to commercialize our products in the electric vehicle market may adversely affect our results of operations and our ability to grow our business. Our business strategy requires us to align the design and performance attributes of our products and technologies to the evolving needs of the market.
Failure by us to develop, maintain and strengthen strategic relationships with industry leaders to commercialize our products in the EV market may adversely affect our results of operations and our ability to grow our business. Our business strategy requires us to align the design and performance attributes of our products and technologies to the evolving needs of the market.
We may not be able to find the right partners to achieve our objectives or our interest and our partners’ interest may not be well aligned. We will continue to seek to engage with additional battery material and electric vehicle manufacturers to realize the full potential of our Aerogel Technology Platform within the electric vehicle market.
We may not be able to find the right partners to achieve our objectives or our interest and our partners’ interest may not be well aligned. We will continue to seek to engage with additional battery material and EV manufacturers to realize the full potential of our Aerogel Technology Platform within the EV market.
Our growth depends, primarily, on continued increase in the sales of existing products, including by improving the performance of existing products, as well as the successful development and introduction of new products, including new products for applications within the electric vehicle market, which face the uncertainty of customer acceptance and reaction from competitors.
Our growth depends, primarily, on continued increase in the sales of existing products, including by improving the performance of existing products, as well as the successful development and introduction of new products, including new products for applications within the EV market, which face the uncertainty of customer acceptance and reaction from competitors.
A substantial amount of our expected sales in the EV market in 2023 are expected to be to a single customer. The substantial majority of our sales to distributors are transacted on a purchase order basis.
A substantial amount of our expected sales in the EV market in 2024 are expected to be to a single customer. The substantial majority of our sales to distributors are transacted on a purchase order basis.
In particular, we face significant competition from Chinese firms, many of whom have longstanding experience in supplying electric vehicle OEMs and are part of a Chinese electric vehicle industry that we believe is in many ways more mature than the electric vehicle industry in the United States and other markets.
In particular, we face significant competition from Chinese firms, many of whom have longstanding experience in supplying EV OEMs and are part of a Chinese EV industry that we believe is in many ways more mature than the EV industry in the United States and other markets.
Any potential greenhouse gas regulations, while potentially helpful in the adoption of electric vehicles, could have the impact of increasing energy costs, reducing the demand for hydrocarbons, decreasing profitability and return on investment in the energy industry, and leading to a sustained downturn in the energy industry.
Any potential greenhouse gas regulations, while potentially helpful in the adoption of EVs, could have the impact of increasing energy costs, reducing the demand for hydrocarbons, decreasing profitability and return on investment in the energy industry, and leading to a sustained downturn in the energy industry.
On May 25, 2018, the GDPR went into effect, implementing a broad data protection framework that expanded the scope of EU data protection law, including to non-EU entities that process, or control the processing of, personal data relating to individuals located 48 in the EU, including clinical trial data.
On May 25, 2018, the GDPR went into effect, implementing a broad data protection framework that expanded the scope of EU data protection law, including to non-EU entities that process, or control the processing of, personal data relating to individuals located in the EU.
For instance, the COVID-19 pandemic and the worldwide semiconductor shortage adversely impacted the automotive industry in 2022, 2021 and 2020, resulting in reduced vehicle production schedules and sales from historical levels. Such events in the future could adversely impact our financial condition, operating results and cash flows and could reduce the value of the awarded business and our revenue targets.
For instance, a worldwide semiconductor shortage adversely impacted the automotive industry in 2022, 2021 and 2020, resulting in reduced vehicle production schedules and sales from historical levels. Such events in the future could adversely impact our financial condition, operating results and cash flows and could reduce the value of the awarded business and our revenue targets.
In addition, certain technological advancements may render our products obsolete. In particular, the future direction of electric vehicle battery packs may strike a commercially reasonable balance between the need for higher energy densities and the need for better safety outcomes.
In addition, certain technological advancements may render our products obsolete. In particular, the future direction of EV battery packs may strike a commercially reasonable balance between the need for higher energy densities and the need for better safety outcomes.
The volatility in oil prices and declines in oil prices, which are often associated with unrelated world events, such as the recent tensions between Russia and Ukraine and political instability in Ukraine and other areas in the world, have resulted, from time to time, in a reduction in capital expenditures by many companies in the energy industry, and in particular by end-users of our products involved in the construction and expansion of offshore and onshore oil and gas production facilities.
The volatility in oil prices and declines in oil prices, which are often associated with unrelated world events, such as the tensions between Russia and Ukraine and political instability in Ukraine, as well as the conflict in the Middle East, and other areas in the world, have resulted, from time to time, in a reduction in capital expenditures by many companies in the energy industry, and in particular by end-users of our products involved in the construction and expansion of offshore and onshore oil and gas production facilities.
With the support of such third parties, we are seeking to focus our technical development and accelerate the potential commercialization of these carbon aerogel materials in the electric vehicle market. Unlike the other markets for which we have previously developed thermal solutions, the electric vehicle market may be more demanding technically, financially, and in other ways.
With the support of such third parties, we are seeking to focus our technical development and accelerate the potential commercialization of these carbon aerogel materials in the EV market. 34 Unlike the other markets for which we have previously developed thermal solutions, the EV market may be more demanding technically, financially, and in other ways.
The market for electric vehicles is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for electric vehicles OEMs, and changing consumer demands and behaviors.
The market for EVs is relatively new, rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulation and industry standards, frequent new vehicle announcements, long development cycles for EVs OEMs, and changing consumer demands and behaviors.
If the electric vehicle landscape evolves in such direction, the demand for our products will not materialize or not meet our current forecasts, plans and expectations, which will have a material adverse effect on our business and operations. Our current thermal barrier product is compatible with pouch and prismatic cells, but not cylindrical cells.
If the EV landscape evolves in such direction, the demand for our products will not materialize or not meet our current forecasts, plans and expectations, which will have a material adverse effect on our business and operations. 25 Our current thermal barrier product is compatible with pouch and prismatic cells, but not cylindrical cells.
We are planning to raise capital through debt financings, equity financings, partner financings, or technology licensing agreements to fund these operating and capital expenditure requirements in 2023 and beyond. Any such future significant expansion of our aerogel capacity, fabrication capacity or similar investment will require us to 19 raise substantial amounts of additional capital.
We are planning to raise capital through debt financings, equity financings, partner financings, or technology licensing agreements to fund these operating and capital expenditure requirements in 2024 and beyond. Any such future significant expansion of our aerogel capacity, or similar investment will require us to raise substantial amounts of additional capital.
We cannot provide any assurance that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business, particularly as it relates to the electric vehicles market.
We cannot provide any assurance that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business, particularly as it relates to the EVs market.
In order to compete with such firms and sustainably participate in the automotive market, we will have to overcome the advantages possessed by those Chinese firms. 20 • Electric vehicles and battery technologies are evolving at a rapid pace. They may evolve in such a way as to render our products obsolete.
In order to compete with such firms and sustainably participate in the automotive market, we will have to overcome the advantages possessed by those Chinese firms. • EVs and battery technologies are evolving at a rapid pace. They may evolve in such a way as to render our products obsolete.
A substantial majority of our revenue is generated from sales to a limited number of direct customers, including distributors, contractors, OEMs, partners and end-user customers. For the years ended December 31, 2022, 2021 and 2020, total revenue from our top ten direct customers represented 72%, 68%, and 66% of our revenues, respectively.
A substantial majority of our revenue is generated from sales to a limited number of direct customers, including distributors, contractors, OEMs, partners and end-user customers. For the years ended December 31, 2023, 2022 and 2021, total revenue from our top ten direct customers represented 80%, 72%, and 68% of our revenues, respectively.
As a result, we may lessen or lose our ability to grow our business in the electric vehicle market that could adversely affect our business, financial condition and results of operations, including impairing our profitability.
As a result, we may lessen or lose our ability to grow our business in the EV market that could adversely affect our business, financial condition and results of operations, including impairing our profitability.
Additionally, as we pursue rapidly evolving opportunities in the electric vehicle market, we have been hiring and will continue to hire additional personnel and incur additional expenses as we seek to implement and increase our capabilities and production capacity.
Additionally, as we pursue rapidly evolving opportunities in the EV market, we have been hiring and will continue to hire additional personnel and incur additional expenses as we seek to implement and increase our capabilities and production capacity.
If we are unable to complete the project contemplated, the costs incurred in connection with such projects may not be recoverable.
If we are unable to complete the projects as contemplated, the costs incurred in connection with such projects may not be recoverable.
On November 28, 2022, our wholly owned subsidiary, Aspen Aerogels Georgia, LLC, or the Borrower, entered into a Loan Agreement, or the “Loan Agreement”, by and between (i) the Borrower, (ii) Aspen Aerogels, Inc. and (iii) Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company, or Aspen RI, and, together with the Borrower and Aspen Aerogels, Inc., each, a Loan Party and collectively, the Loan Parties), as guarantors, and (iv) GM, as lender.
On November 28, 2022, our wholly owned subsidiary, Aspen Aerogels Georgia, LLC, or the Borrower, entered into a Loan Agreement, by and between (i) the Borrower, (ii) Aspen Aerogels, Inc. and (iii) Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company, or Aspen RI, and, together with the Borrower and Aspen Aerogels, Inc., each, a Loan Party and collectively, the Loan Parties), as guarantors, and (iv) GM, as lender, which was amended on September 28, 2023 (the “Loan Agreement”).
For example, under the contract with the U.S. automotive OEM, we are obligated to supply products up to a daily maximum quantity even without a specific purchase commitment. This requires us to invest in capacity, infrastructure and personnel. These investments could result in substantial capital expenditures without any commensurate increase in revenue, or any increase at all.
For example, under the contract with GM, we are obligated to supply products up to a daily maximum quantity even without a specific purchase commitment. This requires us to invest in capacity, infrastructure and personnel. These investments could result in substantial capital expenditures without any commensurate increase in revenue, or any increase at all.
Regulatory changes contemplated in several countries, particularly in Europe, may substantially increase these risks. Changes in the products or manufacturing processes may require the customers to perform an extensive re-qualification process, which our customers may not want to undertake for various reasons, resulting in the customer switching to competing products.
Regulatory changes contemplated in several regions may substantially increase these risks. Changes in the products or manufacturing processes may require the customers to perform an extensive re-qualification process, which our customers may not want to undertake for various reasons, resulting in the customer switching to competing products.
If we are unable to obtain adequate financing when needed, it could adversely affect our ability to invest in the working capital required to maintain and grow our business. The terms of the Loan Agreement with GM require us to meet certain operating covenants and place restrictions on our operating and financial flexibility.
If we are unable to obtain adequate financing when needed, it could adversely affect our ability to invest in the working capital required to maintain and grow our business. The terms of the Loan Agreement with GM and our convertible note arrangement with KDT require us to meet certain operating covenants and/or place restrictions on our operating and financial flexibility.
The costs associated with and the resources necessary for our capacity expansion plans could exceed our expectations and result in a materially adverse impact on our business, results of operations, financial condition, and cash flows. 36 If we are unable to complete the projects as contemplated, the costs incurred in connection with such projects may not be recoverable.
The costs associated with and the resources necessary for our expansion could exceed our expectations and result in a materially adverse impact on our business, results of operations, financial condition and cash flows. If we are unable to complete the project contemplated, the costs incurred in connection with such projects may not be recoverable.
If we are unable to address any labor shortages or increased labor costs adequately, we may not be able to meet demand for our product, which may impact our results of operations and the value of the awarded business. Our growth in the electric vehicle market is dependent upon consumers’ willingness to purchase and use electric vehicles.
If we are unable to address any labor shortages or increased labor costs adequately, we may not be able to meet demand for our product, which may impact our results of operations and the value of the awarded business. Our growth in the EV market is dependent upon consumers’ willingness to purchase and use EVs.
Our growth in the electric vehicle market is highly dependent upon the purchase and use by consumers of electric vehicles. If the market for electric vehicles does not gain broad market acceptance or develops more slowly than we anticipate, our business, prospects, financial condition, and operating results will be harmed.
Our growth in the EV market is highly dependent upon the purchase and use by consumers of EVs. If the market for EVs does not gain broad market acceptance or develops more slowly than we anticipate, our business, prospects, financial condition, and operating results will be harmed.
Furthermore, as we develop an anode active material for the electric vehicle market, we will be required to rely on industry partners in evaluating our materials in their respective anodes in combination with matching cathodes to produce cost effective and compelling cells for next generation electric vehicles.
Furthermore, as we develop an anode active material for the EV market, we will be required to rely on industry partners in evaluating our materials in their respective anodes in combination with matching cathodes to produce cost effective and compelling cells for next generation EVs.
Additionally, in the early years of electric vehicle adoption, our electric vehicle customers’ forecasts may be prone to multiple and frequent revisions resulting in changing demand levels.
Additionally, in the early years of EV adoption, our EV customers’ forecasts may be prone to multiple and frequent revisions resulting in changing demand levels.
In addition, we understand from our direct customers that a substantial majority of their sales of our products are to a small number of end-user customers. Our direct customer concentration also creates accounts receivable concentrations and related risks. As of December 31, 2022, General Motors, LLC and Distribution International, Inc. accounted for 44% and 10% of our accounts receivable, respectively.
In addition, we understand from our direct customers that a substantial majority of their sales of our products are to a small number of end-user customers. Our direct customer concentration also creates accounts receivable concentrations and related risks. As of December 31, 2023, General Motors, LLC and Distribution International, Inc. accounted for 60% and 6% of our accounts receivable, respectively.
Proceedings before the USPTO could result in adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in issued patents.
Proceedings before the USPTO or foreign patent offices could result in adverse decisions as to the priority of our inventions and the narrowing or invalidation of claims in issued patents.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe table below shows a summary of the square footage of these locations as of December 31, 2022: Leased Properties by Location (In square ft.) East Providence, RI 215,783 Marlborough, MA 85,425 Northborough, MA 51,650 Pawtucket, RI 46,400 Statesboro, GA 2,300 Woonsocket, RI 30,000
Biggest changeThe table below shows a summary of the square footage of these locations as of December 31, 2023: Leased Properties by Location (In square ft.) East Providence, RI 201,033 Marlborough, MA 58,965 Monterrey, MX 266,381 Northborough, MA 56,650 Pawtucket, RI 46,400 Statesboro, GA 58,716
We lease additional spaces for research, administrative, and warehousing purposes in six locations in the United States under leases expiring between October 31, 2023 and April 30, 2034.
We lease additional spaces for research, administrative, manufacturing, and warehousing purposes in six locations in the United States and two in Mexico under leases expiring between January 31, 2024 and April 30, 2034.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe second criminal complaint contains the same allegations based on the same underlying facts as the first, however; the judge in this jurisdiction has ordered the local prosecutor to carry out additional investigations and to identify the address of our chief executive officer for service.
Biggest changeThe second criminal complaint contains the same allegations based on the same underlying facts as the first, however; the judge in this jurisdiction has ordered the local prosecutor to carry out additional investigations and to identify the address of our chief executive officer for service. In March 2023, we learned the prosecutor requested dismissal of the second criminal complaint.
On June 24, 2021, the court denied AMA’s request for a PI, reasoning that our Press Release was factually accurate, was not misleading, distinguished facts from opinions and that it 56 was neither anti-competitive nor did it infringe trademark rights of AMA. The Court also ordered AMA to pay certain of our legal fees.
On June 24, 2021, the court denied AMA’s request for a PI, reasoning that our Press Release was factually accurate, was not misleading, distinguished facts from opinions and that it was neither anti-competitive nor did it infringe trademark rights of AMA. The Court also ordered AMA to pay certain of our legal fees.
On July 5, 2021, AMA informed us that it has decided not to appeal the denial of June 24, 2021. We subsequently learned that AMA had also made a criminal complaint against our chief executive officer for defamation in connection with the Press Release.
On July 5, 2021, AMA informed us that it has decided not to appeal the denial of June 24, 2021. We subsequently learned that AMA had also made a criminal complaint against our chief executive officer for defamation in 60 connection with the Press Release.
In addition to the foregoing, we have been and may be from time to time a party to other legal proceedings that arise in the ordinary course of business and to other patent enforcement actions to assert our patent rights. Item 4. MINE SAF ETY DISCLOSURES Not applicable. 57 PART II
In addition to the foregoing, we have been and may be from time to time a party to other legal proceedings that arise in the ordinary course of business and to other patent enforcement actions to assert our patent rights. 61 Item 4. MINE SAF ETY DISCLOSURES Not applicable. 62 PART II
On April 15, 2022, the judge in the infringement case appointed two technical experts to provide a technical assessment of validity and infringement. As of December 31, 2022, we and AMA have each filed the first technical briefs to the experts detailing our positions on validity and infringement. The patent infringement proceedings are ongoing.
On April 15, 2022, the judge in the infringement case appointed two technical experts to provide a technical assessment of validity and infringement. On December 31, 2022, we and AMA each filed the first technical briefs to the experts detailing our positions on validity and infringement.
In March 2023, plaintiffs filed a complaint asserting various causes of action consistent with those set forth in the October 2022 summons, and a demand for monetary damages and other relief in excess of $16 million. Aspen intends to vigorously defend this matter.
In March 2023, plaintiffs filed a complaint asserting various causes of action consistent with those set forth in the October 2022 summons, and a demand for monetary damages and other relief in excess of $16 million.
In response to our infringement complaint, AMA has also added as a counter-claim in connection with its claims regarding the Press Release, those same claims that it previously sought a preliminary injunction, which was denied by the court.
In June 2023, we learned the judge formally dismissed the second criminal complaint. In response to our infringement complaint, AMA also added as a counter-claim in connection with its claims regarding the Press Release, those same claims that it previously sought a preliminary injunction, which was denied by the court.
Removed
As with the first complaint, we believe this complaint is without merit and intend to seek the same disposition of the matter in this second jurisdiction as was achieved in the first jurisdiction.
Added
In January and February 2023, we and AMA each filed second and third technical briefs to the experts addressing further arguments on validity and infringement.
Added
In May 2023, the technical experts issued their preliminary report on validity and infringement in which they found that two of the asserted manufacturing patents were valid and that the third would be valid with a minor correction.
Added
The experts also found that two of the manufacturing patents were infringed by AMA products purchased from Nano Tech Co., Ltd. but that the scope of the composition patent was limited such that AMA’s products did not infringe the claims. In June 2023, we and AMA each filed observations on the preliminary report from the technical experts.
Added
In July 2023, the experts filed their final report, which confirmed the conclusions from their preliminary report. On July 26, 2023, we filed a motion for preliminary injunction requesting the court to enjoin AMA’s sale of infringing aerogel products supplied by Nano Tech Co. Ltd. During September 2023, we and AMA submitted technical briefs regarding our motion for preliminary injunction.
Added
On October 27, 2023, the judge issued an order dismissing our motion. On November 7, 2023, we appealed the judge’s decision to a panel of the Court of Genoa and a hearing was held on November 29, 2023.
Added
As of December 31, 2023, the main patent infringement proceedings are ongoing, and the appeal decision is pending. • On April 18, 2023, we filed a patent infringement complaint at the Seoul Central District Court and a petition for investigation of unfair trade practices in the Korea Trade Commission (KTC).
Added
The complaint and petition alleged that Beerenberg Services AS, Beerenberg Korea Ltd., and Bronx (China) Co., Ltd. have infringed several of our Korean patents in connection with the import and sale of certain aerogel products in Korea.
Added
The asserted patents include (a) Korean patents related to high performance reinforced aerogel compositions and (b) Korean counterparts of the patents previously successfully asserted against Nano Tech Co., Ltd. and Guangdong Alison Hi Tech., Ltd. in Germany and the US. We are seeking injunctive relief and monetary damages against the defendants.
Added
On May 30, 2023, we learned of a decision by the KTC to institute an investigation against Beerenberg Korea Ltd. and Bronx (China) Co., Ltd. on the basis of our petition.
Added
On August 4, 2023, Beerenberg Korea Ltd. and Bronx (China) Co., Ltd. submitted answers to our petition in which they confirmed that the accused infringing products are manufactured in China by Bronx (China) Co., Ltd. and imported into Korea by Beerenberg Korea Ltd. On August 17, 2023, we submitted responses to the answers from Beerenberg and Bronx.
Added
From September through November, the parties submitted opinions regarding validity and infringement to the KTC. As of December 31, 2023, the KTC proceedings are ongoing, and there have been no substantive activities in the District Court case.
Added
In July 2023, we filed a motion to compel arbitration, and in February 2024, the Court granted our motion and stayed the litigation pending arbitration. To the extent APN seeks to pursue claims in an arbitration proceeding, Aspen intends to continue to vigorously defend this matter, including seeking its legal costs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividend Policy Our common stock is trading on The New York Stock Exchange, or NYSE, under the symbol “ASPN.” As of March 15, 2023, there were approximately 41 stockholders of record of our common stock.
Biggest changeItem 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STO CKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividend Policy Our common stock is trading on The New York Stock Exchange, or NYSE, under the symbol “ASPN.” As of March 5, 2024, there were approximately 42 stockholders of record of our common stock.
(c) Purchases of Equity Securities By the Issuer and Affiliated Purchasers . We did not repurchase any of our equity securities during the year ended December 31, 2022. Item 6. [RESERVED] 58
(c) Purchases of Equity Securities By the Issuer and Affiliated Purchasers . We did not repurchase any of our equity securities during the year ended December 31, 2023. Item 6. [RESERVED] 63

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear ended December 31, 2021 compared to year ended December 31, 2020 The following tables set forth our results of operations for the periods presented: Year Ended December 31, Year Ended December 31, 2021 2020 $ Change % Change 2021 2020 ($ in thousands) (Percentage of 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 )% Revenue Year Ended December 31, Change 2021 2020 Amount Percentage of Revenue Amount Percentage 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 % 71 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) 34,557 28,635 5,922 21 % Total revenue increased $21.3 million, or 21%, to $121.6 million in 2021 from $100.3 million in 2020.
Biggest changeNet operating losses of $164.3 million generated from 2018 through 2023 have an unlimited carryforward . 71 Results of Operations The following tables set forth our results of operations for the periods presented: Year Ended December 31, 2023 2022 2021 ($ in thousands) Revenue $ 238,718 $ 180,364 $ 121,622 Cost of revenue 181,797 175,388 111,685 Gross profit 56,921 4,976 9,937 Operating expenses Research and development 16,356 16,930 11,441 Sales and marketing 33,008 28,792 16,581 General and administrative 56,760 38,499 22,514 Total operating expenses 106,124 84,221 50,536 Loss from operations (49,203 ) (79,245 ) (40,599 ) Other income (expense) Interest expense, convertible note - related party (5,328 ) (5,110 ) — Interest income (expense), net 6,534 1,617 (229 ) Gain on extinguishment of debt — — 3,734 Income from Employee Retention Credits 2,186 — — Total other income (expense) 3,392 (3,493 ) 3,505 Net loss $ (45,811 ) $ (82,738 ) $ (37,094 ) Year ended December 31, 2023 compared to year ended December 31, 2022 The following tables set forth our results of operations for the periods presented: Year Ended December 31, Year Ended December 31, 2023 2022 $ Change % Change 2023 2022 ($ in thousands) (Percentage of total revenue) Revenue $ 238,718 $ 180,364 $ 58,354 32 % 100 % 100 % Cost of revenue 181,797 175,388 6,409 4 % 76 % 97 % Gross profit 56,921 4,976 51,945 1,044 % 24 % 3 % Operating expenses Research and development 16,356 16,930 (574 ) (3 )% 7 % 9 % Sales and marketing 33,008 28,792 4,216 15 % 14 % 16 % General and administrative 56,760 38,499 18,261 47 % 24 % 21 % Total operating expenses 106,124 84,221 21,903 26 % 44 % 47 % Loss from operations (49,203 ) (79,245 ) 30,042 (38 )% (21 )% (44 )% Other income (expense) Interest expense, convertible note - related party (5,328 ) (5,110 ) (218 ) 100 % (2 )% -3 % Interest income, net 6,534 1,617 4,917 304 % 3 % 1 % Income from Employee Retention Credits 2,186 — 2,186 100 % 1 % — % Total other income (expense) 3,392 (3,493 ) 6,885 (197 )% 1 % (2 )% Net loss $ (45,811 ) $ (82,738 ) $ 36,927 45 % (19 )% (46 )% 72 Revenue Year Ended December 31, 2023 2022 Change Percentage of Percentage of Amount Revenue Amount Revenue Amount Percentage ($ in thousands) Revenue: Energy industrial $ 128,639 54% $ 124,807 69% $ 3,832 3% Thermal barrier 110,079 46% 55,557 31% 54,522 98% Total revenue $ 238,718 100% $ 180,364 100% $ 58,354 32% The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time, for the periods presented: Year Ended December 31, Change 2023 2022 Amount Percentage Product shipments in square feet (in thousands) 28,392 32,589 (4,197 ) (13 )% Total revenue increased $58.3 million, or 32%, to $238.7 million in 2023 from $180.4 million in 2022.
The decrease in gross profit was the result the $63.7 million increase in total cost of revenue, partially offset by the $58.7 million increase in total revenue.
The decrease in gross profit was the result of the $63.7 million increase in total cost of revenue, partially offset by the $58.7 million increase in total revenue.
Financing Activities Net cash provided by financing activities in 2022 totaled $478.4 million and consisted of $267.5 million of net proceeds from our underwritten public offering, $99.8 million in net proceeds from the issuance of convertible debt, $72.7 million of net proceeds from our 2022 ATM offering program, net proceeds from the private placement of common stock of $49.9 million, and proceeds from employee stock option exercises of $0.6 million, offset, in part, by $9.7 million for payments of a prepayment liability and $2.4 million for payments for employee tax withholdings associated with the vesting of restricted stock units.
Net cash provided by financing activities in 2022 totaled $478.4 million and consisted of $267.5 million of net proceeds from our underwritten public offering, $99.8 million in net proceeds from the issuance of convertible debt, $72.7 million of net proceeds from our 2022 ATM offering program, net proceeds from the private placement of common stock of $49.9 million, and proceeds from employee stock option exercises of $0.6 million, offset, in part, by $9.7 million for payments of a prepayment liability and $2.4 million for payments for employee tax withholdings associated with the vesting of restricted stock units.
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 on June 30 and December 30, commencing on June 30, 2022.
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 on June 30 and December 30, commencing on June 30, 2022.
We received net proceeds of $267.5 million after deducting underwriting discounts and commissions of $8.1 million and offering expenses of approximately $0.5 million. 74 In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes.
We received net proceeds of $267.5 million after deducting underwriting discounts and commissions of $8.1 million and offering expenses of approximately $0.5 million. In February 2022, we sold and issued to an affiliate of Koch $100.0 million in aggregate principal amount of our Convertible Senior PIK Toggle Notes.
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; 62 • 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.
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; 67 • 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.
Gross Profit Year Ended December 31, 2022 2021 Change Percentage Percentage Amount of Revenue Amount of Revenue Amount Percentage ($ in thousands) Gross profit: Energy industrial $ 18,844 15 % $ 14,486 13 % $ 4,358 30 % Thermal barrier (13,868 ) (25 )% (4,549 ) NM (9,319 ) NM Total gross (loss) profit $ 4,976 3 % $ 9,937 8 % $ (4,961 ) (50 )% Gross profit decreased $4.9 million, or 50%, to $5.0 million in 2022 from $9.9 million in 2021.
Gross Profit Year Ended December 31, Change 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage Gross profit: Energy industrial $ 18,844 15% $ 14,486 13% $ 4,358 30% Thermal barrier (13,868 ) (25)% (4,549 ) NM (9,319 ) NM Total gross profit $ 4,976 3% $ 9,937 8% $ (4,961 ) (50)% Gross profit decreased $4.9 million, or 50%, to $5.0 million in 2022 from $9.9 million in 2021.
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. 78 Revenue Recognition We recognize revenue from the sale of our energy industrial aerogel products and thermal barriers.
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. 83 Revenue Recognition We recognize revenue from the sale of our energy industrial aerogel products and thermal barriers.
A substantial majority of our revenue is generated from a limited number of direct customers, including distributors, contractors, fabricators, partners and end-user customers.
A substantial majority of our revenue is generated from a limited number of direct customers, including distributors, contractors, fabricators, OEMs, partners and end-user customers.
During 2023, 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.
During 2024, 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.
As of the date of termination, we had no amounts due or owed to SVB under the SVB Loan Agreement for any principal, interest, or other amounts, other than approximately $1.2 million in letters of credit that were issued under the SVB Loan Agreement and will be cash collateralized in connection with the termination of the SVB Loan Agreement.
As of the date of termination, we had no amounts due or owed to SVB under the SVB Loan Agreement for any principal, interest, or other amounts, other than approximately $1.2 million in letters of credit that were issued under the SVB Loan Agreement and were cash collateralized in connection with the termination of the SVB Loan Agreement.
The award had an aggregate date fair value of $6.5 million. On June 2, 2022, we issued 53,590 shares of restricted common stock, pursuant to a performance-based restricted stock agreement, to each of certain employees. The restricted common stock vests in tranches, subject to achievement of certain time and performance vesting conditions, as defined, over a three-to-five year period.
The award had an aggregate grant date fair value of $6.5 million. On June 2, 2022, we issued 53,590 shares of restricted common stock, pursuant to a performance-based restricted stock agreement, to each of certain employees, with vesting in tranches, subject to achievement of certain time and performance vesting conditions, as defined, over a three-to-five year period.
Interest Income (Expense), Net For the years ended December 31, 2022, 2021, and 2020, interest expense, net consists of interest expense related to our revolving credit facility and in 2022, included interest earned on the cash balances invested in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government.
Other Income (Expense), Net For the years ended December 31, 2023, 2022 and 2021, interest expense, net consists of interest expense related to our revolving credit facility and in 2022 and 2023, included interest earned on the cash balances invested in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government.
We used a Monte-Carlo simulation model to estimate the grant date fair value of the awards. The equity awards had a total aggregate fair value of $4.0 million at the time of grant. 80
We used a Monte-Carlo simulation model to estimate the grant date fair value of the awards. The equity awards had a total aggregate fair value of $4.0 million at the time of grant. 85
We have entered into production contracts with certain major OEMs, including General Motors LLC, or GM, to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation electric vehicles.
We have entered into production contracts with certain major OEMs, including General Motors LLC, or GM, to supply fabricated, multi-part thermal barriers for use in the battery system of its next-generation EVs.
Contractual Obligations and Commitments Operating Leases We lease office space for our corporate offices in Northborough, Massachusetts, which expires in 2031. We also lease additional facilities in East Providence, Rhode Island; Marlborough, Massachusetts; Monterrey, Mexico; and Pawtucket, Rhode Island for research, administrative, fabrication, and warehousing purposes under leases expiring between October 31, 2023 and April 30, 2034.
Contractual Obligations and Commitments Operating Leases We lease office space for our corporate offices in Northborough, Massachusetts, which expires in 2031. We also lease additional facilities in East Providence, Rhode Island; Marlborough, Massachusetts; Monterrey, Mexico; and Pawtucket, Rhode Island for research, administrative, fabrication, and warehousing purposes under leases expiring between January 31, 2024 and April 30, 2034.
Cost of Revenue Year Ended December 31, 2022 2021 Change % of Related % of Total % of Related % of Total Amount Revenue Revenue Amount Revenue Revenue Amount Percentage ($ in thousands) Cost of revenue: Energy industrial $ 105,963 85 % 59 % $ 100,472 87 % 83 % $ 5,491 5 % Thermal barrier 69,425 125 % 38 % 11,213 NM 9 % 58,212 NM Total cost of revenue $ 175,388 97 % 97 % $ 111,685 92 % 92 % $ 63,703 57 % 68 Total cost of revenue increased $63.7 million, or 57%, to $175.4 million in 2022 from $111.7 million in 2021.
Cost of Revenue Year Ended December 31, Change 2022 2021 Amount Percentage of Related Revenue Amount Percentage of Related Revenue Amount Percentage ($ in thousands) Cost of revenue: Energy industrial $ 105,963 85% $ 100,472 87% $ 5,491 5% Thermal barrier 69,425 125% 11,213 NM 58,212 NM Total cost of revenue $ 175,388 97% $ 111,685 92% $ 63,703 57% Total cost of revenue increased $63.7 million, or 57%, to $175.4 million in 2022 from $111.7 million in 2021.
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.
For the restricted stock awards issued to our Chief Executive Officer during the year ended December 31, 2021 with vesting subject to achievement of certain volume weighted average common stock price targets over a three-to-five year period, we used a 84 Monte-Carlo simulation model to estimate the grant date fair value with respect to 461,616 shares of restricted common stock.
These commitments relate to the enhancement of our existing production lines in our East Providence facility and the planned aerogel manufacturing facility in Bulloch County, Georgia and consist primarily of costs for equipment and construction.
These commitments relate to the enhancement of our existing production lines in our East Providence facility and our fabrication operation in Mexico, and the planned aerogel manufacturing facility in Bulloch County, Georgia and consist primarily of costs for equipment and construction.
See “Item 2 — Properties.” We also lease vehicles and equipment under non-cancelable operating leases that expire at various dates. Thermal Barrier Contract We are party to production contracts with General Motors, to supply fabricated, multi-part thermal barriers, or Barriers, for use in the battery system of its next-generation electric vehicles, or Contracts.
See “Item 2 — Properties.” We also lease vehicles and equipment under non-cancelable operating leases that expire at various dates. Thermal Barrier Contract We are party to production contracts with GM, to supply fabricated, multi-part thermal barriers, or Barriers, for use in the battery system of its next-generation EVs, or Contracts.
During the year ended December 31, 2022, we sold 5,241,400 shares of our common stock through the 2022 ATM offering program and received net proceeds of $72.7 million. On February 3, 2021, we entered into a supply agreement with Silbond Corporation for the purchase of certain silanes products.
During the year ended December 31, 2022, we sold 5,241,400 shares of our common stock through the 2022 ATM offering program and received net proceeds of $72.7 million. The 2022 ATM offering program was terminated on June 20, 2023. On February 3, 2021, we entered into a supply agreement with Silbond Corporation for the purchase of certain silanes products.
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 expect our general and administrative expenses to increase as we add general and administrative personnel to support the anticipated growth of our business.
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 46%, 44% and 42% for the years ended December 31, 2022, 2021 and 2020, respectively.
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 40%, 46% and 44% for the years ended December 31, 2023, 2022 and 2021, respectively.
General and administrative expenses as a percentage of total revenue increased to 21% in 2022 from 19% in 2021 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.
General and administrative expenses as a percentage of total revenue increased to 24% in 2023 from 21% in 2022 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.
Square Foot Operating Metric We price our energy industrial product and measure our shipments in square feet. We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and energy industrial product shipments on a uniform and consistent basis.
We believe the square foot operating metric allows us and our investors to measure our manufacturing capacity and energy industrial product shipments on a uniform and consistent basis.
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 3%, 8%, and 15% for the years ended December 31, 2022, 2021 and 2020, respectively.
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 24%, 3%, and 8% for the years ended December 31, 2023, 2022 and 2021, respectively.
The following chart sets forth energy industrial 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, 2022 2021 2020 (Square feet in thousands) Product shipments in square feet 32,589 34,557 28,635 Adjusted EBITDA We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance.
The following chart sets forth energy industrial product shipments in square feet associated with recognized revenue, including revenue recognized over time, for the periods presented: Year Ended December 31, 2023 2022 2021 (Square feet in thousands) Product shipments in square feet 28,392 32,589 34,557 Adjusted EBITDA We use Adjusted EBITDA, a non-GAAP financial measure, as a means to assess our operating performance.
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.
In addition, global supply chain disturbances, increased reliance on foreign materials procurement, industrial gas supply constraints, increases in the cost of our raw materials, engineering changes, higher prototype sales and other factors may significantly impact our material costs and have a material impact on our operations.
Results of Operations The following tables set forth our results of operations for the periods presented: Year Ended December 31, 2022 2021 2020 ($ in thousands) Revenue $ 180,364 $ 121,622 $ 100,273 Cost of revenue 175,388 111,685 85,679 Gross (loss) profit 4,976 9,937 14,594 Operating expenses Research and development 16,930 11,441 8,729 Sales and marketing 28,792 16,581 11,753 General and administrative 38,499 22,514 15,681 Total operating expenses 84,221 50,536 36,163 Loss from operations (79,245 ) (40,599 ) (21,569 ) Other income (expense) Interest expense, convertible note - related party (5,110 ) — — Interest income (expense), net 1,617 (229 ) (240 ) Gain on extinguishment of debt — 3,734 — Total other income (expense) (3,493 ) 3,505 (240 ) Net loss $ (82,738 ) $ (37,094 ) $ (21,809 ) Year ended December 31, 2022 compared to year ended December 31, 2021 The following tables set forth our results of operations for the periods presented: Year Ended December 31, Year Ended December 31, 2022 2021 $ Change % Change 2022 2021 ($ in thousands) (Percentage of total revenue) Revenue $ 180,364 $ 121,622 $ 58,742 48 % 100 % 100 % Cost of revenue 175,388 111,685 63,703 57 % 97 % 92 % Gross (loss) profit 4,976 9,937 (4,961 ) (50 )% 3 % 8 % Operating expenses Research and development 16,930 11,441 5,489 48 % 9 % 9 % Sales and marketing 28,792 16,581 12,211 74 % 16 % 14 % General and administrative 38,499 22,514 15,985 71 % 21 % 19 % Total operating expenses 84,221 50,536 33,685 67 % 47 % 42 % Loss from operations (79,245 ) (40,599 ) (38,646 ) 95 % (44 )% (33 )% Other income (expense) Interest expense, convertible note - related party (5,110 ) — (5,110 ) 100 % (3 )% 0 % Interest income (expense), net 1,617 (229 ) 1,846 (806 )% 1 % 0 % Gain on extinguishment of debt — 3,734 (3,734 ) 100 % — % 3 % Total other income (expense) (3,493 ) 3,505 (6,998 ) (200 )% (2 )% 3 % Net loss $ (82,738 ) $ (37,094 ) $ (45,644 ) (123 )% (46 )% (30 )% 67 Revenue Year Ended December 31, 2022 2021 Change Percentage of Percentage of Amount Revenue Amount Revenue Amount Percentage ($ in thousands) Revenue: Energy industrial $ 124,807 69 % $ 114,958 95 % $ 9,849 9 % Thermal barrier 55,557 31 % 6,664 5 % 48,893 NM Total revenue $ 180,364 100 % $ 121,622 100 % $ 58,742 48 % The following chart sets forth energy industrial 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 2022 2021 Amount Percentage Product shipments in square feet (in thousands) 32,589 34,557 (1,968 ) (6 )% Total revenue increased $58.7 million, or 48%, to $180.3 million in 2022 from $121.6 million in 2021.
The $6.9 million increase was the result of $4.9 million of interest income, $2.2 million of Employee Retention Credits and a $(0.2) million net impact of capitalized interest relating to our Convertible Note in the comparable period in 2022. 75 Year ended December 31, 2022 compared to year ended December 31, 2021 The following tables set forth our results of operations for the periods presented: Year Ended December 31, Year Ended December 31, 2022 2021 $ Change % Change 2022 2021 ($ in thousands) (Percentage of total revenue) Revenue $ 180,364 $ 121,622 $ 58,742 48% 100% 100% Cost of revenue 175,388 111,685 63,703 57% 97% 92% Gross profit 4,976 9,937 (4,961 ) (50)% 3% 8% Operating expenses Research and development 16,930 11,441 5,489 48% 9% 9% Sales and marketing 28,792 16,581 12,211 74% 16% 14% General and administrative 38,499 22,514 15,985 71% 21% 19% Total operating expenses 84,221 50,536 33,685 67% 47% 42% Loss from operations (79,245 ) (40,599 ) (38,646 ) 95% (44)% (33)% Other income (expense) Interest expense, convertible note - related party (5,110 ) — (5,110 ) 100% (3)% 0% Interest income (expense), net 1,617 (229 ) 1,846 (806)% 1% 0% Gain on extinguishment of debt — 3,734 (3,734 ) 100% —% 3% Total other income (expense) (3,493 ) 3,505 (6,998 ) (200)% (2)% 3% Net loss $ (82,738 ) $ (37,094 ) $ (45,644 ) (123)% (46)% (30)% Revenue Year Ended December 31, Change 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Revenue: Energy industrial $ 124,807 69% $ 114,958 95% $ 9,849 9% Thermal barrier 55,557 31% 6,664 5% 48,893 NM Total revenue $ 180,364 100% $ 121,622 100% $ 58,742 48% The following chart sets forth product shipments in square feet associated with recognized revenue, including revenue recognized over time, for the periods presented: Year Ended December 31, Change 2022 2021 Amount Percentage Product shipments in square feet (in thousands) 32,589 34,557 (1,968 ) (6)% Total revenue increased $58.7 million, or 48%, to $180.3 million in 2022 from $121.6 million in 2021.
During 2023, 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.
During 2024, 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 and manufacturing expense as a percentage of total revenue.
On November 28, 2022, our wholly owned subsidiary, Aspen Aerogels Georgia, LLC, or the Borrower, entered into a Loan Agreement, or the “Loan Agreement”, by and between (i) the Borrower, (ii) Aspen Aerogels, Inc. and (iii) Aspen Aerogels Rhode Island, LLC, a Rhode Island limited liability company, or Aspen RI, and, together with the Borrower and Aspen Aerogels, Inc., each, a Loan Party and collectively, the Loan Parties), as guarantors, and (iv) GM, as lender.
On November 28, 2022, our wholly owned subsidiary, Aspen Aerogels Georgia, LLC, or the Borrower, entered into the Loan Agreement, by and between (i) the Borrower, (ii) Aspen Aerogels, Inc. and (iii) Aspen RI, and, together with the Borrower and Aspen Aerogels, Inc., each, a Loan Party and collectively, the Loan Parties), as guarantors, and (iv) GM, as lender.
As a result, we expect to experience a decrease in both net loss and Adjusted EBITDA during 2023. We also expect to incur significant capital expenditures and growing expenses during 2023, related to our planned second aerogel manufacturing facility to be located in Bulloch County, Georgia.
As a result, we expect to experience a decrease in both net loss and negative Adjusted EBITDA during 2024. We also expect to incur reduced capital expenditures and expenses during 2024 related to our planned second aerogel manufacturing facility to be located in Bulloch County, Georgia.
Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to period. During 2022, we experienced strong volume growth in both our energy industrial and thermal barrier products. As a result, we experienced total revenue growth of 48% during the year.
Accordingly, we expect that our net income (loss), earnings per share and Adjusted EBITDA will vary from period to period. During 2023, we experienced strong volume growth in our thermal barrier products. As a result, we experienced total revenue growth of 32% during the year.
Our ten largest customers accounted for approximately 72% of our total revenue during the year ended December 31, 2022, and we expect that most of our revenue will continue to come from a relatively small number of customers for the foreseeable future. In 2022, sales to GM and Distribution International, Inc. represented 25% and 22% of our total revenue, respectively.
Our ten largest customers accounted for approximately 80% of our total revenue during the year ended December 31, 2023, and we expect that most of our revenue will continue to come from a relatively small number of customers for the foreseeable future. In 2023, sales to GM and Distribution International, Inc. represented 41% and 14% of our total revenue, respectively.
At the Borrower’s election and prior to the issuance of a certificate of occupancy for the Plant, interest may be paid-in-kind at a rate equal to Term SOFR (subject to the Floor) plus 9.0% per year.
At the Borrower’s election and prior to the issuance of a certificate of occupancy for the Plant, interest may be paid-in-kind at a rate equal to Term SOFR (subject to the Floor) plus 9.0% per year. Refer to Recent Developments for details of the amendment to the Loan Agreement.
Capital Spending and Future Capital Requirements We have made capital expenditures primarily to develop and expand our manufacturing capacity. Our capital expenditures totaled $178.0 million in 2022, $13.8 million in 2021 and $3.4 million in 2020.
Capital Spending and Future Capital Requirements We have made capital expenditures primarily to develop and expand our manufacturing capacity. Our capital expenditures totaled $175.5 million in 2023, $178.0 million in 2022 and $13.8 million in 2021.
We believe this is a better representation of the estimated life than our actual limited historical exercise behavior. • For the years ended December 31, 2022 and 2021, we used our historical volatility as a basis to estimate expected volatility in the valuation of stock options.
We believe this is a better representation of the estimated life than our actual limited historical exercise behavior. • For the years ended December 31, 2023, 2022 and 2021, we used our historical volatility as a basis to estimate expected volatility in the valuation of stock options. • The risk-free interest rate is based on U.S.
On November 28, 2022, our wholly owned subsidiary, Aspen Aerogels Georgia, LLC, entered into a $100.0 million loan agreement with GM for which the proceeds to be used for the construction and operation of our planned aerogel manufacturing facility in Bulloch County, Georgia. The agreement allows for borrowings beginning in 2023.
The 2022 ATM offering program was terminated on June 20, 2023. On November 28, 2022, our wholly owned subsidiary, Aspen Aerogels Georgia, LLC, entered into a $100.0 million loan agreement with GM for which the proceeds to be used for the construction and operation of our planned aerogel manufacturing facility in Bulloch County, Georgia.
See “ Risk Factors - Risks Related to Our Business and Strategy - We will require significant additional capital to pursue our growth strategy, but we may not be able to obtain additional financing on acceptable terms or at all ” in this Annual Report on Form 10-K for the year ended December 31, 2022. 75 Analysis of Cash Flow The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2022 2021 2020 ($ in thousands) Net cash provided by (used in): Operating activities $ (94,399 ) $ (18,628 ) $ (9,924 ) Investing activities (177,974 ) (13,778 ) (3,416 ) Financing activities 478,370 92,474 26,203 Net increase in cash 205,997 60,068 12,863 Cash and cash equivalents, beginning of period 76,564 16,496 3,633 Cash and cash equivalents, end of period $ 282,561 $ 76,564 $ 16,496 Operating Activities During 2022, we used $94.4 million in net cash in operating activities, as compared to the use of $18.6 million in net cash during 2021, an increase in the use of cash of $75.8 million.
See “ Risk Factors - Risks Related to Our Business and Strategy - We will require significant additional capital to pursue our growth strategy, but we may not be able to obtain additional financing on acceptable terms or at all ” in this Annual Report on Form 10-K for the year ended December 31, 2022. 80 Analysis of Cash Flow The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2023 2022 2021 ($ in thousands) Net cash provided by (used in): Operating activities $ (42,612 ) $ (94,399 ) $ (18,628 ) Investing activities (175,455 ) (177,974 ) (13,778 ) Financing activities 75,477 478,370 92,474 Net increase (decrease) in cash (142,590 ) 205,997 60,068 Cash and cash equivalents, beginning of period 282,561 76,564 16,496 Cash and cash equivalents, end of period $ 139,971 $ 282,561 $ 76,564 Operating Activities During 2023, we used $42.6 million in net cash in operating activities, as compared to the use of $94.4 million in net cash during 2022, a decrease in the use of cash of $51.8 million.
We believe that our December 31, 2022 cash and cash equivalents balance of $281.3 million 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.
We believe that our December 31, 2023 cash and cash equivalents balance of $139.7 million 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 EV market and other strategic business opportunities.
In volume terms, product shipments decreased by 2.0 million square feet, or 6%, to 32.6 million square feet of aerogel products for the year ended December 31, 2022, as compared to 34.6 million square feet in the year ended December 31, 2021.
In volume terms, product shipments decreased by 4.2 million square feet, or 13%, to 28.4 million square feet of aerogel products for the year ended December 31, 2023, as compared to 32.6 million square feet in the year ended December 31, 2022.
As of December 31, 2022, we had capital commitments of approximately $192.7 million, which included commitments for which we have entered into contracts as well as commitments authorized by our Board of Directors.
As of December 31, 2023, we had capital commitments of approximately $202.6 million, which included commitments for which we have entered into contracts as well as commitments authorized by our Board of Directors.
We expect that material costs will increase in absolute dollars during 2023 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.
We expect that material costs will increase in absolute dollars during 2024 due to projected growth in product shipments and contracts but remain stable as a percentage of revenue due to improved manufacturing, and fabrication yields and a favorable mix of products sold. Manufacturing expense is also a significant component of cost of revenue.
We also intend to enter into a new revolving credit facility. We believe that the consummation of equity financings could potentially result in an ownership change under Section 382 of the Internal Revenue Code. Such an ownership change would lead to the use of our net operating loss carryforwards being restricted.
We believe that consummation of equity financings could potentially result in an ownership change under Section 382 of the Internal Revenue Code. Such an ownership change would lead to the use of our net operating loss carryforwards being restricted.
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.
However, we plan to supplement our cash balance and available credit with equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments or government grant and loan programs to provide the additional capital necessary to purchase the capital equipment, construct the new facilities and complete the aerogel capacity expansions required to support our evolving commercial opportunities and strategic business initiatives.
The following assumptions were used to estimate the fair value of the option awards: Year Ended December 31, 2022 2021 2020 Weighted-average assumptions: Expected term (in years) 5.97 5.96 5.81 Expected volatility 61.85 % 52.27 % 49.90 % Risk free rate 2.13 % 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.
The following assumptions were used to estimate the fair value of the option awards: Year Ended December 31, 2023 2022 2021 Weighted-average assumptions: Expected term (in years) 6.12 5.97 5.96 Expected volatility 70.04 % 61.85 % 59.80 % Risk free rate 4.08 % 2.13 % 0.86 % 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.
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 industrial. Our Pyrogel® and Cryogel® product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption.
Our insulation is used by oil producers and the owners and operators of refineries, petrochemical plants, LNG facilities, power generating assets and other energy industrial. Our Pyrogel ® and Cryogel ® product lines have undergone rigorous technical validation by industry leading end-users and achieved significant market adoption. We also derive revenue from a number of other end markets.
The following table sets forth the total revenue for the periods presented: Year Ended December 31, 2022 2021 2020 ($ in thousands) Revenue: Energy industrial $ 124,807 $ 114,958 $ 99,834 Thermal barrier 55,557 6,664 439 Total $ 180,364 $ 121,622 $ 100,273 Energy industrial revenue accounted for 69%, 95%, and greater than 99% of total revenue the years ended December 31, 2022, 2021 and 2020, respectively.
The following table sets forth the total revenue for the periods presented: Year Ended December 31, 2023 2022 2021 ($ in thousands) Revenue: Energy industrial $ 128,639 $ 124,807 $ 114,958 Thermal barrier 110,079 55,557 6,664 Total $ 238,718 $ 180,364 $ 121,622 Energy industrial revenue accounted for 54%, 69%, and greater than 95% of total revenue for the years ended December 31, 2023, 2022 and 2021, respectively.
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. For each of the noted periods, there were no other customers that represented 10% or more of our total revenues.
In 2022, sales to GM and Distribution International, Inc. represented 25% and 22% of our total revenue, respectively. In 2021, sales to Distribution International, Inc. represented 28% of our total revenue. For each of the noted periods, there were no other customers that represented 10% or more of our total revenues.
The $3.3 million increase was the result of interest relating to our Convertible Note. Interest expense, related party $5.1 million increase was the result of interest relating to our Convertible Note.
The $3.3 million increase was the result of increase in interest expense, related party by $5.1 million offset by increase in interest income, net of $1.8 million. Increase in interest expense, related party of $5.1 million was the result of interest relating to our Convertible Note.
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.
During 2022, we used $94.4 million in net cash in operating activities, as compared to the use of $18.6 million in net cash during 2021, an increase in the use of cash of $75.8 million.
On June 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.
In October 2022, we extended the agreement through December 31, 2023, and the agreement has subsequently terminated. On June 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.
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.
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.
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.
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, and in a number of new, high-value markets, including hydrogen energy, filtration, water purification, and gas sorption. We market and sell our products primarily through a sales force based in North America, Europe and Asia.
We experienced a 48% increase in total revenue during 2022 driven by the increase in our energy industrial business, particularly in Asia and North America, and continued growth in the electric vehicle market. We project revenue growth during 2023 due to accelerating demand in the electric vehicle market and continued market share gains in the sustainable insulation materials market.
We experienced a 32% increase in total revenue during 2023 driven by the increase in our energy industrial business, particularly in Europe, and continued growth in the EV market. We project revenue growth during 2024 due to accelerating demand in the EV market and continued market share gains in the sustainable insulation materials market.
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.
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. We expect that our general and administrative expenses will increase in absolute dollars and decrease as a percentage of revenue.
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 our East Providence facility and engineering designs for the planned aerogel manufacturing facility in Bulloch County, Georgia. Net cash used in investing activities for 2022 and 2021 totaled $178.0 million and $13.8 million, respectively.
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 our East Providence facility, our automated fabrication facility in Mexico and engineering designs for the planned aerogel manufacturing facility in Bulloch County, Georgia.
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.
This decrease in the use of cash was the result of the decrease in net loss adjusted for non-cash items of $44.8 million, and a decrease in cash used by changes in working capital of $7.0 million.
GAAP measure, to Adjusted EBITDA for the years presented: Year Ended December 31, 2022 2021 2020 ($ in thousands) Net loss $ (82,738 ) $ (37,094 ) $ (21,809 ) Depreciation and amortization 9,222 9,440 10,198 Stock-based compensation (1) 9,385 5,176 5,004 Gain on the extinguishment of debt — (3,734 ) — Interest expense, convertible note - related party 5,110 — — Interest income (expense), net (1,617 ) 229 240 Adjusted EBITDA $ (60,638 ) $ (25,983 ) $ (6,367 ) (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.
GAAP measure, to Adjusted EBITDA for the years presented: Year Ended December 31, 2023 2022 2021 ($ in thousands) Net loss $ (45,811 ) $ (82,738 ) $ (37,094 ) Depreciation and amortization 15,318 9,222 9,440 Stock-based compensation (1) 10,954 9,385 5,176 Gain on the extinguishment of debt — — (3,734 ) Other (income) expense (3,392 ) 3,493 229 Adjusted EBITDA $ (22,931 ) $ (60,638 ) $ (25,983 ) (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.
If the closing price per share of our common stock on the New 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 77 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.
If the closing price per share of our common stock on the New 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. 82 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.
Total revenue from outside of the United States, based on shipment destination, amounted to $66.4 million, or 37% of our total revenue, 64 $54.8 million, or 45% of our total revenue, and $55.4 million, or 55% of our total revenue, in the years ended December 31, 2022, 2021 and 2020, respectively.
Total revenue from outside of the United States, based on shipment destination, amounted to $87.7 million, or 37% of our total revenue, $66.4 million, or 37% of our total revenue, and $54.8 million, or 45% of our total revenue, in the years ended December 31, 2023, 2022 and 2021, respectively. 69 Cost of Revenue Cost of product revenue consists primarily of materials and manufacturing expense.
Research and Development Expenses Year Ended December 31, Change 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Research and development expenses $ 16,930 9 % $ 11,441 9 % $ 5,489 48 % Research and development expenses increased by $5.5 million, or 48%, to $16.9 million in 2022 from $11.4 million in 2021.
Research and Development Expenses Year Ended December 31, Change 2023 2022 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Research and development expenses $ 16,356 7% $ 16,930 9% $ (574 ) (3)% Research and development expenses decreased by $0.5 million, or 3%, to $16.4 million in 2023 from $16.9 million in 2022.
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. 79 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 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.
Provision for Income Taxes We have incurred net losses since inception and have not recorded benefit provisions for U.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. 66 At December 31, 2022, we had $348.0 million of net operating losses available to offset future federal income tax, if any, of which $194.6 million expire on various dates through December 31, 2037.
Provision for Income Taxes We have incurred net losses since inception and have not recorded benefit provisions for U.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.
In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock, at a price of $27.902 per share, for net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million.
In addition, in March 2022, pursuant to a securities purchase agreement dated February 15, 2022, we sold to an affiliate of Koch 1,791,986 shares of our common stock, at a price of $27.902 per share, for net proceeds of $49.9 million after deducting fees and offering expenses of $0.1 million. 79 On December 19, 2023, we entered into a securities purchase agreement with certain institutional investors named therein, pursuant to which we issued and sold, in a registered direct offering directly to the Investors an aggregate of 6,060,607 shares of our common stock at an offering price of $12.38 per share.
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.
Critical Accounting Policies and Estimates Our financial statements are prepared in accordance with accounting principles generally accepted in the 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.
During the year ended December 31, 2021, we sold 929,981 shares of our common stock through the ATM offering program with B. Riley Securities and received net proceeds of $19.4 million.
Financial Summary On November 5, 2020, we entered into a sales agreement for an at-the-market (“ATM”) offering program with B. Riley Securities as our sales agent. During the year ended December 31, 2021, we sold 929,981 shares of our common stock through the ATM offering program with B. Riley Securities and received net proceeds of $19.4 million.
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 in Bulloch County, Georgia, construction of which is currently in progress.
To meet expected growth in demand for our aerogel products in the EV market, we have been in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia.
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. Thermal Barrier We are also actively developing a number of promising aerogel products and technologies for the electric vehicle market.
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.
The $6.8 million increase was the result of increases in compensation and related costs of $2.8 million, professional fees of $2.4 million, and other general and administrative costs of $2.2 million, partially offset by a decrease in the provision for bad debt of $0.6 million.
The $18.3 million increase was the result of increases in compensation and related costs of $15.3 million and professional fees of $3.6 million, offset by a decrease in other costs of $0.6 million.
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.
We plan to fund the capital expenditures required to build a carbon aerogel battery materials facility, and to construct a new aerogel blanket manufacturing facility with additional equity financings, debt financings, equipment leasing, sale-leaseback transactions, customer prepayments, government grant and loan programs or credit facilities.
Revenue is recognized upon the satisfaction of contractual performance obligations. In general, our customary shipping terms are FOB shipping point and ex works. Products are typically delivered without significant post-sale obligations to customers other than standard warranty obligations for product defects.
Revenue is recognized upon the satisfaction of contractual performance obligations. 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.
Material costs as a percentage of product revenue were 51%, 48% and 44% for the years ended December 31, 2022, 2021 and 2020, 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.
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.
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. 70 Interest Expense, net Year Ended December 31, Change 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Interest expense: Interest expense, related party $ (5,110 ) (3 )% $ — 0 % $ (5,110 ) NM Interest income (expense), net 1,617 1 % (229 ) (0 )% 1,846 NM Total interest expense, net $ (3,493 ) (2 )% $ (229 ) (0 )% $ (3,264 ) NM Interest expense, net increased by $3.3 million to $3.5 million in 2022 from $0.2 million in 2021.
General and administrative expenses as a percentage of total revenue increased to 21% in 2022 from 19% in 2021 primarily due to increased expenditures associated with the growth in our human resource, finance, information technology and general management organizations in preparation for the anticipated growth in our business. 78 Interest Expense, net Year Ended December 31, Change 2022 2021 Amount Percentage of Revenue Amount Percentage of Revenue Amount Percentage ($ in thousands) Interest expense: Interest expense, related party $ (5,110 ) (3)% $ — 0% $ (5,110 ) NM Interest income (expense), net 1,617 1% (229 ) (0)% 1,846 NM Total interest expense, net $ (3,493 ) (2)% $ (229 ) (0)% $ (3,264 ) NM Interest expense, net increased by $3.3 million to $3.5 million in 2022 from $0.2 million in 2021.
We intend to fund capital expenditures related to the expansion of capacity of our existing manufacturing facility with our existing cash balance and anticipated cash flows from operations.
In the meantime, and until we ramp up construction, we expect to be able to substantially reduce our planned capital expenditures for 2024. 81 We intend to fund capital expenditures related to the expansion of capacity of our existing manufacturing facility with our existing cash balance and anticipated cash flows from operations.
We significantly increased staffing and spending levels in support of 63 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.
We increased staffing and spending levels in support of the growing demand for our thermal barrier business and our carbon aerogel battery material opportunity in coming years.
In the longer term, we expect that sales and marketing expenses will increase in absolute dollars but decrease 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 our sales and marketing expenses will increase in absolute dollars but decrease as a percentage of revenue in 2024 and in the longer term.
Riley Securities, 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 in cash used for payments for employee tax withholdings associated with the vesting of restricted stock units.
Financing Activities Net cash provided by financing activities in 2023 totaled $75.5 million and consisted of net proceeds from the registered direct offering of common stock of $74.2 million and $1.7 million in proceeds from employee stock option exercises, offset, in part, by $0.4 million in cash used for payments made for employee tax withholdings associated with the vesting of restricted stock units.
We have operated the East 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 in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia.
To meet expected growth in demand for our aerogel products in the EV market, we have been in the process of expanding our aerogel blanket capacity by constructing a second manufacturing plant in Bulloch County, Georgia.
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 gross profit was the result of the $58.3 million increase in total revenue, partially offset by the $6.4 million increase in total cost of revenue.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThese amounts were held for working capital and capital expansion purposes and were invested primarily in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts at a major financial institution in North America.
Biggest changeThese amounts were held for working capital and capital expansion purposes and were invested primarily in deposit accounts, money market accounts, and high-quality debt securities issued by the U.S. government via cash sweep accounts at major financial institutions in North America.
However, our business may be affected by inflation in the future. Foreign Currency Exchange Risk We are subject to inherent risks attributed to operating in a global economy. Virtually all of our revenue, receivables, purchases and debts are denominated in U.S. dollars. 81
However, our business may be affected by inflation in the future. Foreign Currency Exchange Risk We are subject to inherent risks attributed to operating in a global economy. Virtually all of our revenue, receivables, purchases and debts are denominated in U.S. dollars. 86
Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material. As of December 31, 2022, we had $1.2 million of restricted cash to support our outstanding letters of credit.
Due to the short-term nature of these investments, we believe that our exposure to changes in the fair value of our cash as a result of changes in interest rates is not material. As of December 31, 2023, we had $0.2 million of restricted cash to support our outstanding letters of credit.
Interest Rate Risk We are exposed to changes in interest rates in the normal course of our business. At December 31, 2022, we had unrestricted cash and cash equivalents of $281.3 million.
Interest Rate Risk We are exposed to changes in interest rates in the normal course of our business. At December 31, 2023, we had unrestricted cash and cash equivalents of $139.7 million.

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