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Table of Contents

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, 2021

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 001-37900

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: (480347-1111

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 LLC

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 the Registrant’s Common Stock outstanding as of August 11, 2021 was 19,477,652.

Table of Contents

Table of Contents

    

Page

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

3

Condensed Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020

3

Condensed Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, 2021 and 2020 (unaudited)

4

Condensed Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)

5

Condensed Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)

6

Notes to Condensed Financial Statements (unaudited)

7

Item 2.

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

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

EXHIBIT INDEX

48

SIGNATURES

51

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.

2

Table of Contents

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,

2021

2020

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

14,219

$

14,599

Accounts receivable, net

 

10,383

 

7,607

Inventory

 

6,571

 

5,721

Prepaid expenses and other current assets

 

221

 

270

Total current assets

 

31,394

 

28,197

Property and equipment, net

 

1,288

 

1,946

Right-of-use assets

1,622

 

2,313

Other assets

 

313

 

73

Total assets

$

34,617

$

32,529

Liabilities and Stockholders’ Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

2,869

$

2,224

Accrued liabilities

 

1,742

 

2,232

Deferred revenue

1,815

Current portion of long-term debt

 

4,313

 

4,242

Operating lease liabilities

1,190

1,508

Other liabilities

36

31

Total current liabilities

 

11,965

 

10,237

Long-term debt, net of current portion

 

2,645

 

3,748

Operating lease liabilities, net of current portion

466

903

Long-term income tax liability

229

229

Total liabilities

$

15,305

$

15,117

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, 2021 and December 31, 2020

Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 19,435,274 and 19,031,556 shares issued and outstanding as of June 30, 2021 and December 31, 2020

 

2

2

Additional paid-in capital

 

176,688

 

174,584

Accumulated deficit

 

(157,378)

 

(157,174)

Total stockholders’ equity

 

19,312

 

17,412

Total liabilities and stockholders’ equity

$

34,617

$

32,529

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

3

Table of Contents

EVERSPIN TECHNOLOGIES, INC.

Condensed Statements of Operations and Comprehensive Income (Loss)

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

    

Product sales

$

10,187

$

10,927

$

19,255

$

20,562

Licensing, royalty, and other revenue

1,661

899

2,873

 

1,372

Total revenue

 

11,848

 

11,826

 

22,128

 

21,934

Cost of product sales

4,329

6,521

8,586

11,246

Cost of licensing, royalty, and other revenue

323

114

361

146

Total cost of sales

 

4,652

 

6,635

 

8,947

 

11,392

Gross profit

 

7,196

 

5,191

 

13,181

 

10,542

Operating expenses:1

 

  

 

  

 

  

 

  

Research and development

 

3,357

 

2,774

 

5,796

 

5,804

General and administrative

 

2,338

 

2,448

 

5,181

 

5,248

Sales and marketing

 

1,045

 

1,056

 

2,032

 

2,159

Total operating expenses

 

6,740

 

6,278

 

13,009

 

13,211

Gain (loss) from operations

 

456

 

(1,087)

 

172

 

(2,669)

Interest expense

 

(144)

 

(172)

 

(296)

 

(344)

Other (expense) income, net

(12)

15

 

(27)

 

63

Net income (loss) before income taxes

300

(1,244)

(151)

(2,950)

Income tax expense

(44)

(50)

(53)

(76)

Net income (loss) and comprehensive income (loss)

$

256

$

(1,294)

$

(204)

$

(3,026)

Net income (loss) per share attributable to common stockholders:

Basic

$

0.01

$

(0.07)

$

(0.01)

$

(0.16)

Diluted

$

0.01

$

(0.07)

$

(0.01)

$

(0.16)

Weighted average common shares used to compute net income (loss) per common share attributable to common stockholders:

Basic

 

19,313,162

 

18,747,124

 

19,203,374

 

18,585,339

Diluted

 

19,726,064

 

18,747,124

 

19,203,374

 

18,585,339

1Operating expenses include stock-based compensation as follows:

Research and development

$

265

$

194

$

446

$

356

General and administrative

305

646

790

1,231

Sales and marketing

134

78

211

136

Total stock-based compensation

$

704

$

918

$

1,447

$

1,723

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)

Six Months Ended June 30, 2021

Additional

Total

Common Stock

Paid-In

Accumulated

Stockholders’

  

Shares

  

Amount

  

Capital

  

Deficit

  

Equity

Balance at December 31, 2020

19,031,556

$

2

$

174,584

$

(157,174)

$

17,412

Exercise of stock options

54,077

144

144

Issuance of common stock under stock incentive plans

136,709

364

364

Stock-based compensation expense

743

743

Net loss

(460)

(460)

Balance at March 31, 2021

19,222,342

$

2

$

175,835

$

(157,634)

$

18,203

Exercise of stock options

23,280

57

57

Issuance of common stock under stock incentive plans

189,652

92

92

Stock-based compensation expense

704

704

Net income

256

256

Balance at June 30, 2021

19,435,274

$

2

$

176,688

$

(157,378)

$

19,312

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 under stock incentive plans

88,375

315

315

Stock-based compensation expense

805

805

Issuance of common stock in at-the-market offering, net of issuance costs

468,427

2,084

2,084

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

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, 

    

2021

    

2020

Cash flows from operating activities

 

  

 

  

Net loss

$

(204)

$

(3,026)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

Depreciation and amortization

 

756

 

813

Stock-based compensation

 

1,447

 

1,723

Non-cash warrant revaluation

5

7

Non-cash interest expense

 

168

 

147

Changes in operating assets and liabilities:

 

 

Accounts receivable

 

(2,776)

 

(1,540)

Inventory

 

(850)

 

(505)

Prepaid expenses and other current assets

 

49

 

38

Accounts payable

 

861

 

(776)

Accrued liabilities

 

(126)

 

(1,008)

Deferred revenue

1,815

Lease liabilities

(64)

(73)

Net cash provided by (used in) operating activities

 

1,081

 

(4,200)

Cash flows from investing activities

 

 

Purchases of property and equipment

 

(554)

 

(277)

Net cash used in investing activities

 

(554)

 

(277)

Cash flows from financing activities

 

 

Payments on long-term debt

 

(1,200)

 

Payments on finance lease obligation

 

 

(5)

Proceeds from exercise of stock options and purchase of shares in employee stock purchase plan

 

293

 

827

Proceeds from issuance of common stock in at-the-market offering, net of issuance costs

2,084

Net cash (used in) provided by financing activities

 

(907)

 

2,906

Net decrease in cash and cash equivalents

 

(380)

 

(1,571)

Cash and cash equivalents at beginning of period

 

14,599

 

14,487

Cash and cash equivalents at end of period

$

14,219

$

12,916

Supplementary cash flow information:

 

 

Interest paid

$

128

$

197

Operating cash flows paid for operating leases

$

814

$

862

Financing cash flows paid for finance leases

$

$

5

Non-cash investing and financing activities:

 

 

Increase of right-of-use asset and lease liability due to lease modification

$

$

545

Purchases of property and equipment in accounts payable and accrued liabilities

$

$

22

Bonus settled in shares of common stock

$

364

$

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, medical, automotive/transportation, aerospace and data center markets to design high performance, power efficient and reliable systems without the need for bulky batteries or capacitors.

The Company believes that its existing cash and cash equivalents as of June 30, 2021, 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, among other things, 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, 2020 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, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 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, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC.

Prior Period Reclassifications

Certain immaterial prior period amounts have been reclassified to conform to the current period presentation.

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, and 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, 

2021

2020

Trade accounts receivable

$

10,541

$

7,590

Unbilled accounts receivable

178

255

Allowance for product returns and price concessions

 

(336)

 

(238)

Accounts receivable, net

$

10,383

$

7,607

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, 

June 30, 

June 30, 

December 31, 

Customers

    

2021

    

2020

    

2021

    

2020

    

2021

    

2020

 

Customer A

 

18

%

34

%

13

%

29

%

19

%

29

%  

Customer B

 

23

%

*

25

%

*

43

%

25

%  

Customer C

12

%

*

*

*

*

*

*

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.

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As of June 30, 2021, 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. 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 Company’s current 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, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

  

  

  

Money market funds

$

14,384

  

$

  

$

  

$

14,384

Total assets measured at fair value

$

14,384

  

$

  

$

  

$

14,384

Liabilities:

  

  

  

Warrant liability

$

  

$

  

$

36

  

$

36

Total liabilities measured at fair value

$

  

$

  

$

36

  

$

36

December 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets:

  

  

  

Money market funds

$

14,669

  

$

  

$

  

$

14,669

Total assets measured at fair value

$

14,669

  

$

  

$

  

$

14,669

Liabilities:

  

  

  

Warrant liability

$

  

$

  

$

31

  

$

31

Total liabilities measured at fair value

$

  

$

  

$

31

  

$

31

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 distributors and original equipment manufacturers (OEMs). The Company also recognizes revenue under manufacturing and engineering service agreements and 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, 

    

2021

    

2020

    

2021

    

2020

Distributor

$

7,634

$

6,231

$

15,500

$

13,221

Non-distributor

4,214

5,595

6,628

8,713

Total revenue

$

11,848

$

11,826

$

22,128

$

21,934

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, 

    

2021

    

2020

    

2021

    

2020

Point in time

$

10,559

$

11,183

$

20,593

$

21,226

Over time

1,289

643

1,535

708

Total revenue

$

11,848

$

11,826

$

22,128

$

21,934

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

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2021

    

2020

    

2021

    

2020

Product sales

$

10,187

$

10,927

$

19,255

$

20,562

Royalties

372

256

1,338

664

Other revenue

1,289

643

1,535

708

Total revenue

$

11,848

$

11,826

$

22,128

$

21,934

The Company recognizes revenue in three primary geographic regions: North America; Europe, Middle East and Africa (EMEA); and Asia-Pacific (APAC). 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, 

    

2021

    

2020

    

2021

    

2020

APAC

$

7,793

$

8,387

$

14,951

$

15,283

North America

2,686

1,820

4,426

2,924

EMEA

1,369

1,619

2,751

3,727

Total revenue

$

11,848

$

11,826

$

22,128

$

21,934

4. Balance Sheet Components

Inventory

Inventory consisted of the following (in thousands):

June 30, 

December 31,

    

2021

    

2020

Raw materials

$

208

$

329

Work-in-process

 

6,061

 

4,910

Finished goods

 

302

 

482

Total inventory

$

6,571

$

5,721

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Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

June 30, 

December 31,

    

2021

    

2020

Payroll-related expenses

$

1,157

$

1,274

Inventory

248

416

Other

 

337

 

542

Total accrued liabilities

$

1,742

$

2,232

Deferred Revenue

In the six months ended June 30, 2021, the Company executed contractual arrangements with a customer for the development of a RAD-Hard product, consisting of a technology license, design license agreement and development subcontract. The Company does not share in the rights to future revenues or royalties. The total arrangements are for $6.5 million in consideration.

The Company concluded these contractual arrangements represent one arrangement and evaluated its promises to the customer and whether the performance obligations granted under the arrangement were distinct.  The licenses provided to the customer are not transferable, are of limited value without the promised development services, and the customer cannot benefit from the license agreements without the specific obligated services in the development subcontract, as there is strong interdependency between the licenses and the development subcontract. Accordingly, the Company determined the licenses were not distinct within the context of the contract and combined the license with other performance obligations.

As a result, the Company is recognizing revenue related to the performance obligations over time using the input method based on costs incurred to date relative to the total expected costs of the contract and began recognizing revenue in the second quarter of 2021 over the performance obligation period.

Under the agreements, we received a non-refundable, upfront payment of $3.0 million in the first quarter of 2021. As of June 30, 2021, $1.8 million was recorded as deferred revenue, current, with $1.2 million recognized as revenue in the second quarter of 2021.

5. Leases

Operating leases consist primarily of office space expiring at various dates through 2023. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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

As of June 30, 2021

    

Amount

2021

$

789

2022

861

2023

68

Total lease payments

1,718

Less: imputed interest

(62)

Total operating lease liabilities

1,656

Less: current portion of operating lease liabilities

(1,190)

Total operating lease liabilities, net of current portion

$

466

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

June 30, 

December 31,

    

2021

    

2020

Weighted-average remaining lease term (years)

    

1.32

1.74

    

Weighted-average discount rate

6.00

%

6.00

%

6. Debt

2019 Credit Facility

In August 2019, the Company executed an Amended and Restated Loan and Security Agreement (2019 Credit Facility), which amended and restated the Company’s prior loan and security agreement (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.

In July 2020, the Company executed the first amendment to the 2019 Credit Facility with SVB. The amendment, among other things, extended the initial 12-month interest-only period for the 2019 Term Loan to a 16-month interest-only period and lowered the floor interest rate. The floor interest rates for the 2019 Term Loan and the Line of Credit were reduced from 4.75% and 6.75% to 3.75% and 4.75%, respectively.

The amended 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 4.75%. As of June 30, 2021, the interest rate was 4.75%. The Line of Credit required 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, 2021, the effective interest rate under the Line of Credit was 10.18% and the outstanding balance was $2.0 million. The Line of Credit was set to mature on August 5, 2021. Subsequent to June 30, 2021, the Company executed the second amendment to the 2019 Credit Facility with SVB.  The second amendment, entered into on July 28, 2021, extended the maturity date of the Line of Credit to August 5, 2022.

The amended 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 46 months, and a 16-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 3.75%. As of June 30, 2021, the interest rate was 3.75%. 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, 2021, the effective interest rate under the 2019 Term Loan was 7.85% and the outstanding balance was $4.8 million. The 2019 Term Loan matures on June 1, 2023.

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 to the 2017 Credit Facility, which was a warrant to purchase 9,375 shares of the Company’s common stock at an exercise price of $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

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condensed statement of operations and comprehensive loss. The Company recognized other expense of $1,000 and $5,000 for the three and six months ended June 30, 2021, respectively. The Company recognized other expense of $12,000 and $7,000 for the three and six months ended June 30, 2020, respectively.

In conjunction with entering into the first amendment to the 2019 Credit Facility, on July 15, 2020, the Company issued a warrant to SVB to purchase 21,500 shares of the Company’s common stock at an exercise price of $0.01 per share. The warrant expires on July 15, 2025. The warrant is classified as equity and was recorded as a debt discount that will be amortized to interest expense using the effective interest method. The fair value of the warrant was $152,000 on the date of issuance using the Black-Scholes option-pricing model. Subsequent to June 30, 2021, SVB elected to exercise the warrant associated with the first amendment to the 2019 Credit Facility on July 22, 2021, which resulted in a net cashless exercise of the warrant and the issuance of 21,463 shares of the Company’s common stock.

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 cash balance and availability under the Line of Credit, 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, 2021. 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 2019 Term Loan. As of June 30, 2021, management does not believe that it is probable that the clause will be triggered within the next 12 months, and therefore the 2019 Term Loan is classified as long-term debt.

The amortization of the debt issuance costs and accretion of the debt discount is included in interest expense within the statement of operations and comprehensive loss and included in non-cash interest expense within the statement of cash flows.

The carrying value of the Company’s 2019 Credit Facility as of June 30, 2021 was as follows (in thousands):

    

Current

    

Long-Term

    

Portion

Debt

Total

Credit Facility

$

4,400

$

2,820

$

7,220

Unamortized debt discounts

 

(87)

 

(175)

 

(262)

Net carrying value

$

4,313

$

2,645

$

6,958

The carrying value of the Company’s 2019 Credit Facility as of December 31, 2020 was as follows (in thousands):

    

Current

    

Long-Term

    

Portion

Debt

Total

Credit Facility

$

4,400

$

4,020

$

8,420

Unamortized debt discounts

(158)

 

(272)

 

(430)

Net carrying value

$

4,242

$

3,748

$

7,990

The table below includes the principal repa