SEC Filing | Everspin Technologies Inc.

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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

☐	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 001-37900

Everspin Technologies, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware

26-2640654

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

5670 W. Chandler Boulevard, Suite 100

Chandler, Arizona 85226

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (480) 347-1111

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001	MRAM	The Nasdaq Stock Market

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	☐	Small 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 ☒

The number of shares of Registrant’s Common Stock outstanding as of August 3, 2020 was 18,948,415

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		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	3
	Condensed Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019 (unaudited)	4
	Condensed Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019 (unaudited)	5
	Condensed Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)	6
	Notes to Condensed Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	44
Item 5.	Other Information	44
Item 6.	Exhibits	44
EXHIBIT INDEX		44
SIGNATURES		46

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Everspin Technologies,” and “the Company” refer to Everspin Technologies, Inc. The Everspin logo and other trade names, trademarks or service marks of Everspin Technologies are the property of Everspin Technologies, Inc. This report contains references to our trademarks and to trademarks belonging to other entities. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

EVERSPIN TECHNOLOGIES, INC.

Condensed Balance Sheets

(In thousands, except share and per share amounts)


	June 30,		December 31,
	2020		2019
Assets
Current assets:
Cash and cash equivalents	$	12,916	$	14,487
Accounts receivable, net		7,339		5,799
Inventory		8,368		7,863
Prepaid expenses and other current assets		501		539
Total current assets		29,124		28,688
Property and equipment, net		2,908		3,479
Right-of-use assets		2,985		3,132
Other assets		73		73
Total assets	$	35,090	$	35,372

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,074	$	2,873
Accrued liabilities		1,392		2,727
Current portion of long-term debt		1,073		670
Operating lease liabilities		1,546		1,582
Other liabilities		44		42
Total current liabilities		6,129		7,894
Long-term debt, net of current portion		6,893		7,149
Operating lease liabilities, net of current portion		1,656		1,840
Total liabilities		14,678		16,883
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, 2020 and December 31, 2019		—		—
Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 18,869,775 and 18,081,753 shares issued and outstanding as of June 30, 2020 and December 31, 2019		2		2
Additional paid-in capital		172,098		167,149
Accumulated deficit		(151,688)		(148,662)
Total stockholders’ equity		20,412		18,489
Total liabilities and stockholders’ equity	$	35,090	$	35,372

The accompanying notes are an integral part of these condensed financial statements.

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EVERSPIN TECHNOLOGIES, INC.

Condensed Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Product sales	$	10,927	$	8,003	$	20,562	$	17,026
Licensing, royalty, and other revenue		899		643		1,372		1,646
Total revenue		11,826		8,646		21,934		18,672
Cost of sales		6,635		4,627		11,392		9,868
Gross profit		5,191		4,019		10,542		8,804
Operating expenses:¹
Research and development		2,774		3,519		5,804		7,517
General and administrative		2,448		2,856		5,248		6,451
Sales and marketing		1,056		1,239		2,159		2,603
Total operating expenses		6,278		7,614		13,211		16,571
Loss from operations		(1,087)		(3,595)		(2,669)		(7,767)
Interest expense		(172)		(186)		(344)		(397)
Other (expense) income, net		(35)		111		(13)		238
Net loss and comprehensive loss	$	(1,294)	$	(3,670)	$	(3,026)	$	(7,926)
Net loss per common share, basic and diluted	$	(0.07)	$	(0.21)	$	(0.16)	$	(0.46)
Weighted-average shares used to compute net loss per common share, basic and diluted		18,747,124		17,137,338		18,585,339		17,117,777

¹Operating expenses include stock-based compensation as follows:
Research and development	$	194	$	161	$	356	$	308
General and administrative		646		556		1,231		1,065
Sales and marketing		78		81		136		129
Total stock-based compensation	$	918	$	798	$	1,723	$	1,502

The accompanying notes are an integral part of these condensed financial statements.

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EVERSPIN TECHNOLOGIES, INC.

Condensed Statements of Stockholders’ Equity

(In thousands, except share and per share amounts)

(Unaudited)


	Three and Six Months Ended June 30, 2020
				Additional				Total
	Common Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Balance at December 31, 2019	18,081,753	$	2	$	167,149	$	(148,662)	$	18,489
Issuance of common stock in at-the-market offering, net of issuance costs (Note 7)	468,427		—		2,084		—		2,084
Issuance of common stock under stock incentive plans	88,375		—		315		—		315
Stock-based compensation expense	—		—		805		—		805
Net loss	—		—		—		(1,732)		(1,732)
Balance at March 31, 2020	18,638,555	$	2	$	170,353	$	(150,394)	$	19,961
Issuance of common stock under stock incentive plans	231,220		—		827		—		827
Stock-based compensation expense	—		—		918		—		918
Net loss	—		—		—		(1,294)		(1,294)
Balance at June 30, 2020	18,869,775	$	2	$	172,098	$	(151,688)	$	20,412


	Three and Six Months Ended June 30, 2019
				Additional				Total
	Common Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Balance at December 31, 2018	17,095,456	$	2	$	158,912	$	(133,993)	$	24,921
Issuance of common stock under stock incentive plans	12,607		—		13		—		13
Stock-based compensation expense	—		—		704		—		704
Net loss	—		—		—		(4,256)		(4,256)
Balance at March 31, 2019	17,108,063	$	2	$	159,629	$	(138,249)	$	21,382
Issuance of common stock under stock incentive plans	43,227		—		137		—		137
Stock-based compensation expense	—		—		798		—		798
Net loss	—		—		—		(3,670)		(3,670)
Balance at June 30, 2019	17,151,290	$	2	$	160,564	$	(141,919)	$	18,647

The accompanying notes are an integral part of these condensed financial statements.

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EVERSPIN TECHNOLOGIES, INC.

Condensed Statement of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2020		2019
Cash flows from operating activities
Net loss	$	(3,026)	$	(7,926)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		813		876
Loss on disposal of property and equipment		—		20
Stock-based compensation		1,723		1,502
Non-cash gain on warrant revaluation		7		—
Non-cash interest expense		147		153
Changes in operating assets and liabilities:
Accounts receivable		(1,540)		1,658
Inventory		(505)		133
Prepaid expenses and other current assets		38		200
Accounts payable		(776)		(456)
Accrued liabilities		(1,008)		(907)
Lease liabilities		(73)		(43)
Net cash used in operating activities		(4,200)		(4,790)
Cash flows from investing activities
Purchases of property and equipment		(277)		(461)
Net cash used in investing activities		(277)		(461)
Cash flows from financing activities
Payments on debt		—		(3,000)
Payments on finance lease obligation		(5)		(5)
Proceeds from exercise of stock options and purchase of shares in employee stock purchase plan		827		150
Proceeds from issuance of common stock in at-the-market offering, net of issuance costs		2,084		—
Net cash provided by (used in) financing activities		2,906		(2,855)
Net decrease in cash and cash equivalents		(1,571)		(8,106)
Cash and cash equivalents at beginning of period		14,487		23,379
Cash and cash equivalents at end of period	$	12,916	$	15,273
Supplementary cash flow information:
Interest paid	$	197	$	257
Operating cash flows paid for operating leases	$	862	$	837
Financing cash flows paid for finance leases	$	5	$	5
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating leases	$	—	$	23
Increase of right-of-use asset and lease liability due to lease modification	$	545	$	—
Purchase of property and equipment in accounts payable and accrued liabilities	$	22	$	27
Bonus settled in shares of common stock	$	315	$	—

The accompanying notes are an integral part of these condensed financial statements.

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EVERSPIN TECHNOLOGIES, INC.

Notes to Unaudited Condensed Financial Statements

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, 2020, 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.

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, 2019 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, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 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, 2019, 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 reserves, product warranty reserves, deferred tax assets and related valuation allowances, and stock-based compensation. The Company believes its estimates and assumptions are reasonable; however, actual results may differ from the Company’s estimates.

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Accounts receivable, net

The Company establishes an allowance for product returns. The Company analyzes historical returns, current economic trends and changes in customer demand and acceptance of products when evaluating the adequacy of sales returns. Returns are processed as credits on future purchases, as a result, the allowance is recorded against the balance of trade accounts receivable. In addition, the Company establishes an allowance for estimated price concessions related to its distributor agreements. The Company estimates credits to distributors based on the historical rate of credits provided to distributors relative to sales.

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


	June 30,		December 31,
	2020		2019
Trade accounts receivable	$	6,978	$	5,454
Unbilled accounts receivable		488		576
Allowance for product returns and price concessions		(127)		(231)
Accounts receivable, net	$	7,339	$	5,799

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

Accounts Receivable, net

Three Months Ended

Six Months Ended

As of

June 30,

December 31,

Customers

2020

2019

2020

2019

2020

2019

Customer A

Customer B

Customer C

Customer D

Customer E

Customer F

*	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

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

As of June 30, 2020, 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 and a Level 3 liability. 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 Company’s Level 3 liability consists of warrants issued in connection with the 2019 Credit Facility (Note 6).

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


	June 30, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	13,653	$	—	$	—	$	13,653
Total assets measured at fair value	$	13,653	$	—	$	—	$	13,653

Liabilities:
Warrant liability	$	—	$	—	$	40	$	40
Total liabilities measured at fair value	$	—	$	—	$	40	$	40


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	12,367	$	—	$	—	$	12,367
Total assets measured at fair value	$	12,367	$	—	$	—	$	12,367

Liabilities:
Warrant liability	$	—	$	—	$	33	$	33
Total liabilities measured at fair value	$	—	$	—	$	33	$	33

Recently Issued Pronouncements

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (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. As the Company is a smaller reporting company, ASU 2016-13 is effective for the Company’s annual reporting periods, and interim periods within those years, beginning after December 15, 2022, 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 and ASU 2019-04 on its financial statements.

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3. Revenue

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Distributor	$	6,231	$	5,564	$	13,221	$	12,749
Non-distributor		5,595		3,082		8,713		5,923
Total revenue	$	11,826	$	8,646	$	21,934	$	18,672

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,
	2020		2019		2020		2019
Point in time	$	11,183	$	8,180	$	21,226	$	17,631
Over time		643		466		708		1,041
Total revenue	$	11,826	$	8,646	$	21,934	$	18,672

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Product sales	$	10,927	$	8,003	$	20,562	$	17,026
Royalties		256		177		664		605
Other revenue		643		466		708		1,041
Total revenue	$	11,826	$	8,646	$	21,934	$	18,672

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,
	2020		2019		2020		2019
North America	$	1,820	$	3,528	$	2,924	$	5,717
EMEA		1,619		2,094		3,727		4,728
APJ		8,387		3,024		15,283		8,227
Total revenue	$	11,826	$	8,646	$	21,934	$	18,672

4. Balance Sheet Components

Inventory

Inventory consisted of the following (in thousands):


	June 30,		December 31,
	2020		2019
Raw materials	$	302	$	119
Work-in-process		6,233		6,329
Finished goods		1,833		1,415
Total inventory	$	8,368	$	7,863

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Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	June 30,		December 31,
	2020		2019
Accrued payroll-related expenses	$	755	$	1,236
Accrued joint development agreement expenses		—		170
Accrued inventory		252		87
Restructuring expenses		67		782
Other		318		452
Total accrued liabilities	$	1,392	$	2,727

As of June 30, 2020, the Company completed the corporate restructuring activity initiated during the year ended December 31, 2019. Cash paid for employee severance and benefit arrangements in connection with the restructuring activity were $0.3 million and $0.7 million during the three months and six months ended June 30, 2020.

5. Leases

Operating leases consist primarily of office space expiring at various dates through 2023. In May 2020, the Company executed an amendment to its lease agreement for its manufacturing facility. The amendment extended the lease term by one year and reduced the monthly rent payment.

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


As of June 30, 2020	Amount
2020 (remaining six months)	$	873
2021		1,603
2022		861
2023		68
Total undiscounted lease payments	$	3,405

6. Debt

2019 Credit Facility

In August 2019, the Company executed an Amended and Restated Loan and Security Agreement (the 2019 Credit Facility), which amended and restated the 2017 Credit Facility, providing for a formula revolving line of credit (Line of Credit) and a term loan (2019 Term Loan) with Silicon Valley Bank (SVB) to refinance in full the outstanding principal balance of $8.0 million under the 2017 Credit Facility. In August 2019, the Company paid the final payment of $0.8 million, which was due upon the refinancing of the 2017 Credit Facility.

The Line of Credit allows for a maximum draw of $5.0 million, subject to a formula borrowing base, has a two-year term and bears interest at a floating rate equal to the Wall Street Journal (WSJ) prime rate plus 1.5%, per annum, subject to a floor of 6.75%. As of June 30, 2020, the interest rate was 6.75%. The Line of Credit provides for a commitment fee of 1.6% of the maximum availability of the Line of Credit, which was paid in August 2019 upon closing, and was accounted for as a debt discount. The Line of Credit also provides for a termination fee equal to 1% of the maximum availability under the Line of Credit, which is due in case of a termination of the Line of Credit prior to the scheduled maturity date, and an unused facility fee equal to 0.125% per annum of the average unused portion of the Line of Credit, which is expensed as incurred. At execution, $2.0 million from the Line of Credit was used to refinance a portion of the outstanding balance of the 2017 Credit Facility, and $3.0 million remains available under the Line of Credit, subject to borrowing base availability. As of June 30, 2020, the effective interest rate under the Line of Credit was 10.57% and the outstanding balance was $2.0 million.

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The 2019 Term Loan provides for a $6.0 million term loan, which was used to refinance the remaining balance of the 2017 Credit Facility. The 2019 Term Loan has a term of 42 months, and a 12-month interest only period followed by 30 months of equal principal payments, plus accrued interest. The 2019 Term Loan bears interest at a floating rate equal to the WSJ prime rate minus 0.75%, subject to a floor of 4.75%. As of June 30, 2020, the interest rate was 4.75%. A final payment of 7% of the original principal amount of the 2019 Term Loan must be made when the 2019 Term Loan is prepaid or repaid, whether at maturity or as a result of a prepayment or acceleration or otherwise. The additional payment, which is accounted for as a debt discount, is being accreted using the effective interest method. The 2019 Term Loan has a prepayment fee equal to 2% of the total commitment, which is due only if the 2019 Term Loan is prepaid prior to the scheduled maturity date for any reason. As of June 30, 2020, the effective interest rate under the 2019 Term Loan was 8.66%.

In conjunction with entering into the 2019 Credit Facility, on August 5, 2019, the Company and SVB amended and restated the warrant issued to SVB in connection with the First Amendment, which was a warrant to purchase 9,375 shares of the Company’s common stock at $8.91 per share, to add an option by SVB to put the warrant back to the Company for $50,000 upon expiration or a liquidity event, to be prorated if SVB exercises a portion of the warrant. The warrant expires on July 6, 2023. The warrant is classified as a liability and recorded at fair value within other liabilities in the Company’s condensed balance sheet. Due to the put right, the warrant is subject to fair value remeasurement at each subsequent reporting date until the exercise or expiration of the warrant. Any resulting change in the fair value of the warrant will be recorded as other (expense) income, net in the Company’s condensed statement of operations and comprehensive loss. The Company recognized other expense of $12,000 and $7,000 for the three and six months ended June 30, 2020, respectively.

Collateral for the 2019 Credit Facility includes all of the Company’s assets except for intellectual property. The Company is required to comply with certain covenants under the 2019 Credit Facility, including requirements to maintain a minimum liquidity ratio, 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, 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, 2020. The 2019 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, 2020, 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 2019 Credit Facility at June 30, 2020 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	1,200	$	7,220	$	8,420
Unamortized debt discounts		(127)		(327)		(454)
Net carrying value	$	1,073	$	6,893	$	7,966

The carrying value of the Company’s 2019 Credit Facility at December 31, 2019 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	800	$	7,620	$	8,420
Unamortized debt discounts		(130)		(471)		(601)
Net carrying value	$	670	$	7,149	$	7,819

Table of Contents

The table below includes the principal repayments due under the 2019 Credit Facility (in thousands):



	Principal Repayment as of June 30, 2020
2020 (remaining six months)	$	—
2021		4,400
2022		2,400
2023		1,620
Total principal repayments	$	8,420

In July 2020, the Company executed an amendment to the 2019 Credit Facility with Silicon Valley Bank. The amendment extended the initial 12 months interest-only period for the term loan to a 16 months interest only period. The floor interest rate has been lowered by 100 basis points. The 2019 Term Loan bears interest at a floating rate equal to the WSJ prime rate minus 0.75%, subject to a floor of 3.75% p.a. The floor interest rate for the Line of Credit Facility has been lowered by 200 basis points. The Line of Credit now bears interest at a floating rate equal to the Wall Street Journal (WSJ) prime rate plus 1.5%, per annum, subject to a floor of 4.75% p.a. In conjunction with entering into the First Amendment to the 2019 Credit Facility, on July 15, 2020, the Company issued a warrant to Silicon Valley Bank to purchase 21,500 shares of the Company’s common stock at $0.01 per share. The warrant expires on July 15, 2025.

7. Stockholders’ Equity

At-the-Market Sales Agreement

In August 2019, the Company entered into an Open Market Sale Agreement, or the 2019 Sales Agreement, with Jefferies, LLC, or Jefferies, for the offer and sale of shares of its common stock having an aggregate offering of up to $25.0 million from time to time through Jefferies, acting as the Company’s sales agent. The issuance and sale of these shares by the Company pursuant to the 2019 Sales Agreement are deemed an “at-the-market” offering under the Securities Act of 1933, as amended. Under the 2019 Sales Agreement, the Company agreed to pay Jefferies a commission of up to 3% of the gross proceeds of any sales made pursuant to the Sales Agreement. During the six months ended June 30, 2020, the Company received net proceeds of $2.1 million after deducting commissions and expenses payable by the Company, from the sale of 468,427 shares of common stock pursuant to the 2019 Sales Agreement. The ATM sales were suspended in March 2020. As of June 30, 2020, the Company had an aggregate of $17.7 million available for future sales under the 2019 Sales Agreement.

8. Stock-Based Compensation

The following table summarizes the stock option and award activity for the six months ended June 30, 2020:

Options Outstanding

Weighted-