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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number: 001-36481

 

ASPEN AEROGELS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

04-3559972

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

30 Forbes Road, Building B

Northborough, Massachusetts

 

01532

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (508691-1111

 

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

Title of each class

Trading Symbol

Name of exchange on which registered

Common Stock, par value $0.00001 per share

ASPN

The New York Stock Exchange

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of August 4, 2020, the registrant had 26,845,309 shares of common stock outstanding.

 

 


ASPEN AEROGELS, INC.

INDEX TO FORM 10-Q

 

 

 

 

 

Page

 

 

PART I FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheets (unaudited) as of June 30, 2020 and December 31, 2019

 

1

 

 

 

 

 

 

 

Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2020 and 2019

 

2

 

 

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the three and six months ended June 30, 2020 and 2019

 

3

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2020 and 2019

 

4

 

 

 

 

 

 

 

Notes to Consolidated Financial Statements (unaudited)

 

5

 

 

 

 

 

Item 2.

 

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

 

17

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

32

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

33

 

 

 

 

 

 

 

PART II OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A.

 

Risk Factors

 

36

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

38

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

38

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

38

 

 

 

 

 

Item 5.

 

Other Information

 

38

 

 

 

 

 

Item 6.

 

Exhibits

 

39

 

 

 

 

 

SIGNATURES

 

40

 

Trademarks, Trade Names and Service Marks

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

 

 

 


 

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements.

ASPEN AEROGELS, INC.

Consolidated Balance Sheets

(Unaudited)

 

 

 

June 30

 

 

December 31,

 

 

 

2020

 

 

2019

 

 

 

(In thousands, except

share and per share data)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,359

 

 

$

3,633

 

Accounts receivable, net of allowances of $130 and $144

 

 

19,168

 

 

 

32,254

 

Inventories

 

 

9,452

 

 

 

8,768

 

Prepaid expenses and other current assets

 

 

1,391

 

 

 

1,114

 

Total current assets

 

 

43,370

 

 

 

45,769

 

Property, plant and equipment, net

 

 

50,132

 

 

 

53,617

 

Operating lease right-of-use assets

 

 

3,949

 

 

 

4,032

 

Other long-term assets

 

 

94

 

 

 

84

 

Total assets

 

$

97,545

 

 

$

103,502

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,713

 

 

$

12,596

 

Accrued expenses

 

 

4,092

 

 

 

8,057

 

Revolving line of credit

 

 

 

 

 

3,123

 

Deferred revenue

 

 

3,412

 

 

 

5,620

 

Operating lease liabilities

 

 

1,091

 

 

 

1,038

 

Total current liabilities

 

 

13,308

 

 

 

30,434

 

Prepayment liability

 

 

9,676

 

 

 

9,786

 

Long-term debt

 

 

3,661

 

 

 

 

Operating lease liabilities long-term

 

 

4,091

 

 

 

4,292

 

Other long-term liabilities

 

 

278

 

 

 

 

Total liabilities

 

 

31,014

 

 

 

44,512

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

   outstanding at June 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.00001 par value; 125,000,000 shares authorized, 26,845,309 and

   24,302,504 shares issued and outstanding at June 30, 2020 and December 31,

   2019, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

561,548

 

 

 

545,140

 

Accumulated deficit

 

 

(495,017

)

 

 

(486,150

)

Total stockholders’ equity

 

 

66,531

 

 

 

58,990

 

Total liabilities and stockholders’ equity

 

$

97,545

 

 

$

103,502

 

 

See accompanying notes to unaudited consolidated financial statements.

1


 

ASPEN AEROGELS, INC.

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(In thousands, except

share and per share data)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

24,526

 

 

$

28,908

 

 

$

52,833

 

 

$

55,693

 

Research services

 

 

115

 

 

 

625

 

 

 

227

 

 

 

1,752

 

Total revenue

 

 

24,641

 

 

 

29,533

 

 

 

53,060

 

 

 

57,445

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

 

21,761

 

 

 

25,715

 

 

 

44,160

 

 

 

49,193

 

Research services

 

 

29

 

 

 

304

 

 

 

69

 

 

 

1,020

 

Gross profit

 

 

2,851

 

 

 

3,514

 

 

 

8,831

 

 

 

7,232

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,121

 

 

 

1,868

 

 

 

4,348

 

 

 

3,796

 

Sales and marketing

 

 

2,972

 

 

 

3,509

 

 

 

6,296

 

 

 

7,020

 

General and administrative

 

 

3,406

 

 

 

3,352

 

 

 

6,921

 

 

 

7,592

 

Total operating expenses

 

 

8,499

 

 

 

8,729

 

 

 

17,565

 

 

 

18,408

 

Loss from operations

 

 

(5,648

)

 

 

(5,215

)

 

 

(8,734

)

 

 

(11,176

)

Interest expense, net

 

 

(50

)

 

 

(103

)

 

 

(133

)

 

 

(144

)

Total interest expense, net

 

 

(50

)

 

 

(103

)

 

 

(133

)

 

 

(144

)

Net loss

 

$

(5,698

)

 

$

(5,318

)

 

$

(8,867

)

 

$

(11,320

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.21

)

 

$

(0.22

)

 

$

(0.34

)

 

$

(0.47

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

26,521,861

 

 

 

24,118,620

 

 

 

25,858,076

 

 

 

24,025,136

 

 

See accompanying notes to unaudited consolidated financial statements.

2


 

ASPEN AEROGELS, INC.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

 

Preferred Stock

$0.00001 Par

Value

 

 

Common Stock

$0.00001 Par

Value

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total Stockholders' Equity

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

 

 

$

 

 

 

24,302,504

 

 

$

 

 

$

545,140

 

 

$

(486,150

)

 

$

58,990

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,169

)

 

 

(3,169

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

992

 

 

 

 

 

 

992

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

336,951

 

 

 

 

 

 

(1,195

)

 

 

 

 

 

(1,195

)

Proceeds from underwritten public offering, net of underwriting discounts and commissions of $1,093 and issuance costs of $285

 

 

 

 

 

 

 

 

1,955,000

 

 

 

 

 

 

14,751

 

 

 

 

 

 

14,751

 

Balance at March 31, 2020

 

 

 

 

 

 

 

 

26,594,455

 

 

 

 

 

 

559,688

 

 

 

(489,319

)

 

 

70,369

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,698

)

 

 

(5,698

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,007

 

 

 

 

 

 

1,007

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

45,066

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

5,629

 

 

 

 

 

 

(16

)

 

 

 

 

 

(16

)

Proceeds from employee stock option exercises

 

 

 

 

 

 

 

 

200,159

 

 

 

 

 

 

869

 

 

 

 

 

 

869

 

Balance at June 30, 2020

 

 

 

 

$

 

 

 

26,845,309

 

 

$

 

 

$

561,548

 

 

$

(495,017

)

 

$

66,531

 

 

 

 

Preferred Stock

$0.00001 Par

Value

 

 

Common Stock

$0.00001 Par

Value

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total Stockholders' Equity

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2018

 

 

 

 

$

 

 

 

23,973,517

 

 

$

 

 

$

541,839

 

 

$

(471,585

)

 

$

70,254

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,002

)

 

 

(6,002

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

878

 

 

 

 

 

 

878

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

273,290

 

 

 

 

 

 

(454

)

 

 

 

 

 

(454

)

Balance at March 31, 2019

 

 

 

 

 

 

 

 

24,246,807

 

 

 

 

 

 

542,263

 

 

 

(477,587

)

 

 

64,676

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,318

)

 

 

(5,318

)

Stock compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

996

 

 

 

 

 

 

996

 

Issuance of restricted stock

 

 

 

 

 

 

 

 

50,328

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of restricted stock units

 

 

 

 

 

 

 

 

3,129

 

 

 

 

 

 

(10

)

 

 

 

 

 

(10

)

Balance at June 30, 2019

 

 

 

 

$

 

 

 

24,300,264

 

 

$

 

 

$

543,249

 

 

$

(482,905

)

 

$

60,344

 

 

See accompanying notes to unaudited consolidated financial statements.

 

3


 

ASPEN AEROGELS, INC.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(8,867

)

 

$

(11,320

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,125

 

 

 

5,097

 

Amortization of debt issuance costs

 

 

2

 

 

 

 

Stock-compensation expense

 

 

1,999

 

 

 

1,874

 

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

 

 

472

 

 

 

459

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

13,086

 

 

 

3,399

 

Inventories

 

 

(684

)

 

 

(5,781

)

Prepaid expenses and other assets

 

 

(287

)

 

 

(281

)

Accounts payable

 

 

(7,546

)

 

 

(1,823

)

Accrued expenses

 

 

(3,965

)

 

 

332

 

Deferred revenue

 

 

(2,318

)

 

 

6,627

 

Operating lease liabilities

 

 

(537

)

 

 

(470

)

Other liabilities

 

 

278

 

 

 

(56

)

Net cash used in operating activities

 

 

(3,242

)

 

 

(1,943

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(1,977

)

 

 

(1,302

)

Net cash used in investing activities

 

 

(1,977

)

 

 

(1,302

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from underwritten public offering, net of underwriting discounts and commissions of $1,093

 

 

15,036

 

 

 

 

Issuance costs from underwritten public offering

 

 

(285

)

 

 

 

Proceeds from issuance of long-term debt

 

 

3,686

 

 

 

 

Issuance costs from long-term debt

 

 

(27

)

 

 

 

Repayments of borrowings under line of credit, net

 

 

(3,123

)

 

 

(1,296

)

Prepayment proceeds under customer supply agreement

 

 

 

 

 

5,000

 

Proceeds from employee stock option exercises

 

 

869

 

 

 

 

Payments made for employee restricted stock tax withholdings

 

 

(1,211

)

 

 

(464

)

Net cash provided by financing activities

 

 

14,945

 

 

 

3,240

 

Net increase (decrease) in cash

 

 

9,726

 

 

 

(5

)

Cash and cash equivalents at beginning of period

 

 

3,633

 

 

 

3,327

 

Cash and cash equivalents at end of period

 

$

13,359

 

 

$

3,322

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

125

 

 

$

198

 

Income taxes paid

 

$

 

 

$

 

Supplemental disclosures of non-cash activities:

 

 

 

 

 

 

 

 

Initial recognition of operating lease liabilities related to right-of-use assets

 

$

 

 

$

5,995

 

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

 

$

389

 

 

$

294

 

Changes in accrued capital expenditures

 

$

(337

)

 

$

(541

)

 

See accompanying notes to unaudited consolidated financial statements.

4


 

ASPEN AEROGELS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Description of Business and Basis of Presentation

Nature of Business

Aspen Aerogels, Inc. (the Company) is an aerogel technology company that designs, develops and manufactures innovative, high-performance aerogel insulation used primarily in the energy infrastructure and building materials markets. The Company also conducts research related to aerogel technology supported by funding from several agencies of the U.S. government and other institutions in the form of research contracts. The Company has decided to cease efforts to secure additional funded research contracts and to wind down existing contract research activities during 2020.

The Company maintains its corporate offices in Northborough, Massachusetts. The Company has three wholly owned subsidiaries: Aspen Aerogels Rhode Island, LLC, Aspen Aerogels Germany, GmbH and Aspen Aerogels Georgia, LLC.

Liquidity

During the six months ended June 30, 2020, the Company incurred a net loss of $8.9 million and used $3.2 million of cash in operations. On February 18, 2020, the Company received net proceeds of $14.8 million upon the completion of an underwritten public offering of the Company’s common stock. On May 4, 2020, Aspen Aerogels Rhode Island, LLC received loan proceeds of $3.7 million upon the execution of a promissory note pursuant to the Paycheck Protection Program (PPP) established by the Coronavirus Aid, Relief and Economic Security Act (CARES Act) and administered by the U.S. Small Business Administration (SBA) (see note 7). The Company had cash and cash equivalents of $13.4 million, long-term debt of $3.7 million and no outstanding borrowings under its revolving line of credit as of June 30, 2020 (see note 8). After giving effect to $1.3 million of outstanding letters of credit, the amount available to the Company at June 30, 2020 under the revolving line of credit was $8.9 million. The existing revolving line of credit matures on April 28, 2021.

The Company is increasing capacity at its existing manufacturing facility in East Providence, Rhode Island and developing new technologies and strategic business opportunities. The Company expects its existing cash balance and the amount anticipated to be available under the existing revolving line of credit will be sufficient to support current operating requirements, complete the planned capacity expansion and to fund its planned strategic business initiatives.

However, in the future, the Company may need to supplement its cash balance and available credit with debt financings, customer prepayments, technology licensing fees or equity financings to provide the capital necessary to complete future capacity expansions or to fund evolving strategic business opportunities.

Unaudited Interim Financial Information

The accompanying unaudited interim consolidated financial statements include the accounts of the Company and have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes in our Annual Report on Form 10-K for the year ended December 31, 2019 (the Annual Report), filed with the U.S. Securities and Exchange Commission on March 6, 2020.

In the opinion of the Company’s management, the unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments that are of a normal recurring nature and necessary for the fair statement of the Company’s financial position as of June 30, 2020 and the results of its operations and stockholders’ equity for the three and six months ended June 30, 2020 and 2019 and the cash flows for the six month periods then ended. The Company has evaluated subsequent events through the date of this filing.

The Company’s results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or any other period. In addition, the Company is uncertain of the ultimate duration and severity of the COVID-19 pandemic and recent global oil market volatility, and the impact they will have on the Company’s results of operations for the year ending December 31, 2020 or any other period.

5


 

(2) Significant Accounting Policies

Principles of Consolidation

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

Use of Estimates

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

Cash and Cash Equivalents

Cash equivalents include short-term, highly liquid instruments, which consist of money market accounts. All cash and cash equivalents are maintained with major financial institutions in North America. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits typically may be redeemed upon demand and, therefore, bear minimal risk.

Revenue Recognition

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

Leases

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842). See note 9 for further details.

Stock-based Compensation

Stock-based compensation expense is measured at the grant date based on the fair value of the award. Expense is recognized on a straight-line basis over the requisite service period for all awards with service conditions. For performance-based awards, the grant date fair value is recognized as expense when the condition is probable of being achieved and then on a graded basis over the requisite service period. The Company uses the Black-Scholes option-pricing model to determine the fair value of service-based option awards, which requires a number of complex and subjective assumptions including fair value of the underlying security, the expected volatility of the underlying security, a risk-free interest rate and the expected term of the option. The fair value of restricted stock and restricted stock unit grants is determined using the closing trading price of the Company’s common stock on the date of grant. The fair value of awards containing market conditions is determined using a Monte Carlo simulation model based upon the nature of the conditions, the expected volatility of the underlying security, and other relevant factors.

During the six months ended June 30, 2020, the Company granted 165,430 restricted common stock units (RSUs) with a grant date fair value of $1.3 million and non-qualified stock options (NSOs) to purchase 617,627 shares of common stock with a grant date fair value of $2.4 million to employees under the 2014 Employee, Director, and Consultant Equity Incentive Plan (the 2014 Equity Plan). The RSUs and NSOs granted to employees will vest over a three-year period. During the six months ended June 30, 2020, the Company also granted 45,066 shares of restricted common stock with a grant date fair value of $0.3 million and NSOs to purchase 58,902 shares of common stock with a grant date fair value of $0.2 million to its non-employee directors under the 2014 Equity Plan. The restricted common stock and NSOs granted to non-employee directors vest upon the earlier of the date that is the one-year anniversary of the grant or the day prior to the Company’s annual meeting of stockholders to be held in 2021.

6


 

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

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

(In thousands)

 

Cost of product revenue

 

$

127

 

 

$

123

 

 

$

446

 

 

$

240

 

Research and development expenses

 

 

167

 

 

 

130

 

 

 

313

 

 

 

244

 

Sales and marketing ex