Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2019	Jul. 31, 2019
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Entity Registrant Name	EVERSPIN TECHNOLOGIES INC
Entity Central Index Key	0001438423
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		17,151,478
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true
Entity Shell Company	false

Condensed Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 15,273	$ 23,379
Accounts receivable, net	5,864	7,522
Inventory	8,964	9,097
Prepaid expenses and other current assets	488	688
Total current assets	30,589	40,686
Property and equipment, net	3,867	4,286
Right-of-use assets	2,947
Other assets	73	73
Total assets	37,476	45,045
Current liabilities:
Accounts payable	2,197	2,637
Accrued liabilities	3,704	5,001
Current portion of long-term debt	5,977	5,977
Lease liabilities	1,583
Total current liabilities	13,461	13,615
Long-term debt, net of current portion	3,642	6,509
Lease liabilities, net of current portion	1,726
Total liabilities	18,829	20,124
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized; no shares issued and outstanding as of June 30, 2019 and December 31, 2018
Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 17,151,290 and 17,095,456 shares issued and outstanding as of June 30, 2019 and December 31, 2018	2	2
Additional paid-in capital	160,564	158,912
Accumulated deficit	(141,919)	(133,993)
Total stockholders’ equity	18,647	24,921
Total liabilities and stockholders’ equity	$ 37,476	$ 45,045

Condensed Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Condensed Balance Sheets
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares Issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	17,151,290	17,095,456
Common stock, shares outstanding	17,151,290	17,095,456

Condensed Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Total revenue	$ 8,646	$ 10,765	$ 18,672	$ 25,618
Cost of sales	4,627	6,229	9,868	11,127
Gross profit	4,019	4,536	8,804	14,491
Operating expenses:
Research and development	3,519	6,773	7,517	13,253
General and administrative	2,856	3,329	6,451	6,548
Sales and marketing	1,239	1,713	2,603	3,079
Total operating expenses	7,614	11,815	16,571	22,880
Loss from operations	(3,595)	(7,279)	(7,767)	(8,389)
Interest expense	(186)	(222)	(397)	(433)
Other income, net	111	132	238	176
Net loss and comprehensive loss	$ (3,670)	$ (7,369)	$ (7,926)	$ (8,646)
Net loss per common share, basic and diluted	$ (0.21)	$ (0.44)	$ (0.46)	$ (0.55)
Weighted-average shares used to compute net loss per common share, basic and diluted	17,137,338	16,635,261	17,117,777	15,717,248
Product sales
Total revenue	$ 8,003	$ 9,449	$ 17,026	$ 18,814
Product sales
Total revenue	8,003	9,449	17,026	18,814
Licensing, royalty and other revenue
Total revenue	$ 643	$ 1,316	$ 1,646	$ 6,804

Condensed Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Balance at Dec. 31, 2017	$ 1	$ 128,422	$ (117,539)	$ 10,884
Balance (in shares) at Dec. 31, 2017	12,817,201
Increase (Decrease) in Stockholders' Equity
Adjustment to opening balance for adoption of new accounting standard			1,300	1,300
Issuance of common stock in secondary offering, net of issuance costs	$ 1	24,608		24,609
Issuance of common stock in secondary offering, net of issuance costs (in shares)	3,772,447
Issuance of common stock under stock incentive plans		309		309
Issuance of common stock under stock incentive plans (in shares)	58,229
Compensation expense related to vesting of common stock issued to GLOBALFOUNDRIES		237		237
Stock-based compensation expense		625		625
Net loss			(1,277)	(1,277)
Balance at Mar. 31, 2018	$ 2	154,201	(117,516)	36,687
Balance (in shares) at Mar. 31, 2018	16,647,877
Balance at Dec. 31, 2017	$ 1	128,422	(117,539)	10,884
Balance (in shares) at Dec. 31, 2017	12,817,201
Increase (Decrease) in Stockholders' Equity
Net loss				(8,646)
Balance at Jun. 30, 2018	$ 2	155,866	(124,885)	30,983
Balance (in shares) at Jun. 30, 2018	16,800,505
Balance at Mar. 31, 2018	$ 2	154,201	(117,516)	36,687
Balance (in shares) at Mar. 31, 2018	16,647,877
Increase (Decrease) in Stockholders' Equity
Issuance of common stock under stock incentive plans		723		723
Issuance of common stock under stock incentive plans (in shares)	152,628
Compensation expense related to vesting of common stock issued to GLOBALFOUNDRIES		225		225
Stock-based compensation expense		717		717
Net loss			(7,369)	(7,369)
Balance at Jun. 30, 2018	$ 2	155,866	(124,885)	30,983
Balance (in shares) at Jun. 30, 2018	16,800,505
Balance at Dec. 31, 2018	$ 2	158,912	(133,993)	24,921
Balance (in shares) at Dec. 31, 2018	17,095,456
Increase (Decrease) in Stockholders' Equity
Issuance of common stock under stock incentive plans		13		13
Issuance of common stock under stock incentive plans (in shares)	12,607
Stock-based compensation expense		704		704
Net loss			(4,256)	(4,256)
Balance at Mar. 31, 2019	$ 2	159,629	(138,249)	21,382
Balance (in shares) at Mar. 31, 2019	17,108,063
Balance at Dec. 31, 2018	$ 2	158,912	(133,993)	24,921
Balance (in shares) at Dec. 31, 2018	17,095,456
Increase (Decrease) in Stockholders' Equity
Net loss				(7,926)
Balance at Jun. 30, 2019	$ 2	160,564	(141,919)	18,647
Balance (in shares) at Jun. 30, 2019	17,151,290
Balance at Mar. 31, 2019	$ 2	159,629	(138,249)	21,382
Balance (in shares) at Mar. 31, 2019	17,108,063
Increase (Decrease) in Stockholders' Equity
Issuance of common stock under stock incentive plans		137		137
Issuance of common stock under stock incentive plans (in shares)	43,227
Stock-based compensation expense		798		798
Net loss			(3,670)	(3,670)
Balance at Jun. 30, 2019	$ 2	$ 160,564	$ (141,919)	$ 18,647
Balance (in shares) at Jun. 30, 2019	17,151,290

Condensed Statement of Cash Flows - USD ($) $ in Thousands	6 Months Ended
Condensed Statement of Cash Flows - USD ($) $ in Thousands	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities
Net loss	$ (7,926)	$ (8,646)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	876	729
Loss on disposal of property and equipment	20	19
Stock-based compensation	1,502	1,342
Non-cash interest expense	153	200
Compensation expense related to vesting of common stock to GLOBALFOUNDRIES		462
Changes in operating assets and liabilities:
Accounts receivable	1,658	(1,391)
Inventory	133	940
Prepaid expenses and other current assets	200	(635)
Right-of-use assets	23
Other assets		(136)
Accounts payable	(456)	51
Accrued liabilities	(907)	2,591
Lease liabilities	(43)
Shipping term reversal		(39)
Net cash used in operating activities	(4,790)	(4,513)
Cash flows from investing activities
Purchases of property and equipment	(461)	(347)
Net cash used in investing activities	(461)	(347)
Cash flows from financing activities
Proceeds from the issuance of common stock, net of offering costs		24,609
Payments on debt	(3,000)	(1,000)
Payments on finance lease obligation	(5)	(6)
Proceeds from exercise of stock options and purchase of shares in employee stock purchase plan	150	1,032
Net cash (used in) provided by financing activities	(2,855)	24,635
Net (decrease) increase in cash and cash equivalents	(8,106)	19,775
Cash and cash equivalents at beginning of period	23,379	12,950
Cash and cash equivalents at end of period	15,273	32,725
Supplementary cash flow information:
Interest paid	257	233
Operating cash flows paid for operating leases	837
Financing cash flows paid for finance leases	5
Right-of-use assets obtained in exchange for new operating leases	23
Non-cash investing and financing activities:
Purchases of property and equipment in accounts payable	$ 27	$ 27

Organization and Nature of Business	6 Months Ended
Organization and Nature of Business	Jun. 30, 2019
Organization and Nature of Business
Organization and Nature of Business	1. Organization and Nature of Business Everspin Technologies, Inc. (the Company) was incorporated in Delaware on May 16, 2008. The Company’s magnetoresistive random-access memory (MRAM) solutions offer the persistence of non-volatile memory with the speed and endurance of random-access memory (RAM) and enable the protection of mission critical data particularly in the event of power interruption or failure. The Company’s MRAM solutions allow its customers in the industrial, automotive, transportation, and enterprise storage markets to design high performance, power efficient and reliable systems without the need for bulky batteries or capacitors. Ability to continue as a going concern The Company believes that its existing cash and cash equivalents as of June 30, 2019, coupled with its anticipated growth and sales levels will be sufficient to meet its anticipated cash requirements for at least the next twelve months from the financial statement issuance date. The Company’s future capital requirements will depend on many factors, including its growth rate, the timing and extent of its spending to support research and development activities, the timing and cost of establishing additional sales and marketing capabilities, and the introduction of new products. The Company may be required at some point in the future to seek additional equity or debt financing, to sustain operations beyond that point, and such additional financing may not be available on acceptable terms or at all. If the Company is unable to raise additional capital or generate sufficient cash from operations to adequately fund its operations, it will need to curtail planned activities to reduce costs. Doing so will likely harm its ability to execute on its business plan.

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date but does not include all of the information required by GAAP for complete financial statements. These unaudited interim condensed financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial information. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019 or for any other interim period or for any other future year.

The accompanying condensed financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC.

Use of Estimates

The preparation of the condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, fair value of assets and liabilities, inventory, product warranty reserves, income taxes, and stock-based compensation. The Company believes its estimates and assumptions are reasonable; however, actual results may differ from the Company’s estimates.

Accounts receivable, net

The Company estimates credits to distributors based on the historical rate of credits provided to distributors relative to sales. At June 30, 2019, the allowance for product returns and the allowance for price concessions were $212,000 and $100,000, respectively. At December 31, 2018, the allowance for product returns and the allowance for price concessions were $144,000 and $569,000, respectively.

Accounts receivable, net consisted of the following (in thousands):


	June 30,		December 31,
	2019		2018
Trade accounts receivable	$	5,584	$	7,297
Unbilled accounts receivable		592		938
Allowance for accounts receivable		(312)		(713)
Accounts receivable, net	$	5,864	$	7,522

Concentration of Credit Risk

Financial instruments that potentially expose the Company to a concentration of credit risk consist principally of cash and cash equivalents that are held by a financial institution in the United States and accounts receivable. Amounts on deposit with a financial institution may at times exceed federally insured limits. The Company maintains its cash accounts with high credit quality financial institutions and, accordingly, minimal credit risk exists with respect to the financial institutions.

Significant customers are those which represent more than 10% of the Company’s total revenue or net accounts receivable balance at each respective balance sheet date. For the purposes of this disclosure, the Company defines “customer” as the entity that is purchasing the products or licenses directly from the Company, which includes the distributors of the Company’s products in addition to end customers that the Company sells to directly. For each significant customer, revenue as a percentage of total revenue and accounts receivable as a percentage of total accounts receivable, net are as follows:


	Revenue				Revenue				Accounts Receivable, net
	Three Months Ended				Six Months Ended				As of
	June 30,				June 30,				June 30,		December 31,
Customers	2019		2018		2019		2018		2019		2018
Customer A	23	%	*		16	%	*		40	%	23	%
Customer B	13	%	*		12	%	*		*		*
Customer C	12	%	14	%	12	%	14	%	*		*
Customer D	11	%	*		13	%	*		*		*
Customer E	*		*		*		20	%	*		*
Customer F	*		19	%	*		13	%	*		*
Customer G	*		*		*		*		11	%	21	%
Customer H	*		*		*		*		*		11	%
Customer I	*		*		*		*		*		11	%

*Less than 10%

Fair Value of Financial Instruments

Fair value is defined as an exit price, representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. The framework for measuring fair value provides a three-tier hierarchy prioritizing inputs to valuation techniques used in measuring fair value as follows:

Level 1— Observable inputs such as quoted prices for identical assets or liabilities in active markets;

Level 2— Inputs, other than quoted prices for identical assets or liabilities in active markets, which are observable either directly or indirectly; and

Level 3— Unobservable inputs in which there is little or no market data requiring the reporting entity to develop its own assumptions

The carrying value of accounts receivable, accounts payable, and other accruals readily convertible into cash approximate fair value because of the short-term nature of the instruments. As of June 30, 2019, based on Level 2 inputs and the borrowing rates available to the Company for loans with similar terms and consideration of the Company’s credit risk, the carrying value of the Company’s variable interest rate debt, excluding unamortized debt issuance costs, approximates fair value. The Company’s financial instruments consist of Level 1 assets. Where quoted prices are available in an active market, securities are classified as Level 1. Level 1 assets consist of highly liquid money market funds that are included in cash equivalents.

The following tables sets forth the fair value of the Company’s financial assets measured at fair value on a recurring basis (in thousands):


	June 30, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	15,417	$	—	$	—	$	15,417
Total assets measured at fair value	$	15,417	$	—	$	—	$	15,417


	December 31, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	23,478	$	—	$	—	$	23,478
Total assets measured at fair value	$	23,478	$	—	$	—	$	23,478

Leases

The Company leases office, lab, manufacturing space and equipment in various locations with initial lease terms of up to five years. These leases require monthly lease payments that may be subject to annual increases throughout the lease term. The terms of these leases also include renewal options at the election of the Company to renew or extend the lease for a range of an additional two to five years. These optional periods have not been considered in the determination of the right-of-use-assets (ROU) or lease liabilities associated with these leases as the Company did not consider it reasonably certain it would exercise the options.

The Company determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The classification of the Company's leases as operating or finance leases along with the initial measurement and recognition of the associated ROU assets and lease liabilities is performed at the lease commencement date. The measurement of lease liabilities is based on the present value of future lease payments over the lease term. The Company’s uses its incremental borrowing rate, based on the information available at commencement date, to determine the present value of lease payments when its leases do not provide an implicit rate. The Company uses the implicit rate when readily determinable. The ROU asset is based on the measurement of the lease liability, includes any lease payments made prior to or on lease commencement and excludes lease incentives and initial direct costs incurred, as applicable. Lease expense for the Company’s operating leases is recognized on a straight-line basis over the lease term. Amortization expense for ROU assets associated with finance leases is recognized on a straight-line basis over the shorter of the useful life of the asset or the lease term and interest expense associated with finance leases is recognized on the balance of the lease liability using the effective interest method based on the estimated incremental borrowing rate.

The Company has lease agreements with lease and non-lease components. The Company has elected to not separate lease and non-lease components for any leases involving real estate and office equipment classes of assets and, as a result, accounts for the lease and non-lease components as a single lease component. The Company will separate lease and non-lease components for any leases involving manufacturing facility classes of assets. Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to leases with terms of 12 months or less (short-term leases) for all classes of assets. As of June 30, 2019, the Company did not have any short-term leases.

Operating leases are included in right-of-use assets, lease liabilities, and lease liabilities, net of current portion in the Company’s balance sheet. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities in the Company’s balance sheet.

Stock-based Compensation

Stock-based compensation arrangements include stock option grants and restricted stock unit (RSU) awards under the Company’s equity incentive plans, as well as shares issued under the Company’s Employee Stock Purchase Plan (ESPP), through which employees may purchase the Company’s common stock at a discount to the market price.

The Company measures its stock option grants made to employees based on the estimated fair value of the options as of the grant date using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized over the requisite service period using the straight-line method. The Company has made an accounting policy election to account for forfeitures as they occur, rather than estimating expected forfeitures at the time of the grant.

Stock-based compensation expense for options granted to non-employees as consideration for services received is measured on the date of performance at the fair value of the consideration received or the fair value of the equity instruments issued, using the Black-Scholes option-pricing model, whichever can be more reliably measured. Compensation expense for options granted to non-employees is recognized as the underlying options vest. The Company has made an accounting policy election to account for forfeitures as they occur, rather than estimating expected forfeitures at the time of the grant. In addition, the Company made an accounting policy election to use the contractual term as the expected term rather than estimating the expected term.

Recently Adopted Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016 02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding ROU asset for leases with a lease-term of more than 12 months. This ASU is effective for fiscal years and interim periods within those years beginning after December 15, 2018. In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842 Leases and ASU No. 2018-11, Leases (Topic 842) Targeted Improvements. ASU 2018-10 clarifies how to apply certain aspects of ASU 2016-02. The Company adopted this standard on January 1, 2019, using the modified retrospective method. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

Topic 842 permits the application of certain practical expedients, of which the Company elected the “package of three” expedient, that eliminated the requirements to reassess prior conclusions about lease identification, lease classification, and initial direct costs. Further, the Company elected the short-term lease exception policy, permitting it to not apply the recognition requirements of this standard to short-term leases.

Upon adoption of Topic 842, on January 1, 2019, the Company recorded an operating lease ROU asset of $3.6 million, operating lease liabilities of $4.0 million, and derecognized the deferred rent liability of $390,000. The accounting for the Company’s finance leases remained substantially unchanged.

In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 is intended to reduce the cost and complexity and to improve financial reporting for nonemployee share-based payments. The ASU expands the scope of Topic 718, (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606. The Company adopted this standard on January 1, 2019 and the impact of its adoption on the Company’s financial statements was not material.

Recently Issued Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for annual reporting periods, and interim periods within those years, beginning after December 15, 2019, and requires a cumulative effect adjustment to the balance sheet as of the beginning of the first reporting period in which the guidance is effective. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements Financial Instruments-Credit Losses (Topic 326). The new ASU provides narrow-scope amendments to help apply ASU No. 2016-13. The Company is evaluating the impact of the adoption of ASU 2016-13 on its financial statements.

Revenue

6 Months Ended

Jun. 30, 2019

Revenue

Revenue

3. Revenue

The Company sells the majority of its products to its distributors, but also recognizes revenue under licensing and royalty agreements. The following table presents the Company’s revenues disaggregated by sales channel (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Distributor	$	5,564	$	8,386	$	12,749	$	16,531
Non-distributor		3,082		2,379		5,923		9,087
Total revenue	$	8,646	$	10,765	$	18,672	$	25,618

The following table presents the Company’s revenues disaggregated by timing of recognition (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Point in time	$	8,180	$	9,644	$	17,631	$	24,116
Over time		466		1,121		1,041		1,502
Total revenue	$	8,646	$	10,765	$	18,672	$	25,618

The following table presents the Company’s revenues disaggregated by type (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Product sales	$	8,003	$	9,449	$	17,026	$	18,814
License fees		—		—		—		5,000
Royalties		177		195		605		302
Other revenue		466		1,121		1,041		1,502
Total revenue	$	8,646	$	10,765	$	18,672	$	25,618

The Company recognizes revenue in three primary geographic regions: North America; Europe, Middle East and Africa (EMEA); and Asia-Pacific and Japan (APJ). The following table presents the Company’s revenues disaggregated by the geographic region to which the product is delivered or licensee is located (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
North America	$	3,528	$	2,379	$	5,717	$	4,110
EMEA		2,094		2,096		4,728		5,147
APJ		3,024		6,290		8,227		16,361
Total revenue	$	8,646	$	10,765	$	18,672	$	25,618

Balance Sheet Components

6 Months Ended

Jun. 30, 2019

Balance Sheet Components

Balance Sheet Components

4. Balance Sheet Components

Inventory

Inventory consisted of the following (in thousands):


	June 30,		December 31,
	2019		2018
Raw materials	$	38	$	288
Work-in-process		6,501		6,759
Finished goods		2,425		2,050
Total inventory	$	8,964	$	9,097

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	June 30,		December 31,
	2019		2018
Accrued payroll-related expenses	$	785	$	1,558
Accrued joint development agreement expenses		1,190		661
Accrued inventory		812		1,678
Deferred rent		—		390
Other		917		714
Total accrued liabilities	$	3,704	$	5,001

Leases

6 Months Ended

Jun. 30, 2019

Leases

Leases

5. Leases

During 2017, the Company entered into an operating lease for 27,974 square feet of office space for its corporate headquarters located in Chandler, Arizona, that expires in January 2022. The Company has the option to renew the lease through August 2024; however, the Company does not consider it reasonably certain it will exercise the renewal option.

The Company leases office and lab space for its design facility located in Austin, Texas, under an operating lease that expires in January 2022. The Company has the option to renew the lease for an additional five years; however, the Company does not consider it reasonably certain it will exercise the renewal option.

The Company has another operating lease for its Arizona manufacturing facility, which includes office and fabrication space. This lease is cancellable upon 24 months’ notice by either of the parties and expires in January 2021.

The undiscounted future non-cancellable lease payments under the Company’s leases were as follows (in thousands):


As of June 30, 2019	Operating Leases		Finance Lease		Total
2019 (remaining six months)	$	857	$	5	$	862
2020		1,736		10		1,746
2021		859		—		859
2022		50		—		50
Total undiscounted lease payments		3,502		15		3,517
Less: Present value adjustment		(208)		—		(208)
Total lease liability		3,294		15		3,309
Less: Current portion of lease liability		(1,573)		(10)		(1,583)
Total lease liability, net of current portion	$	1,721	$	5	$	1,726

As determined under ASC 840, the future minimum rental commitments under the Company’s operating leases at December 31, 2018 were as follows (in thousands):


Year Ending December 31,	Amount
2019	$	1,645
2020		1,701
2021		846
2022		47
Total minimum lease payments	$	4,239

Other information related to the Company's lease liabilities was as follows:


As of June 30, 2019	Operating leases		Finance lease
Weighted-average remaining lease term (years)	2.12		1.42
Weighted-average discount rate	6.01	%	3.50	%

Lease costs for the Company’s operating leases were $401,000 and $420,000 for the three months ended June 30, 2019 and 2018 respectively, and $800,000 and $851,000, for the six months ended June 30, 2019 and 2018 respectively. Variable lease payments for operating leases were immaterial for the three and six months ended June 30, 2019 and 2018. Lease costs for the Company’s finance lease were immaterial for the three and six months ended June 30, 2019 and 2018.

Debt

6 Months Ended

Jun. 30, 2019

Debt

Debt

6. Debt

2017 Credit Facility

On May 4, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (2017 Credit Facility) for a $12.0 million term loan. The term loan provided for interest at a floating rate equal to the prime rate minus 0.75%. The term loan provided for a period of interest-only payments through April 30, 2018, followed by fixed principal and interest payments based on a 24-month amortization schedule. An end of term fee of 6% of the amount borrowed must be made when the loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or otherwise.

On July 6, 2018, the Company entered into the First Amendment to the 2017 Credit Facility (the First Amendment). The First Amendment extended the period of interest-only payments through December 31, 2018, followed by fixed principal and interest payments based on either a 24-month or a 36-month amortization schedule if the Company achieves certain milestones. The Company determined it would not meet the milestones, therefore, the 2017 Credit Facility is based on a 24-month amortization schedule and matures in December 2020. The 2017 Credit Facility provides for interest at a floating rate equal to the prime rate minus 0.75%. As of June 30, 2019, the interest rate was 4.75%. The terms of the First Amendment included the refund of $1.0 million in principal payments previously made by the Company. An end of term fee of 7% of the amount borrowed must be made when the loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or otherwise. The additional payment is being accreted using the effective interest method. As of June 30, 2019, the effective interest rate under the 2017 Credit Facility was 7.77%.

In January 2019 and June 2019, the Company entered into the Second Amendment and the Third Amendment to the 2017 Credit Facility, respectively, which primarily modified the financial covenants under the 2017 Credit Facility.

The Company is permitted to make voluntary prepayments of the 2017 Credit Facility with a prepayment fee, calculated as of the effective date of the First Amendment, equal to (i) $240,000 during the first 12 months and (ii) $120,000 if prepaid in months 13-24. The Company is required to make mandatory prepayments of the outstanding loan upon the acceleration by lender following the occurrence of an event of default, along with a payment of the end of term fee, the prepayment fee and any other obligations that are due and payable at the time of prepayment. In the event of default, the interest rate in effect will increase by 5.0% per annum.

In conjunction with the First Amendment, outstanding warrants held by SVB to purchase 9,229 shares of the Company’s common stock at $26.00 per share were cancelled. The Company subsequently issued a warrant to SVB for the purchase of 9,375 shares of the Company’s common stock at an exercise price of $8.91 per share. The warrant can be exercised at any time and expires five years after the date of issuance. The Company estimated the fair value of the warrant as $43,000 on the date of issuance using the Black-Scholes option pricing model. The warrant was recorded as a discount to the debt and will be amortized into interest expense over the remaining term of the loan using the effective interest method.

Security for the 2017 Credit Facility includes all of the Company’s assets except for intellectual property. The Company is required to comply with certain covenants under the 2017 Credit Facility, including requirements to maintain a minimum liquidity ratio, meet certain revenue targets, and restrictions on certain actions without the consent of the lender, such as limitations on its ability to engage in mergers or acquisitions, sell assets, enter into transactions involving related parties, incur indebtedness or grant liens or negative pledges on its assets, make loans or make other investments. Under these covenants, the Company is prohibited from paying cash dividends with respect to its capital stock. The Company was in compliance with all covenants at June 30, 2019. The 2017 Credit Facility contains a material adverse effect clause which provides that an event of default will occur if, among other triggers, an event occurs that could reasonably be expected to result in a material adverse effect on the Company’s business, operations or condition, or on the Company’s ability to perform its obligations under the term loan. As of June 30, 2019, management does not believe that it is probable that the clause will be triggered within the next 12 months, and therefore the term loan is classified as long-term.

The carrying value of the Company’s 2017 Credit Facility at June 30, 2019 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	6,000	$	3,840	$	9,840
Unamortized debt discounts		(23)		(198)		(221)
Net carrying value	$	5,977	$	3,642	$	9,619

The carrying value of the Company’s 2017 Credit Facility at December 31, 2018 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	6,000	$	6,840	$	12,840
Unamortized debt discounts		(33)		(341)		(374)
Net carrying value	$	5,967	$	6,499	$	12,466

The table below includes the principal repayments due under the 2017 Credit Facility (in thousands):


	Principal Repayments
	as of June 30, 2019
2019 (remaining six months)	$	3,000
2020		6,840
Total principal repayments	$	9,840

Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Stock-Based Compensation

Stock-Based Compensation

7. Stock-Based Compensation

The following table summarizes the stock option and award activity for the six months ended June 30, 2019:


		Options Outstanding
			Weighted-		Weighted-
	Options and		Average		Average
	Awards		Exercise		Remaining	Aggregate
	Available for	Number of	Price Per		Contractual	Intrinsic
	Grant	Options	Share		Life (years)	Value
						(In thousands)
Balance—December 31, 2018	764,145	1,475,299	$	7.60	7.8	$	284
Authorized	512,864	—		—
RSUs granted	(141,750)	—		—
RSUs cancelled/forfeited	9,000	—		—
Options granted	(530,250)	530,250	$	6.68
Options exercised	—	(4,188)	$	4.88		$	12
Options cancelled/forfeited	124,269	(127,798)	$	8.83
Balance—June 30, 2019	738,278	1,873,563	$	7.26	8.1	$	556
Options exercisable—June 30, 2019		804,998	$	6.95	6.9	$	496

The total grant date fair value of options vested was $516,000 and $545,000 during the three months ended June 30, 2019 and 2018, respectively, and $1.2 million and $922,000 during the six months ended June 30, 2019 and 2018, respectively.

The weighted-average grant date fair value of employee options granted was $4.34 and $4.14 per share during the three months ended June 30, 2019 and 2018, respectively, and $4.07 and $4.56 per share during the six months ended June 30, 2019 and 2018, respectively.

2016 Employee Stock Purchase Plan

In January 2019, there was an increase of 170,955 shares reserved for issuance under the Company’s Employee Stock Purchase Plan (ESPP). The Company had 417,939 shares available for future issuance under the Company’s ESPP as of June 30, 2019. Employees purchased 22,405 shares for $130,000 during the three and six months ended June 30, 2019. Employees purchased 20,057 shares for $137,000 during the three and six months ended June 30, 2018.

Modification of Stock Awards

In February 2018, the Company modified the terms of 400,000 vested and unvested stock option awards granted to the Chief Executive Officer, by reducing their exercise price from $16.25 per share to $7.64 per share. There was no change to any of the other terms of the option awards. The modification resulted in an incremental value of $600,000 being allocated to the options, of which $63,000 was recognized to expense immediately based on options that were vested at the time of the modification. The remaining incremental value of $537,000 attributable to unvested options will be recognized over the remaining vesting term through September 2021.

Restricted Stock Units

The following table summarizes Restricted Stock Units (RSUs) activity for the six months ended June 30, 2019:


	RSUs Outstanding
		Weighted-
		Average
	Number of	Grant Date
	Restricted Stock	Fair Value Per
	Units	Share
Balance—December 31, 2018	93,560	$	8.38
Granted	141,750		6.79
Vested	(29,241)		8.40
Cancelled/forfeited	(9,000)		7.86
Balance—June 30, 2019	197,069	$	7.25

The fair value of RSUs is determined on the date of grant based on the market price of the Company’s common stock on that date. As of June 30, 2019, there was $1.3 million of unrecognized stock-based compensation expense related to RSUs to be recognized over a weighted-average period of 2.8 years.

Stock-based Compensation Expense

The Company recognized stock-based compensation expense from awards granted to employees and non-employees under its equity incentive plans and from its ESPP as follows, excluding amounts related to GLOBALFOUNDRIES, Inc. (GF) (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development	$	161	$	138	$	308	$	246
General and administrative		556		466		1,065		899
Sales and marketing		81		113		129		197
Total	$	798	$	717	$	1,502	$	1,342

As of June 30, 2019, there was $5.5 million of total unrecognized compensation expense related to unvested options which is expected to be recognized over a weighted-average period of 2.7 years. Compensation cost capitalized within inventory at December 31, 2019 and 2018 was not material.