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 March 31, 2022

☐	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 130

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 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	☒	Smaller reporting company	☒
		Emerging growth company	☐


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

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The number of shares of the Registrant’s Common Stock outstanding as of May 9, 2022, was 20,033,377.

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		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021	3
	Condensed Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2022 and 2021 (unaudited)	4
	Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)	5
	Condensed Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (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	24
Item 4.	Controls and Procedures	24

	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	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
EXHIBIT INDEX		46
SIGNATURES		48

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)

(Unaudited)


	March 31,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	19,885	$	21,409
Accounts receivable, net		10,240		8,193
Inventory		6,208		6,396
Prepaid expenses and other current assets		636		762
Total current assets		36,969		36,760
Property and equipment, net		959		973
Right-of-use assets		3,974		913
Other assets		769		734
Total assets	$	42,671	$	39,380

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,287	$	1,776
Accrued liabilities		1,565		3,579
Deferred revenue		330		832
Current portion of long-term debt		3,377		3,370
Lease liabilities		942		724
Other liabilities		39		50
Total current liabilities		8,540		10,331
Long-term debt, net of current portion		954		1,529
Lease liabilities, net of current portion		2,897		68
Long-term income tax liability		214		214
Total liabilities	$	12,605	$	12,142
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 March 31, 2022 and December 31, 2021		—		—
Common stock, $0.0001 par value per share; 100,000,000 shares authorized; 19,970,786 and 19,858,460 shares issued and outstanding as of March 31, 2022, and December 31, 2021		2		2
Additional paid-in capital		180,960		180,067
Accumulated deficit		(150,896)		(152,831)
Total stockholders’ equity		30,066		27,238
Total liabilities and stockholders’ equity	$	42,671	$	39,380

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 Income (Loss)

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended March 31,
	2022		2021
Product sales	$	12,671	$	9,068
Licensing, royalty, patent, and other revenue		1,676		1,212
Total revenue		14,347		10,280
Cost of product sales		5,752		4,256
Cost of licensing, royalty, patent, and other revenue		272		39
Total cost of sales		6,024		4,295
Gross profit		8,323		5,985
Operating expenses:¹
Research and development		2,436		2,439
General and administrative		2,729		2,843
Sales and marketing		1,134		987
Total operating expenses		6,299		6,269
Income (loss) from operations		2,024		(284)
Interest expense		(75)		(152)
Other expense, net		(14)		(15)
Net income (loss) before income taxes		1,935		(451)
Income tax expense		—		(9)
Net income (loss) and comprehensive income (loss)	$	1,935	$	(460)
Net income (loss) per common share:
Basic	$	0.10	$	(0.02)
Diluted	$	0.09	$	(0.02)
Weighted average shares of common stock outstanding:
Basic		19,896,654		19,092,367
Diluted		20,726,193		19,092,367

¹Operating expenses include stock-based compensation as follows:
Research and development	$	333	$	181
General and administrative		371		485
Sales and marketing		120		77
Total stock-based compensation	$	824	$	743

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 Months Ended March 31, 2022
				Additional				Total
	Common Stock			Paid-In		Accumulated		Stockholders’
	Shares	Amount		Capital		Deficit		Equity
Balance at December 31, 2021	19,858,460	$	2	$	180,067	$	(152,831)	$	27,238
Exercise of stock options	15,830		—		69		—		69
Issuance of common stock under stock incentive plans	96,496		—		—		—		—
Stock-based compensation expense	—		—		824		—		824
Net income	—		—		—		1,935		1,935
Balance at March 31, 2022	19,970,786	$	2	$	180,960	$	(150,896)	$	30,066


	Three Months Ended March 31, 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

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)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net income (loss)	$	1,935	$	(460)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization		258		383
Stock-based compensation		824		743
Non-cash warrant revaluation		(11)		4
Non-cash interest expense		32		86
Changes in operating assets and liabilities:
Accounts receivable		(2,047)		(2,708)
Inventory		188		363
Prepaid expenses and other current assets		126		62
Right-of-use assets		(3,061)		343
Other assets		(13)		—
Accounts payable		267		(63)
Accrued liabilities		(2,014)		280
Deferred revenue		(502)		3,000
Lease liabilities		3,047		(382)
Net cash (used in) provided by operating activities		(971)		1,651
Cash flows from investing activities
Purchases of property and equipment		(22)		(309)
Net cash used in investing activities		(22)		(309)
Cash flows from financing activities
Payments on long-term debt		(600)		(600)
Proceeds from exercise of stock options and purchase of shares in employee stock purchase plan		69		144
Net cash used in financing activities		(531)		(456)
Net (decrease) increase in cash and cash equivalents		(1,524)		886
Cash and cash equivalents at beginning of period		21,409		14,599
Cash and cash equivalents at end of period	$	19,885	$	15,485
Supplementary cash flow information:
Interest paid	$	43	$	66
Operating cash flows paid for operating leases	$	318	$	413
Financing cash flows paid for finance leases	$	2	$	—
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for operating lease liabilities	$	3,350	$	—
Right-of-use assets obtained in exchange for finance lease liabilities	$	36	$	—
Purchases of property and equipment in accounts payable and accrued liabilities	$	257	$	—
Bonus settled in shares of common stock	$	—	$	364

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 key markets, such as 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.

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, 2021, 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 months ended March 31, 2022, are not necessarily indicative of the results to be expected for the year ending December 31, 2022 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, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC.

The Company believes that its existing cash and cash equivalents as of March 31, 2022, coupled with its anticipated growth and sales levels and availability under its credit facility, will be sufficient to meet its anticipated cash requirements for at least the next 12 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.

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, from time to time, may establish an allowance for estimated price adjustments related to its distributor agreements. The Company estimates credits to distributors based on the historical rate of credits provided to distributors relative to sales and evaluation of current market conditions.

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


	March 31,		December 31,
	2022		2021
Trade accounts receivable	$	9,798	$	8,140
Unbilled accounts receivable		968		450
Other receivables		51		—
Allowance for product returns and price adjustments		(577)		(397)
Accounts receivable, net	$	10,240	$	8,193

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				As of
	March 31,				March 31,		December 31,
Customers	2022		2021		2022		2021
Customer A	*		*		13	%	*
Customer B	18	%	27	%	46	%	54	%
Customer C	13	%	*		*		*

*	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 March 31, 2022, 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):


	March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	19,898	$	—	$	—	$	19,898
Total assets measured at fair value	$	19,898	$	—	$	—	$	19,898

Liabilities:
Warrant liability	$	—	$	—	$	39	$	39
Total liabilities measured at fair value	$	—	$	—	$	39	$	39


	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	21,508	$	—	$	—	$	21,508
Total assets measured at fair value	$	21,508	$	—	$	—	$	21,508

Liabilities:
Warrant liability	$	—	$	—	$	50	$	50
Total liabilities measured at fair value	$	—	$	—	$	50	$	50

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 2019-04, Codification Improvements Financial Instruments-Credit Losses (Topic 326). ASU 2019-04 provides narrow-scope amendments to help apply ASU 2016-13, and is effective with the adoption of ASU 2016-13. The Company is evaluating the impact of the adoption of ASU 2016-13 and ASU 2019-04 on its financial statements.

We reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the condensed consolidated financial statements.

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3. Revenue

The Company sells products to its distributors and OEMs. The Company also recognized revenue under licensing, patent, and royalty agreements with some customers.

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


	Three Months Ended March 31,
	2022		2021
Distributor	$	10,794	$	7,866
Non-distributor		3,553		2,414
Total revenue	$	14,347	$	10,280

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


	Three Months Ended March 31,
	2022		2021
Point in time	$	13,646	$	10,034
Over time		701		246
Total revenue	$	14,347	$	10,280

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


	Three Months Ended March 31,
	2022		2021
Product sales	$	12,671	$	9,068
Licensing		575		—
Royalties		400		966
Other revenue		701		246
Total revenue	$	14,347	$	10,280

The Company recognizes revenue in three primary geographic regions: Asia-Pacific (APAC); North America; and Europe, Middle East and Africa (EMEA). The Company recognizes revenue by geography based on the region in which the products are sold, and not to where the end products in which they are assembled are shipped. The Company’s revenue by region for the periods indicated was as follows (in thousands):


	Three Months Ended March 31,
	2022		2021
APAC	$	9,234	$	7,158
North America		3,105		1,740
EMEA		2,008		1,382
Total revenue	$	14,347	$	10,280

4. Balance Sheet Components

Inventory

Inventory consisted of the following (in thousands):


	March 31,		December 31,
	2022		2021
Raw materials	$	360	$	464
Work-in-process		4,499		4,620
Finished goods		1,349		1,312
Total inventory	$	6,208	$	6,396

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Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	March 31,		December 31,
	2022		2021
Payroll-related expenses	$	859	$	2,845
Inventory		314		177
Other		392		557
Total accrued liabilities	$	1,565	$	3,579

Deferred Revenue

During the year ended December 31, 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. The total transaction price of $6.5 million was allocated to the single performance obligation.

The Company recognizes 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. This method depicts performance under the contract and requires the Company to make estimates about the future costs expected to be incurred to perform under the contact, including labor and material costs.

As of March 31, 2022, the Company has billed $4.2 million for the performance under the contractual agreements. Under the input method of recognition, the Company has recognized $0.6 million in revenue for the three-months ended March 31, 2022, and $3.9 million in revenue since inception of the contractual agreement. As a result, the Company has recorded $0.3 million in deferred revenue as of March 31, 2022. The Company expects to recognize the remaining $2.6 million of the transaction price as services are performed throughout the contractual period and performance is expected to be complete in the year ended December 31, 2024.

5. Leases

Operating leases consist primarily of office space expiring at various dates through 2029. Finance leases relate to a server lease expiring in January 2025. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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


As of March 31, 2022	Amount
2022	$	871
2023		653
2024		600
2025		605
2026		620
Thereafter		1,002
Total lease payments		4,351
Less: imputed interest		(512)
Total lease liabilities		3,839
Less: current portion of lease liabilities		(942)
Total lease liabilities, net of current portion	$	2,897

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


	March 31,		December 31,
	2022		2021
Weighted-average remaining lease term (years)	4.52		1.08
Weighted-average discount rate	4.73	%	6.00	%

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


	March 31,		December 31,
	2022		2021
Weighted-average remaining lease term (years)	2.84		—
Weighted-average discount rate	4.50	%	—	%

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).

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, 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 March 31, 2022, the interest rate was 5.00%. 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. Currently, $4.0 million remains available under the Line of Credit, subject to borrowing base availability. As of March 31, 2022, the effective interest rate under the Line of Credit was 10.18% and the outstanding balance was $1.0 million. The Line of Credit was set to mature on August 5, 2021. The second amendment, entered into on July 28, 2021, extended the maturity date of the Line of Credit to August 5, 2022.

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The amended 2019 Term Loan provides for a $6.0 million term loan. 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 March 31, 2022, 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 March 31, 2022, the effective interest rate under the 2019 Term Loan was 7.85% and the outstanding balance was $3.4 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 statements of operations and comprehensive income (loss). The Company recognized other income of $11,000 and other expense of $4,000 for the three months ended March 31, 2022 and 2021, respectively, related to the change in fair value of the warrant within other expense, net in the statements of operations and comprehensive income (loss).

Additionally, in conjunction with entering into the first amendment to the 2019 Credit Facility, on July 15, 2020, the Company issued an additional warrant to SVB to purchase 21,500 shares of its common stock at an exercise price of $0.01 per share, which was to expire on July 15, 2025. The warrant was classified as equity and was recorded as a debt discount that was 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.

On July 22, 2021, SVB elected to exercise the warrant associated with the first amendment to the 2019 Credit Facility, 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 as of March 31, 2022. 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 March 31, 2022, 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 statements of operations and comprehensive income (loss) and included in non-cash interest expense within the statement of cash flows.

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The carrying value of the Company’s 2019 Credit Facility at March 31, 2022, was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	3,400	$	1,020	$	4,420
Unamortized debt discounts		(23)		(66)		(89)
Net carrying value	$	3,377	$	954	$	4,331

The carrying value of the Company’s 2019 Credit Facility as of December 31, 2021 was as follows (in thousands):


	Current		Long-Term
	Portion		Debt		Total
Credit Facility	$	3,400	$	1,620	$	5,020
Unamortized debt discounts		(30)		(91)		(121)
Net carrying value	$	3,370	$	1,529	$	4,899

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



	Principal Repayment as of March 31, 2022
2022		3,400
2023		1,020
Total principal repayments	$	4,420

7. Stock-Based Compensation

Summary of Stock Option Activity

The following table summarizes the stock option and award activity for the three months ended March 31, 2022:


		Options Outstanding
			Weighted-		Weighted-
	Options and		Average		Average	Aggregate
	Awards		Exercise		Remaining	Intrinsic
	Available for	Number of	Price Per		Contractual	Value
	Grant	Options	Share		Life (years)	(In thousands)
Balance—December 31, 2021	1,038,956	1,783,298	$	5.21	8.0	$	10,891
Authorized	595,753
RSUs granted	(330,832)
RSUs cancelled/forfeited	5,951	—
Options granted	(488,744)	488,744	$	8.17
Options exercised	—	(15,830)	$	4.40		$	927
Options cancelled/forfeited	48,015	(70,341)	$	6.40
Balance—March 31, 2022	869,099	2,185,871	$	5.84	8.5	$	6,337
Options exercisable—March 31, 2022		727,933	$	5.59	7.1	$	2,329

The total grant date fair value of options vested was $966,000 and $312,000 during the three months ended March 31, 2022 and 2021, respectively.

The weighted-average grant date fair value of options granted was $5.41 and $3.53 per share during the three months ended March 31, 2022 and 2021, respectively.

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As of March 31, 2022, of the 70,341 options cancelled/forfeited during the three months ended March 31, 2022, 22,326 of the options relate to a prior stock-based compensation plan that are no longer available for grant under the current stock-based compensation plan.

2016 Employee Stock Purchase Plan

In January 2022, there was an increase of 198,584 shares reserved for issuance under the Company’s Employee Stock Purchase Plan (ESPP) pursuant to the terms of the ESPP. The Company had 851,358 shares available for future issuance under the Company’s ESPP as of March 31, 2022. Employees did not purchase any shares during the three months ended March 31, 2022 and 2021.

Restricted Stock Units

The following table summarizes restricted stock units (RSUs) activity for the three months ended March 31, 2022:


	RSUs Outstanding
		Weighted-
		Average
	Number of	Grant Date
	Restricted Stock	Fair Value Per
	Units	Share
Balance—December 31, 2021	384,307	$	5.00
Granted	330,832	$	8.17
Vested	(96,496)	$	4.92
Cancelled/forfeited	(5,951)	$	5.47
Balance—March 31, 2022	612,692	$	6.72

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 March 31, 2022, there was $3.6 million of unrecognized stock-based compensation expense related to RSUs to be recognized over a weighted-average period of 2.6 years.

Stock-based Compensation Expense

As of March 31, 2022, there was $3.2 million of total unrecognized stock-based compensation expense related to unvested options which is expected to be recognized over a weighted-average period of 3.0 years.

8. Significant Agreements

GLOBALFOUNDRIES, Inc. Joint Development Agreement

Since October 17, 2014, the Company has participated in a joint development agreement (JDA) with GLOBALFOUNDRIES Inc. (GF), a semiconductor foundry, for the joint development of Spin-transfer Torque MRAM (STT-MRAM), technology to produce a family of discrete and embedded MRAM technologies. The term of the agreement is until the completion, termination, or expiration of the last statement of work entered into pursuant to the joint development agreement. The Company entered into a Statement of Work (SOW) and an Amendment to the SOW, under the JDA with GF effective August 2016 and June 2018, respectively. The agreement was extended on December 31, 2019 to include a new phase of support for 12nm MRAM development.

Under the current JDA extension terms, each party licenses its relevant intellectual property to the other party. For certain jointly developed works, the parties have agreed to follow an invention allocation procedure to determine ownership. In addition, GF possesses the exclusive right to manufacture the Company’s discrete and embedded STT-MRAM devices developed pursuant to the agreement until the earlier of three years after the qualification of the MRAM device for a particular technology node or four years after the completion of the relevant statement of work under which the device was developed. For the same exclusivity period associated with the relevant device, GF agreed not to license intellectual property developed in connection with the JDA to named competitors of the Company.

Generally, unless otherwise specified in the agreement or a statement of work, the Company and GF share project costs, which do not include personnel or production qualification costs, under the JDA. If GF manufactures, sells or

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transfers to customers wafers containing production quantified STT-MRAM devices that utilize certain design information, GF will be required to pay the Company a royalty.

Silterra Malaysia Sdn. Bhd. Joint Collaboration Agreement

In September 2018, the Company entered into a Joint Collaboration Agreement (JCA) with Silterra Malaysia Sdn. Bhd., and another third party. The JCA will create additional manufacturing capacity for the Company’s Toggle MRAM products. The Company had previously anticipated initial production starting in 2020. However, as a result of recent delays, the Company now anticipates initial production to start some time in 2022. Under the JCA, the Company is required to pay non-recurring engineering costs of $1.0 million. As of September 30, 2021, the Company had paid $600,000 of these JCA costs. On October 23, 2021, the Company executed a termination of the JCA. As a result, the Company does not expect to incur additional JCA costs for the remainder of 2022.

9. Net Income (Loss) Per Common Share

Basic net income (loss) per common share is calculated by dividing the net income (loss) by the weighted-average number of shares of common stock outstanding for the period less shares subject to repurchase, without consideration of potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method by dividing net income by the total weighted average shares of common stock outstanding in addition to the potential impact of dilutive securities including restricted stock units, warrants, and options. In periods with a net loss, diluted net loss per common share is the same as basic net loss per common share since the effect of potentially dilutive securities is anti-dilutive.

The following tables set forth the computation of basic and diluted net income (loss) per share attributable to common stockholders (in thousands, except share and per share amounts):

Basic EPS


	Three Months Ended March 31,
	2022		2021
Numerator:
Net income (loss)	$	1,935	$	(460)
Denominator:
Weighted-average shares of common stock outstanding, basic		19,896,654		19,092,367
Net income (loss) per common share, basic	$	0.10	$	(0.02)

Diluted EPS


	Three Months Ended March 31,
	2022		2021
Numerator:
Net income (loss)	$	1,935	$	(460)
Less: warrant liability fair value gain recognized		(11)		—
Net income (loss) attributable to common stockholders, diluted	$	1,924	$	(460)
Denominator:
Weighted-average shares of common stock outstanding, basic		19,896,654		19,092,367
Effect of dilutive securities		829,539		—
Weighted-average shares of common stock outstanding, diluted		20,726,193		19,092,367
Net income (loss) per common share, diluted	$	0.09	$	(0.02)

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The following outstanding shares of potentially dilutive securities have been excluded from diluted net income (loss) per common share for the periods presented, because their inclusion would be anti-dilutive:


	Three Months Ended March 31,
	2022	2021
Options to purchase common stock	197,131	2,121,896
RSUs	66,166	485,012
Common stock warrants	18,461	49,336
Total	281,758	2,656,244

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes included in Part I, Item 1 of this report and with our audited financial statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2021.

Forward-Looking Statements

This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to, among other things, our industry, business, future plans, strategies, objectives, expectations, intentions and financial performance, as well as anticipated impacts from, and our responses to, the COVID-19 pandemic and our expectations regarding current supply constraints, and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” and elsewhere in this report, as well as in our other filings with the Securities and Exchange Commission (SEC). Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Overview

Everspin is a pioneer in the successful commercialization of Magnetoresistive Random Access Memory (MRAM) technology. Our portfolio of MRAM technologies, including Toggle MRAM and Spin-transfer Torque MRAM (STT-MRAM), is delivering superior performance, persistence and reliability in non-volatile memories that transform how mission-critical data is protected against power loss. With over 10 years of MRAM technology and manufacturing leadership, our memory solutions deliver significant value to our customers in key markets such as industrial, medical, automotive/transportation, aerospace and data center. We are the leading supplier of discrete MRAM components and a successful licensor of our broad portfolio of related technology intellectual property.

We sell our products directly and through our established distribution channels to industry-leading original equipment manufacturers (OEMs) and original design manufacturers (ODMs).

We manufacture our MRAM products using both captive and third-party manufacturing capabilities. We purchase industry-standard complementary metal-oxide semiconductor (CMOS) wafers from semiconductor foundries and perform back end of line (BEOL) processing that includes our magnetic-bit technology at our 200mm fabrication facility in Chandler, Arizona. We also manufacture full-flow 300mm CMOS wafers with our STT-MRAM magnetic-bit technology integrated in BEOL as part of our strategic relationship with GLOBALFOUNDRIES.

Key Metrics

We monitor a variety of key financial metrics to help us evaluate trends, establish budgets, measure the effectiveness of our business strategies and assess operational efficiencies. These financial metrics include revenue, gross margin, operating expenses and operating income determined in accordance with GAAP. Additionally, we monitor and project cash flow to determine our sources and uses for working capital to fund our operations. We also monitor Adjusted EBITDA, a non-GAAP financial measure, and design wins. We define Adjusted EBITDA as net income or loss adjusted for interest expense, taxes, depreciation and amortization, stock-based compensation expense, and restructuring costs, if any.

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Adjusted EBITDA. Our management and board of directors use Adjusted EBITDA to understand and evaluate our operating performance and trends, to prepare and approve our annual budget and to develop short-term and long-term operating and financing plans. Accordingly, we believe that Adjusted EBITDA provides useful information for investors in understanding and evaluating our operating results in the same manner as our management and our board of directors. Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income (loss) reported in accordance with GAAP. The following table presents a reconciliation of net income (loss), the most directly comparable GAAP measure, to Adjusted EBITDA for the periods indicated:


	Three Months Ended March 31,
	2022		2021
Adjusted EBITDA reconciliation:
Net income (loss)	$	1,935	$	(460)
Depreciation and amortization		258		383
Stock-based compensation expense		824		743
Interest expense		75		152
Adjusted EBITDA	$	3,092	$	818

Effect of the COVID-19 Pandemic on our Business

The COVID-19 outbreak has resulted in government authorities around the world implementing numerous measures to try to reduce the spread of COVID-19, such as travel bans and restrictions, quarantines, “shelter-in-place,” “stay-at-home,” total lock-down orders, business limitations or shutdowns and similar orders. More recently, new variants of COVID-19, such as the Omicron variant and its subvariants, that are significantly more contagious than previous strains have emerged. The spread of these new strains have caused many government authorities and businesses to reimplement the aforementioned measures to try to reduce the spread that had become less prevalent. While some of these restrictions have begun to be lifted, the lingering impact of the COVID pandemic continues to create significant volatility throughout the global economy, including supply chain constraints, labor supply issues and higher inflation. Accordingly, it is unclear at this point the full impact COVID-19 and its variants will have on the global economy and on our Company.

Overall, our business remains operational in the midst of the pandemic. However, as a result of the ongoing COVID-19 pandemic and the related responses from government authorities, our business, results of operations and financial condition have been, and continue to be, adversely impacted. For example, we have experienced electronics supply chain and demand disruptions from extended factory shutdowns, particularly in some Asian countries, which created unusual order patterns, and subsequently slowed Toggle MRAM demand, particularly from our industrial customers. We continue to see an impact as reflected in reduced demand from some customers and distributors. While we are working closely with our manufacturing partners and suppliers to support demand for our products, the full impact on our demand from customers remains unknown. Management is thus planning for a broad range of possible demand outcomes in an effort to ensure the success of our business under a variety of end market conditions.

Further, in an effort to protect the health and safety of our employees, we transitioned most of our office and support employees and contractors to working from home; suspended all non-essential business travel; and implemented social distancing guidelines for our employees and contractors who must work in our manufacturing and laboratory locations. Consequently, the remote working environment we have implemented for our employees has adversely impacted manufacturing operations given delays in data gathering, analysis and inefficiencies of teams solving technical problems via remote-only means, which has impacted, and continues to impact, our cost of sales.

The recent prospect of lockdowns in China, emergence of new variants of COVID-19, and the prevalence of breakthrough cases of infection among fully vaccinated people adds additional uncertainty and could result in further impacts to our business and operations, including those discussed above and in “Risk Factors” in Part II, Item 1A of this report.

We will continue to monitor the situation and take additional actions as warranted. These actions may include further altering our operations in order to protect the best interests of our employees, customers and suppliers, and to comply with government requirements, while also planning and executing our business to best support our customers, suppliers, and partners.

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The ultimate extent of the impact of the COVID-19 pandemic on our business, results of operations and financial condition will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted, including, but not limited to, the duration and spread of the COVID-19 outbreak, its severity, the emergence and severity of its variants, the actions to contain the virus or treat its impact, such as the availability and efficacy of vaccines (particularly with respect to emerging strains of the virus) and potential hesitancy to use them, general economic factors, such as increased inflation; supply chain restraints; labor supply issues; and how quickly and to what extent normal economic and operating conditions can resume. Accordingly, our current results and financial condition discussed herein may not be indicative of future operating results and trends. See “Risk Factors” in Part II, Item 1A of this report for additional risks we face due to the COVID-19 pandemic.

Results of Operations

The following table sets forth our results of operations for the periods indicated:


	Three Months Ended March 31,
	2022		2021		2022			2021
	(In thousands)				(As a percentage of revenue)
Product sales	$	12,671	$	9,068		88	%		88	%
Licensing, royalty, patent, and other revenue		1,676		1,212		12			12
Total revenue